Gibson files for bankruptcy

**vinnyv1k** · 05-01-2018, 12:55 PM

My only concern is that the Crimson guys all get there jobs back and Gibson archtops start rolling off the assembly line again including 175’s. I can care less about anything else as long as Gibson is still a USA made guitar.

LONG LIVE GIBSON ! and no I don’t see Chibson happening.

**Thumpalumpacus** · 05-01-2018, 01:07 PM

Originally Posted by dallasblues

I guess I never totally understood exactly why Gibson has been struggling. I've heard rumors that there've been quality control issues but haven't seen it firsthand.

Your answer is here:

Originally Posted by Almeisan

Or are other areas of the company such a drag?

The reason why Gibson has so much debt because about 5 years ago they went headfirst in consumer electronics, buying Phillips, Onkyo, TEAC, and other home electronics companies. whose stars were fading. The bankruptcy plan calls for shedding those unproductive ownings and refocusing on building guitars, which has always been profitable and still is, to my knowledge.

Originally Posted by Doctor Jeff

Which kind of sounds like Henry J convinced them he could still run the company, if only he didn't have the unprofitable parts. We'll see if that is the case.

He has had his wings clipped quite a bit of course, but interestingly no Henry J wasn't a condition for bankruptcy.

They've given him a consultancy for one year, put him on salary, and ensured that he's a minority shareholder. A buddy of mine at another forum worked with KKR overseeing a similar process, and according to him, HJ as CEO will have to answer to some pretty strict metrics, as that is KKR's way of turning a business around. Non-performing execs get axed, according to Donny.

Originally Posted by Stringswinger

No ownership or management change will occur.

This is inaccurate. HJ has already traded in a lot of ownership stake in order to raise the loan that has saved Gibson for the time being. Henry has lost about 21% stakeholding, and only owns 39% of Gibson now. He's retained the title of CEO, for now; but he now answers to KKR, and serves at their leisure.

**tonedeaf** · 05-01-2018, 01:27 PM

Originally Posted by Woody Sound

Oh, where to begin...

Here are all the details: Full coverage - Google News

**Al_F** · 05-01-2018, 01:51 PM

Standard operating procedures of KKR—purchasing businesses, adding debt, minimising taxes, cutting costs (and facilities and employment), extracting large fees. Gibson will survive but probably won't look the same could be good or not so good for guitar players.

**jameslovestal** · 05-01-2018, 02:36 PM

Gibson should have started to grow their own trees. But since trees take a long time to mature, they needed to do this when my L-7 was made back in the 50s!

**plasticpigeon** · 05-01-2018, 02:41 PM

Originally Posted by LtKojak

I got a massive amount of heat when I first said, paraphrasing the "Game of Thrones" saga, "Winter is coming" for Gibson. I got even more heat when I said that a new Norlin is going to happen.

What do you have to say now? I don't know about you, but in my case, I think a simple "told ya so" is in order.

Anyway, I don't think Gibson's gonna disappair, mind you. However, like it or not, a new "Norlin scenario" with Chinese capital and management is the most likely outcome.

EDIT: I just read the Bloomberg report; from what it's been petitioned, if granted, a New Norlin scenario seem to be avoidable... although I somehow still have my doubts about the actual feasibility of the requested refinancement. Only time will tell, I suppose...

You got a lot of heat as you seemed to be revelling in Gibson's woes.

**John A.** · 05-01-2018, 03:36 PM

What's the over/under on this thread for:

Total posts?

Number of people who announce they're quitting the forum?

I'm guessing 245 and 6

John

**Tal_175** · 05-01-2018, 03:48 PM

In days like this I get that terrible feeling that may be I didn't do enough. I should've bought that custom shop LP last year and how about that L-5 Wes-Mo the other day. I could've done more. We all could.

**Greentone** · 05-01-2018, 04:18 PM

I am not the most informed person on this one. I wonder, though, why Gibson thought it could make a go of Baldwin Pianos and Instruments when Gretsch couldn't? The piano business (at least in the US) is in the tank. China builds pianos for about 17-cents apiece, or something like that.

Henry J, et al., grabbed Baldwin and didn't make a dime, as far as I can tell.

Same thing with Phillips and with Onkyo.

Shoulda stuck with Gibson-logo yoga pants.

**Stringswinger** · 05-01-2018, 04:18 PM

Originally Posted by Thumpalumpacus

Your answer is here:

The reason why Gibson has so much debt because about 5 years ago they went headfirst in consumer electronics, buying Phillips, Onkyo, TEAC, and other home electronics companies. whose stars were fading. The bankruptcy plan calls for shedding those unproductive ownings and refocusing on building guitars, which has always been profitable and still is, to my knowledge.

