Our monthly "Gibson in Imploding" article.

I deeply disagree - not only is it the central matter with Gibson, it's the same mindset and approach that caused the crash of '08, and contributed enormously to the decline in everyday peoples' standard of living.
 
Lerxst said:
Didn’t we have an almost identical thread when Fender had to pull back iis IPO once everyone saw their crushing debt service obligations from years of acquisitions and less than rosy sales projections, tied into GCs outlook? IIRC there were plenty of jokes about Gibson buying them at the time. In the years since, they seem to have managed to refinance, revitalize some subsidiary lines, like Guild, and cast off some other aquisitions...still seem to be here for the foreseeable future.
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Not entirely similar scenarios. Fender's biggest problem at that time was they're number one retailer (GC) owed them an ass ton of money, and to basically all of their divisions and sub-brands. Yes, they had looming note payment deadlines etc, but nothing on the order of Gibson. Fender managed to get their own situation under control and turned around with some wise decisions and sound practices. Gibson is not just incapable of "wise" and "sound", but that ship sailed long ago. They are literally out of options. The only way they stay out of Bankruptcy Court is through a complete buy out from a larger corporation with excess liquid capitol. That last part pretty much translates to "Chinese", because American mega corps with excess liquid capitol are like unicorns unless they are bio-med or a select few other industries that would have no interest.

Perhaps the saddest part of this is, that while Gibson mismanaged themselves into Oblivion Henry J at the helm, both they and Fender both took a massive hit from GC not paying their bills. Not saying it would have prevented the inevitable, but it most certainly accelerated it.

Think back a few years ago when GC stores were LOADED with Behringer gear. Behringer had a reputation for being low quality junk at the time (which I believe was totally unwarranted), which in turn gave the impression that GC sold nothing but junk.

GC left Behringer hanging out to dry on a massive debt. Behringer responded in a few ways:

1st. They pulled all of their gear off of GC's shelves and severed ties completely.

2nd. They invested massively in new product R&D while completely and thoroughly addressing the quality concerns be they real or perceived.

3rd. They made new relationships with prominent e-commerce heavy retailers.

4th. They started rolling out new products that were significantly improved in every way, and with a big focus on construction and reliability coupled with cutting edge features that EVERYBODY wants, but only few can afford.

5th. They acquired TC/Helicon. This gave them both a premium brand with a solid reputation, and a source of industry people with all the right skills and knowledge.

6th. Re-investment. Here's the real meat of it all... Once free from the financial boat anchor that was GC pulling them under, and after having greatly improved their products and reputation, they set about an almost surreal frenzy of new product development. Seizing on the very popular synth market and the current fascination with old school analog synths with modern features and reliability, they have been on a tear!

Keyboard guys are WAY WORSE than guitar guys when it comes to product bias and cork sniffing. Behringer had ONE shot at impressing that crowd and they knocked it out of the park with the DEEPMIND 12 Synth. Even before the official release, YouTube videos of evaluation examples led to it being the most highly anticipated new machines in years.

It was an instant success, and has now proven itself to be everything claimed and more. You'd be hard pressed to find any detractors. Since then, they've jumped headfirst into that burgeoning market by LISTENING to what the end users really want, and immediately acting on that knowledge. By all accounts, they are currently "Out-Mooging" MOOG with their own re-issue of the classic Model D. The list of products coming down the pipe is staggering, and each new item they bring to the table only elevates their reputation further.

Both Gibson and Fender could learn a thing or two from Uli.
 
Danhedonia said:
That video is terrible.

There's nothing - literally, nothing there in terms of reporting. Just 'a guy' and his opinion that "guitars just aren't as popular." And this is how it happens: instead of having to learn how greedy, crooked bastards pay themselves handsomely to run a company into ruin, no, that's too boring, let's say "guitars aren't as popular any more."

It is a story of corporate malfeasance.
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Impassioned we are.

The point that I was trying to make by posting that video is that it does list what some of their acquisitions have been. That was pointed out by others in this thread, so my point was that the video does highlight some of their other corporate acquisitions, which on the surface appear to be ill-timed in the electronics market. And as others have pointed out, it's not just their marketing, models, costs, pricing structure or QC that's pulling them down, it's their ventures into being a "lifestyle company".

As I said in an earlier post, maybe they should have followed Rickenbacker model, but obviously they took off into becoming an unsuccessful conglomerate. I see mismanagement, maybe you can elaborate on the malfeasance in the technical sense.

But also, I don't see why you don't recognize the drop in demand in guitars as being a real issue. I was a forum member of HCEG since 1993 and believe me, the trend from "NGD!" to "shut up and learn to play what you have", has been a major cultural shift on the boards, and no doubt, it's impacted the sales of many guitar manufacturers. Listing your gear is now more likely to get you boo'd for excessive consumerism than applauded.

It started with Ma n Pa stores losing business to booming catalog sales in the late 80s/early 90s, then online sales took off, creating feverish consumerism for discount deals. Now that's old hat and the bubble has passed.
 
GAS Man said:
Impassioned we are.

The point that I was trying to make by posting that video is that it does list what some of their acquisitions have been. That was pointed out by others in this thread, so my point was that the video does highlight some of their other corporate acquisitions, which on the surface appear to be ill-timed in the electronics market. And as others have pointed out, it's not just their marketing, models, costs, pricing structure or QC that's pulling them down, it's their ventures into being a "lifestyle company".

