Gibson responds to bankruptcy reports

Discussion in 'Guitars in General' started by COYS, Feb 22, 2018.

  1. Anthony Newcomb

    Anthony Newcomb Member

    Messages:
    1,753
    Joined:
    Jun 10, 2017
    Location:
    Florida
    Last edited: Feb 27, 2018
  2. Mr Fingers

    Mr Fingers Member

    Messages:
    1,877
    Joined:
    May 14, 2017
    The stuff the company mentions is all obvious and none of it assures that the company will emerge as sound, let alone capable of making great guitars. For the sake of the workers and the core guitars the company has offered over the years, I would love to see Gibson come through this mess, but on the other hand, I'd love to see the company clean house at the executive level. And take those zero frets with you when you leave, boys. We don't want 'em.
     
  3. DC1

    DC1 Member

    Messages:
    15,109
    Joined:
    Oct 30, 2006
    Location:
    SoCal
    Bah. The zero frets are fine, as are the big, wide necks.

    Hate the robot tuners though.

    dc
     
  4. Jonny G

    Jonny G Member

    Messages:
    1,482
    Joined:
    May 21, 2014
    Location:
    London + Moscow
    Bingo! :idea

    The debt was loaded onto a flat (ie no growth) but profitable guitar business and spent on no name, no margin consumer electronics which is an area that anyone sane has been trying to get out of for decades. Everyone in these Gibson threads talks about guitars being the issue. Its not - its the electronics acquisitions which have to qualify as one of the poorest strategic decisions evah! (and believe me, history has shown quite a few of those, so there is stiff competition for that particular title....)
     
    EL34, BaoBao, lexreverb and 2 others like this.
  5. toomanyamps

    toomanyamps Member

    Messages:
    1,485
    Joined:
    Apr 26, 2007
    It's not that I want Henry to stay, I DON'T WANT the private equity vulture capitalists to take control. They will look at The declining demographics and sell the company piece by piece to get their money back ASAP.
     
    Boris Bubbanov likes this.
  6. Jarick

    Jarick Supporting Member

    Messages:
    6,264
    Joined:
    Jan 25, 2006
    Location:
    Saint Paul, MN
    Yep. Gibson tried to make changes to their guitars in response to the poor audio brand performance as well as flat guitar market.
     
    stratplexi likes this.
  7. BaoBao

    BaoBao Member

    Messages:
    134
    Joined:
    Feb 21, 2018
    I think it's a bit of both. I think that the bad Gibson business practices (both to employees and customers) were going to drag them down anyway, but by diversifying into dying companies and financing them with unmaintainable debt, they shot themselves into both feet. In the end, I think both are due to the same problem though: a total disregard for the real world and real problems.

    They could have done well to read this book beforehand:
    https://www.goodreads.com/book/show/2854392-billion-dollar-lessons

    The interesting thing is what's going to happen next. It's clear Gibson cannot refinance this half billion with the assets and profit they have, so they will go down. They will need to sell off all the crap at fire sale prices, and that will still leave them with a default of the main company, which still has grumbling employees and bad business practices. Will Epiphone be the center of the surviving ruins? Will Fender or Ibanez buy them? Will Guitar Centre or Sam Ash buy them and get a monopoly?
     
  8. toomanyamps

    toomanyamps Member

    Messages:
    1,485
    Joined:
    Apr 26, 2007
    I think it is far from a done deal they can't refinance, they do have over a billion dollar yearly revenue stream.
    If someone does come in they will probably want a decent chunk of equity, but it may be doable.
    Fender, Guitar Center or Sam Ash aren't going to buy Gibson, Guitar Center owes twice as much money already, Fender is just digging themselves out of debt and Sam Ash is not that big and I've heard their finances aren't rock solid.
    I have no idea what Ibanez situation is.
     
    Last edited: Feb 27, 2018
    BaoBao likes this.
  9. Boris Bubbanov

    Boris Bubbanov Member

    Messages:
    22,882
    Joined:
    Apr 30, 2008
    Location:
    New Orleans + in the past
    I hear you. We tend to assume a White Knight is the only possible outcome. '

    But.

    Yes, the next owner could in fact, be worse. My sense is that possibly, Henry J is selling off the assets that might attract that type of buyer. In trying to help his own position, he could along the way shield the company from the scenario you and I fear most.
     
  10. toomanyamps

    toomanyamps Member

    Messages:
    1,485
    Joined:
    Apr 26, 2007
    Ironically the one thing that may keep Gibson whole is the fact Henry proved it is not a "lifestyle " brand it's value is in guitars.
     
