Gibson Guitar Corp. Business Information, Profile, and History

Company Perspectives:

Gibson became the world's best known and most respected maker of fretted instruments. The traditional motto "Quality, Prestige & Innovation" now applies to a large family of companies that make and sell the world's finest guitars, basses, banjos, mandolins, drums, keyboards, amplifiers, strings and accessories.

History of Gibson Guitar Corp.

Gibson Guitar Corp., one of the world's foremost manufacturers of fretted instruments, has enjoyed the respect of musicians for most of its century-long history. Its instruments have been used by some of the best guitarists known, including Chet Atkins, the Everly Brothers, Chuck Berry, Eric Clapton, Jimmy Page, B. B. King, Frank Zappa, and Joe Walsh. The company fell from its status as a premier guitar maker to near bankruptcy in the 1980s but was brought back to solvency and its former respect by new owners, Henry Juszkiewicz and David Berryman. Although best known for its acoustic and electric guitars, by the mid-1990s the company also produced bass guitars, mandolins, synthesizers, drums, amplifiers, and various accessories for its instruments.

Early History

Orville Gibson, the company's namesake, was making his living as a salesman and clerk when he bought a small workshop in Kalamazoo, Michigan, in the 1880s to begin building mandolins. At the time, most mandolins were made by bending and forming the wood into shape. However, Gibson believed that this technique stressed the wood and resulted in inferior vibrating characteristics. He therefore developed a new technique based on violin construction that involved carving the front, back, and sides of the mandolin rather than bending the wood into shape. Gibson created the first archtop acoustics using this technique, although he only received one patent for his designs, for a mandolin in 1898. Gibson began applying his techniques to the construction of guitars, banjos, and lutes as well.

Gibson soon earned a reputation as a maker of high-quality, custom stringed instruments. By 1896 Gibson was making instruments full time. Early in the new century, demand for Gibson's instruments outpaced his ability to meet it. In response, Gibson entered into an agreement with five Kalamazoo financiers to form the Gibson Mandolin-Guitar Manufacturing Company in 1902. According to the contract, O. H. Gibson was not a major stockholder; instead, he was given a few shares of stock and a lump sum of $2,500 for his patent and the right to use his name. Gibson sold his stock in July 1903 but remained at the company until 1904, consulting and training employees on his construction techniques. Thereafter, he received a monthly pension until he died in 1918.

From its inception, the company focused on innovation and the production of high-quality instruments, goals it became known for over the next half-century. In the company's first few years, production manager Sylvo Reams improved upon Gibson's already popular instruments, refining his construction techniques and using higher-quality materials and finishes. The product line began with six guitar models (three archtops with oval soundholes and three with round soundholes) and four harp guitars. Within the company's first decade, it had been granted patents for the elevated pickguard, the intonation-adjustable bridge, and the harp guitar and had introduced one of the first production guitars with a cutaway.

Despite these early innovations in fretted instrument design, the company made few changes to its guitar line in the 1910s. Instead, it concentrated on its mandolins, a far more popular instrument at the time and one that made up most of Gibson's sales. Through either luck or foresight, Gibson began making banjos in 1917, positioning the company to take advantage of the sudden popularity of this instrument in the early 1920s. Lloyd Loar, a well-known mandolinist and composer, added his talents as an acoustics engineer and musician to Gibson's engineering and research and development teams. He made significant contributions to the company's Master Line Master Tone instruments, including the two-footed, intonation-adjustable bridge, the f-hole design, and narrow pegheads.

Early Innovations in Guitar Design

Guitars slowly increased in popularity in the 1920s, and Gibson responded by introducing several new models. Its first modern guitar, part of the company's Style 5 series in the Master Line Master Tone line, was introduced in 1922. One of the best known of Gibson's early acoustic guitars, the L-5 used Loar's innovations to build a specific pitch into the sound box, a radical concept at the time. Another unusual design, the flat-top guitar, had been produced by the company as early as 1918; however, it did not begin serious production of a flat-top model until 1926. In addition to several flat-top models, Gibson began production of an economy series, the Kalamazoo line, in 1929.

Despite the Depression, the market for guitars expanded rapidly in the 1930s. As they had in the past, Gibson promptly followed the trend, shifting the focus of their production and advertising from mandolins and banjos to guitars. Not only did they expand their line of archtop f-hole guitars and flat-top guitars, the company also pioneered new designs. In 1934 it created its legendary Super 400. An 18-inch wide archtop, this guitar pushed the edges of guitar design in size and established higher standards for craftsmanship and decoration. Other new guitar designs included the Jumbo, a 16-inch wide flat-top, and a Premier version of the L-5, which featured a modern-style, rounded cutaway.

