Fender to close New Hartford operations

[fronobulax]

From the article posted on the "official release thread"

"At Fender, Mr. Mendello doesn’t rule out a future public offering. Fender might try again sooner rather than later, because about $237 million of its $246 million in long-term debt will be due in 2014".

Evidently the check is not in the mail.

I'm not going to search for it but someone posted an interview with Guitar Center's leadership, and the GC moneyman said something to the effect that no one does a leveraged deal and expects to actually have to pay the notes when they are due. So the 2014 deadline may not be real in the sense that folks are already working to restructure it.

For many working people, the equivalent was a mortgage with a ballon payment. Folks who understood what they were getting into either sold before the ballon was due or refinanced before it was due.

 

[adorshki]

One of the guys at the factory told me that they could have cranked out 500 guitars a week but Fender was enamored with the profit margin on limited run guitars. They were perfectly capable of cranking out a huge run of D-25s but I suppose that would conflict price-wise with the Mexican line. Too many lines, from too many countries, saturating the market and diluting the brand.

Agree. While I actually agree with Fender's philosphy of high margins on limited run guitars,and not "diluting" the brand, it appears they didn't do a good enough job of differentiating the New Hartford "top shelf" product from the off-shore "daily driver" product.

A_J, the problem with inovation is that it has minimal legs. Look at Steinberger and Parker Fly guitars. How many people own them? You have to sell something that makes sense, brandwise.

Also agree. Most innovations are "flash in the pan". In fact selling the "brand heritage" appealed to me as a traditionalist, but I've long since realized I'm a marketing demographic minority these days.

 

[Just_Guild]

So, at 20 guitars per day, each guitar sold would need to support the daily livelihood of 2.3 employees, while also covering the cost of materials, machinery, rent/debt on the building, medical plans for employees, marketing and distribution, etc. while also providing for a decent profit margin for FMIC.

If I were looking at this business model from the viewpoint of an investor, I would keep my checkbook in my pocket. Even if the guitars were as good as they are.

There is no way that they made a profit on the F-50 Std I purchased last month, given all that went into its construction.

Neal

Neal, thats exactly the point I was making in a previous post. It just didn't add up financially.

 

[Just_Guild]

One of the guys at the factory told me that they could have cranked out 500 guitars a week but Fender was enamored with the profit margin on limited run guitars. They were perfectly capable of cranking out a huge run of D-25s but I suppose that would conflict price-wise with the Mexican line. Too many lines, from too many countries, saturating the market and diluting the brand.

A_J, the problem with inovation is that it has minimal legs. Look at Steinberger and Parker Fly guitars. How many people own them? You have to sell something that makes sense, brandwise. Every other manufacturer does. So Godin is making a Telecaster knockoff with an acoustic bridge. Fender had/has the Acousticaster. How many of them sold?
You can point to Godin's model but they are visually... What's the word? They don't make you smile when you open the case.
I'm sure it's a good sounding guitar but it's not attractive.

Steve, I agree with most of your sentiments especially regarding the looks of most Godin guitars. No argument. But I do like that A6 Ultra in Koa. Gets the job done, lol.

 

[Just_Guild]

As far as Guilds? Less than 20 per day.

On our last tour, Martin tour guide said about 1000 per week +/-. More high end than low end. Highly automated factory.

 

[Just_Guild]

I'm not going to search for it but someone posted an interview with Guitar Center's leadership, and the GC moneyman said something to the effect that no one does a leveraged deal and expects to actually have to pay the notes when they are due. So the 2014 deadline may not be real in the sense that folks are already working to restructure it.

For many working people, the equivalent was a mortgage with a ballon payment. Folks who understood what they were getting into either sold before the ballon was due or refinanced before it was due.

That was me.

 

[Default]

I've too many years of stuff that "gets the job done". If you enjoy it and it meets your needs, cool.

Godins just scream disposable to me.

 

[Default]

Which just might be their strategy. Why pay for a neck reset or to have a soundboard crack cleated when you can throw that one out and buy a new one for three bills? You might not have a legasy, but you will have a steady stream of buyers, for a while, anyways.

 

[motoolejr]

I have sent emails to Congressman John Larson and Gov Dan Malloy asking if their offices have reached out to the New Hartford facility and offered their support or provide guidance. Connecticut has spent money to attract business but when practical they need to help support the ones already here. I do not expect anything from either politician but at least they heard from me...

 

[griehund]

I'm not going to search for it but someone posted an interview with Guitar Center's leadership, and the GC moneyman said something to the effect that no one does a leveraged deal and expects to actually have to pay the notes when they are due. So the 2014 deadline may not be real in the sense that folks are already working to restructure it.

For many working people, the equivalent was a mortgage with a ballon payment. Folks who understood what they were getting into either sold before the ballon was due or refinanced before it was due.

