Official Luthiers Forum!

Steve - flashback.... Wow, I can't believe I totally forgot about Mars existence. I wonder where their inventory and client lists did end up?

It does raise the point that even if Eric's dire appraisal of GC's future is correct, I think he's dreaming in forecasting any end of the big box music store holding 1/4 of the whole market. Maybe they will restructure and survive. Maybe subsidiaries like Music & Arts, Musicians Friend, Harmony Central, etc, will be split off or sold. Maybe they will see full bankruptcy and be liquidated, but regardless, it's not like the bohemoth will disappear and the market will go back to a bunch of mom and pop stores.

Someone would take over their inventory and their client lists, and big box guitar sales will continue. I just don't know who would be a potential buyer - no other competitor I know of could come close to taking assimilating their assets without taking on so much debt that they'd find themselves in bankruptcy themselves in short time.

This will be interesting to watch, as if they do fail it's hard to predict how the market would adjust. I can't see how anyone could/would take over their business as a whole (even if drastically trimmed). When we look at other big failures like Circuit City, Borders, Kmart, Radio Shack, they are all quite different in that they were not the only 800 pound gorillas in the market. There were always other giant companies in their markets to buy/absorb/assimilate the failed companies market share and inventory. In this case, there is no other competitor on their scale to buy them out (either as a full business or liquidated inventory).

So what would happen? I don't know, but I imagine that if there were a complete failure the biggest risk (beyond to GC and their employees) would be to the manufacturers. If they survive a restructuring however, many manufacturers could have strong incentive to negotiate on their debts given the alternative. This in turn could be a blow to other smaller dealers, as it would amount to an even greater disparity in the cost GC paid for their inventory vs what Billy's Main Street Music paid, and allow GC to clear stuff out at even lower prices, bringing more barely-profitable sales to GC and hurting the smaller dealers even more.

There's so many possibilities I know everything I say is just wild speculation, but it really fascinates me.

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Eschew obfuscation, espouse elucidation.

I forgot about MARS too and thanks for bringing them up Steve.

Just checked out what I could find on the Internet (so it has to be true, right..... ) about them and it looks like their demise was a combination of things. First they were attempting to grow and expand at a pretty good rate but in the then post 9/11 economy which was very much a recession as well before the big one.... the great recession. The stock market had tanked, VC dried up as the 1% took their footballs (deflated or not...) and went home to lick their wounds from stock market losses...

The combination of growing too fast and no vulture capital participation seems to have put MARS down. The growing too fast thing is one of the very most common reasons why companies fail so that's understandable. The post 9/11 economy kind of sort of froze everything in place with no new money coming into play. If your business model was highly dependent on the disposable income of others, and musical instruments are exactly this kind of thing, all bets were off and MARS perished.

As for their assets after a failed attempt at chapter 11 (reorganization with the hope and possibility of emerging out the other side new, stronger, and with less crippling debt under the protection of the courts) their chapter 11 efforts failed forcing them into chapter 7 - complete liquidation..... Liquidation is the selling of all assets to the highest bidder.

In the greater context of the discussion which focusses on GC now that Steve brought up MARS it's not unlike GC didn't have a negative and recent example of what not to become. But they went there anyway and continue to expand according to the guy who is one of the top three executives for GC and couldn't even tuck in his shirt or wear a tie.... shame on GC! If you think that I'm nuts for harping on GC CFO's inability to recognize that he has to consider that he is representing a $2B company and 1/4 of an entire market I very much am. Confidence is a powerful thing at any level of a major retail concern's presentation to anyone which includes potential clients, clients, potential investors, investors, etc. His remark about the LBO (leveraged buy out) partners concerns not being his problem would be grounds for dismissal in my experience.... Moreover it may be a signal as well of a division between the LBO money/partners and GC executive management.....

Regarding the French and their edged toys these days it's likely that a more horrible fate would be to chain the .1% to a stack of Fender Basemans on a busy Saturday at the local GC while every snot-nosed brat in town plugged in to the amps with cheap Epiphone Les Pauls and played their versions of Stairway over and over again.... Oh the horror I tell ya.....

Anyone here ever been to West Lake Village, California? I have a number of times on business and it's one of the very most expensive areas for corporate headquarters in the country.... As GC continues to punish their employees with cuts, poor pay, etc. resulting in the unionization that happened in the GC NYC market isn't it nice to know that the CFO and CEO continue to enjoy their mahogany row offices and perks and headquarters location with no effort to share the austerity.... There is another article that I found that details recent layoffs in West Lake Village at GC HQ but they went after the middle managers....

