The final two days for the Chaco production crew in Paonia were filled with intense emotions.

On Wednesday, July 30, the last six pairs of Chaco sandals came off the Paonia assembly line. Virtually everyone in the building came to watch the historic moment.

Each of the 12 employees on the production line trimmed one sandal. Cheri Burch trimmed the last. She had worked for Chaco 13 years and was the longest tenured employee. Only Chaco founder, owner and CEO Mark Paigen had worked there longer. Burch had gone to lunch in downtown Paonia not thinking the crew would finish their work so soon. She was brought back so she would have the honor, as lead, to trim the final sandal.

Tami Sterns sewed the last sandal to be made in Paonia. The sandals were boxed up. The box was signed by the production crew before being shipped to the Delta distribution center.

The production line would soon be dismantled. Equipment was offered to Chaco’s Chinese partner, but no word had arrived on whether they were interested. Some equipment was purchased by other manufacturers in the United States.

Thursday, July 31, was planned to be a fun and fitting farewell. The laid off employees had requested barbecue from Rib City Grill. The lunch was at 11 a.m. In an atmosphere not unlike a high school graduation scene, the workers signed one another’s yearbooks. After lunch, various workers spent brief moments sharing their thoughts on working for Chaco. Many thanked Mark Paigen for their careers and the working environment at Chaco.

Paigen flew in from a trade show to personally thank the production crew and others who were now out of work. He remembered when he started out, he didn’t think he could handle more than 10 employees. “It is such a time of change and I can encapsulate my feelings today in two words — for everyone here, those who are leaving and those who are staying — thank you. You guys have propelled Chaco into the limelight of outdoor footwear. And we are a company that I would never have foreseen how big and strong and healthy that we could be. And none of it could have happened without the team effort of all of you,” he shared. “The very last thing I’ll leave you with is something that I have found very true for my time at Chaco and that is the biggest rewards have always come from the biggest challenges. Keep that in mind as you move forward. And thank you all so very, very much.”

In mid-August 2007 Chaco announced to their employees that 25 percent of the production of Chaco Headwaters would be done in China. By October it was known that all sandal production would be sent overseas. Other shoe lines by Chaco were already being produced in China. Originally, it was estimated 35 to 45 employees would lose their jobs, with a staff of 75 remaining. The final count on July 31, 2008, was 73 laid off. The remaining work force of 60 includes 12 at the Delta distribution center and warehouse. Chaco headquarters will remain in Paonia with customer service, sales, marketing, product development, repair and warranty, finance and IT.

The Paonia crew produced 270,000 to 300,000 sandals a year, with 600,000 to 700,000 other Chaco shoes produced from their inception in China. “So the difference between that is product from its inception that was always made in China simply because we don’t have the technical capability to make those kinds of products here,” said Ed Wieland, general manager and director of finance.

According to Dave Knutson, Chaco’s former human resources director, new designs were making it harder to produce the sandals in Paonia, which excelled in traditional sandals. “The next generation of sandals in 2010 could not be produced in Paonia. The entirely new design will require a different assembly process,” Knutson said.

Production of sandals will be done in China by two companies: Shing Tak and Hwa Shun. According to Wieland, factory to factory the cost to make the sandals will be $10 to $11 less in China than Paonia. With shipping and the import duty of 37-1/2 percent the total savings per pair of sandals will be between $5 and $6.

Dave Shishim, manager of customer service, pointed out the sandals are made of petroleum-based products, and the recent oil price hikes have also increased the cost to produce and transport the sandals.

Even so, Wieland expects the total units that will be purchased by Chaco from their Chinese suppliers will “continue to grow and increase year after year.”

Chaco will ship to their foreign distributors directly from Hong Kong. That represents  four to five percent of Chaco’s business. The remaining 95 to 96 percent of Chaco product will continue to come into Delta and be shipped to customers.

The business decisions have taken their toll on the Chaco staff. “It’s been a difficult time obviously for everybody. It’s been an emotional time. We have some truly dedicated and loyal people that we are saying goodbye too,” Wieland said. “From an overall perspective, I think by us letting the folks know early in the game and providing supplemental benefits at the end of the trail it was amazing the number of people who stayed on within Chaco. Our retention rate was extremely high and much better than we expected. Our retention rate of the people we hired on a temporary basis between then and now  was very huge. We were really surprised by that. Despite the emotional roller coaster that is involved in a situation like this.  I would give kudos to everyone on the production team. Our productivity rates were just far beyond anything we had imagined. They just maintained a high level of productivity. We really appreciate that.”

Over the last five months, the  Paonia crew produced 18,000 more pairs of sandals than planned. Delta audits found zero quality errors. The result was a 35-cent cost savings per pair.

Chaco management did a number of things to help the laid off personnel. “We put together  a package to supplement unemployment. We are doing monetary payouts that are dependent on length of service. The range is anywhere from the equivalent of four weeks of pay to a maximum of 26 weeks of pay. It’s based on years of service and a formula we developed,” Wieland explained. “To the extent we were providing health insurance for an individual that will continue for two additional months. We also had a series of job fairs and seminars.”

