Other Guitars

Is Gibson In Trouble….??

1

It's no secret that Gibson has been overcharging for years trying to corner every market possible. Then they introduce a strange new guitar that sells for $4k that no one will buy......

.... And a half-billion $$ in debt?????

http://www.musicradar.com/n...

2

And now they're moving out of their Memphis plant looking to move into a smaller facilities. I just read about it on reverb.

3

I get the impression, and that's all it is - an impression based on unrelated articles I've read about the state of the music instrument industry - that Gibson is not alone in this. From a few articles I saw around the time of the NAMM show in January, everybody's sales and profits are down.

In Gibson's case, they're a privately-held corporation so their financials aren't as public as might be the case at a company with shareholders. However, in the last few years they've made a lot of deals, primarily non-guitar related, that have increased their debt burden. Not something I'd want to do when sales were looking soft, but maybe that's why I fix airplanes for a living rather than owning Gibson.

4

Gibson never should have left Kalamazoo.

5

A privately held company that manufactures guitars carrying $520 million in debt is really bad news. I do not have insight into the fiscal positions of other guitar manufacturers but I cannot imagine Gibson being able to carry on much longer unless they partner with an Angel Investor or Venture Capitalist and share ownership of the company. Even then, the average amount will only be around $10 million to $12 million and that hardly makes a dent.

What other options are there? Going public? I haven't seen a Gibson D&B report but I cannot believe the score would be too good and the stock would hit the ground running as a dog with fleas and not attracting many investors.

6

The name "Henry J" has a long fabled association with spectacular money-sinking enterprises. It once adorned a car that helped drain the fortune of two titans of industry, both rich as Croeseus.

Henry J may not have been Gibson's ideal savior.

We'd hate to lose Gibson - but I can't imagine one of THE great guitar brands won't be around in some form, let's hope with US manufacture, drawing on its unparalleled heritage and catalog of great designs.

7

They will file for reorganization, downsize, F over their creditors, employees, customers and continue.

8

They will file for reorganization, downsize, F over their creditors, employees, customers and continue.

– Curt Wilson

Exactly this.

But, let me say that while I don't like the sense that Gibson would "F over [its] creditors, employees, customers and continue", I think that this is exactly what the federal bankruptcy laws are designed for. We don't want to lose Gibson as a manufacturer of fine American guitars. They mean a lot to the musical heritage of our country. But, they have a management who has made wrong decisions that have led them to be unable to financially recover unless they are given relief. That is exactly the purpose of the bankruptcy laws, whether a Chapter 11, Chapter 7, or otherwise. It is to give the company a new start.

I think that, if Gibson does file for bankruptcy protection (which it seems like it inevitably must do), there needs to be new management of the company. Henry Juszkiewicz needs to step down and allow others to take the reins. We want Gibson, but not under his faulty management.

Get back to the basics of building fine guitars -- not experimental or highly novel guitars. Just the basics. Downsize the expectations. We don't need Gibson owning the music world. We need them to just build their tried and true guitars. They could actually learn a lesson or two from FMIC's handling of the Gretsch brand -- it's okay to build guitars for a small niche. They should begin with that attitude and, if the market receives their new products with enthusiasm, then think about something a little grander.

9

it's okay to build guitars for a small niche.

Every niche should be so small. Gibson (and Gibson-inspired guitars) are a huge part of the market - electrics, of course, but with a storied and still sizable presence of classic acoustics too.

You'd think it would be enough.

10

Many of you know my story... briefly: Their IP is already highly leveraged, private equity is scheduled to make a call in January and countless opportunities to restructure debt, mitigate risk and like sound financial practices have been rejected by HEJ.

Hell, they’ve borrowed money from GC against future orders just to make payroll, which has put GC in a few tough spots.

They steal. The violate Federal Law. They screw vendors. They waste $10s of millions in legal fees litigating ridiculous and meritless lawsuits ( and usually lose), and...

