Dire financial situation at Gibson?

[uwe]

Interesting, a fun-loving auntie then!

[westen44]

The same might be said for Churchill himself.  The impression some may have of him as being stodgy may not be too accurate. 

[Dave W]

Can we please get back to Gibson?

Henry blames retailers

After making it impossible for any but the largest retailers to carry Gibson, and then making the ones who do qualify take whatever inventory Gibson decides to send them, he still won't take responsibility for his actions.

From the last paragraph: "Those guitars from the 50s are what the purists want, but we have to have something new and exciting. Imagine if the camera had never changed. Innovation is a part of every business to some degree, but [the guitar industry] hates it. The kids demand it, and if you don't have it, they walk." Riiiight, Henry. That's why the kids rushed out to buy all your innovations. Funny how your competitors are prospering without robo tuners and the like.

[westen44]

He still isn't getting the point that you can't just have innovation for its own sake.  It has to mean something.  It has to be appealing and useful.  Any person with common sense understands this.  He did emphasize, though, the negative impact that 2008 had.  I agree with that. 

[Dave W]

Ruh-roh.

S&P downgrades Gibson to default imminent

The important part is that the results of Gibson's recently released 12/31/17 report to creditors have put Gibson in technical default; they may need monthly waivers even to continue until the due dates later this year.

Henry's days are numbered.

[uwe]

I don't find his observations so horrible or inept, more than a grain of truth in those. As regards innovation vs. tradition, a cutting edge instrument maker should offer both, if Ted McCarty's modernistic guitars (Flying V, Explorer, Moderne) weren't cutting edge back then, I don't know. Yes, they were also commercially unsuccessful at the time, but would we want them to have never been built? I think there is room for both - a vintage and a modern line. And while I'm not clamoring for a TBird with automatic tuners, they wouldn't keep me from buying a modernistic version of it either.

But I don't believe that Gibson's model policy is really the core of their difficulties.

[Dave W]

Yes, there's certainly some truth in his observations about retail, but Gibson's problems with retailers are all self-inflicted wounds. Gibson's model policy is a big problem only because of his insistence on blaming others when his changes are rejected.

His expansions into consumer electronics businesses are what will bring him down. Again, he won't come out and admit his disastrous mistakes. He still thinks he's an unappreciated business genius.

[uwe]

Modernisation is often throwing things randomly at a wall to see what sticks. I would have never thought that there would be a market for people lugging around an electronic motor on a bicycle - always thought that the point of a bicycle was to let your legs do the work, but look at what a commercial success E-Bikes have become (still don't own one though I ride 3 to 5 times a week 25 miles round trip home-office-home through woods mostly which has had some positive effect on my girth since I started with it last summer or so  ).

[Dave W]

Gibson lays off staff at Nashville Custom Shop

Gibson CEO Henry Juszkiewicz says the staff reductions are “part of a broad initiative throughout the company to prepare for our refinancing”.

Right. Lay off 15 senior workers. That will improve QC and turn your sinking ship around.

[uwe]

What a brilliant turnaround move, straight out of the restructuring handbook, I can barely contain my accordance.



Consolingly though, I do like how "broad initiative" sounds ... and didn't it do DEAN a whole lot of good too?

[Dave W]

Chinese Investment Consortium Is Eyeing a Gibson Guitar Acquisition

I don't see this happening. Henry's not selling and I don't think he'll allow himself to be forced into Chapter 11. OTOH if the creditors take some equity in exchange for debt, some foreign group could wind up owning a part of the company.

[slinkp]

I guess I don't understand how these things work. What options does Henry still have if his refinancing efforts fail?

[Dave W]

I guess I don't understand how these things work. What options does Henry still have if his refinancing efforts fail?

He'll have to accept the creditors' demands or they will force him into bankruptcy. They are apparently demanding some ownership equity in exchange for debt, and some control over how the company is run even if the ownership equity is less than 50%. If he refuses and is forced into Chapter 11, he'll likely come out with nothing.

[uwe]

Having seen/experienced what Chinese investors did to Volvo (a whole lot of good), I wouldn't be unduly worried.

The problem with Henry J is that he is not a guitar maker by pedigree, so there really isn't a face-saving position for him as some kind of elder statemen figure head in the company once it would have been taken over by someone else.

That CFO called Bill Lawrence who left only recently, was he a relative of the other, German origin, pup-creator Bill Lawrence or is that just a coincidence?

[Dave W]

No relation to Willi Stich a/k/a Bill Lawrence the pickup maker.