Like many American companies, Exxel Outdoors Inc., an Irwindale sleeping bag maker, did not hesitate to outsource its manufacturing work to low-cost foreign countries while building its business.

But this traditional story has a twist.

Unlike many of its competitors, Exxel was able to capitalize on an opportunity to scoop up a modern, high-tech factory on the cheap. That allowed it not only to begin manufacturing domestically, but to close its south-of-the-border plant and bring work back to the United States well before the current decline of the dollar boosted domestic manufacturing.

“We started noticing as we were doing our study sheets, time sheets, efficiencies that wait a minute the factory in the U.S. is kind of viable,” said Chief Executive Harry Kazazian, who founded the company in 1991. “It was never on the radar. But when you sit down and keep crunching numbers, you come to the conclusion that we could be more profitable by being in the United States.”

Now, with rising wages overseas and increasing shipping rates from Asia, the cost of outsourcing manufacturing work is going up, allowing Exxel to gain relative to its competitors.

Sales of its bags, tents and related camping products, which are carried by national chains, have grown about 25 percent over the past three years, with 2007 revenue topping $38 million, according to Kazazian.

The company, which has its top management and distribution operations in L.A. County, achieved this success by seizing an opportunity that came along.

Exxel had been manufacturing its bags in Mexico when in 2000, Brunswick Corp., the Lake Forest, Ill.-based company known for its bowling gear, decided to get out of the sleeping bag market where it was having limited success.

While waiting to board a plane one day, Kazazian read about Brunswick’s planned closure of a Haleyville, Ala., plant that had been operating since 1977. He realized that acquiring the facility could help spur growth.

“When I got home, I picked up the phone and called Brunswick Corp.,” he said. “The next thing I know, I’m talking to the president of Brunswick. It wasn’t even that complicated.”

Kazazian said he bought the factory for $6.1 million, a fraction of the total $21 million Brunswick spent in its failed effort to become the No. 1 domestic sleeping bag manufacturer.

His intention at the time was to close the plant and move the equipment to his primary manufacturing facility in Mexico. He also hoped to get some better deals on raw materials and, ideally, take over Brunswick’s customer base.

Outdoor appeal

Those intentions created anxiety among the plant’s employees, but those fears were assuaged when Exxel realized the technologically advanced plant could be profitable especially given the fire-sale acquisition price.

Barbara Garrison, administrative manager for the Brunswick plant since 1991, said Exxel also had a particular advantage.

Brunswick was a much larger company, while Exxel has only a little more than 100 employees. That has allowed Exxel to make changes to production schedules, introduce new products and phase out others much quicker than Brunswick could.

“In a company like we run, we can make almost instantaneous decisions,” said Garrison, who stayed on with Exxel as vice president of operations. “If you have to go through levels of management, you might lose an opportunity.”

One retailer that long respected Exxel was El Segundo-based Big 5 Sporting Goods Corp. The retailer had been buying from Exxel since the mid-1990s, and upped their purchases after the company took over the Alabama plant.

“I think (being made in America) meant a lot to a lot of people. Everything seems to be coming in from Asia now,” said Cliff Cornhall, who worked as Big 5’s buyer for camping products and visited the plant before retiring in 2005. “It was just a fantastic factory.”

The company does have some specialty bags and other products made in China, but its low-cost bags, which retail at low as $7.99, are made at the Alabama plant. The factory is expected to produce 1.4 million units this year and nearly 2 million in 2009. And with its U.S. plant growing, Exxel recently closed its facility in Mexico, where wages have been rising. Experts said this could be part of a growing trend.

“Average hourly earnings in Mexico over the last few years have been growing at a faster pace than in the United States and productivity growth in (Mexican) manufacturing has been growing at a slower pace,” said David Huether, chief economist for the National Association of Manufacturers.

Indeed, as early as 2006, the Conference Board business organization conducted a study that found big gains in U.S. productivity just about canceled out any wage advantages Mexico had. At the time, Mexican compensation averaged only 15 percent of U.S. wages.

The study also found that even lower wage costs in China and India still gave those countries an edge as a manufacturing base, but the recent fall of the dollar has erased some of that advantage.

Moreover, rising shipping costs due to skyrocketing fuel prices also are pushing up the cost of imports, especially for companies that import bulky, low-value products. Relatively few sleeping bags, for example, can fit in the heavy cargo containers that are standard among international shippers.

Still, there may be rough waters ahead for domestic manufacturers. Consumer purchases in the sporting goods industry in the first quarter of 2008 dipped 2.6 percent from last year.

“The housing downturn, rising energy costs are putting downward pressure on consumer spending,” Huether said.

But Kazazian believes that in a rough economy more consumers tend to consider where their products are made, which gives greater currency to the “Made in America” label.

“When the time gets tough and the economy is turning a little south, people tend to ask, ‘Why aren’t we buying USA?'” he said.

Exxel Outdoors Inc.

Headquarters:

Irwindale


Founded:

1991


Core Business:

Manufacturing low-cost sleeping bags and other camping supplies


Employees:

109 (up four from last year)


Goal:

To become a market leader in the sleeping bag industry while maintaining domestic manufacturing operations


Driving Force:

The ongoing popularity of camping in the United States as a recreational activity