Financial troubles at Gibson

[Deleted member 165050]

I think it's that people are slowly detecting things. You know, it dawns to them slowly as the year passes by. There's numerous threads of why Gibson SG's wont stay in tune, and neither does Les Pauls. They don't fix it, and keep the traditional stuff, just because it's vintage. It's a clear indication that neither Leo nor Polfuss did get it right the first time, as they said. Their exortionate prices requires you to do several advanced repairman setup, even after buying a brand new instrument. Like with intonation, and especially tuning. And such things could very easily be remedied. But no.

In my guitar alter-ego I have always used Gibsons - the idea that they don't stay in tune is a myth (I have owned plenty of SGs and Les Pauls of all ages, plus 335s and Vs). And setups on the tunamatic bridges are a breeze, much easier than on a Strat. No matter what people think they got their basic guitar design sorted in the 50s and 60s (although the original wraparound bridge was pretty bad) and the instruments designed in that era are iconic and still selling. Maybe Gibson should ask themselves why they have become a company that so many people love to hate?

 

[Honch]

It's not the company you hate, it's their products. There's no smoke without fire, not matter that whatever Gibsons you've owned do stay in tune. Maybe you don't bend strings, ever?

Watch this, can't agree more:

 

[Deleted member 165050]

It's not the company you hate, it's their products. There's no smoke without fire, not matter that whatever Gibsons you've owned do stay in tune. Maybe you don't bend strings, ever?

I am known far and wide for my string bending. My middle name translated from Olde Englishe means "he who most mightily bendeth his strynges"

Seriously, tuning issues from bending are usually due to strings sticking in the nut and are simple to fix without needing to resort to anything like a locking nut. Minor adjustment and/or graphite usually sorts it out, and it's not an issue limited to Gibsons.

 

[Gizmot]

Well, that's a bit of an interesting point, and one that demonstrates that large MI companies often serve two masters.

As consumers, we look at a brand like Gibson, and we see them branching out into all kinds of extraneous silliness. We wonder when they lost the plot, see wasted capital, and wish they would return to simpler times when they just focused on their bread and butter products.

Analysts and investors, however, often have the polar opposite demand of the company. They recognize the MI industry for what it is: luxury products largely bought by those with discretionary income. An industry that is massively influenced by local, national and global economies, constantly in completion with foreign manufacturers, every luthier with a home shop and an internet connection, and the used market. Unlike the consumers, they push the MI business to expand and diversify, thinking that this diversity will lead to a broader economic base and stable operations over economic cycles.

The more I look at the industry as a whole, the more I start to think that, beyond a certain size, MI becomes a lose-lose proposition.

I've worked for two large NYSE listed companies that you could say were on the fringes of the MI industry. I know that neither one of them thought that the industry was fueled by people with high discretionary income. As a matter of fact, I think that most companies involved in any facet of the MI business feel that the heart of the business is created by people that simply love making music. I've seen tons of my friends (and to be honest, myself back in a certain era) that would have a hard time getting a car financed, but took out loans and sold other possessions in order to get things they thought they wanted or needed. Yes - there are some well-heeled buyers and collectors of instruments, but I don't think that they represent a large share of the overall market.

The MI industry (and the pro audio business too) were created by individuals and companies who had expertise in certain type of product or they started screwing around with products and developed the expertise. In all cases, these companies were garage operations or sole proprietorships that could do what they wanted. They were passionate about and loved what they were doing. The problems (like Gibson's) arise when these companies start acting like they're big business or when big corporations step in. The MI industry, big business and typical corporations (especially public-held ones) don't make good partners.

The MI industry is very cyclical and although the business is generally flat right now, it will recover.

After a few seconds of thought, another facet of Gibson's current problems go back long before its current owners got involved. Gibson has been bought, sold and in bankruptcy several times in the last 50 years. Will it make it through its current mess remains to be seen.

 

[Bunk McNulty]

Not enough younger buyers anymore.....
The greatest players are aging with no replacements. (R.I.P. Walter Becker)
How many kids will know who players like Holdsworth, Henderson, Carlton, Landau etc. are??
The 1970's and 80's were a great time... those times are long gone and the interest in being a great guitar player is a lot less than it used to be these days and let's face it, it's a LOT of work to be as good as those players are/were.
All I see is a bunch of people staring into their cel-phones these days. Sad.

Then again, why bother being as good as the greatest players when your band will get ZERO gigs playing music that goes over the heads of the average drunk-loser taking up space at the local "club". The average bar patron has no frigging clue who Allan Holdsworth is and just how great of a player he was, and they don't care either. Bullcrap FM classic rock tunes rubbed into the dirt for 40 years is pretty much all the average, non-musician (and a lot of weekend bar band heros) knows. Personally, I can't listen to the same tunes on the radio day-in and day-out, every day, all the time, 24/7/365 and then go on a stage to puke them out again for people with drinks in hand and back to stage, talking and staring at their cel-phones.

You need a $3000.00 Gibson to play "Slow Ride" for the millionth time?? Don't think so.

End of rant.

You seem very upset. How about having a little fun with us? I'm going to drop you into the middle of "Whole Lotta Love" just for funsies.

 

[Honch]

Yes it was at lows with the Norlin. As well as Moog. CBS had bad sales with Fender and the sold it, or "let it go" and then it flourished again. Norlin, a Panama based conglomerate Ecuadorian Company Limited owned it. A brewing company. Need we say more...?

Gibson has recently, well, as from 2011 onwards been involved in Lacey Acts things on extinct wood and so on. Maybe those have been too much, and rub people the wrong way? What people don't know is that Gibson ain't only Gibson. Or guitars. Its greatest markets are in electronics, guitars a lesser part. Onkyo, TEAC, etc are all "Gibsons".