They've given him a consultancy for one year, put him on salary, and ensured that he's a minority shareholder. A buddy of mine at another forum worked with KKR overseeing a similar process, and according to him, HJ as CEO will have to answer to some pretty strict metrics, as that is KKR's way of turning a business around. Non-performing execs get axed, according to Donny.

This is inaccurate. HJ has already traded in a lot of ownership stake in order to raise the loan that has saved Gibson for the time being. Henry has lost about 21% stakeholding, and only owns 39% of Gibson now. He's retained the title of CEO, for now; but he now answers to KKR, and serves at their leisure.

Indeed. It looks like Henry J. stays in control, but as a minority shareholder. He could be fired. My guess is that he will run the company in a very cautious manner and will retire on his own terms within a few years.

**Hammertone** · 05-01-2018, 04:40 PM

Originally Posted by Stringswinger

Indeed. It looks like Henry J. stays in control, but as a minority shareholder. He could be fired. My guess is that he will run the company in a very cautious manner and will retire on his own terms within a few years.

Or they retire his ass in a year, and off he goes with a bag of money. Henry's done just fine for himself. But what about Dave? Will they ask for the tattoo back? Or will he stick around?

**Stringswinger** · 05-01-2018, 04:59 PM

Originally Posted by Hammertone

Or they retire his ass in a year, and off he goes with a bag of money. Henry's done just fine for himself. But what about Dave? Will they ask for the tattoo back? Or will he stick around?

How much of the company will Dave own after the BK plan is accepted?

**Spook410** · 05-01-2018, 04:59 PM

Sad for those employees in the states and abroad that will suffer from this. Looks like the audio businesses will be shuttered. Many will be uprooted for poor choices made by a few elites.

My background is engineering and business rather than music. Which doesn't mean I know anything but it does make me more opinionated on this sort of thing.

- Whoever manages Gibson (current team named as 'transition' which can mean anything) will be under great pressure to show short term profit. Not long term vision. Gibson will focus on their most profitable models and trim out the rest.

- They will move manufacturing where it makes the most business sense to have it. One does not have to look at too many other big guitar makers to see what that means. Maybe keep a halo and/or set up business in the states. Could be wrong. Some companies rely on a populist 'Made in USA' tag. Don't think the numbers will support it though.

- There is a lot of analysis going on right now by the lenders to see how they can lose the least in this deal. There are a lot of considerations (jazz guitar players not being one of them). Financial houses don't manufacture guitars or have an emotional stake. If they make more selling the name, they'll sell it.

- The high end Gibson archtop as we've known it, will no longer be made.

- Some think used Gibson prices will now go up. If there were a demand for archtops, maybe. Those in the know might see some bargains. As for the rest, wouldn't bet on it. I think the new Gibson will dilute the brand.. though maybe be better made than we've seen recently.

**John A.** · 05-01-2018, 05:16 PM

Originally Posted by Greentone

I am not the most informed person on this one. I wonder, though, why Gibson thought it could make a go of Baldwin Pianos and Instruments when Gretsch couldn't? The piano business (at least in the US) is in the tank. China builds pianos for about 17-cents apiece, or something like that.

Henry J, et al., grabbed Baldwin and didn't make a dime, as far as I can tell.

Same thing with Phillips and with Onkyo.

Shoulda stuck with Gibson-logo yoga pants.

Baldwin pianos are made in China.

John

**plasticpigeon** · 05-01-2018, 05:25 PM

For what it's worth, which is nothing at all, as I know diddly squat, I think they will have to be made in the USA. There are lots of good brands made in the far east already. A guitar is not really like a drill, phone or food mixer, it is more than purely functional, and for many there is quite an emotional investment and even identity wrapped up in their choice of instrument. I think the Gibson customer wants a USA guitar. I bet the old Orville by Gibson guitars were pretty good as were the Epiphone Elitists, and even though they are highly thought of, enthusiasts aspire to own the real thing, whether that is logical or not! I certainly don't understand why Gibson can't make a massive profit on every guitar if Mark Camellone can make a living charging less than Gibson does for a bespoke instrument!

**Bluedawg** · 05-01-2018, 06:59 PM

Originally Posted by plasticpigeon

For what it's worth, which is nothing at all, as I know diddly squat, I think they will have to be made in the USA. There are lots of good brands made in the far east already. A guitar is not really like a drill, phone or food mixer, it is more than purely functional, and for many there is quite an emotional investment and even identity wrapped up in their choice of instrument. I think the Gibson customer wants a USA guitar. I bet the old Orville by Gibson guitars were pretty good as were the Epiphone Elitists, and even though they are highly thought of, enthusiasts aspire to own the real thing, whether that is logical or not! I certainly don't understand why Gibson can't make a massive profit on every guitar if Mark Camellone can make a living charging less than Gibson does for a bespoke instrument!