When the CEO is not of sound mind, this is the outcome. 2018 should be really tough on them.

Ric12: HEJ has rejected all bailouts to date as the terms require him leaving and that will never happen. He’ll continue to ride it into the ground first. Really.

11

How does Henry run a small business?

Start with a big one.

12

Several rumours around that FMIC might be looking at a Gretsch type marketing deal with Gibson.

13

it's okay to build guitars for a small niche.

Every niche should be so small. Gibson (and Gibson-inspired guitars) are a huge part of the market - electrics, of course, but with a storied and still sizable presence of classic acoustics too.

You'd think it would be enough.

– Proteus

That's exactly my point.

14

HEJ has rejected all bailouts to date as the terms require him leaving and that will never happen. He’ll continue to ride it into the ground first. Really. -- gretschman36

He will seek bankruptcy protection and will be forced to sell is how I see it playing out. He can't survive the call in January unless another "Hail Mary" occurs where someone tries to throw him a fruitless lifeline. But, that won't last long. Eventually, the creditors will get a trustee in place that will force some of these issues.

15

That's exactly my point.

Of course! I was just emphasizing it.

16

Several rumours around that FMIC might be looking at a Gretsch type marketing deal with Gibson.

Yeah, I don't know. Doesn't seem to me the thing to do.

17

And I'm not so sure that I want to see FMIC and Gibson combine in any fashion. That seems to be anti-competitive to some degree. Better that Gibson get some new ownership/management and return to the basics. Make America's Guitar Company Great Again! Or something like that.

18

He believes in the Hail Mary...

No question, the MI continues to shrink and HEJ saw it coming and knew diversification was at least a bridge. However, when one relies on innovative third parties to build the platform and you either do not pay, steal or otherwise bite the hand that feeds you, this is what happens.

Look at how he trashed the TC Electronics deal at the last minute. That was a win-win. That stunt further ruined his reputation and eroded trust for future deals with most anyone.

This will be interesting. HEJ loves a fight. Make no mistake, this is about ego and an unsound mind. Period. Think Howard Hughes.

19

I know one group that wants to come in and sell off every piece and allow most anyone to license their IP - turn it into a commodity.

20

The end for Gibson may have been written the day the board added Henry J as CEO. So many times, when someone with no "skin in the game", no real-world experience in the business, but who "knows how to make money" is brought in to "save" a company, the final chapter is opened.

When the financial mavens and geniuses of Wall Street started lapping up businesses simply to break them up and profit from that breakup a new mantra was started to be heard around the boardroom tables- "grow or die".

As explained to me by a representative of one of America's tech giants during a negotiation to swallow up a much smaller local operation, those are their only two options (this was his point of view), because shareholders -no longer the you's and me's of this world, but corporate entities unto themselves- no longer seem to be content with just making a profit each year, they insist on a "bigger" profit every year or they'll abandon the their position in search of more profit. Hence, "grow or die".

There are really only two ways to accomplish this- "grow" in actual size (get bigger) or grow your profits through sloughing off portions and disposing of the expensive bits that need to be fed, or as I like to call them- people. Often, "growth" is accomplished through a bit of a dance combining the two- buy a smaller, struggling company, then dispose of it and the people who came with it one piece at a time.

Fictional characters like "Wall Street's" Gordon Gekko and Edward Lewis in "Pretty Woman" are supposed to be caricatures of these "arbitragers", but the reality seems to be that Gekko and Co truly do exist. As an example, take a look at the incredible consolidation of ownership in our mass media as companies vie with each other to gobble up the most.

*-Food service is another prime example. Almost every restaurant chain is owned at the top of their own "food chain" by a venture capitalist or finance company. The result has been a "homogenization" of those formerly disparate chains as the ones who are really in charge exert their search for greater profit through single source purchases, common management and operational structure and in some cases, horribly similar menus and pricing. *

At first, "grow or die" was relatively benign. The companies that were bought and broken up were not always in the best of shape, and the smaller, profitable divisions which had been supporting the less solvent portions often wound up thriving. Sadly, this inspired more and more takeovers, but ultimately the rules -such as they were- had to change and soon it was all about how much you can squeeze out of a company rather than actually helping it out.

