The Tennessee Shuffle
Just what is going on with Gibson and what could its future hold?
It’s been a painful, gradually unfolding process and impossible to ignore, but the revelations regarding Gibson’s calamitous financial woes in the last year have made for depressing reading. There’s been a host of misinformation online too, including everything from how culpable its CEO might be to whether Bonamassa could bail them out. Ultimately, we just need to know how Gibson got here and how deep of a hole it’s in. Has Gibson really filed for bankruptcy? Following debts of around $375m (£276m) Gibson Brands Inc filed a case under chapter 11 of the United States Bankruptcy Code last month. This is also known as a reorganisation bankruptcy and is commonly filed by corporations that require some time to hold off their creditors so they can restructure debts they have amassed. It can give the debtor, in this case Gibson, the chance to fulfil obligations under a plan of reorganisation and put their house in order.
It’s still not a step to be taken lightly, and usually comes after other alternatives have been explored and exhausted. The business is banned from making certain decisions without the express permission of the courts and that can include any sale of assets beyond inventory and expansion. So is all this debt because Gibson isn’t selling enough guitars? It’s Gibson’s ventures outside of its core guitar manufacturing that have been the most disastrous.“My dream was to be the Nike of music lifestyle,” CEO Henry Juszkiewicz said in an interview. “At this point, I have to cut back on that ambition, frankly.” He and president David Berryman have been the driving forces behind trying to expand the Gibson brand into markets where other established consumer electronics brands have carved formidable reputations already.
The purchase of audio electronics companies WOOX Innovations from Phillips in 2014, following Stanton Magnetics and Tokyo Electro Acoustic Company in 2011 and in 2013 were significant financial commitments. And investing in ventures such as Trainer by Gibson, an active lifestyle-focused headphone brand, have seen the company moving away from its roots to invest in these new areas and taking on significant debt in the process. How does all this affect Gibson guitars? The company’s focus in restructuring will be on selling off its electronic-based assets, but its guitar manufacturing has certainly felt the pinch too. Last October Gibson took the decision to make savings by downsizing its operation in Memphis. Manufacturing in Nashville and Bozeman, Montana, continues. The internet is awash with opinions on Gibson’s contemporary output, but wherever you stand there’s an argument that it has never shied from asserting itself as an aspirational brand for players. Buying your first Gibson has traditionally been a landmark. But with fiercer competition in the industry than ever, what will that mean to tomorrow’s guitarplaying generation? So what now? This restructure isn’t just about offloading debt; most guitar fans can see that Gibson now has a dilemma to come to grips with. What does it want to be going forward? Juszkiewicz himself has spoken of a desire to innovate versus the expectation to be beholden to the past. But Fender’s success – CEO Andy Mooney says the company’s sales have increased in the past 10 years – suggests an iconic guitar manufacture can thrive both ways. An optimist would argue this could be Gibson’s dark before the dawn, and we could yet see a re-focused brand return to core values. Guitarist will be returning to Gibson’s story as it develops.