If you follow music industry news, or even just general business news, you're probably aware that Gibson Brands, Inc. is teetering on the edge of bankruptcy. There's every reason to believe it will fall over that edge by August of this year at the very latest, because it has, as Bruce Springsteen put it in at least two different songs, "debts no honest man can pay."
Now, I've been a Gibson baby from time out of mind. My second electric guitar was a red SG Standard (my first was a Teisco - a crappy, bargain-basement Japanese guitar that just happened to have a fabulously playable, 17-ply neck), and I currently own a 1978 The Paul (Gibson's first entry-level Les Paul guitar since the 1950's era LP Junior, and a guitar I've loved since I first laid hands on it), a 2012 wine red Les Paul Studio II Deluxe SE (about which I glowingly posted last year), and a 2014 red, satin-finish SGJ (which remains difficult to tune, despite being upgraded with a Tonepros locking bridge and tailpiece and a custom set - as in "built to my specifications" - of Sperzel locking tuners). So, although I own and play other guitars, I'm definitely a fan of Gibson guitars - and it both makes me sad and pisses me off mightily that the company whose guitars helped forge the rock revolution may end up in the dustbin of history later this year.
"Why?" you may ask.
Reading reports about the impending disaster, you constantly see statements like, "Gibson made questionable investments." And, boy howdy, is THAT ever true. But the way the business and industry rags phrase that might lead you to believe those decisions were made by some kind of executive committee, with the knowledge and consent of an independent board of directors.
Nothing could be farther from the truth.
It's not "Gibson" that made these disastrous product and acquisition decisions. It's Henry Juszkiewicz, the CEO and majority owner who's solely responsible. Juszkiewicz is a former car guy (Product Manager at Delco) who became an investment banker specializing in mergers and acquisitions, He made enough money at the M&A game to purchase Gibson from its former owners in1985.
He's also one of the most hated men in the music business - and THAT's a real accomplishment. Just not in a good way.
He's especially hated by his own employees, who view him as a stingy, bad-tempered tyrant. Morale there has nosedived under his leadership - which I think is the main reason for Gibson's notoriously lousy quality control. (When employees hate their jobs, it's hard for them to feel motivated to produce world-class products.) But they're not the only ones who despise him. Gibson dealers are giving up on the brand in droves, as Juszkiewicz continuously ratchets up the number of ever-more-expensive guitars they have to sell to keep their certified dealership status. As they do, the number of outlets for Gibson guitars shrinks, and its sales diminish as a consequence.
Juszkiewicz's principle mistake on the product side has been to focus on selling guitars to the collector market (basically baby boomers who are now wealthy enough to purchase "collectible" instruments that, sadly, are designed to be displayed, rather than played) and the halfhearted newbie market (the wannabes that don't wanna be bothered to learn how to tune a guitar, despite the fact that electronic tuners make that a helluva lot easier now than it was back in the Stoned Age, when I learned to play). Thus his acquisition of Tronical Tuning and his decision to package Tronical's automagic self-tuners across the spectrum of Gibson's lowest-end (i.e. - beginner) guitars.
The problems with those strategies are:
a. Focusing on the "collector" market means taking resources away from the PLAYER market, and
b. Focusing on products for the laziest, least-motivated beginners means that Gibson will sell exactly ONE guitar to each such customer - because, if they're too lazy to learn how to tune a guitar, they're damned sure too lazy to stick with learning to play one long enough to have reason to want to buy a better one.
But that's not the end of Juszkiewicz's megalomaniacal foolishness. It's only the start. Beginning this decade, he decided that Gibson needed to become a "lifestyle brand." To accomplish that, he set out on an acquisition spree that he financed predominently with new debt. He focused on buying consumer electronics companies - which provided Gibson with zero synergistic benefits from the purchases (that is, those companies and Gibson's core guitar manufacturing business have almost nothing in common, so the combined companies don't get to benefit from one another's strengths in manufacturing, product design, marketing, or much of anything else).
Now a debt-financed acquisition strategy can make perfect sense, if the merged companies are a good fit. Before he bought Gibson, Juszkiewicz successfully merged a group of tech companies - none of which was successful on its own - into a very successful combined entity. In fact, selling that company is how he made the fortune he spent to buy Gibson. But those acquisitions DID have synergy, whereas a shotgun marriage between Gibson and Philips has ... well ... nothing. They're in profoundly different businesses with no trace of synergy to be found.
Now this financial house of cards is coming unglued, and it's Henry Juszkiewicz and nobody else who's responsible. With S&P having just lowered its debt rating to CCC minus (it literally can't go any lower), there's every reason to believe that Gibson will be forced into Chapter 11 bankruptcy, at a minimum. Getting out of that will require pretty drastic restructuring of the company, and it's increasingly clear that its major creditors won't agree to a Chapter 11 solution unless Juszkiewicz resigns as CEO (and perhaps from the Board of Directors, as well).
That could very well end up being a Good Thing for Gibson's core business, in the end. Selling off all those misguided acquisitions would provide operational financing for Gibson, and jettisoning Henry Juszkiewicz as CEO could allow someone who's much more closely focused on its actual business - and on improving employee morale - to take the helm of the musical instrument legend. Dumping the resource-intensive "collector instrument" focus and the self-defeating, self-tuning guitar distraction could allow the design team to focus once again on creating great guitars that actual guitar players will actually WANT to buy, raising employee morale by engaging with the Gibson workforce, rather than treating them as wage slaves could restore the company's current, reprehensibly-bad quality control to a level that will attract, instead of repel, the guitarists who keep it in business, and returning to a mutually-supportive relationship with its certified dealers could reignite THEIR passion for selling Gibson guitars.
Or it could all go sideways, Juszkiewicz could refuse to step down, the company's creditors could make his departure a bottom-line demand, and Gibson could wind up in Chapter 7 bankruptcy because of the deadlock, instead of Chapter 11 - which would mean that it would cease operations altogether, fire its entire workforce, and be sold off in pieces, instead of surviving the collapse of Henry Juszkiewicz's pipe dream.
I guess we'll see - but I am not sanguine about this iconic company's future.