Paonia, Colo.

On the Chaco factory floor in western Colorado, workers are head down at sewing machines and sole trimmers – stitching, gluing, and shaping pair after pair of rubber-bottomed river sandals. The high-ceilinged room hums and buzzes with activity, as it does every day, but today is different. For most of these employees, today feels something like a graduation and something like a funeral.

Since company founder Mark Paigen invented the sandals in his spare room almost 20 years ago, Chacos have caught on among river guides, kayakers, and weekend warriors, and the company has grown from a one-man operation to a 145-person business with a catalog of styles and an international clientele. Through it all, the sandals have been designed, made, and proudly worn here in tiny Paonia.

The company’s steel-sided headquarters and factory sit just outside town, next to soccer fields and within sight of the western edge of the Rockies. The setting, tucked between the mountains and the desert, is starkly gorgeous, but as the saying goes, one can’t eat the scenery. The county’s per capita income hovers just above $17,000, and blue-collar jobs with benefits – like most of those on the Chaco factory floor – aren’t easy to find here.

So the sandal builders at Chaco tend to stay around – Cheryl Burch, the leader of the “glue team,” has been with the company more than 13 years – and their camaraderie is palpable, their ribbing and bickering like that of an extended family. The tags on the completed sandals read “Made with pride” – sometimes even “Made with love” – “in Colorado, U.S.A.”

But in the past two decades, shoe manufacturing has rapidly decamped overseas. Now, only about 1 percent of all shoes bought in the US are made here, with the vast majority of the rest made in China. (US military footwear, required by law to be made domestically, helps sustain what stateside manufacturing remains.)

Chaco, founded on small-town loyalty, resisted the trend. While the company sent some of its manufacturing abroad, it continued to make the bulk of its sandals – some 320,000 pairs a year – in this isolated Colorado valley. Today, that’s about to change. “We knew it had to happen,” says Mr. Paigen, Chaco’s founder and owner. “There was no way we could continue to compete in the marketplace and have our material costs so much higher than everyone else’s.”

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Paigen is a former river guide who remains an inveterate skier and sailor. In his years leading the company, he has traded shaggy curls and a moustache for a trimmer look. While he recognizes what he describes as the “tremendous feeling of solidarity” on the factory floor below his office, he says the move to China was at least a year overdue.

“We’ve seen our margins erode, erode, erode,” he says.

Even after accounting for shipping and other costs, he says, a pair of Chacos can be made for at least $4 to $5 less in China than in Colorado. That translates into roughly a $16 to $20 difference for consumers, he says, and while some might be willing to pay such a premium out of patriotism – or regional pride – he doubts that loyal core could support the company.

What’s more, he says, dwindling domestic supplies of materials and equipment could soon force Chaco to look overseas for more of its components, no matter the location of its factory – meaning that if were it to stay in Colorado, the factory would have to ship in materials only to assemble them with more costly labor.

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