Gibson Guitar Laying Off Employees as Bankruptcy Fears Worsen

Gibson Guitar Factory, Nashville (photo: Geoff Alexander CC 2.0)

Gibson Guitar Factory, Nashville (photo: Geoff Alexander CC 2.0)

Gibson Guitar is now battling a deteriorating financial situation, with layoffs already underway.  The company is desperately lowering overhead to meet critical loan obligations ahead.

Gibson Guitar is now desperately trimming its operational overhead costs to stave off a near-term bankruptcy.  Last week, the company acknowledged outstanding loans exceeding $500 million, with payoffs due by late July and early August of this year.  If Gibson is unable to meet those obligations, analysts say bankruptcy is a near-certain possibility.

+ February 16th: Gibson Guitar Faces Imminent Bankruptcy After 116 Years In Business

According to the Nashville Post, Gibson has already started laying off employees.  So far, that includes 15 employees at an Elm Hill Pike plant this week.  Specifically, the cuts were made at the Gibson Custom Shop, which focuses on higher-end, custom guitar manufacturing.

That’s one of several Gibson manufacturing operations sprinkled throughout Nashville, leading to fears of broader cuts ahead.   And Gibson’s CEO is doing little to allay those concerns.  In comments issued by Gibson chief Henry Juszkiewicz, the layoffs were acknowledged as “part of broad initiative throughout the company to prepare for our refinancing,” and a “Spring cleaning of sorts” to lighten the operational load.

The Custom Guitar Shop focuses on handmade, painstakingly-crafted guitars, with price points starting at $4,000.  Depending on the model and specifications, those prices can easily soar past $20,000.  Those high-tailored guitars certainly help the Gibson brand, though financially, they may not be generating sustainable revenues.

More importantly, the presence of less profitable operations will reduce Gibson’s chance of getting emergency funding.

Just recently, Standard & Poor’s downgraded their rating on Gibson to near-junk status, based on existing debt, revenue problems, and operational overhead.  Earlier this year, Moody’s also downgraded the guitar maker, making it extremely difficult for Gibson to secure additional cash.

An analyst at Moody’s remarked that bankruptcy was now a very real possibility.

Meanwhile, creditors are putting heavy pressure on Juszkiewicz to relinquish control of the company.

According to Bloomberg, the activist group of bondholders is now pushing for the CEO to give up ownership control and cede the company to them.  Juszkiewicz is strongly resisting those pressures, though it’s unclear if he’ll be able to retain control of the guitar maker if a default occurs.

Separately, outside investors are eyeing the company for a possible vulture acquisition.  According to details shared with Digital Music New, a group of investors based in China are now considering a buyout.  But they’re waiting for the company to plunge into bankruptcy first.  That would introduce a distressed price point, while allowing the investment consortium to shed entire factories, management teams, and legacy financial obligations.

More as this develops.

 


 

 

17 Responses

    • Avatar
      harry

      You mean when schools stop teaching music instrument makers go under. What a surprise?

    • Avatar
      DrAG

      I noticed it too. I mean, it’s only the name of the damn publication!

  1. Avatar
    Smith

    Ha ha! Good. Whatever it takes to kill the deformed monstrosity that this CEO turned Gibson into.

    When those robot tuner guitars drop from 3k to 500 bucks in a liquidation, I’ll buy one as a trophy!

    • Avatar
      joe

      I’m not even sure it would work as a trophy. will be one of the happiest days in my life when this company goes under – not the company per se – Gibson has a long history and it would be a shame for them to not be around in some form, but their current CEO has got to go.

      • Avatar
        Stefan P.

        Absolutely. He’s beginning to remind me of Hillary – blaming everyone but himself.

        • Avatar
          Bob Loblaw

          he reminds me of trump, bankrupting companies and getting daddy to bail him out with loans

  2. Avatar
    rastards

    Am I the only one who considers the possibility that this is a PR stunt to get all those collectors to buy up les pauls? Just a thought since the owner has enough stock to pay it off easy. The other thought which makes me grin is that the twits priced themselves out of existence. An epiphone version only requires better pickups… they’re living off their name. BMW comes to mind, their quality is gone, just living off past successes like the good old 2002.

    • Avatar
      Mike Stand

      not a stunt. The CEO is a royal tool. Full stop. There’s no strategy here. The bankrupcy is real. CEO and other top and mid-level management have been lining their pockets for tears, without regard for quality, employees, customers…sweat-shop mentality…the folks who actually build the guitars, they are the real heros, the real reason Gibson guitars are what they are today. Management and ownership couldn’t care less about quality or customer satisfaction…The brand IS living off of it’s legacy reputation, but now those days are OVER. Good riddance to the CEO and ALL management. They SUCK. With some luck, another company will take over after the bankrupcy, dump the management team, and replace them with folks who BUILD the guitars.

      • Avatar
        Rocco

        Just like uor government and politicians they should be put to death. It’ the people that are great !!!

  3. Avatar
    REVV

    This is a fitting end to all the Gibson nonsense! They have been screwing the small vendors FOREVER making it nearly impossible to sell its brand. Super high buy-ins, they get to choose the pieces you have to carry, insane pricing schemes, and no protection from the big retailers like guitar center. In then end it will collapse due to ego, stupidity and greed…Sad because the guitars are great! But no young person can afford them.

    • Avatar
      Jomo

      Very well put, and 100% true. While I by no means cheer the demise of Gibson, I do appreciate all the cosmic justice that’s unfolding here.

      So many factors already creating a burden on all guitar manufacturers (the real, undeniable death of rock and roll, millennials with attention spans of fleas completely disinterested in learning an instrument, etc) Gibson’s problems are those reasons and an incredibly greedy, inept, deluded jackass at the helm.

      • Avatar
        Alonso

        Gibson is making high end guitars that only lawyers or doctors can afford.
        Even the standard Guitars are expensive.
        The prices are out of reach for the musicians that plays a gig or the common player.
        Their epiphone brand is great but from 499. To 800.00 dollars for a Chinese copy is something you have to think about ….
        There are many other guitar companies that sell there guitars for around the same price and they are not copies of their line production.
        Gibson also is ” wasting money “buying other companies that have nothing to do with guitars…
        Now laying off good employees with a lot of experience will only bring down quality …
        Poor choices all around.

  4. Avatar
    Lanny G

    This is all fine. No one, including the author of this one sided, sky is falling, Gibson bashing doomsday drivel (oops, I mean “article”) has a clue as to what will happen.

    It’s all speculation. What will you say if they secure the financing?

  5. Avatar
    Jeff

    Although I don’t necessarily disagree with the previous posters problems with the current “management” at Gibson … I seem to remember a past assault on the
    company by certain Democrats that really put a few nails in the Gibson coffin ….
    something to do with bogus claims that they were importing and/or using wood that was banned? Turned out to be all BS?

  6. Avatar
    wallace

    For the most of us we have to choose 1500 $ for a guitar or house payment guess what will win, they have priced them selfs out of business.