Yup

IMHO they will be shooting themselves in the foot and other tender areas if they don't make Gibson in the US.

Fender tried it in the late 80s and it didn't take them long to bring bake a US made line of guitars.

**jzucker** · 05-01-2018, 09:20 PM

i don't think the market will bare an expensive american-made instrument. The labor costs are too high here and the older, baby-boomer population are selling their collections, not acquiring more. These forums with guys who have 25+ archtops are not representative of the market as a whole.

**Jazzstdnt** · 05-01-2018, 09:29 PM

Originally Posted by jzucker

i don't think the market will bare an expensive american-made instrument. The labor costs are too high here and the older, baby-boomer population are selling their collections, not acquiring more. These forums with guys who have 25+ archtops are not representative of the market as a whole.

Not sure if Martin, PRS, Collings, and others received that memo Jack.

**johnnytuinals** · 05-01-2018, 09:44 PM

Gibson will be owned by someone else.
Gibsons will be made overseas in 2020(China} and their Custom Shops will still be made in the states.
Too many companies making guitars and most are overseas......JT

**Jazzstdnt** · 05-01-2018, 09:46 PM

Originally Posted by Doctor Jeff

he's been with the company a long time and is long in the tooth.

As far as the Gibson guitar business, I don't think everything is rosy there either. You can't just make a boutique product in today's market and depend on collectors and LP fanboys to pull you through.

Martin, Godin, even Fender (though their finances are not secure) know how to make something for everyone.

He's "been with the company a long time"? Really? He's not a manager. He owns it.

The guitar business has sales of $1B per year. How's that compare to your business?

Those others know how to make something for everyone? Well Gibson does too, they have models in all ranges. But like Martin they're known for the good stuff. It's what people expect of them. They call that "branding".

**jzucker** · 05-01-2018, 09:52 PM

Originally Posted by Jazzstdnt

Not sure if Martin, PRS, Collings, and others received that memo Jack.

PRS has a huge range of instruments ranging from very inexpensive to very expensive. So does Martin. Collings is a relatively small boutique company with low production output. And

If gibson wants to morph into heritage, hand-making 50 guitars a month that's one thing but I don't see that happening.

**Jazzstdnt** · 05-01-2018, 10:06 PM

Originally Posted by vinnyv1k

My only concern is that the Crimson guys all get there jobs back and Gibson archtops start rolling off the assembly line again including 175’s. I can care less about anything else as long as Gibson is still a USA made guitar.

LONG LIVE GIBSON ! and no I don’t see Chibson happening.

Nothing ever happened to hurt Crimson. They RIF'd supervisors, admin, and older staff. They never shut Crimson - and no article ever claimed that they did.

**Jazzstdnt** · 05-01-2018, 10:11 PM

Originally Posted by Thumpalumpacus

Your answer is here:

The reason why Gibson has so much debt because about 5 years ago they went headfirst in consumer electronics, buying Phillips, Onkyo, TEAC, and other home electronics companies. whose stars were fading. The bankruptcy plan calls for shedding those unproductive ownings and refocusing on building guitars, which has always been profitable and still is, to my knowledge.

They've given him a consultancy for one year, put him on salary, and ensured that he's a minority shareholder. A buddy of mine at another forum worked with KKR overseeing a similar process, and according to him, HJ as CEO will have to answer to some pretty strict metrics, as that is KKR's way of turning a business around. Non-performing execs get axed, according to Donny.

This is inaccurate. HJ has already traded in a lot of ownership stake in order to raise the loan that has saved Gibson for the time being. Henry has lost about 21% stakeholding, and only owns 39% of Gibson now. He's retained the title of CEO, for now; but he now answers to KKR, and serves at their leisure.

The phrase is "serves at their pleasure", not "leisure".

And yes, darn right it's their pleasure. They trust him to know how to run Gibson better than any of them do (Easy to say given that they know absolutely nothing. If they did he would be gone).

CEOs of publicly traded companies serve at the pleasure of the board. They have a salary and stock options. They have contracts. They are hired help. So now he is in a similar position.

So?

**Jazzstdnt** · 05-01-2018, 10:17 PM

Originally Posted by jzucker

PRS has a huge range of instruments ranging from very inexpensive to very expensive. So does Martin. Collings is a relatively small boutique company with low production output. And

If gibson wants to morph into heritage, hand-making 50 guitars a month that's one thing but I don't see that happening.

So does Gibson. They call them Epiphones.

And you're right. Gibson doesn't want to morph into Heritage. Heritage may have dreamed of the reverse though. Or maybe not, whatever. Nobody gives two craps about Heritage and they never have.

If Gibson wanted to become Heritage no bailout would be in play.