Gibson's expansion stalled during World War II for several reasons. Materials that met the company's standards were hard to come by, so rather than lower the quality of their instruments Gibson discontinued several models, including the L-5 and Super 400. Other models continued to be made but at a radically slower rate. In addition, the company shifted production from musical instruments to parts useful in the war effort. In 1944, as the war neared its conclusion, the Chicago Musical Instrument (CMI) Company acquired Gibson and prepared the company to meet the pent-up demand for guitars when the war ended.

Postwar Boom

The postwar period saw phenomenal expansion for Gibson, much of it due to the vision and leadership of Ted McCarty. McCarty joined Gibson in 1948 and served as company president from 1950 to 1966. During his tenure company sales grew from less than a million dollars a year to $15 million a year, its work force grew from 150 employees to 1,200, and its profits multiplied 15 times. McCarty also led CMI to purchase rival Epiphone in 1957, giving Gibson greater control of the market.

Underlying Gibson's vast success during this period was McCarty's ability to lead the company to fruitful innovations. Under McCarty, Gibson finally committed themselves to the electric guitar market, having squandered their early efforts in the area. Gibson had introduced an electric guitar in 1935, the aluminum-bodied Electric Hawaiian Guitar. The large, hollow-body guitar used a magnetic pickup that needed thousands of wire windings. However, when Grammy&ndashard winning guitarist and inventor Les Paul, who had been endorsing Gibson guitars since 1928, approached the company with a solid-body electric guitar in 1941, Gibson rejected the idea outright. Paul continued to try to convince Gibson throughout the 1940s but met with little success until McCarty was at the helm. By that time, Leo Fender had developed his own highly successful solid-body electric guitar, the Fender Telecaster.

Although Gibson had missed the chance to take the pioneering role in electric guitars, McCarty made sure they did not lag in subsequent improvements to the design. The Les Paul model debuted in 1952, and Gibson continued to refine the design for decades. Also under McCarty's leadership, Gibson designers introduced the humbucking pickup, the first semi-solid guitar, and the distinctive reverse-body Firebirds. McCarty personally contributed several groundbreaking changes, including the stop tailpiece and the Tune-O-Matic bridge. Other important models were introduced during this period, such as the first thinline archtop, the Byrdland, and the commercially unsuccessful but subsequently influential solidbodies the Flying V, Explorer, and Moderne.

Although electric guitars played an increasing role in Gibson's sales in the 1960s, the company continued to introduce new acoustic models as well. The Hummingbird, Dove, and Everly Brothers models debuted at that time, as did several artist models, including the Johnny Smith and Trini Lopez. However, after McCarty left in 1966 the company released few new models, either acoustic or electric, and suffered from the loss of McCarty's perceptive assessments of the market.

Declining Sales

In 1969 CMI merged with ECL, an Ecuadoran brewery, and the following year the two companies formed Norlin. Norlin combined Gibson guitars with Moog synthesizers and Lowrey organs and pianos to form a music division. Gibson suffered under the new management. Although a few new models were introduced in the 1970s they were not successful, such as the short-lived Mark series acoustics and the Marauder, S-1, and RD electrics. The company managed to maintain sales through most of the 1970s, but the long-term effects of absentee corporate management could be seen when sales steadily declined in the 1980s.

Although the guitar market in general suffered during the 1980s, Gibson exacerbated the problem by allowing its quality to slip and by abandoning their popular guitar models in favor of poorly conceived new models. "Corporate bean counters from thousands of miles away started dictating to the sales department that the old stuff was stale, and that what they needed was new, new, new," Matt Umanov, a New York guitar retailer, told The New York Times in 1994. "That led to all kinds of stupid design changes."

In 1983 Norlin was taken over by Rooney Pace and Piezo Electric Product, Inc., and the new owners promptly put the Gibson music division up for sale. New owners did not materialize, and Gibson's bad times continued. In 1984 the company closed its Kalamazoo factory. Several new models were introduced and met with such a terrible response that they were discontinued almost immediately. Severe cuts in staff and the closing of all divisions but one line of guitars did not stem Gibson's losses. At last, enthusiastic new owners took over in 1986, Henry Juszkiewicz and David Berryman, who bought the company for $5 million.

Turnaround under New Owners

Juszkiewicz, who took over as company chairman, was eminently suitable to reverse the company's fortunes. A long-time Gibson guitar enthusiast, he had played guitar professionally in high school and college. In addition to a musical sensibility and an appreciation for the company's products, Juszkiewicz brought an MBA from Harvard and some tough business experience to bear on Gibson's problems.

