Gibson Guitars Circles the Drain

What’s going on with Gibson Guitars? The CEO’s expensive Harvard Business School education is not helping. Photo: Groovy Man Stuff’s 1974 Gibson Les Paul Custom.

The name Gibson evokes something special for an awful lot of people across the entire world. Eric Clapton with Cream. Peter Green with Fleetwood Mac. Jimmy Page with Led Zeppelin. Jazz guitar players the world over. Unfortunately, the golden cultural brand of Gibson Guitars is falling on dark times and may even be at risk of bankruptcy. News emerged this week that Moody’s Analytics, an investment ratings agency that has followed Gibson for years, suddenly downgraded Gibson Brands’ credit rating for the second time in three months. Gibson Brands corporation now owns junk bond status Caa1, otherwise known as “Non-investment grade aka junk bonds.” Some of its largest obligations are rated even more poorly. After those two swift downgrades, Gibson is now deep in high-risk territory. You can’t buy stock in Gibson as the company is wholly owned by its CEO Henry Juszkiewicz (Jus-Kay-Vitch). However, holders of Gibson’s debt cannot be happy that their investments are sustaining such dramatic downgrades.

Gibson Guitars in Distress

Gibson’s Juszkiewicz is a Harvard Business School graduate, and acquired the Gibson Guitars business in 1986. Unfortunately, like a killer cyborg, Juszkiewicz, bearing his expensive business education, with its emphasis on free-market ideology and a set of values that disregard history, appears to be on the way to killing one of America’s finest creative brands.

Gibson’s current meltdown can be traced to the dramatic redesign of the Gibson Guitars products with a robotic tuning system, and many other changes. Gibson combined these innovations with dramatic price increases of up to 100% year-to-year. This series of moves met with scorn across musician chat boards and comment threads everywhere on the Internet:

“Senior [factory] managers told me that they are happy when he [Juszkiewicz] does not show up”
“I have also spoken to a few prominent Gibson dealers, all of whom hate the new guitars, and have sold very few.”
“One of the Gibson customer service guys even told me under his breath that he hates the new guitars.” (Les Paul Forum)
“I work at (large guitar chain), and [agree with every detail]… I agree innovation is great, but these features are not what most guitarists are after, especially those that are Gibson players. The Min-E-Tune/G-Force systems are buggy, and are often hard to keep in tune (I’ve had to fix a couple while having customers demo them, which is quite embarrassing). (Reverb.com)
“[Juszkiewicz] manages by fear and intimidation, and he is routinely rude and insulting to his staff.” (Glassdoor.com)

Gibson Brands also embarked on leveraged-buyout acquisitions of distressed electronics and music brands, including the Japanese Onkyo and TEAC stereo businesses. The goal, apparently, is to transform Gibson into an “electronic lifestyle brand” instead of an iconic guitar brand. A perusal of Mr. Juszkiewicz’s LinkedIn page expresses the goal “to build the largest and greatest company serving the music community globally.” It boasts precisely one recommendation. (Looking at Gibson’s Glassdoor ratings is like reading a prison memoir.)

What is the future for Gibson Guitars?

Some buyers report a good experience and love their new instruments. Unfortunately, guitar players (particularly Gibson owners) tend to be a picky and conservative bunch. (See what I did there?) The 2015 Gibson Guitars line met with complete lack of acceptance. Without going into the myriad details, the decision to go in such a drastic new direction, coupled with dramatic price hikes, cratered Gibson’s sales. Just as crucially, Gibson’s margins plummeted, as they scrambled to sell unwanted gear at cut-rate prices. Gibson simply did not execute. The result: Gibson’s debt is now rated deep in junk territory. The market has spoken, and based on the numbers, it will take a miracle for Gibson to survive, at least as a guitar company. After the ill-advised acquisitions by Gibson Brands, and Juszkiewicz’s brutal management style, even a complete offshoring of the company’s operations cannot be ruled out.

Its Customers Own Gibson

A name like Gibson Guitars is never truly owned by one man. Anyone who owns a vintage or newer Gibson instrument, such as myself, is a stakeholder in this brand. It begins to resemble a public trust due to its wide name recognition and the outright love that many of its customers have for the instruments and the image they convey. We hope that one of its debtholders sees the quality of the Gibson Guitars brand and rescues it from oblivion. Henry Juszkiewicz bought the Gibson Corporation in 1986, saving it from imminent shutdown. Now it appears Gibson Guitars may need to be saved from its erstwhile rescuer.

About the author

Richard Grace is a technical writer and long-time denizen of Silicon Valley. He thinks men's style in Silicon Valley could use a bit of improvement. For the latest Groovy Man Stuff, friend him on facebook, "Like" his Groovy Man Stuff page, follow him on Twitter, or plus him on Google+. And since this is Silicon Valley, Richard also has a Linked In profile.