On Tuesday this week the iconic instrument maker Gibson Guitars filed for bankruptcy. The company as been suffering from high debt levels and insufficient working capital due largely from losses from non-core business’s that had been acquired in an attempt to broaden the company’s presence among music fans. The company stated it is filing for chapter 11 bankruptcy and working on “re-focusing, reorganizing and restructuring” the company by shedding some of its side businesses and concentrating on its original mission of selling musical instruments.
Gibson’s CEO Henry Juszkiewicz said in a statement that the company had “Over the past 12 months made substantial strides through an operational restructuring. We have sold non-core brands, increased earnings, and reduced working capital demands.
Orville Gibson founded the company in 1902 as the “Gibson Mandolin-Guitar Mfg. Co. Ltd.” in Kalamazoo, Michigan, to make mandolin-family instruments. Gibson invented archtop guitars by constructing the same type of carved, arched tops used on violins. By the 1930s, the company was also making flattop acoustic guitars, as well as one of the first commercially available hollow-body electric guitars, used and popularized by Charlie Christian. In 1944, Gibson was bought by Chicago Musical Instruments (CMI), which was acquired in 1969 by Panama-based conglomerate Ecuadorian Company Limited (ECL), that changed its name in the same year to Norlin Corporation.
Gibson was owned by the Norlin Corporation from 1969 to 1986. In 1986, the company was acquired by its present owners. Gibson is a privately held company that is owned by its chief executive officer Henry Juszkiewicz and its president David H. Berryman.
According to a court filing from the management consulting firm that will assist the company’s pivot, Gibson’s electronics business had been “trapped in a vicious cycle in which it lacked the liquidity to buy inventory and drive sales.” The company will continue to operate during its reorientation and bankruptcy proceedings, thanks to agreements it has reached with shareholders and noteholders.
The writing was on the wall for the iconic guitar company, as its annual revenue fell nearly half a billion in the last three years. It has debts of between $100 million and $500 million and owes money to at least 26 other companies, including suppliers; import regulations on rosewood have hampered its business in the last few years, as has a dramatic fall in the sale of guitars overall.
The company will continue to produce instruments. Gibson also owns and produces instruments under the brands Epiphone, Kramer, Steinberger, Dobro, and Baldwin and these are unlikely to be effected by the Bankruptcy proceeding’s. Juszkiewicz went on to say “The Gibson name is synonymous with quality and today’s actions will allow future generations to experience the unrivaled sound, design and craftsmanship that our employees put into each Gibson product.”