Is Gibson cutting production???

[LPDEN]

I was at the music shop during lunch hour and I was chatting with a few people there and the talk was Gibson among other manufacturers may be cutting production due to the economy's effects. I did read the link about the layoffs at Gibson, so this really wouldn't be a big surprise following that bad news. I do wonder though what that may do for product availability, especially the higher end stuff that costs Gibson more $$ to produce?

 

It seems the financial fallout may be reaching further through the economy and discretionary spending (like guitars) is taking a hit...

[chongo]

I was at the music shop during lunch hour and I was chatting with a few people there and the talk was Gibson among other manufacturers may be cutting production due to the economy's effects. I did read the link about the layoffs at Gibson' date=' so this really wouldn't be a big surprise following that bad news. I do wonder though what that may do for product availability, especially the higher end stuff that costs Gibson more $$ to produce?

 

It seems the financial fallout may be reaching further through the economy and discretionary spending (like guitars) is taking a hit...[/quote']

 

I can't speak for Gibson, but I know that other guitar companies are feeling the pinch.

I'd guess that the wait times for Custom Shop guitars will be coming down significantly as well.

I don't think that product availability will be a question, since most retailers will probably have inventories of all of it that just won't be selling as quickly. You may, on the other hand, find that some of these retailers are *reducing* their inventories a bit, but will be expecting Gibson's distribution centers to maintain stocks of various items. So you may not have as many choices on the walls, but you'll still be able to get all of the important items. The "higher end stuff" actually doesn't cost Gibson that much more to produce, leastways not in terms of labor or materials. Other companies are fully capable of producing similar guitars with as good or better materials and build quality at much lower prices. There's a LOT of air built into Gibson pricing. Expect prices to drop within 8-10 months.

[Riffster]

Other companies are fully capable of producing similar guitars with as good or better materials and build quality at much lower prices. There's a LOT of air built into Gibson pricing. Expect prices to drop within 8-10 months.

 

Most of them are imports tough without saying that in a detrimetal way since I own a few myself and I am quite happy with the quality. We all know manufacturing cost a lot less in China, Korea and even Japan.

 

A lot of the "air" is in paying all of those guys to advertise your guitars, Slash, Zakk Wylde, Angus, Tonny Iommi. Of course they also bring Sales but everything gets more expensive in the end.

 

Just 3 weeks ago I spoke to a guy that works on the Custom Shop and he said he was not getting overtime lately.

 

I also read that Gibson cut 50 employees worldwide, I guess I thought it was a higher number.

[deepblue]

Anyone wanna take a guess as to how much it costs Gibson to produce one Les Paul?

Say for instance we pay $2800....Gibson sells them to your local dealer for...???

[Duende]

Anyone wanna take a guess as to how much it costs Gibson to produce one Les Paul?

Say for instance we pay $2800....Gibson sells them to your local dealer for...???

 

I would have thought there would be a middle man before the shop gets it, watering the price down.

 

Anyway my guess for a street price Guitar of $2800 is that it would cost Gibson in materials and labour between $500-$800.

 

Just my layman guess :)

 

Matt

[jchabalk]

This is always an interesting question...

 

My guess is that if a dealer is selling a guitar for 2800 that their cost is somewhere between $2100 and $2600. I would bet it depends based on the volume they push etc...

 

Also i'd guess that the margins are much different depending on what the guitar/model is.

 

It's easy to forget also that the cost to gibson, or any other manufacturer is much more than just the cost of labor and materials. While those two things are part of it there's significant additional cost added to the price of each instrument surrounding the infrastructure needed to employee those people, produce the guitar and deliver it to your dealer.

 

It's not as cut and dry as to just figure out the incremental cost of spitting 1 more guitar out of the factory and apply that to the production of all guitars though. (although if they ever make that option available for a while will someone please forward me the link? cause i might be ready to go big!)

 

Part of the justification (to me anyway) to buying an expensive guitar like this is that i'm helping support a US company and hopefully helping to keep it going. And in the process i'm getting an extremely high-quality instrument that'll last more than a lifetime. Plus it's beautiful and sounds freaking amazing! :-

[NeoConMan]

Dealer cost is about half of retail list.

If Gibson sells a guitar to a dealer for $1,500 then list will be somewhere around $3k.

Dealer sells it for $2,000 and pockets $500 (well, not really, overhead costs eat that up) and you can guess Gibson clears a couple hundred bucks on each one that leaves its door.

 

Wild guess - Gibson has less than a grand in it.

 

 

As somebody who has assembled a few Strats over the years and heavily modded some Gibson products, I invite ANYBODY to beat Gibson on build quality and price - and make a living while you're at it.

