Gibson (Nashville) Custom Shop layoffs

[Thumpalumpacus]

Everything ends, all businesses have a life cycle. I think it's hopefully unlikely but it's not impossible that we are seeing the end of Gibson's life cycle (say 60/40 odds based on the publicly available information). In retrospect, looking from the outside and probably not knowing what I'm talking about anyway, it appears that Gibson management made some very expensive choices that did not pan out and are dragging the company down. Those choices were specifically buying into other market sectors where they were not successful and now selling those acquired businesses off. They may lose some money on those deals, I don't know, but the sales will free up some cash to put towards servicing their debt coming due. Combine that with a shrinking market for their core business (guitars) and the cash flow problem is significant. They are either going to have to sweettalk their debt holders or come up with infusion of new money and that is not easy.

I'm guessing any rescue loan will come with strings, such as asking Henry and Dave to surrender some equity, and reducing their decision-making input. Between that and a sell-off of the unproductive acquisitions, Gibson may well survive.

[lammie200]

I think that's a really pertinent observation.

Next up: The invention of the movable type, twitter, conspiracy theories, and the greatness of a Gibson reverse Flying V.

[christianm77]

I can’t wait

[Dennis D]

My first instrument was the accordion, when I was a little kid in the 1960’s. When my relatives would all gather for Christmas celebrations at our house, and as the night wore on, and maybe folks drank a little too much, my mother would summon me to play my accordion. And my uncles would say you know, it’s getting late, we got a long drive ... never failed to clear the room. God I couldn’t wait to start playing guitar!

....playing and singing the everpopular : " Lady of Spain, I adore you " - -

[EarlBrother]

My younger sister worked there!Better call her see how she is doing.Thanks!

[rice_burner2000]

Why don’t they sell off other assets? Like other guitar companies they bought in the past only to shut them down? Then just focus on the American made Gibsons? They made some foolish investments.


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[2bornot2bop]

Lots of excellent points. The question I have is, if you're the world's best major guitar company that still is the world standard for mass guitar production, why not focus on downsizing and doing what you do best - continue to produce guitars but at a lesser number? Instead of diversifying yourself into hock with things that are far away from your specialty? Or how much does plain own greed play into this terrible mix? There's a story there somewhere.

And, can America handle a Chinese owned Gibson? Talk about being OWNED!

[powerwagonjohn]

To a guy like me it would be as bad as a Italian owned Dodge/Chrysler !
No Thanks John

[sgosnell]

Selling the companies they went deeply into debt to buy isn't easy, and especially not within a very few months. The first bonds are due in July, so they have to come up with about a half billion dollars by then. Plus more than that comes due in about September, IIRC. When you owe more than a billion dollars in bonds, coming up with that much money in a short time isn't easy. In fact, I don't think it's possible. If the average sale price were $5,000, it would take 200,000 sales in the next 3+ months. Never happen, GI. Nor will they be able to sell enough pianos, Les Paul speakers, Onkyo amps, nor any of the rest of the stuff they bought. Exxon can turn a billion in profit in a quarter, but Exxon is a lot bigger than Gibson Brands. Even if Gibson tried, they couldn't sell off enough assets in time to meet the bond maturities.

[lammie200]

To a guy like me it would be as bad as a Italian owned Dodge/Chrysler !
No Thanks John

Dude, you're not taking away my FIAT Abarth. Between myself and two of my sisters we have owned 5 of them.

[ThatRhythmMan]

Gotta hang on to Kramer. They are sure to come back strong.

I saw somewhere that they already sold Baldwin, but I haven’t been able to confirm that.

[Thumpalumpacus]

Why don’t they sell off other assets? Like other guitar companies they bought in the past only to shut them down? Then just focus on the American made Gibsons? They made some foolish investments.


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They'll no doubt look to sell those assets off -- if they can ... probably at a loss, and probably not enough to recoup original investment, never mind debt servicing.