Legendary U.S. guitar-company Gibson files for bankruptcy

21 February 2018, Germany, Cologne: The logo reads 'Gibson' on the soundhole of a Gibson acoustic guitar. The established guitar manufacturer from Nashville has to face an existential struggle: According to a 'Nashville Post' report, the guitar manufacturer is to have piled up debts in the amount of half a billion US dollars. Photo by: Oliver Berg/picture-alliance/dpa/AP Images

Gibson, an iconic American guitar manufacturer with history of over 100 years, announced bankruptcy and filed for bankruptcy protection to the court. Just like Rolling Stone Magazine described, “It was not pleasing news, especially for those fans who always worry about Rock & Roll will eventually fade away.”

For months, the company has had hundred-million debts, owing to at least 26 companies including suppliers. Before the huge debt expired, this time-honored brand had struggled for times, including replacing the CFO, continually selling its assets for cash and looking for new investors; however, every effort turned out in vain.

“All the guitarists that you can recognize must have at least one Gibson, no matter in electronic music or acoustic music,” George Gruhn, the renowned guitar expert, said. Even so, this classic guitar-maker brand ends up bankruptcy, and needs large-scale business restructuring.

IMAGE DISTRIBUTED FOR GIBSON BRANDS – Musician Joe Perry, left, Dave Berryman, President of Gibson Guitar, center, and Peter Leinheiser, Senior Director of GIbson Entertainment Relations, pose together after Perry was presented a Gibson Custom Made 2 Measure Aged Goldtop Les Paul at NAMM 2017 on Saturday, Jan. 21, 2017, in Anaheim, Calif. (Matt Sayles/AP Images for Gibson Brands)
FILE – In this Aug. 8, 2013, file photo, Blues music legend B.B. King performs on Frampton’s Guitar Circus 2013 Tour at Pier Six Pavilion, in Baltimore. The maker of the Gibson guitar, omnipresent for decades on the American music stage, is filing for bankruptcy protection after wrestling for years with debt. A pre-negotiated reorganization plan filed Tuesday, May 1, 2018, will allow Gibson Brands Inc. to continue operations with $135 million in financing from lenders.. (Photo by Owen Sweeney/Invision/AP, File)
A display of Jimi Hendrix memorabilia including a custom-made Gibson Flying V, which Hendrix played at the Isle of Wight in 1970, is pictured at the Hard Rock Cafe Seattle in Seattle Thursday Feb. 9, 2012 during the Jimi Hendrix Signature Series Edition launch event. Fifteen percent of the sales of the merchandise will benefit the Fender Music Foundation and the Jimi Hendrix Park Foundation. The artwork for the guitar began as a collaboration of artist Alan Aldridge and Jimi Hendrix in 1970. (Stephen Brashear/AP Images for Hard Rock)

Established in Tennessee, U.S., 1902, Gibson has been steadily occupying the leading position of the guitar-manufacturer for decades with highest market share. According to the files of bankruptcy, in fact, in about 80 countries, Gibson yearly sells over 170 thousand guitars of which the guitars priced at over $2000 make up 40%. Despite the significant sales volume, the court documents submitted by consultants indicated that the key point that turned Gibson’s century-foundation down was its electronic device business. “Because of excessive inventory, ineffective sales fell into vicious circles of unsalable sales.”

In the past three years, Gibson’s annual revenue has shrunk from $2.1 billion to $1.7 billion; hence, the society is not surprised at all that Gibson went bankrupt. In order to solve huge debt problem and preserve the classic brand, it is necessary for Gibson to cut off most of non-core businesses such as music accessories, headphone, speakers and electronic devices, refocusing on sales of instruments.

“In the past 12 months, through restructuring, our new business program is on process,” Henry Juszkiewicz, the CEO of Gibson, reaffirmed. “With the support of debt holders, we decided to focus on our core business – instruments- at this stage. Gibson has now reached a consensus with creditors who have a total of 69% of the debts. Based on a pre-agreed restructuring plan, the company will continue to operate the Gibson brand business with a loan of $135 million.” Henry Juszkiewicz insisted that even during the process of bankruptcy filing, Gibson will operate as usual and won’t have any impact on consumers. He believes after reorganization, it is still expected to achieve long-term stability which brings the financial status back on track.

Henry Juszkiewicz, CEO of Gibson Brands, pose for a portrait with a Gibson Custom L-5 guitar during the official opening of the European hub of Gibson Brands at the A’dam Tower in Amsterdam, Netherlands, Friday, June 17, 2016. (AP Photo/Peter Dejong)

With the declining sales of guitar in recent years plus new restriction on imports of Dalbergia Nigra, the main materials of guitar body, Gibson has decided to diversify their business fields under the leadership of Henry Juszkiewicz. For instance, Gibson made acquisition of business of audio and home theatre from Phillips with $135 million in 2014, in order to extend the brand influence; however, this decision was opposed by loyal supporters. “We are still making music,” Juszkiewicz defended. “Gibson is still a music company, no matter making music, music devices or music speakers. We are just desperate to be the top of every field.”

Yet, nothing comes out as planned. Too many sidelines has sunk Gibson into the huge crisis of debts. However, for Gibson’s future, Juszkiewicz is still very optimistic. He believes that the bankruptcy does not mean the end of this classic brand. “As a guitar-manufacturer, the fame of the brand does decline for the bankruptcy, but this is not the terminal. I still think it has a great chance to make a comeback.”

In fact, it has been far from the moment that Gibson makes its bow on the stage of music, because it still owns such famous brands as Epiphone, Kramer, Steinberger, Dobro and Baldwin, which are the most important members in global musical instrument companies. It is widely believed that after the bankruptcy, if Gibson can concentrate on expanding the instrument business, maybe it can find a new way to be embraced by the music addicts again.

After all, just like Henry Juszkiewicz noted: Gibson represents quality.