NEW YORK • Like blues giant Robert Johnson, whose mastery of a Gibson guitar was said to be the result of a deal with the Devil, the company has come to a crossroads.
After 116 years, the Devil is knocking on Gibson's door. Debt of as much as US$560 million (S$738 million) is due this summer and investors are whispering that chief executive Henry Juszkiewicz has to go.
He traded a slice of Gibson's soul in an attempt to become more than just the maker of the world's most beloved guitar. He bought a line of consumer electronics from Japanese company Onkyo and, in 2014, added Royal Philips's audio and home entertainment business, WOOX Innovations, for US$135 million. He relaunched Gibson Guitars as Gibson Brands, a "music lifestyle'' company. It did not work out as planned.
"My dream was to be the Nike of music lifestyle," Mr Juszkiewicz said in an interview. "At this point, I have to cut back on that ambition, frankly."
Elvis Presley changed history on a Gibson J-200. Eric Clapton's famous solo on The Beatles' While My Guitar Gently Weeps was played on a Gibson, and when a young B.B. King fled a burning building and realised he had left his Gibson behind, he risked his life by going back inside to retrieve it. The fire had been accidentally started by two men fighting over a woman, and King gave his hollow-body guitar her name - Lucille.
But pop cares little for legend. Gibson says sales are strong, but guitars do not have the mystique they did in King's day.
The transition has drained more cash than expected. A looming US$375-million bond maturity means Mr Juszkiewicz is running out of time for a turnaround, says Moody's Investors Service senior analyst Kevin Cassidy.
On top of the Aug 1 payment, the company has a "springing lien" that will cause US$185 million of debt to become current in July if it falls behind on payments, says S&P Global Ratings.
Gibson has expressed pride that its guitars are made in the United States. Acoustic instruments come out of a factory in Bozeman, Montana, and solid-body electric guitars are made in Nashville, Tennessee. Hollow bodies, such as King's Lucille, are crafted at its Memphis plant.
To raise cash, Gibson Brands sold the Memphis factory in December last year to private equity firms Somera Road and Tricera Capital for US$14.1 million. It continues work there, for now.