Wall Street still makes insane amounts of money (most of which you and I will never be able to access) by continuing this business trend, but the real cost in human terms has been growing every year. Though there are other factors involved, the brain trust at Sears is a current example.

The end of Sears was forecast within weeks of the installation of the first CEO whose experience running a major department store was non-existent. He had no skin in the retail game, no street-smarts in that kind of business, and the revolving door of very similar MBA's in Sears' front office as the company sank lower and lower shows the Board (run by the real ownership) had no interest in actually saving the company as the appliance section was sold off, followed by the legendary Craftsman brand, ultimately followed by most of the real estate holdings. People profited from each transaction, but very little money went into saving Sears, and each time, real people -our friends and neighbors- lost their jobs.

I've seen it, negotiated on behalf of employees at two such operations before I retired and in the end, it wasn't pretty for the real people who used to work there. Sears in Canada is a truly outrageous example of "following the law" while tossing their entire staff and pensioners to the wolves (Canadian law sucks), but the trend continues.

It sends Wall Street to those record levels we see trumpeted in the headlines and by sitting politicians almost daily (even though we really don't see much of that money ourselves), but there has to be a top end to this. It simply can't continue.

It's the ultimate pyramid scheme.

Sooner of later, they'll begin to eat each other and then what will happen? Who will "grow" and who will "die"?

Gekko and Lewis were supposed to be satires of the real versions. Sadly, some folks took the lessons they learned the wrong way.

Let's hope the folks at Gibson manage to avoid the trap.

21

I know one group that wants to come in and sell off every piece and allow most anyone to license their IP - turn it into a commodity.

– gretschman36

That would be a shame somehow. I would hate to think that we would be seeing Indonesian L-5 guitars hit the market.

22

He believes in the Hail Mary...

No question, the MI continues to shrink and HEJ saw it coming and knew diversification was at least a bridge. However, when one relies on innovative third parties to build the platform and you either do not pay, steal or otherwise bite the hand that feeds you, this is what happens.

Look at how he trashed the TC Electronics deal at the last minute. That was a win-win. That stunt further ruined his reputation and eroded trust for future deals with most anyone.

This will be interesting. HEJ loves a fight. Make no mistake, this is about ego and an unsound mind. Period. Think Howard Hughes.

– gretschman36

Great comparison Gretschman. HEJ is treating business as usual as Hughes did in financing the "Spruce Goose". There are way too many LP models with many of the specs overlapping. I'm pretty sure that is the reason why Sweetwater and other retailers are cutting prices and offering attractive financing on '16 and '17 models. Although I am aware that they are running the financing for other brands as well.

Great input by Ric, Kevin and others but this guy is a mess and now Gibson's finances are.

23

I know one group that wants to come in and sell off every piece and allow most anyone to license their IP - turn it into a commodity.

Can't be Dieter. He wouldn't buy a brand name.

24

I know one group that wants to come in and sell off every piece and allow most anyone to license their IP - turn it into a commodity.

Can't be Dieter. He wouldn't buy a brand name.

– Proteus

Now that’s funny! No. Pure raiders. Slice and dice guys.

25

That would be a shame somehow. I would hate to think that we would be seeing Indonesian L-5 guitars hit the market.

– Ric12string

Or worse and with genuine Les Paul logos, etc.

No question, it would welcome even more piracy as “no one will be home” to monitor and enforce those rights. I’d say it would take a matter of years to dilute the brand and trickle down to the vintage market, too.

Complete Wild West scenario like the early days of Japanese lawsuit guitars.

Yep. I can already see a $395 Eastman Les Paul Recording version...


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