  11. modavis99

    modavis99 Silver Supporting Member

    Messages:
    1,140
    Joined:
    Apr 7, 2010
    Location:
    New Jersey
    I have no inside knowledge but here’s a guess — Henry will refinance the entire debt coming due with a lender that will put in a change of control clause. Something like: total debt must be no larger than $xxx million within yyy years or the debt automatically becomes equity and Henry loses the company. I bet Henry would take that deal to give himself runway to fix the mess; and the new bond holders either get repaid or take over the company without going to bankruptcy court.
     
    BaoBao likes this.
  12. LR1400

    LR1400 Member

    Messages:
    745
    Joined:
    Jan 18, 2006

    If all of these companies are or have been recently in similar situations it tells you that the main problem is a crappy industry, not necessarily the companies themselves. Not even necessarily their management.

    Often times industries just have irrational characteristics that really no one can define why they are that way. For example, airlines - classically a terrible industry. It’s gotten better with consolidation.

    You would think that they would be able to maintain rational pricing power because they have high barriers to entry, limited competition, and there is no viable alternative to travel. It takes one irrational operator or a disrupter (Southwest). Even before Southwest airlines was a terrible business.

    Another example of outside influence decimating industries: textiles and low cost manaufactures products like toilet seats or gloves. These industries have seen foreign low cost products destroy their ability to produce at any sort of margin. There’s nothing management can do there. American textiles...gone, Ive personally watched a toilet seat manufacturer and glove maker disappear due to the the influx of much lower cost foreign products. Management can do nothing there with the one possible exception of transferring it’s manufacturing overseas, though that isn’t always possible. The best decision is to often exit the business.

    You often see the opposite in some consumer products industries. Their margins will stay solid for decades and no one really acts irrational to disrupt that.

    The guitar industry is one that appears to mainly be affected by changing consumer taste. This has also affected some consumer products industries.

    I agree that Gibson has made what seems to be ridiculous acquisitions in the consumer electronics areas.
     
    BaoBao likes this.
  13. bal704

    bal704 Supporting Member

    Messages:
    847
    Joined:
    Aug 23, 2009
    Henry spent a ton of money trying to convert Gibson from a guitar company to a 'lifestyle' company. At some point a few years ago (the 2015 fiasco I think), there was even a Gibson employee on these boards saying that they were going to make so much money from their other business acquistions they didn't need to make ANY money on guitars.

    To me, that is the root of Gibson's current problem....Henry's vision to become a lifestyle company put Gibson in a huge debt hole.
     
    FbIsNotE likes this.
  14. EtaCarinae

    EtaCarinae Member

    Messages:
    1,209
    Joined:
    Jul 31, 2012
    Location:
    St. Paul, MN
    They would be profitable without the debt. They would not have the debt without having bought consumer electronics. They could have handled the debt had it not been for the recession.

    The bankruptcy will clear the obligations to their creditors. What happens next is going to surprise some people - they will keep doing a lot of the same thing with their guitars. Why? Because it was profitable. The business of putting out more of the same in the Les Paul segment, along with low volume high volume custom shop models that the general forum goer complains about but the collectors gobble up. They are going to do this because consumers reward them for staying mostly the same, and punish them for changes. Meanwhile people are going to complain in the same breath that Gibson is not doing this new thing they want while complaining about every new thing they are doing.

    Robot tuners are a popular whipping boy, but I have owned several, and they're great. The newest models especially so. I have played a lot of new Gibsons in the last few years, and they have been consistently excellent in terms of fit and feel. Sure, I think Henry J is a D-bag, but internet pile on group think has been comically bad vis a vis Gibson for years (forgive the brief rant).
     
    toomanyamps likes this.
  15. webe123

    webe123 Member

    Messages:
    1,404
    Joined:
    Dec 24, 2003
    Sorry, but I think you are dead WRONG! PRS could outdo Henry J in ideas without even thinking about it! HE ALREADY HAS! How is it that you cannnot see this? Henry J DESREVES the bad reputation he has gotten....it is not about just the stupid ideas he has signed off on, but the way he has run the company literally into the ground! He may have saved the company before....but they way Gibson is headed now is into bankruptcy and that is just a fact! History will tell if he is the one that sinks Gibson as well as he saved it before. I love a good Gibson guitar and think they are a great company with a rich history.... but the fact remains that Henry J and his cronies need to go!
     
    Last edited: Mar 1, 2018
  16. 70' s Tone

    70' s Tone Member

    Messages:
    2,576
    Joined:
    May 30, 2017

Share This Page

  1. This site uses cookies to help personalise content, tailor your experience and to keep you logged in if you register.
    By continuing to use this site, you are consenting to our use of cookies.
    Dismiss Notice