Does the Military Need to Defend New Balance?

Like the sole of a shoe that's had a hole worn in it from walking too many miles, two U.S. senators from Maine are wearing out their shoe leather pushing a mandate to have the military purchase only American-made sneakers with an argument that is equally threadbare.

There's only one major sneaker maker left in the U.S. that actually manufactures its sneakers here, and it's no small coincidence that its factories are located in Maine (and Massachusetts). Privately held New Balance employs 5,000 people in the U.S. and truly remains the last man standing when it comes to making footwear in the states, so the Senate effort is really meant to just benefit them.

While it sounds patriotic enough to call for a "Buy American!" campaign, it's really a hollow, well-trod path of transferring wealth from consumers to the company's union employees.

It's true Nike (NYSE: NKE  ) manufactures virtually all of its footwear in factories outside the U.S. -- Vietnam, China, and Indonesia account for 98% of its production -- and Skechers  (NYSE: SKX  ) also sources its shoes primarily from overseas, but it's also true that three-quarters of New Balance's footwear comes from outside the U.S as well. So what we're talking about is saving some well-paid union jobs at the expense of other American jobs held by workers at the competition.

Nike employs 44,000 workers worldwide, but there are some 7,000 working in its Beaverton, Ore., headquarters and thousands more who work in its retail stores. California-based Skechers says most of its 5,600 or so employees are employed at its retail locations, 85% of which are based in the United States. Perhaps we ought to ask the senators why one American job is better than another.

The military is already required to buy its uniforms, shoes, and boots from American companies, but personnel are given a cash allowance to buy their own casual footwear. The two senators from Maine are worried that like much of the rest of the buying public, servicemen and women also like sneakers made by Nike, Skechers, and K-Swiss  (NASDAQ: KSWS  ) , a third of whose workers are also in the United States.

So there is a significant base of shoe companies that are indeed American; they're just not making union-made sneakers like New Balance. And that's the root of the problem at the company and why there is no footwear manufacturing base left in the country: labor costs. Because shoemaking is a labor-intensive business, the sneaker maker says that all else being equal, it still costs 25% to 30% more to make its footwear in the U.S. than elsewhere.

I have no animus against New Balance shoes, regardless of where they're produced or who they're made by, and have heard they offer comparable or better quality than what its rivals offer. But New Balance shoes aren't cheap -- they can give Jordans a run for their money at upwards of $275 a pair -- so requiring our military personnel to purchase a certain brand of sneaker to benefit a highly paid worker at the expense of some other employee simply runs over common sense.

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  • Report this Comment On May 04, 2013, at 8:51 AM, JonM12345 wrote:

    Rich- I'm concerned about the lack of accuracy here. The senators are calling for enforcement of the law requiring the military to buy American-made products when possible. It is possible to buy a Berry-compliant shoe from New Balance made entirely in the US, therefore the military is required to do so. I believe it's common sense to follow the law.

    Yes, the senators are from Maine, but you don't note the Oregon congressional team's efforts to help Nike sustain business practices that help profits but kill jobs here at home. The free trade agreement with Southeast Asia is a perfect example of shipping jobs overseas for such profit, despite such factories crumbling beneath the workers' feet. Do you ignore all of this because you own Nike stock?

    I'm also struggling to understand the $275 remark; I find exactly one shoe for that price on the NB website, and it's a premium shoe. Most running shoes on NB's website are exactly priced like comparable Nike or Sketchers. NB shoes made in the US do cost slightly more than your average Nike shoe, but considering the highest Nike prices are still higher than NB and they make no shoes here, I'm struggling to understand that point. I'm sure missiles, tanks and clothing cost more to produce here as well, but the law is the law. No mention of that anywhere above.

    Lastly, New Balance does not have any union labor at any level of its organization- I've checked, where clearly you didn't. I understand blogging is similar to graffiti with punctuation masquerading as journalism, but this entire post is troublesome for its poor information. Why are you assuming that these are union jobs? Please cite that source of information or post a retraction.

    I would suggest posting "I want Nike stock prices to go up" in articles before commenting on the athletic industry. Putting it at the end is unprofessional and misleading, as you're biased and true journalists & commentators call out biases as they comment or report. Better yet, they don't comment pretending to be objective.

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