Perhaps what we are seeing now is an attempt to get out from under. The IPO failed but I haven't heard of any other stabs at creative financing to take the teeth out of the balloon. They can break it up and sell it in pieces or file chapter 11. I did hear that the GC debt had been restructured which would help to alleviate some of the immediate burden, but that only goes so far. When I heard fender was sold I couldn't believe that anyone would pay good money for a debt loaded corporation in a shrinking market. When you have debt you have to increase funds to reduce the debt while maintaining business. Cutting costs will improve profit on sales but when sales are falling it doesn't raise funds to reduce debt. They seem to be stuck between a hard place and a harder place. So far nobody has come along to buy the Hamer or Ovation brands.

I spent the first 17 years of my adult working life in retail. I worked for 5 different companies and now every one of them is gone.

 

[GC]

I'm sorry to see this happening, but it reinforces my impression of what Fender has done during their ownership of Guild. They have onerous policies that make it difficult for small dealers to offer the brand. I have had a dealer personally tell me that he would stock Guilds were it not that Fender had prohibitive minimums in the number of models he had to order to get any. Under those circumstances he opted not to carry them. If they really wanted to promote Guild, they could have been more flexible.

(By the way: GC is my user name. I am in no way connected to, nor endorse the chain with the same initials. I had them long before they ever existed.)

 

[Default]

I remember the old days when all you had to buy was 8 Guilds to be a dealer. The brand was everywhere. That changed when Fender took over and all of a sudden you couldn't find them any more.

 

[bluesypicky]

I remember the old days when all you had to buy was 8 Guilds to be a dealer. The brand was everywhere.

Ah... the mom and pop stores, remember?! Before the Wall Street slot machines ruled the world......
But gambling is addictive. 'Specially when it's rigged in your favor.

 

[Westerly Wood]

I have had several Taylors, but the depth of tone was just never there for me to keep them. They are fine guitars, but I just cannot get into the sound. Great necks however. I have had several Martins, and while great tone, I hate how the neck connects to the body, that bulky heel join on the back of the bottom of the neck. I am sure there is a term for that piece but my hand keeps knocking into it when I am playing up the neck. I have had a couple Gibsons, and while I liked them very much, they also lacked on sound and sustain. So when I came to Guild, I was hooked by the following:

1. vintage profound tone like Martin but without the stupid bulky heel joint. How Guild connects the neck to the body is genius.
2. even volume across all strings.
3. that hard "woody" hog tone that sounds like old time tunes, that rich acoustic voice.
4. overall durability
5. coolest guitar company story around
6. spent much of its life in the biggest little state in the union, Rhode Island

As I am partial to Westerly, I guess this affects me less than most from a Guild purchase standpoint, but I just never want to see the Guild US presense die off. I am pulling for a Corona redux. I will even commit to buying a new Guild from the new US location to pitch in and keep the brand alive. I know I am not really helping Guild at all by targeting Westerlies

 

[Watasha]

I will even commit to buying a new Guild from the new US location to pitch in and keep the brand alive. I know I am not really helping Guild at all by targeting Westerlies

While I understand the idea of buying used Guilds (amazing deals on great guitars) I have commented multiple times on how Guild fans push potential customers to buy used all the time on this forum & elsewhere. Sound advice for the player. Horrible for the brand's bottom line. You seem to see this more with Guild folks than all the other brands fans combined.

 

[Westerly Wood]

While I understand the idea of buying used Guilds (amazing deals on great guitars) I have commented multiple times on how Guild fans push potential customers to buy used all the time on this forum & elsewhere. Sound advice for the player. Horrible for the brand's bottom line. You seem to see this more with Guild folks than all the other brands fans combined.

yes, I need to throw my hat in the ring and help out, chip in, buy a new one. I bet the argument will go over well with my wife too

 

[fronobulax]

I'm sorry to see this happening, but it reinforces my impression of what Fender has done during their ownership of Guild. They have onerous policies that make it difficult for small dealers to offer the brand. I have had a dealer personally tell me that he would stock Guilds were it not that Fender had prohibitive minimums in the number of models he had to order to get any. Under those circumstances he opted not to carry them. If they really wanted to promote Guild, they could have been more flexible.

Just out of curiosity, how long ago was that? Guild changed the dealership requirements in or around 2013 and my dealer, at least, thought they were a vast improvement because he was no longer required to stock GADs which did not move well in his store. Of course had been stocking Guilds for many years and what he saw as an improvement may still have looked like a barrier to entry to your source.

 

[fronobulax]

While I understand the idea of buying used Guilds (amazing deals on great guitars) I have commented multiple times on how Guild fans push potential customers to buy used all the time on this forum & elsewhere. Sound advice for the player. Horrible for the brand's bottom line. You seem to see this more with Guild folks than all the other brands fans combined.

Well at least that makes the accusation that certain individuals are shills for Guild/FMIC harder to prove

I will note that way back at LMG I the then Guild brand management was quite straightforward in stating that the biggest competition for a new Guild was a used one and they were not quite sure how to deal with that market reality.

 

[Warner_21]

Here is a link to an AP article about the closing.

http://www.nhregister.com/arts-and-...tion-guitar-factory-in-connecticut-is-closing

 

[Geral]

So Guild US could realistically live on at some other US fender plant? Any ideas as to where?

No wonder I just got a new F30R for $880. Holy Crap! Now I've got three Guilds that I'll never sell !!!