Chaco hired a Denver out placement firm, Lee Hecht Harrison, to counsel with people about the upcoming major changes in their lives and to provide a foundation for them to move forward and find other employment.

Chaco had a Job Fair on July 11, bringing in three schools and eight employers. Knutson said he knows some of those who were laid off have other jobs, but waited until their time at Chaco was finished.

“We were very fortunate in being awarded some federal grants under the Trade Adjustment Act, so several employees have chosen to go back to school and change their careers. Under these grants they will have as much as two years of schooling and $15,000 in tuition. There is a real interesting aspect to that grant. If it is approved training that is going to get them a job, they will continue to get their unemployment through their entire schooling. So they can go to school for up to two years and have their unemployment checks as an income base,” Knutson said.

Financial planners were brought in to teach the workers how to handle budgets and how to get out of debt. Leadership training classes were offered on communication skills so the workers would be better prepared for their next job. Colorado Workforce came several times beginning last December to tell the workers about grants and unemployment benefits. On Friday, Aug. 1, Colorado Workforce was available at the Delta County Annex in Hotchkiss to sign employees up for unemployment and to answer questions.

Among those laid off, Dave Knutson plans to be a house husband for the time being. “I’m teaching a Monday night course on compensation at Mesa State and I’m  working with the Grand Mesa Nordic Council on strategic planning,” he shared. His  wife teaches at the Montessori School. They will be staying in the area.

Donna Hart was the sew team lead. For her the last day of production was difficult. “I wasn’t here the full day because we ended before everyone else. It was a lot of emotions. It was just strange seeing how everything was disappearing off the line. But, I made it through.” She plans to stay home for a while and spend time with her two-year-old son. After that she is not quite sure. “I’m sad about it, but I know that as a business you do what you have to do to make it and survive. I’m fine with it. I understand all that . . . I have had a lot of growth and just learned a lot of things from this job.” She added, “It’s been a great job. They have taken care of us. It’s just been superb. The hours and all the benefits. It’s been great. I definitely would have stayed with them.”

Ginger Fancher worked for Chaco a year and 10 months. She was on the sew team. Fancher was one of them who yelled a big “hooray” after the last pair was sewn. “It was exciting and sad at the same time. My plans are to go to school and further my education. I would like to study the business aspect of the medical field.” She plans to study  at Teletech Colorado in Grand Junction. About the production going to China, Fancher said, “I think it’s sad because ‘Made in America’ is very important.”

Bill Sterns was production lead of the combined team. “I planned on retiring here. I’m 57. When you get up to that age . . . I’ve been here seven years, so I was kind of looking at the retiring process. It’s a blow to me and my wife. She is 54. She has been here nine years.” His wife Tamra (Tami), was a mentor on the combined team. “Right now I’ve already got a job guiding and outfitting. I’ve done it before. It’s not a steady job. It’s off and on. More spring, summer and in the fall.” His wife will possibly work as a cook in a nursing home. Sterns said, “I take it day by day. Hard feelings? Not really. It’s progress . . . It’s hard to see this job go to China, but you know I guess I have more of a forgiving heart.  There are a lot of people in China who need it more than I do. It’s hard to see it go, but I’m a survivor. That’s just the way it is. I’ll make do with what happens. It’s a free country here. It’s not quite so free over there.”

Naomi Smith, manufacturing manager, worked eight years for Chaco. “[It’s] one of the best experiences of my life. I’ve grown a lot personally and professionally. It’s meant a lot,” she said. About the production move to China Smith said, “It’s definitely hard. I hope it’s the best move for the company. I wish them the best, but I’m sad for all the great workers we had  here who are losing their jobs.” She plans to attend Mesa State College and study business administration and management. She doesn’t know if she has been approved for the grant with two-years of free tuition.

Deana Sheriff, executive director for Delta Area Development, Inc., (DADI) has been searching for a company to move to Paonia since they were notified a little over a year ago that production would end at Chaco. They contacted businesses on the Western Slope but could find no interest. There is one out-of-state manufacturing firm which will probably move to the Hotchkiss area in late fall or early winter. But the company will only hire about five workers.

“[Chaco] was able to use the local workforce, but had it not been the desire of the owner to pick this location, Chaco probably wouldn’t have gone to Paonia in the first place. Chaco has been wonderful for Paonia. It has been difficult to find another business to move to that location to take over those others jobs because of how out of the way Paonia is. That’s been a challenge,” Sheriff said. She has been told by businesses they are not moving right now because of the economy or they have to be on a major transportation corridor.

“The workforce of Chaco is so dedicated — that is what makes it so painful,” Sheriff said. Getting a company to move takes about two years of negotiations. “We need to find a business whose ownership wants to be in Paonia,” Sheriff concluded. “We haven’t given up. We are still continuously looking.”