Gibson Lays Off Custom Shop Workers
The Gibson guitar company's problems are escalating, just weeks after experts said it was "running out of time" to resolve its debt issues. The latest reports claim that the guitar maker's Custom Shop is now sending workers home.
According to the Dayton Daily News, Standard & Poor's – the financial research firm that analyzes stocks – has downgraded the company. “With multiple maturities looming and operating weakness ongoing, we believe Nashville-based Gibson Brands could default on its debt obligations,” Standard & Poor’s wrote to clients. “We are lowering our corporate credit rating to ‘CCC-’ from ‘CCC’.”
This latest bad news for the company comes after Standard & Poor's noted that there is an “increased likelihood” that this "default or restructuring event" could happen sometime within the next six months. Meanwhile, the Nashville Post reports that Gibson laid off approximately 15 employees from its Custom Shop, which was founded 20 years ago, employs about 100 people and manufactures replicas of vintage guitars and other special instrument orders.
The company owes an equity firm $375 million, with an additional $145 million due if the first amount is not repaid by July 23. Gibson’s electronics operations have been in a sales slump over the past few years, which many experts see as the root of the company's problems.
The company's CEO and majority shareholder, Henry Juszkiewicz, recently placed the blame on stores where the guitars are exclusively sold, since Gibson doesn't sell its guitars online.
"They're all afraid of e-commerce, with Amazon just becoming the second largest employer in the U.S., and the brick and mortar guys are just panicking," he told Billboard. "They see the trend, and that trend isn't taking them to a good place, and they're all wondering if there will be a world for brick and mortar stores for much longer. It’s a turbulent world to be a retailer, and many of our retail partners are facing that same issue.”
Juszkiewicz told the Nashville Post that the new staff cuts are “part of broad initiative throughout the company to prepare for our refinancing.”