Amid rumors of an impending Gibson Guitar Corp. bankruptcy. I wanted to see if I could get behind the headlines and connect you, the Inc.com reader, with Henry Juszkiewicz, chairman & CEO of the Gibson Guitar Corp.
I have been a Gibson Guitar devotee and collector and, as an artist, had my own guitar line through Epiphone guitars, a Gibson owned guitar company, for several years.
But first some important background information:
The Gibson Mandolin-Guitar Manufacturing Co., Ltd. was established in 1902. The guitars carrying the Gibson brand have been and currently are all manufactured in the United States. In 1952, after partnering with jazz guitar legend Les Paul, Gibson started to manufacture the Les Paul model guitar which has become one of the most legendary and iconic guitar models in the history of recorded popular music.
In 1986, after a period of what is considered a dark decade of poor quality control and mismanagement, Henry Juszkiewicz, Dave Berryman and Gary A. Zebrowski bought the Gibson company three months short of closing its doors permanently and have, since then, brought the quality of the Gibson, and Epiphone guitar brands specifically, back to their former glory.
Over the last several years, Gibson--through Juszkiewicz's entrepreneurial guidance--has moved beyond the acquisition of musical instrument companies by acquiring several Japanese consumer electronics companies such as TEAC Corporation (Teac and Esoteric brands), Phillips, Cerwin Vega, Stanton, as well as professional audio equipment from KRK Systems and TEAC Corporation/TASCAM.
What follows is an excerpt of my exclusive interview with Henry Juszkiewicz that took place in February 2018.
Jay Jay French
Henry, how close is the Gibson guitar company to filing for bankruptcy?
Gibson is not going to file for bankruptcy. It's not our intention.
We're in compliance with all the bonds. We've paid interest, and it is our intention to refinance these bonds. We have a very good investment bank called Jefferies that has been working on refinancing for well over a year. They're very confident that we're going to refinance the business. That's normally what happens, because bonds always expire, and there's an effort to find new investors and to refinance the business.
We've talked to lots of people already who are potential investors. Gibson guitars are doing really well. Our sales have grown. Our profitability has increased in the guitar business and we expect to have an even better year. We're just going through our 2019 model year. Guitar Center (the nationwide retail chain) is back in a big way and our numbers with Guitar Center are spectacular for the last few months, well above the last year. And, things are going generally well with the MI (musical Instrument) business. Our KRK studio monitors are doing really well. We're still number one with Yamaha and others. The consumer electronics side (Onkyo, Pioneer, TEAC, Esoteric, Cerwin-Vega) has been challenged since we bought it in 2013.
Does that cover the TEAC, Esoteric and Philips lines, or do each one of these companies have their own particular issues?
Yeah. TEAC is really independent. I mean, they're a publicly traded company in Japan. You know, they are what they are. I can't say they're spectacular, but they're doing okay.
When you originally used the financial tools to infuse the company with capital, did you ever think this was possible?
Was this a scenario that you even could have imagined where you are now?
You know, sure. I've been in trouble for 30 years. I think I have a very difficult business assignment, and I knew that the CE (consumer electronics) business was going to be a lot of work. While it wasn't as bad as Gibson was when we took it on, it wasn't a company that was really solid. It needed a lot of work and the only difference is that I thought management had some time.
The currency crisis that was caused in the first year really kind of derailed that plan. And it ended up being a whole lot more work than anticipated. I'm an entrepreneur, so disaster can always come. That's the nature of risk. If you knew what the disaster would look like, then it wouldn't be risk. Any time you do something that is challenging, it's always possible for something to happen.
What is the price point of guitar sales that is the most effective, and is the premium, high-end market pretty much over?
When we bought Gibson, everybody said the guitar was dead and keyboards would take over. Do you remember that?
Yes, it was the early, early '80s.
Yep. You know, it was all electronics. The Japanese electronics companies were making these MIDI [Music Instrument Digital Interface] guitars. Everything was electronic and it would take over all acoustic instruments. It would be dead. And every [guitar] store [in the U.S.] was underwater with guitars. I started with that.
But the death of guitar sales didn't happen. I did really well with guitars. They didn't die. They actually did really well. And then there was John Travolta and disco music, and that was all the rage. Everybody was saying, "Guitars are going to die." And they didn't die. They did really well through that period. People are still playing the Beatles. In fact, the kids are listening to older music [produced] before they were born than ever before. Music is, because of streaming, much more eclectic.
So the guitar business and the music instrument business, in general, is a plus or minus 3 percent growth business since the 1900s. It's a very stable business. It continues to be. Our industry is up 3 percent, which is a big growth for our business. Guitar sales are up.
What is the hottest price point for a guitar, in your estimation?
Based on what I'm seeing, over 3,000 bucks. The second thing is, high-end [electric] guitars are hot. It's just that there aren't a lot of them in terms of units.
I play Epiphone guitars exclusively live. I've been playing them for over 15 years. And I happen to think they're amazing guitars, and they're priced at some unbelievable street prices for the quality, which are about $499. I would think, numerically, you must sell boatloads of that stuff. Am I correct?
Oh, yeah. We probably sell three or four to one. Epiphone to Gibson brand. But we make more money on the Gibson side. We are priced effective. The whole point is we want to give really great value to the consumer, right? And we do. Dave [Berryman, president of the Gibson Guitar Corp. and head of the Epiphone duitar division of Gibson] is just doing a bang up job and the guitars keep getting better.
Henry, is that era of the six, seven, eight, nine thousand Collector's Choice Les Paul model [a super-premium, Gibson custom-shop recreation of legendary Les Paul 1950's models] pretty much done or do you think there's room in that era still?
If Jerry Seinfeld buys a guitar, it's not going to be a $500 Epiphone, right? He's going to buy high-end stuff. The point being, there's a lot of high end--it's a beautiful piece of art and it has history to it. That connection is forever.
If you hold on, is the future about acquiring more companies outside of the music instrument business?
Right now I'm focused on making this company really perform well so we can do best in the field. I'm not even thinking about that. I am focused on today.
You saved this company [Gibson] from the Norlin era once already. Is there a future for Henry Juszkiewicz at Gibson?
Yeah, I think there is. I have to pass it on to another generation of people to do cool things with. I'm going to die being in the guitar world, but if I do the brand justice, I have to bring up fresh young management with their own aggressive ideas.
That's what I want to do. As long as I can be in there, I'm going to be in there. But for the company, I got to bring in new blood. And that's my intention.