 

[Johnny Crab]

Key point Guy brought up there folks. So pay attention.
Because this is a significant factor in business today. The investment community (and absentee owners) almost always have very different goals for a company than its management, emloyees, and customers do. And running a profitable and financially sound company that's in it for the long haul - and is responsive to its customer base - isn't one of them.
And it's killing a lot of businesses. Sometimes even by design.

A major difference in management styles between eastern(Japan, Taiwan, etc) and "USA" styles. Virtually every Japanese or Taiwanese company I've been exposed to in 27+ years in petrochem HAS 3 sets of goals: immediate, medium term(5 year), and long term(10 or more years). One I was exposed to specifically reversed their plans for an IPO in the US because the owners had seen too many "American" companies destroyed by putting next quarter's profit statement above long term viability of the company. They did not want to see their company run into the ground by greed IMO.

 

[mikewalker]

That's right.
In fact, if you figure how many basses have been produced over the last 50 years by all the bass manufacturing companies, there are so many to go round.
I believe that only a relative small number of the basses have been thrown away.
So , despite the growing world population, the need for a new bass is less than it used to be.
So less and less new basses are being sold.

I could be wrong of course.

Have you checked the thread "how many basses do you own" lately? Just wait another fifty years or so - then you will see the used market REALLY flooded. I mean (much to my sardonic amusement) - I keep reading the threads here about "keeping my '07 MIM jazz mint condition for collect-ability" , etc...

 

[mikewalker]

Incidentally- EVERYONE reading this thread should march down to their local library right now and get out the book

"The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public". (Also available on Amazon)

synopsis here: The Shareholder Value Myth

 

[40Hz]

A major difference in management styles between eastern(Japan, Taiwan, etc) and "USA" styles. Virtually every Japanese or Taiwanese company I've been exposed to in 27+ years in petrochem HAS 3 sets of goals: immediate, medium term(5 year), and long term(10 or more years). One I was exposed to specifically reversed their plans for an IPO in the US because the owners had seen too many "American" companies destroyed by putting next quarter's profit statement above long term viability of the company. They did not want to see their company run into the ground by greed IMO.

Too true. I was an employee of one company (a Fortune 500) for seven years before I saw the writing on the walls (and in "the numbers" it was my job to analyze) and got out of there. A few years later they were gone due to one strategic business error, one utterly stupid but utterl huge managerial decision, and trying too hard to please Wall Street.

Sad. It was one of the premier companies in their sector of the market. It deserved better top management than it got.

 

[BAG]

Gibson will continue in one way or another but this one part from the link at the OP.......

Levered at a rate of 10 times debt to Ebitda, Gibson has $375 million in senior bond debt maturing on Aug. 1, 2018. An additional $145 million in senior bank debt has a springing maturity of June 23, 2018, if the company doesn't manage to refinance the bonds.

means that the current owners most likely won't be the ones running the show in a year or three.

 

[ThuzzleFump]

Servicing the debt will be tough. I understand their bonds are yielding 35% now. That's an amazing return, but I'm not buying them!

Really? That's worse than a credit card default rate.

 

[Handyman]

Really? That's worse than a credit card default rate.

Maybe Henry can refinance the $500,000,000 or so of debt coming due on his Master Card then?

 

[Handyman]

Not sure if this has been posted before but geez.

[Invalid or Expired Link Removed]

 

[Deleted member 165050]

Not sure if this has been posted before but geez.

[Invalid or Expired Link Removed]

You know as someone who usually does a day job, I'm kind of with Henry on this one. The employee in question - who clearly is a manager and has a team to run - has a track record of one-day absences around the weekend and faked a sick day to get the day off he wanted. Not saying the Gibson CEO isn't as bad as he's made out to be, but in this case it sounded like he was right.

 

[Handyman]

You know as someone who usually does a day job, I'm kind of with Henry on this one. The employee in question - who clearly is a manager and has a team to run - has a track record of one-day absences around the weekend and faked a sick day to get the day off he wanted. Not saying the Gibson CEO isn't as bad as he's made out to be, but in this case it sounded like he was right.

Really? To me that email looks like the autobiography of an insane manager. Keep in mind that it had a distribution list of 20 people.

 

[guy n. cognito]

Really? That's worse than a credit card default rate.

Bond Yield

Bond yield of 35% doesn't mean the corporation is paying 35%. I'm sure it's high, but it's not that high.

 

[BAG]

Really? To me that email looks like the autobiography of an insane manager. Keep in mind that it had a distribution list of 20 people.

That would be the same 20 people that the executive included in his email requesting the day off.

Who sends an email request for a day off to the CEO and copies 20 other executives in that email? Obviously someone who has an ulterior motive. I wonder who leaked the email?

Don't get me wrong, i have heard that he is not a good CEO but there really appears to be two different sides to this story.

 

[jthisdell]

Bond Yield

Bond yield of 35% doesn't mean the corporation is paying 35%. I'm sure it's high, but it's not that high.

Correct, a bond yield that high indicates that investors see a high risk of default

 

[blue4]

That would be the same 20 people that the executive included in his email requesting the day off.

Who sends an email request for a day off to the CEO and copies 20 other executives in that email? Obviously someone who has an ulterior motive. I wonder who leaked the email?

Don't get me wrong, i have heard that he is not a good CEO but there really appears to be two different sides to this story.

I'd say the ulterior motive was to get one of his rants on the record. I don't think any of us can know exactly what went on there, but it seems to me that copying 20 people is a sign that someone is building a case about something.