Our monthly "Gibson in Imploding" article.

I care. The people who work there care. Especially the ones who worked there for years, and see their stability crumble, when they have invested their labor there.

Is it right to tell someone that after 20+ years of hard work, that they are to lose their pension? The healthcare they were promised? I don't view employee relationships as hourly rentals, especially when long-term commitments are broken.
 
Danhedonia said:
I care. The people who work there care. Especially the ones who worked there for years, and see their stability crumble, when they have invested their labor there.

Is it right to tell someone that after 20+ years of hard work, that they are to lose their pension? The healthcare they were promised? I don't view employee relationships as hourly rentals, especially when long-term commitments are broken.
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So, no you have no numbers to substantiate your accusations. Again, I will reiterate that no money/ commission they took seems to be contributing to their issue. Let's use your example of 72/400, a drop in the bucket. That's 18% which in my opinion is not an unreasonable commission.

While it might not be the right thing to do, and not something I would do. The employees are owed the terms of their contract during the time of their employment and nothing more.
 
The concept of that much debt on an old and venerable name brand like Gibson just seems like an illogical course. I'm a "small-time" CFO in a much smaller pond, about 5% of the business revenue that article reports for Gibson, but from an outsider's view, it seems implausible that mismanagement would run up a staggering amount of debt like that in a company that produces an iconic quality product that is in demand worldwide. Especially when you consider it's not opening up new markets or any significantly new product lines. (But don't let me forget about its new factory(s) in China built in an effort to cheapen the Epi brand and increase margins - so where are they?)

Of course we all learn in Economics 101 that for some products, like name brand guitars, that "the demand is elastic", meaning if it gets too expensive (like by adding too much damn debt service to a product) then the demand will drop off precipitously. At least Harley Davidson is coming out with an electric motorcycle, whereas Gibson came out last year with "American made" Gibsons sharing Epiphone parts. thwap0

Maybe Henry J should pick up the phone and ask John Hall of Rickenbacker how it's done.
 
FWIW, Gibson does a lot more than make guitars. The guitar making across all the brands they own is a pretty small part of their overall operation. They own Philips Consumer Electronics, for example, which makes a fuck ton of stuff not music related. They also are partnered with Onkyo and I believe they own most of it. From a few things I have read, the guitar business is profitable, but a relatively small part of their overall portfolio. I think they bet on growing some of the brands they acquired and had some wildly optimistic numbers in mind, then a big recession hit and a softening in consumer electronics, which made them borrow more money to keep things going, and then, well, you eventually borrow enough that you have to pay higher interest rates, which makes things worse in terms of cashflow. I'm sure the sagging guitar market and their giant missteps in 2015 probably hurt too, with some of their safer business income faltering.

I read the creditors might step in and force changes, likely sacking the management (like Henry). Henry would still be an owner, but no longer in charge. The other option might just be for Gibson to restructure all that debt in a bankruptcy. I don't think any other guitar company could step in and buy the whole of Gibson, but the creditors might break up the company if they were to take control and sell the guitar division. Just guesses from various things I've read.
 
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18% is considered usurous in the VC world. That's outrageous as a transaction fee. Not having access to their balance sheet or transaction figures is irrelevant in the face of the obvious: they borrowed a bunch of money to buy things, and are now selling them at a loss as Moody's downgrades them. There are no special circumstances; this has absolutely nothing to do with Econ 101. GAS Man is correct - for debt to be legit, there must be the possibility to pay it off. Which of Gibson's businesses was supposed to greatly increase? Demanding specifics of their private equity deals isn't necessary or helpful when the signs are this large.
 
This is where I find corporate finance fascinating: Gibson has an un-makeable interest nut, but somehow overhead is the problem?

As my dad once said, "usually, when someone does a leveraged transaction, it means they think they can cut costs. And if you didn't read the memo, you're the cost."
 
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