Heckler & Koch — maker of the Marine Corps M27 — is in dire straits

mikeyp

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Heckler & Koch — maker of the Marine Corps M27 — is in dire straits

For decades, German arms giant Heckler & Koch has served as the gold standard for military and civilian weapons manufacturing — building revolutionary and oftentimes game-changing rifles, machine guns, grenade launchers, submachine guns and pistols for a variety of customers including special operations forces, conventional infantry units and law enforcement agencies.

After a lackluster 2018, reports indicate that H&K is now struggling to keep its head above water, with the hopes that boosting sales in FY2019 buys the company at least another year to come out of the red and fix the situation it’s in.

The Tactical Wire recently reported that German business journals have already predicted the end for what was once one of the most powerful arms manufacturers in the world.

In fact, the situation is so bad that, as The Firearm Blog reported just last month, H&K employees jointly voted to increase weekly work hours without paid overtime, as well as nixed a one-off payment of 400 Euros per head for the month of July, so as to provide their beleaguered company some form of relief.

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SportCo Holdings Files Bankruptcy | Tactical Wire

SportCo Holdings Files Bankruptcy
Yesterday, the “other shoe dropped” in the matter of SportCo Holdings, the company that owns, among others, Ellett Brothers and United Sporting Co. After months of rumors concerning their overall fiscal health, the company filed for Chapter 11 bankruptcy, saying it planned to liquidate it’s holdings.

The company cited management’s impression that Hillary Clinton would win the White House in 2016 and it’s subsequent speculation into guns and ammunition based on that mistaken presumption as one major factor in their failure. Rather than booming sales and healthy margins, they were caught with inventory no one wanted.

Company CEO Bradley Johnson also cited other factors, including industry “disruption” caused by the Bass Pro Shop acquisition of Cabela’s, Gander Mountain’s bankruptcy and hurricanes that devastated much of the Southeast, including South Carolina.

But there’s more to this story than the long-term impact the failure will have on an already turgid business environment.


The top ten major unsecured creditors in the SportCo filing are (from #1 to #10) : Vista Outdoors ($3,299,326.61), Sturm Ruger ($3,196.842.10), Magpul Industries ($2,078,353.17), Savage Arms Rifles ($1,927,392.50), Bushnell Corp. ($1,879,795.66), Navico Company ($1,743,684.04), Henry RAC Holding Corp. ($1,467,618.00), Smith & Wesson Corp. ($1,386, 714.26), Garmin USA, Inc. ($1,150,579.41), and Fiocchi of America ($1,096, 632.70).

The filing’s listing of other unsecured creditors reads like a who’s who of the rest of the industry: FN America, Magtech, Remington Arms, Kel-Tec, Hornady, Leupold & Stevens, Heckler & Koch, Barrett Firearms, Browning Arms Company, Blaser USA, Armscor, Chiappa, Bond Arms, Truglo, and SCCY.

Keep in mind those are only the top 30 creditors. SportCo’s filing says there are anywhere from 200 to 999 companies and individuals.

With SportCo Holdings filing, the industry will be roiled for some time to come.

But another legal action, this time a civil suit filed in South Carolina nearly three weeks ago, by a New York financial group lays the groundwork for a story that will have even longer-lasting implications.

The first question will undoubtedly be whether the South Carolina suit puts the legality of the Delaware filing into question.

That’s because the two corporations listed as holding 10% or more of SportCo’s equity interest are Prospect Capital Corporation and Wellspring Capital Partners I.V. LP.

The opposing parties in the South Carolina suit.

Prospect Capital Corp., has filled their civil suit against “Wellspring Capital Management LLC; Wellspring Capital Partners IV, L.P.; WCM GenPar IV, L.P.; WCM GenPar IV GP, LLC; Alexander E. Carles; William F. Dawson, Jr.; John E. Morningstar; Bradley Johnson; F. Hewitt Grant; Charles E. Walker,Jr.; Todd Boehly; Bernard Ziomek; Andrew Kupchik; and John Does One through One Hundred.”

According to the filing, that listing of individuals, managers and entities were collectively loaned a total of $188,864,420.94, ostensible to build Ellett Brothers LLC and the various affiliated subsidiaries.
 

yogi

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Hmmmm.....would think somebody would be interested in buying them out assuming the value of trademarks and patents and goodwill. Love my VP9.
 

oldguy68

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H&K, building overpriced firearms and having horrible customer service to boot.
A company that doesn't care about civilian sales and then finds themselves out of business..
If they capitalized on 416 uppers at a semi-reasonable price they would have made some nice coin.
Sold a better looking G36 and UMP at again a semi-reasonable price.
As well as mags that don't cost $60.00.

If they followed the Glock playbook they would have had many more loyal customers.

They kind of remind me of Colt.
 

drgrant

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H&K, building overpriced firearms and having horrible customer service to boot.
A company that doesn't care about civilian sales and then finds themselves out of business..
If they capitalized on 416 uppers at a semi-reasonable price they would have made some nice coin.
Sold a better looking G36 and UMP at again a semi-reasonable price.
As well as mags that don't cost $60.00.

If they followed the Glock playbook they would have had many more loyal customers.

They kind of remind me of Colt.
They needed to do what you suggest about circa 2008. They could have sold a 416 semi piston rifle under 2k and it would have sold metric tons....

HK always lapped the ballbag of getting big gov/mil/le contracts, bet they wished they didn't leave all the cash on the table on the commercial side in the past decade or so....
 

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They needed to do what you suggest about circa 2008. They could have sold a 416 semi piston rifle under 2k and it would have sold metric tons....