Good luck.

[deepblue]

Good points guys.

 

This not guitar related but is a point to ponder...

I have a friend who works at Canada customs. She told me she sees all the invoices of what companies declare their

costs to be.

Those video games that we pay $60-$70 to buy....Its costs the manufacturer roughly 90 cents per game.

*ouch*

[pippy]

Again, not guitar-related, but as a student I had summer-jobs in a photographic dealership during the worst of the 'Grey Import' era where most of the big wholesale electrical (non-photographic) shops were buying in huge quantities of stock intended for the far-Eastern market. These mega-stores were able to sell cameras to the public for less than we, an independent dealer, could buy them from the Parent Companies Official Importer! We would have been making more money if we bought them from the Mega-Stores instead of the O.I.!

 

Canon, for example, were reckoned to have possibly ten qualities of the same camera model depending on it's intended outlet. This came to light when a camera body was sent by ourselves, out of warranty, to the Canon repair depot. It came back with a polite note with words to the effect '...we are unable to undertake the repair work as the internals are different in almost every respect from the cameras sold in the UK."

 

Some Olympus cameras had nylon gear cogs instead of steel!

 

We should all pay for the quality we desire; All employees need to earn a decent wage, have decent work facilities and all the rest.

[deepblue]

We should all pay for the quality we desire; All employees need to earn a decent wage, have decent work facilities and all the rest.

 

+1 :o

[kubog]

Yea same with food. Milion restaurants can make better burgers than Mc. But only Mc can sell milions of burgers...

[Riffster]

I have been told there is a 40% mark up from the dealer on Gibsons and about the same on Fenders.

 

So a $2,800 guitar is sold to the dealer by Gibson for about $1,680. that has to cover, materials, salaries, fixed cost, shipping, packaging, marketing expenses.

 

Like Neo says, try to do that and make a living. Keeping the manufacturing in the USA.

 

I hate it when anybody starts with the well my Korean guitar is better. ..

[Duende]

I am completely with you guys about supporting your country.

 

I like to buy British where possible too for the same reason. Jeez make no mistake we are in as much dire straits financially as you are. These are difficult times.

 

I must admit I have always thought Gibson great value too.

You can get a gigging instrument that stays in tune, has great intonation sustain and tone for £600 here (a SG Special).

 

Even the so called higer end stuff ins't a lot compared to other instruments prices.

 

Matt

[chongo]

Anyone wanna take a guess as to how much it costs Gibson to produce one Les Paul?

Say for instance we pay $2800....Gibson sells them to your local dealer for...???

 

Okay' date=' look -- let's take the imports first and let the "USA first" folks get riled up. Rondo puts out a $399 guitar imported from Korea that rivals a Les Paul at $2400 in quality of construction. Let's assume for a bit that the tuners and bridge could be upgraded for a few bucks more, but honestly, the pickups are pretty good. What we're going to look at here is not labor, but at what it costs for materials. If you assume that Rondo is making a reasonable profit on these guitars, let's call the average markup on guitars somewhere between 30 and 50% of the SELLING price (MSRP's are mythical garbage numbers). That means that they *may* pay (including shipping) a total price of $280 for a $399 guitar. Let's assume that all labor is slave labor (and since it's South Korea, it's not) and free. We can now assume with some certainty that you can get the [i']wood and most of the metal bits for a guitar and put one together for $280 or less.

[/i]

 

Now let's consider Carvin, a stateside (San Diego) constructor that makes all of its electric guitars in the US with US labor complete with medical, dental and all that. Their California Single guitar (the CS model) is a high-end custom-made-for-each-customer guitar with Custom Shop specs that's base-priced from $1000 to $1350. The high-end number represents a AAAA 20mm thick flamed top over a premium mahogany body and set neck with a smooth neck heel and a matching flamed headstock face, locking Sperzel tuners, ebony fretboard with abalone dot inlays, 25" scale, etc. The Low-end number represents an all-mahogany version (presumably painted) with the same hardware, board, etc. There's also a version in the middle with plain-top maple. We have to assume that they're making 50% on their guitars, and they ship direct to the consumer, so their labor AND materials on the low end model is probably around $500 and on the high end about $675. Hard costs. The rest of that covers management, company profit, plant maintenance, advertising, etc.

 

Gibson is not using better grade wood or materials on their guitars compared to Carvin, and they're paying their labor at approximately the same rate, so we need to assume that they're paying no more than these prices for their wood, material and labor. Therefore, it's unlikely that any Les Paul (aside from something heavily inlaid) is going to cost them more than about $675 to build, and that includes Custom Shop guitars right into the $4-5000 range.