As I said in an earlier post, maybe they should have followed Rickenbacker model, but obviously they took off into becoming an unsuccessful conglomerate. I see mismanagement, maybe you can elaborate on the malfeasance in the technical sense.

But also, I don't see why you don't recognize the drop in demand in guitars as being a real issue. I was a forum member of HCEG since 1993 and believe me, the trend from "NGD!" to "shut up and learn to play what you have", has been a major cultural shift on the boards, and no doubt, it's impacted the sales of many guitar manufacturers. Listing your gear is now more likely to get you boo'd for excessive consumerism than applauded.

It started with Ma n Pa stores losing business to booming catalog sales in the late 80s/early 90s, then online sales took off, creating feverish consumerism for discount deals. Now that's old hat and the bubble has passed.
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All excellent points. I don't know why, but he wants to hammer his belief that the route of all evil at Gibson is Henry and his team taking payouts. He doesn't have any evidence, and has conceded that even if that did happen it would make little difference to their current situation. But still you must know he could be evil.....:dh:


Imo as I have sated before. It looks like they made a play to diversify, and it was a bad play. Not to mention poorly executed.
 
Danhedonia said:
I deeply disagree - not only is it the central matter with Gibson, it's the same mindset and approach that caused the crash of '08, and contributed enormously to the decline in everyday peoples' standard of living.
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Yes, issues with executive compensation at the institutional level (corporations, government, universities, even unions) has an overall adverse affect on the the customer and employee experiences. But @reverend1 and @GAS Man are correct, Gibson has a history of poor management and bad decisions that led to their current situation. Could executive compensation be one of them? Possibly. But without access to their financials to confirm, it would be jumping to a conclusion to assume so. Executive packages aren't the only crappy things business do, keep an open mind for all the ways they can screw you that you may never have considered. There is some evidence that Henry J actually has high demands on his direct reports, look at how he denies them vacation time because they are "essential" to day-to-day operations. That's usually not indicative of a "good ol' boys" network that scratches each others back.

We just can't assume Gibson is similar to Hostess, where executives drained depleted coffer for their golden parachutes and then successfully redirected blame to organized labor. If Gibson goes bankrupt, details tend to leak out. We learn a lot from postmortems.

GAS Man said:
I was a forum member of HCEG since 1993
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OMG! You pre-date me! We both really need offline and live life.
 
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I appreciate the posts, let me try to restate: Gibson had no rationale for that debt. Even if they needed to borrow to make acquisitions, clearly those were not justified loans given the quick turnaround on the fire sale. There is really only one way to interpret Gibson's debt situation: ludicrous. And it is clearly disconnected from their core business of making and selling guitar gear.

We can only speculate on why they incurred such obviously unwarranted debt, but given how common this situation is, it's reasonable to speculate. Do we think Henry fancied that Phillips was going to become the next Samsung? Or was it an eight-figure 'bonus' he used to buy that island he's always wanted? Those things aren't really oppositional.

And it's not "jumping to a conclusion" -- when a company is selling off assets it just bought at a loss, that's not speculation, but simple observation.

The bottom line is that the debt was far from justified. Thanks for citing Hostess; I am 10+ years removed from the world of VC-funded companies and I can still name at least a dozen more off the top of my head, and direct involvement with three of them. And there are hundreds of companies like that, and yes, that syndrome has a serious impact on our economy.
 
Wyatt said:
We just can't assume Gibson is similar to Hostess, where executives drained depleted coffer for their golden parachutes and then successfully redirected blame to organized labor. If Gibson goes bankrupt, details tend to leak out. We learn a lot from postmortems.
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Instead of the last set of ridiculous paint jobs, Gibson really should come out with a line of Hostess-inspired guitars. The Zinger Les Paul, the Ho-Ho double cut, the Twinkiecaster...that'll get 'em back on their feet for sure!
 
shoeless said:
Instead of the last set of ridiculous paint jobs, Gibson really should come out with a line of Hostess-inspired guitars. The Zinger Les Paul, the Ho-Ho double cut, the Twinkiecaster...that'll get 'em back on their feet for sure!
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Gibson has long been known for their twinkie weiner sandwiches, right @Kerouac?

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The downgrade spotlights the canard of over-leveraging: GC (via a Bain-backed board) did the same thing as Gibson.

This underscores the illegitimacy of the debt: bond-rating houses (was this from Moody's?) serve their customers - banks who did not participate in the initial transaction, but may or may not wish to buy some of the debt. Having the debt rated so low shows that it was ill-considered (to be kind), and we go back to why do it in the first place? I won't pretend to know Henry's angle (he honestly seems a bit crazy), but I do know that those who lend the money make it all up front ... doesn't really matter if you can or can't pay it back, go bankrupt, whatevs, I got mine and see ya.

Too bad for guitarists. Too bad for Gibson employees. Too bad for the guy who drives the lunch truck that serves Gibson. etc. etc. etc.

Meanwhile, the 'executive' who closed those bonds got a nice, fat bonus and is probably doing blow in Ibiza right now.


Very serious: this is exactly how it work.
 
Please note that I am not criticizing such activities, just noting that some folks don't earn that privilege.
 
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