Juszkiewicz and Berryman began by firing 30 of Gibson's 250 employees, including all of the company's top management. They then began a series of acquisitions, including the purchase of Steinberger, a manufacturer of high-tech electric guitars, in 1987; Oberheim Corporation, a synthesizer manufacturer, in 1990; and Tobias, maker of handtooled professional quality basses, in 1990. When the company bought the Flatiron Mandolin Company in 1987, Juszkiewicz used the newly acquired factory in Bozeman, Montana, to establish a flat-top acoustic division, which soon won acclaim for its high-quality instruments. Mandolin production inherited from Flatiron also continued, reviving a division of Gibson that had long been closed. By the mid-1990s the Gibson and Flatiron mandolin lines included the Gibson F-5, based on a Lloyd Loar design from 1922, and Flatiron mandolins, mandolas, and octave mandolins in a wide range of styles.

Reissues of classic guitar models played an important role in refreshing the company's reputation. To re-create popular models, such as the Advanced Jumbo and the J-200, the company retooled its factories and dismantled old sound pickups to study their design. The popularity of these reissues encouraged Gibson to offer a special commemorative line of guitars for its 100th anniversary in 1994. In each month of 1994 Gibson released a different electric and acoustic model in limited runs of 100. In addition to reviving the classic Gibson acoustic and electric guitar models, the partners reestablished the company's amplifier division and expanded its line of accessories to include strings, picks, straps, pickups, and the Gibson Tourwear clothing line.

Since taking over the company the partners have made strong efforts to win back the loyalty of successful musicians. Much of the old Gibson aura could be attributed to famous musicians playing their guitars, such as Chuck Berry and his Gibson ES-350T. The company created a new operation to custom craft and hand tool instruments for celebrities. In addition, Gibson began wooing endorsements from well-known musicians by providing their guitars. Famous musicians who renewed or began endorsing Gibson included Chet Atkins, Steve Miller, and B. B. King. Many other musicians have joined the ranks of Gibson guitar users, such as Emmylou Harris, Pete Townshend, Travis Tritt, Johnny Cash, Neil Young, Peter Frampton, and Paul McCartney.

The changes instituted by Juszkiewicz and Berryman turned the company around. Juszkiewicz told The New York Times in 1994 that since 1986 Gibson has achieved a compound annual growth rate in sales of 30 percent. Starting with annual sales below $10 million in 1986, the company reached an estimated $70 million in sales by 1993, up from $50 million in 1992.

Gibson celebrated its 100th anniversary in 1994. Although the company proper was founded in 1902, Gibson Guitar has long cited 1894 as the earliest confirmable date of a Gibson instrument. An engraving on a mandolin states, "Made by O. H. Gibson, 1894," although Orville Gibson clearly made instruments before that date. The company used the anniversary as the theme of a major international promotion. A concert in Tokyo by the heavy-metal group the Scorpions launched a series of national and international concerts and exhibits. A White House salute to Gibson, hosted by President Bill Clinton and First Lady Hillary Rodham Clinton, highlighted the year's activities.

Juszkiewicz's expansion plans proceeded steadily through the early and mid-1990s. To cover the lower end of the market Juszkiewicz and Berryman revived the lower-priced Epiphone line of guitars. Epiphone production had been moved to Asia in the 1970s, and the line had lost much of its distinction. In late 1995 Gibson returned Epiphone to the United States, moving it into its own facility in Nashville. Gibson's acquisition plans continued as well. The company purchased the Original Musical Instrument Company (O.M.I.) in 1993. Originator of the Dobro resonator guitar, O.M.I. continued to offer a full line of woodbody and metalbody resonator guitars and basses under the leadership of Gibson. In 1995 Gibson bought the Slingerland Drum Company. Slingerland adds its rich history to Gibson; founded in 1928, Slingerland was the choice of such famous drummers as Gene Krupa and Buddy Rich. When Gibson acquired the company, it had evolved into mainly an import company. With plans to revive its reputation, Gibson returned Slingerland production to the United States.

With Gibson exhibiting serious expansion goals, there was some speculation that the company might make a public offering of stock to gain additional cash for acquisitions. "On the one hand it's appealing because it would be a quick way to do it," Juszkiewicz reflected in an interview with The New York Times in 1994. "But then I don't know if I could operate the way I want having to answer to other people."

Principal Subsidiaries: The Original Musical Instrument; Epiphone; Oberheim Electronics; Steinberger; Slingerland; Tobias.

Principal Divisions: Gibson Nashville; Gibson Montana; Gibson Custom, Art, Historic; Gibson Strings & Accessories; Gibson World Net Services; Flatiron; G-Wiz; Pro Sound.