 

Gibson, however, sells to retailers and they advertise a good deal more and they do a lot of endorsement deals. Gibson sells wholesale to places like Guitar Center. Guitar Center may open up their "our cost/our selling price" book to you to show you that they're going to sell some particular guitar to you at their cost "and we're really not supposed to show you this...", etc. But even that wholesale cost listing (for a single guitar) is nothing like what Guitar Center actually pays. There are, additionally, discounts for buying at certain times, discounts for buying in certain volumes, discounts for co-pay advertising, discounts for specific promotions on specific guitars and probably (used to be, anyway) spiffs for employees who sell particular models that they really want to move. In the end Guitar Center is probably paying 50% or even less for their Gibson guitars compared to the SELLING (street) price. Again, the MSRP is mythical. No one has paid MSRP for a Gibson ever.

 

So for a $500-675 guitar you will pay $2400-5000, roughly 30-50% of which will go to Guitar Center, including both that particular store and Guitar Center corporate. The balance, minus the hard costs, will go to Gibson and that'll go to corporate profit, management bonuses, advertising, endorsement deals and other marketing costs.

 

Back to the overseas business. That $399 guitar Rondo sells is equivalent to a $650 or 700 Epiphone in terms of original costs( for a while they came from the same plants, but Rondo has a much lower profile operation, no brick and mortar stores, little advertising and few retail-type costs, where Epiphone is sold by retailers and heavily advertised). Remember that we figured these at Rondo's door at around $280, and the plant is paying for wood and labor to produce these guitars and they're making a profit off all of that. So assume that the actual wood in the guitar is worth no more than $100 and probably less. And we're talking fairly decent mahogany and maple here. The rest is labor, metal goods (pickups, tuners, bridge, strap buttons, etc), profit and shipping.

 

I've been in the music business as a musician, a retailer and an advertiser for a long time. That's how it works.

 

Never make comparisons between one-off guitars where the guy goes to a luthier wood supply and then picks up most of his other materials at retail to build a guitar. This has NO bearing on production guitar building whatsoever.

[pippy]

Thanks for that, Chongo.

 

Plenty of food for though and no mistake.

[Murph]

I like Carvin bass amps and P.A. gear.

 

I'll stick with Gibson guitars.

 

Murph.

[deepblue]

Nice Chongo...

That put things into a clearer line of vision.

[Duende]

 

Okay' date=' look -- let's take the imports first and let the "USA first" folks get riled up. Rondo puts out a $399 guitar imported from Korea that rivals a Les Paul at $2400 in quality of construction. Let's assume for a bit that the tuners and bridge could be upgraded for a few bucks more, but honestly, the pickups are pretty good. What we're going to look at here is not labor, but at what it costs for materials. If you assume that Rondo is making a reasonable profit on these guitars, let's call the average markup on guitars somewhere between 30 and 50% of the SELLING price (MSRP's are mythical garbage numbers). That means that they *may* pay (including shipping) a total price of $280 for a $399 guitar. Let's assume that all labor is slave labor (and since it's South Korea, it's not) and free. We can now assume with some certainty that you can get the [i']wood and most of the metal bits for a guitar and put one together for $280 or less.

[/i]

 

Now let's consider Carvin, a stateside (San Diego) constructor that makes all of its electric guitars in the US with US labor complete with medical, dental and all that. Their California Single guitar (the CS model) is a high-end custom-made-for-each-customer guitar with Custom Shop specs that's base-priced from $1000 to $1350. The high-end number represents a AAAA 20mm thick flamed top over a premium mahogany body and set neck with a smooth neck heel and a matching flamed headstock face, locking Sperzel tuners, ebony fretboard with abalone dot inlays, 25" scale, etc. The Low-end number represents an all-mahogany version (presumably painted) with the same hardware, board, etc. There's also a version in the middle with plain-top maple. We have to assume that they're making 50% on their guitars, and they ship direct to the consumer, so their labor AND materials on the low end model is probably around $500 and on the high end about $675. Hard costs. The rest of that covers management, company profit, plant maintenance, advertising, etc.

 

Gibson is not using better grade wood or materials on their guitars compared to Carvin, and they're paying their labor at approximately the same rate, so we need to assume that they're paying no more than these prices for their wood, material and labor. Therefore, it's unlikely that any Les Paul (aside from something heavily inlaid) is going to cost them more than about $675 to build, and that includes Custom Shop guitars right into the $4-5000 range.

