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Colt files Chapter 11 bankruptcy
Story here. Chapter 11 isn't "we're going under" bankruptcy, but more "if you'll hold our creditors at bay, we can make changes and survive (maybe)" bankruptcy.
Given the booming gun economy (last I heard Ruger was running three shifts of workers, factories going 24 hours a day) and the government contract for M4s, I have no idea how they could get into this bind.
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It isn't hard to do. In tough times, you develop a credit reputation for being a "slow pay". Then, when business explodes, nobody wants to loan you the money to buy the raw materials to fulfill the orders you have on the books. (Said orders not fully prepaid, of course.)
Could have something to do with this - long term effects of exiting the retail/consumer market.
Colt placed all its future on Gov't contracts. The scheme blew up in their corporate faces. I think it also has to do with their product line.
1911 pistol has many manufacturers now at competitive consumer prices.
Python revolver has nice optics, but I've yet to see a Python that didn't shoot loose..even as little as 50-mag rounds.
I think Colt dropped all their other handgun product lines, too.
Much of the previous comments on product line are certainly correct, but a major contributor is the financial structure the current owners forced on the firm. Loading it up with unsustainable debt, paying themselves large "consulting" fees made the product choices problems even worse. Greed seems to have gotten the best of them and the Chap. 11 will only allow them to sell off pieces of a once great company.
The guy over at Weaponsman.com has a pretty detailed explanation of what Dave above is alluding to. He mentions that the only things that might still have value -- the name and various patents -- have already been mortgaged or otherwise used as collateral for previous loans. There may not be much of value left to sell. Even the building is apparently owned separately by one of the current owners and leased back to Colt.
It's almost as if someone was sent in there to suck out as much money as possible while destroying a gun company.
And in the mean time, Rick Perry is traveling to New England to lobby whats left of Colt and Mossberg into moving to Texas.
Back in the 90's when I was going for my MBA I had a finance course that was taught by a person who was very high up in the finance department of Colt Holdings. They explained that Colt Holdings determined that rather than make anything they could make more money and quicker by pushing paper (financial dealings) then they could manufacturing anything. So they were selling off anything to do with manufacturing. That of course imploded and they attempted to go back to manufacturing on the back of government contracts. But in my opinion it was half hearted and there were too many people who just wanted to deal with paper and get the "quick" profit for it to succeed long term. Very sad.
This was a while ago, but their manufacturing plant in CT was pretty old and outdated, plus union wage rates. They have a huge fixed cost structure that any other manufacturer like FN, who has a new state-of-the-art facility in South Carolina, doesn't have to deal with.