When Krugman the Nobel economist who writes for the NYT (suck it up....) wrote about Bain he was kind. Instead of saying that Bain killed jobs he wrote that Bain did not so much kill jobs as they did indeed kill well paying, middle class jobs.... Looks like GC HQ just got Bained......

You're so Bain..... you probably think this post is about you - you're so Bain..... Loved Carol King!

Chris, QE is no joking matter. As far as dumb... could be the years of breathing Cyano vapors taking hold, no joke.

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Kurt Thomas

"There's a first time for everything even if you do it by mistake."

I'm no economist either, but I saw Donald Trump declare bankruptcy what--8 times? And climb into his helicopter and fly away after each one. But he's always come back. I bet GC is here to stay is some form or another.

When Trump declares bankruptcy, it isn't personal bankruptcy. Any business that he has that goes belly up is funded with other peoples money, not his own! What my Dad used to call a successful bankruptcy.

Alex

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"Indecision is the key to flexibility" .... Bumper sticker

Is "bankruptcy" used indiscriminately in the US as a term both for personal insolvency and corporate liquidation?

In the UK, companies are never referred to as going "bankrupt" ...they go "into liquidation" ... the directors of such companies of course carry on regardless, their personal assets untouched (normally).

"Bankruptcy", in the UK, refers only to individuals who have become insolvent and cannot pay their debts.

The US Supreme Court has already basically declared that corporations have the rights of individuals, so how could you make the distinction here?

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Jim Kirby
kirby@udel.edu

They maybe considered to have the rights of individuals but they clearly don't have the obligations of individuals and, unlike individuals, corporations aren't at risk of being put in the slammer.

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Once in a while you get shown the light in the strangest of places if you look at it right - Robert Hunter

Murray in the states since we were founded as a nation of debtors when you consider our history and departure from our pals across the pond US bankruptcy laws have always had a bias toward the idea of a new beginning/start. As such bankruptcy here is not always a liquidation of assets with the benefactors being the creditors.

Instead in both personal bankruptcy as well as corporate bankruptcy not to mention now municipal bankruptcy as in the case of DeToilet (Detroit) opportunities for "reorganization" under the protection of the courts exist in US law as well. Not all that long ago a little company that no one ever had heard of called General Motors was able to shed massive debt, some obligations to unionized employees.... etc. and start new under the protection from creditors of the courts. This is what we call chapter 11 or reorganization.

If a chapter 11 activity proves not to be possible for one reason or another such as creditors not being on board with the plan to settle things at least partially then it can degrade into chapter 7 - total liquidation. In chapter 7 the concern is liquidated to settle debts. Interestingly there is a pecking order of sorts as to who is entitled to get paid first and my understanding, but I'm not an attorney, is that the lawyers are very close to the top of who gets paid first....

Anyway in both personal as well as corporate and/or now municipal bankruptcy the opportunity exists here for reorganization which is a plan put together that will pay some things, settle others, negotiate new rates perhaps with labor, etc. and pop out the other side one day with a fresh start and even some cash to go at it again with.

I assume that the chapter7/chapter11 thing is only relevant to corporate insolvency, not to personal bankruptcy ? I realize I could google all this, but I don't really have an overwhelming desire to become that well-versed in US insolvency practice.

As far as personal bankruptcy in the UK is concerned, bankruptcy, or "sequestration of assets" as the lawyers like to call it, means the loss of everything you own of any value, other than the tools of your trade, which are protected by common law. Your house, your cars, your horses ...all gone, along with the contents of your bank accounts. Your future earnings are also monitored for a period of years, and anything over and above a certain amount is supposed to go to pay your creditors, until such time as you are "discharged".

Hesh, I think the same applies here in the UK as far as the pecking order is concerned. The liquidators get theirs in full, followed, I think, by HMRC (Her Majesty's Revenue and Customs) and then the banks. Anything left after that is divvied up at so many pence in the pound for the proper creditors, the poor innocents who are the real sufferers.

Murray I don't know how exactly personal bankrupcy works here so I can't answer your question as to if the chapter 7 and 11 thing also applies to personal financial distress. I do know that folks survive bankrupcy but they also get a negitive mark on their credit report that lasts some number of years. The gift that keeps on giving so-to-speak.....

In the US we tend to not reinvent the wheel and instead many of our laws including the very concept of democracy came from somewhere else. It could be that what happens here is very much like how the UK handles things.

We do have lawyers on the OLF although I can't recall anyone being a bankrupcy guru but perhaps someone will weigh-in here and let us all know.

It is important to note that Chapters 7 & 11 are not the only options... there are other chapters in Title 11 that can apply in different situations, like Chapter 13 to individuals, etc.

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"I want to know what kind of pickups Vince Gill uses in his Tele, because if I had those, as good of a player as I am, I'm sure I could make it sound like that.
Only badly."