 

Gibson, however, sells to retailers and they advertise a good deal more and they do a lot of endorsement deals. Gibson sells wholesale to places like Guitar Center. Guitar Center may open up their "our cost/our selling price" book to you to show you that they're going to sell some particular guitar to you at their cost "and we're really not supposed to show you this...", etc. But even that wholesale cost listing (for a single guitar) is nothing like what Guitar Center actually pays. There are, additionally, discounts for buying at certain times, discounts for buying in certain volumes, discounts for co-pay advertising, discounts for specific promotions on specific guitars and probably (used to be, anyway) spiffs for employees who sell particular models that they really want to move. In the end Guitar Center is probably paying 50% or even less for their Gibson guitars compared to the SELLING (street) price. Again, the MSRP is mythical. No one has paid MSRP for a Gibson ever.

 

So for a $500-675 guitar you will pay $2400-5000, roughly 30-50% of which will go to Guitar Center, including both that particular store and Guitar Center corporate. The balance, minus the hard costs, will go to Gibson and that'll go to corporate profit, management bonuses, advertising, endorsement deals and other marketing costs.

 

Back to the overseas business. That $399 guitar Rondo sells is equivalent to a $650 or 700 Epiphone in terms of original costs( for a while they came from the same plants, but Rondo has a much lower profile operation, no brick and mortar stores, little advertising and few retail-type costs, where Epiphone is sold by retailers and heavily advertised). Remember that we figured these at Rondo's door at around $280, and the plant is paying for wood and labor to produce these guitars and they're making a profit off all of that. So assume that the actual wood in the guitar is worth no more than $100 and probably less. And we're talking fairly decent mahogany and maple here. The rest is labor, metal goods (pickups, tuners, bridge, strap buttons, etc), profit and shipping.

 

I've been in the music business as a musician, a retailer and an advertiser for a long time. That's how it works.

 

Never make comparisons between one-off guitars where the guy goes to a luthier wood supply and then picks up most of his other materials at retail to build a guitar. This has NO bearing on production guitar building whatsoever.

 

A wake up call/slap in the face romance destroying post that reeks of sense!

 

I know people who think that because their guitar costs £1000 more on the mark up, then the wood must be completely superior to a guitar a grand less.

 

Matt

[esch]

 

Okay' date=' look -- let's take the imports first and let the "USA first" folks get riled up. Rondo puts out a $399 guitar imported from Korea that rivals a Les Paul at $2400 in quality of construction. Let's assume for a bit that the tuners and bridge could be upgraded for a few bucks more, but honestly, the pickups are pretty good. What we're going to look at here is not labor, but at what it costs for materials. If you assume that Rondo is making a reasonable profit on these guitars, let's call the average markup on guitars somewhere between 30 and 50% of the SELLING price (MSRP's are mythical garbage numbers). That means that they *may* pay (including shipping) a total price of $280 for a $399 guitar. Let's assume that all labor is slave labor (and since it's South Korea, it's not) and free. We can now assume with some certainty that you can get the [i']wood and most of the metal bits for a guitar and put one together for $280 or less.

[/i]

 

Now let's consider Carvin, a stateside (San Diego) constructor that makes all of its electric guitars in the US with US labor complete with medical, dental and all that. Their California Single guitar (the CS model) is a high-end custom-made-for-each-customer guitar with Custom Shop specs that's base-priced from $1000 to $1350. The high-end number represents a AAAA 20mm thick flamed top over a premium mahogany body and set neck with a smooth neck heel and a matching flamed headstock face, locking Sperzel tuners, ebony fretboard with abalone dot inlays, 25" scale, etc. The Low-end number represents an all-mahogany version (presumably painted) with the same hardware, board, etc. There's also a version in the middle with plain-top maple. We have to assume that they're making 50% on their guitars, and they ship direct to the consumer, so their labor AND materials on the low end model is probably around $500 and on the high end about $675. Hard costs. The rest of that covers management, company profit, plant maintenance, advertising, etc.

 

Gibson is not using better grade wood or materials on their guitars compared to Carvin, and they're paying their labor at approximately the same rate, so we need to assume that they're paying no more than these prices for their wood, material and labor. Therefore, it's unlikely that any Les Paul (aside from something heavily inlaid) is going to cost them more than about $675 to build, and that includes Custom Shop guitars right into the $4-5000 range.

 

Gibson, however, sells to retailers and they advertise a good deal more and they do a lot of endorsement deals. Gibson sells wholesale to places like Guitar Center. Guitar Center may open up their "our cost/our selling price" book to you to show you that they're going to sell some particular guitar to you at their cost "and we're really not supposed to show you this...", etc. But even that wholesale cost listing (for a single guitar) is nothing like what Guitar Center actually pays. There are, additionally, discounts for buying at certain times, discounts for buying in certain volumes, discounts for co-pay advertising, discounts for specific promotions on specific guitars and probably (used to be, anyway) spiffs for employees who sell particular models that they really want to move. In the end Guitar Center is probably paying 50% or even less for their Gibson guitars compared to the SELLING (street) price. Again, the MSRP is mythical. No one has paid MSRP for a Gibson ever.

