Monday, May 7, 2018

Gibson Brands Files For Bankruptcy Protection - A New Hope

Gibson Guitars
Gibson Guitars has recently filed for Chapter 11 bankruptcy protection. This is a legal way for companies, or people for that matter, that cannot pay their bills, to reorganize, and develop a plan to repay their debtors. Gibson has overextended their business, possibly due to numerous acquisitions of companies unrelated to the guitar industry.

Chapter 11 Bankruptcy
Gibson has at least 100 million dollars of debt. It may be as much as 500 million dollars. This was noted in documents filed on May 1st, 2018 in a Delaware court.

The company states its goal is to emerge from bankruptcy, “…with working capital financing, materially less debt, and a leaner and stronger musical instruments-focused platform,"

Gibson Factory Nashville
Gibson Brands not only includes Gibson guitars, but also owns Epiphone guitars, which manufactures wonderful replicas of original Gibson guitars that are nearly as good, and sometimes superior to the US made instruments, and sell for a much lower price point.

Maestro Guitar by Gibson

Gibson Brands also owns the name Maestro, which was once a productive brand, but now has been applied to inferior guitars made in Pacific Rim countries and sold by Walmart and Amazon.

 mid 1970's Kramer metal neck guitar

They also own the name brand Kramer, which was a guitar company started in the 1970’s by building metal neck guitars.

1983 Kramer Pacer guitar
The company then went on to produce more exotic and pointy electric guitars which include many improvements to the Stratocaster shaped guitar, and eventually gave us the Super-Strat.  One of these improvements was the Rockinger tremolo.

Kramer guitars were a mainstay for Heavy Metal rockers and got a shot big in the arm from rocker Eddie Van Halen.

Sadly the Kramer brand was sold out to bankruptcy and purchased by Gibson Guitars. Kramer guitars are now made in Japan and Korea.

Vintage Steinberger Bass Guitar
Gibson Brands owns the Steinberger name, which was originally designed by Ned Steinberger, who produced unique basses and guitars made out of graphite, that had headless tuners, and resembled a Cricket bat. The original instruments were expensive, but prized by their owners.

Hohner B2 Licensed by Steinberger
Eventually the design, and shape were licensed to other manufacturers that sold similar instruments, usually not made of graphite, at a lower cost. The latest Gibson/Steinberger models are manufactured in South Korea.

Vintage  Pre-Gibson Tobias Bass
Tobias Bass guitars were established by Michael Tobias in 1977. These were asymmetrical instruments with neck thru-body that featured a neck that was thinner on the lower side than on the upper. Gibson purchased the brand in 1990 and changed to a bolt-on style neck.

1941 Kalamazoo KG-14 guitar

Gibson still owns the Kalamazoo brand name, but has not used it on instruments since the mid-1960’s.

1930's Dobro Angelus

Gibson Brands also purchased the Dobro brand name of resonator guitars. This company started in 1928 and produced acoustic steel guitars, and guitars that are used by Bluegrass, and Blues performers. There was much turmoil within the company, and eventually the remaining Dopyera brothers established OMI, the Original Musical Instrument Company in 1967.

1967 Mosrite D-100 Dobro
By 1970 Semi Moseley acquired the Dobro name and company assets that were being liquidated. Moseley subsequently filed bankruptcy, and Gibson bought the brand in 1993.

Gibson's version of these guitars are made under the Dobro brand, offshore under the Epiphone brand.

Valley Arts Guitar
Gibson also owns Valley Arts guitars brand, a company started in Hollywood, California by Mike McGuire and Al Carness in their guitar repair shop. In 1977 these instruments caught the eye of many well known players. In the late 1990’s a fire destroyed their shop. To rebuild, the partners sold half of their assets to Korean manufacturer Samick, but quickly became dissatisfied with the arrangement and sold to Gibson. By 2002, the remaining partner McGuire retired, and the brand ceased production.

Garrison G20 guitar
Gibson also purchased Garrison Guitars, a Newfoundland, Canadian company. The company made instruments using the unique Griffiths active bracing system. Gibson acquired this brand in 2007, and let it languish.

1970's Slingerland
Buddy Rich Drum set

Non-guitar brands owned by Gibson include the Slingerland Drum Company which once produced the best drums ever made and was founded in 1912. The company continued flourishing until the 1970’s and ‘80’s when the ownership changed multiple times.

In 1994 Gibson Brands acquired it, and demanded that in order for a retail business to sell Gibson guitars, they must sell Slingerland drums. Individually owned music stores could not comply with this demand. It not only killed off Slingerland Drums, but caused smaller dealers to lose their Gibson franchise.

Gibson also purchased four piano manufacturing companies. Count them; four piano companies!

Wurlitzer Piano

One of the oldest piano manufacturer in the United States was Wurlitzer, and was established by Franz Rudolph Wurlitzer in Ohio in 1861. By 1880 he was building and selling pianos.

1960's Wurlitzer 140b Electric Piano
By 1955 the company introduced the first electronic piano. This was originally built to train students in large classrooms, but went on to become a mainstay in rock and pop music.

In 1995 Baldwin Piano, another Ohio company, acquired the Wurlitzer name and assets. Baldwin was undergoing a lot of changes at the time and before the acquisition they had moved their manufacturing business offshore to be built by the Young Chang Piano Company. Production later moved to Samick, the largest piano builder in Korea, and in 2001.

Gibson Brands acquired Wurlitzer, Baldwin, Hamilton, and Chickering Piano companies. All were popular brands and once manufactured in the United States, but now are made offshore in Korea. Out of all of the piano companies that Gibson acquired, only Baldwin pianos are still in production.