 

So for a $500-675 guitar you will pay $2400-5000, roughly 30-50% of which will go to Guitar Center, including both that particular store and Guitar Center corporate. The balance, minus the hard costs, will go to Gibson and that'll go to corporate profit, management bonuses, advertising, endorsement deals and other marketing costs.

 

Back to the overseas business. That $399 guitar Rondo sells is equivalent to a $650 or 700 Epiphone in terms of original costs( for a while they came from the same plants, but Rondo has a much lower profile operation, no brick and mortar stores, little advertising and few retail-type costs, where Epiphone is sold by retailers and heavily advertised). Remember that we figured these at Rondo's door at around $280, and the plant is paying for wood and labor to produce these guitars and they're making a profit off all of that. So assume that the actual wood in the guitar is worth no more than $100 and probably less. And we're talking fairly decent mahogany and maple here. The rest is labor, metal goods (pickups, tuners, bridge, strap buttons, etc), profit and shipping.

 

I've been in the music business as a musician, a retailer and an advertiser for a long time. That's how it works.

 

Never make comparisons between one-off guitars where the guy goes to a luthier wood supply and then picks up most of his other materials at retail to build a guitar. This has NO bearing on production guitar building whatsoever.

 

wow, pulling numbers outta your *** gets more respect than I would have supposed...

[NeoConMan]

Rondo puts out a $399 guitar imported from Korea that rivals a Les Paul at $2400 in quality of construction.

For the sake of argument' date=' let's say that's true.

Sell your $2,400 Les Paul and you might get back every penny you paid for it, or maybe 2/3 at $1,600 if you're desperate.

 

Sell your $399 Rondo around here - good luck selling it at all.

When you do, think you might recover half?

 

Tell somebody you have a Les Paul and their eyes light up. [b']"Really?"[/b]

Tell 'em it's a copy brand they never heard of - or even an Epiphone and they'll look away and say "Oh, okay..."

 

 

 

 

Gibson is not using better grade wood or materials on their guitars compared to Carvin

I do not doubt that to be true. I've seen some very nice Carvins' date=' mostly basses.

I flirted with the idea of ordering one instead of my PRS even....

 

What stopped me?

Have you ever tried to SELL a used Carvin?

Nobody cares about Sandy Eggo and American craftsmanship if it's not a Fender (not even as nice), Gibson or PRS.

Everything else is a boutique guitar if it comes from the states.

Carvin is STILL fighting the 'cheapo' misconception, if they doubled their prices [b']I bet their sales would go UP.[/b]

Perception is their enemy outside of the small group of loyal customers who know the difference and swear by them.

 

 

 

 

SELLING (street) price. Again' date=' the MSRP is mythical. [/quote']

MSRP is what the manufacturers base their entire price structure on the retail end, it's the only ready reference the public has. I tell people every day to take 35% off the MSRP and you'll be down around the MAP.

(Minimum Advertised Price)

If you can get a dealer to make you a deal that gets you out the door for a third off list, you usually did fine.

 

 

 

 

No one has paid MSRP for a Gibson ever.

Maybe YOU haven't.

Neither have I.

 

I have first hand knowledge of people who have - in dozens of cases.

Not just Guitar Center and their big bag of dirty fxcking tricks' date=' but at independent dealers too.

You KNOW what I'm talking about here....

Selling you the case the guitar came in, "performance guarantees" that can't be called specifically a warranty....

Ever seen retailers make a "mistake" by marking the MSRP up by 30% before they give you your "discounted" price?

 

 

 

 

I've been in the music business as a musician' date=' a retailer and an advertiser for a long time. That's how it works.[/quote']

I was never in "the business" like you, but I'm good friends with several people who are and I've been shopping guitars for a couple of decades. I can tell YOU how it works because I've bought $50,000 worth of gear, but I learn something new every time I go out there - especially at Guitar Center.

I do NOT know it all, and my integrity keeps me from seriously considering some of the tricks they pull until I see 'em.

 

What a bunch of crooks...

[Rick]

Yea same with food. Milion restaurants can make better burgers than Mc. But only Mc can sell milions of burgers...

 

pay attention, mc is only the (bad) icon of fast foods=p~

 

everyway if gibson cuts prices in europe (there's financial crysis here too :P ) that will be a very good move ^^