Vintage Baldwin
baby grand piano

The Baldwin Piano Company was started in 1857 and began building pianos in 1880 in Cincinnati, Ohio and made some of the most popular pianos in the world. My own father worked for the company when he was a young man. In 1961 the Baldwin Company began manufacturing organs. By the 1970’s Baldwin not only had acquired the guitar company Burns of London, but Gretsch Guitars as well.

Baldwin United Stock certificate
Baldwin management decided to diversify and  also got in the financial business. At one point they  owned over 200 savings and loan and insurance companies. By 1977 they merged with the United Corporation to become Baldwin-United. By 1983 they were forced into bankruptcy.

The piano and organ business remained until 2001 when the company once again was on the verge of bankruptcy and sold their assets to Gibson Brands. Gibson maintained a small staff at the Baldwin Arkansas factory to build artist grand pianos. The main piano manufacturing is done in South Korea. Hamilton Pianos, were a subsidiary of the Baldwin Piano and Organ Company and were acquired by Gibson with the Baldwin acquisition.

1854 Ad for Chickering and Sons
Piano Company

The Chickering Piano Company was a Boston Massachusetts based company that started building pianos in 1832. By 1853 the name was changed to Chickering and Sons.

Jonas Chickering made great developments and improvements to the modern piano. By 1985 the company went out of business and the assets were acquired by the Wurlitzer Piano company, which eventually went to Gibson Brands.

Onkyo TX-8160 Stereo receiver

Gibson Brands includes a division known as Gibson Innovations which owns multiple audio manufacturing companies, including the Onkyo Corporation, which also makes Pioneer Brands.

Teac Tascam DA-78HR

Gibson owns both the TEAC Tascam Companies which manufacturers recording and audio equipment.

KRK powered monitors
and 2 x 2 audio interface

They also own the KRK Systems company which manufactures audio equipment used by DJ’s. Prior The audio company acquisitions occurred between 2011 through 2014.

Raid on Gibson Factory

In 2009 and 2011 agents from the United States Fish and Wildlife Department raided Gibson and seized illegally imported ebony, and rosewood from India that was questionably obtained.

These were violations of the Lacey Act of 1900 that protects fish and wildlife, including plants, to preserve species. The Act was amended in 2008 to include wood illegally harvested.

Fish and Wildlife Service
raid Gibson factory
Gibson fought the charges and tried to recover the wood, but by 2012 they reached a settlement with the United States Government and agreed to pay a $300,000 fine and a $50,000 community payment. The agree stipulated they forfeit the seized wood. Gibson Brands has never recovered from this chapter in their history.

One other issue that I am aware of is that in 2011, Gibson pulled the plug on many of their loyal franchise holders, awarding much of their business to Guitar Center, Musician's Friend, and other large music retailers. I visited one of my favorite music stores this past week. They had been selling Gibson products for years, but there was no sign of a Gibson guitar in sight.

Musicyo Kramer

At one time Gibson attempted to sell some inferior instrument direct to the public through an online website called Musicyo. Many of these budget instruments were low quality Pacific Rim knock-offs of Fender Stratocaster style guitars under the Kramer brand.  These were made with cheap parts, such as PVC material for pickups, wiring, nuts and fret markers. Not all of those products were bad. Apparently the venture was not successful as Gibson abruptly shut down the web site.

Gibson Factory Memphis

Last year Gibson announced it was looking to sell off it's plant in Memphis to consolidate manufacturing to the facility in Nashville, Tennessee. Their acoustic guitar facility is headquartered in Bozeman, Montana.

Gibson was not the only company to go on a acquisition spree in the past few decades.

Fender Owned Brands
The Fender Musical Instrument Company has done the same, and some of their ventures have not turned out too well.

The fiasco from back in the 1960's and 70's when the Baldwin Piano company made a futile attempt to venture into the guitar manufacturing business is legendary.

Reading this history of other musical instrument manufacturers is a real eye opener. Piano companies, brass and wind instrument manufacturers, and some guitar business have all experienced financial ups and downs, and some were eventually consolidated or purchased by other companies before they folded.

Norlin era
Gibson Maurader 
Even Norlin Brands, who owned Gibson Guitars was within three months of going out of business before it was bought by Henry E. Juszkiewicz, David H. Berryman, and Gary A. Zebrowski in January 1986.

Gibson's turnaround plans include giving some of the company's lenders equity ownership, while its lenders have agreed to an operating loan of up to $135 million to keep the company afloat. The company sells over 170,000 guitars annually in more than 80 countries and says that it sells over 40 percent of all electric guitars costing more than $2,000.

Gibson Factory Bozeman, Montana
They will continue to operate their guitar-making factories in Nashville and Memphis, at least until the Memphis plant is sold, and Bozeman, Montana.  The restructuring will allow Gibson to focus on its most profitable ventures, such as musical instruments.

No changes will be made to its guitar manufacturing business, and all Gibson and Epiphone branded guitars are expected to continue in production uninterrupted.

I sincerely hope that Gibson will emerge from this chapter in their history as a stronger, leaner, and smarter company. Gibson guitars are an iconic American brand with a incredible history of innovation.  May they concentrate on what they do best; build incredible guitars.

Click on the links under the pictures for sources. Click on the links in the text for further reading.
©UniqueGuitar Pulbications (text only)


Glenn Lazzaro said...

Best Summary of the Gibson mess I've read. Thanks. said...

Thanks Glenn. They got in too deep.


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