HK always lapped the ballbag of getting big gov/mil/le contracts, bet they wished they didn't leave all the cash on the table on the commercial side in the past decade or so....
Great guns but their management at every level has had nothing but contempt for non mil/gov customers.......I could almost understand the EU management contempt but their american counterparts....there's no excuse for and its completely effed them.

I hope they survive and learn a lesson
 

Behind Enemy Lines

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I remember reading this last year. And the year before. And the year before that. Massive debt load (which actually I thought I read had improved this year).

The poor management, German export laws, and the refusal to truly enter the largest gun market in the world are what has them in trouble again and again. Why they didn't get HK USA cranking 10 years ago is beyond me.
 

jpk

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This is what happens when the poors can't afford your product.
In all fairness in the last 12-24 month HK has brought the price of their striker fired guns to be in line with Glock......its a bit late but......
 

Dennis in MA

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Good. Now maybe those asshats at HK will build more civilian product and not price it out of range...
A while later. . . . still THIS!

Gosh. I almost bought one of those urban gray SL8's a million years ago. The problem was - even during the AWB years, it was 2x the cost of an AR it seemed. For nothing much more than an AR.

Price your stuff right, people will buy it. Care about the civilian market - people will buy it.

Bleep them.
 

new guy

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A while later. . . . still THIS!

Gosh. I almost bought one of those urban gray SL8's a million years ago. The problem was - even during the AWB years, it was 2x the cost of an AR it seemed. For nothing much more than an AR.

Price your stuff right, people will buy it. Care about the civilian market - people will buy it.

Bleep them.
I picked up a NIB gray SL8 a couple of months ago for less than the price of a MA AR. Just had to wait them out. [smile] Hell, even 10 years ago the shops were having a hard time moving the SL8s and USCs, not because they were expensive, but rather I think because people just weren't ready for plastic spaceguns that had a bunch of AWB/F civilians-type features. My frigging SL8 is huge, heavy and crippled - it's going to take a bunch more cash to get it where I want it.

HK's pricing has always been toward the higher side of the market, but IMO that's reflective of the fact that their products and overall quality are also on the higher side of the market. I'd rather pay a few hundred bucks more for a USP pistol over a Glock. In other words it's a meh as far as I'm concerned, but apparently the overall demand suffered as a result. Of maybe they're suffering due to something else - poor management, labor issues, crushing eurocracy, etc.
 

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I like my 45C. It’s been reasonably reliable, except for one or two magazines that have sunk not allowing the following round to load properly. It only happens with 10-round mags for some reason. It’s the same ammo I use for my Colt Comp Stainless which has run flawlesly.
 

Dennis in MA

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I picked up a NIB gray SL8 a couple of months ago for less than the price of a MA AR. Just had to wait them out. [smile] Hell, even 10 years ago the shops were having a hard time moving the SL8s and USCs, not because they were expensive, but rather I think because people just weren't ready for plastic spaceguns that had a bunch of AWB/F civilians-type features. My frigging SL8 is huge, heavy and crippled - it's going to take a bunch more cash to get it where I want it.

HK's pricing has always been toward the higher side of the market, but IMO that's reflective of the fact that their products and overall quality are also on the higher side of the market. I'd rather pay a few hundred bucks more for a USP pistol over a Glock. In other words it's a meh as far as I'm concerned, but apparently the overall demand suffered as a result. Of maybe they're suffering due to something else - poor management, labor issues, crushing eurocracy, etc.
Except their AR's are 2-3x as much as everyone else's, save Colt.

While it's great to have the greatest, bestestest gun, most folks aren't willing to fork over an extra $1,000-1,500 for not much more gun - and sometimes the SAME gun just because it has your emblem on it.

It seems to me they could make a pile remanufacturing civilian MP5's up the ying-yang. Sell em for $1500. Nope. Ditto for the other caliber'd models of the era.

Arrogant German engineering. "Vee ah zelling zee bezt gunz on zee maaakit. You vill PAY vor dem or elske!"
 

drgrant

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Hates Kustomers also hates poors.

Not sure why anyone would be surprised by this news.
It's not just about the poors, but they insult people with money, too. The value prop of something like an HK (whatever) vs an LWRC is terrible when the LWRC is several hundred bucks less. There's a lot of competition in that arena.

Lack of product line diversity doesn't help either. HK could have sold a Colt 6920/40 clone for like $1600 or whatever and people would fall over themselves to buy it
because it says HK on the side.

-Mike
 
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I have a few of their pistols (HK45 and the VP9). I find the quality to be better than anything else I've bought recently. By a noticeable margin. I didn't think they were unreasonably priced either. No experience with their rifles though...
 
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The tooling of the P2K was paid for by the old BP contract. They make those guns pretty much for free ROI wise. There is absolutely no reason the USP/P2K couldn't be a much more reasonably priced weapon at this point. Then again, the .gov contract was probably $450 per gun considering I could have bought the exact same weapon package for $600 with good night sights and 6 mags included. Figure at least $100 for the sights and 6x$20 for the mags (I had to replace one, while expensive, it wasn't that bad)(Ok, I didn't have to replace it, but I didn't want to write another memo that week).
 

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If they go bankrupt someone else will buy the tooling and make whatever .gov needs. If their civilian guns go away or if they’re made under another brand no loss.
 

snax

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Great guns but their management at every level has had nothing but contempt for non mil/gov customers.......I could almost understand the EU management contempt but their american counterparts....there's no excuse for and its completely effed them.

I hope they survive and learn a lesson
Pretty simple, they hired people like them.
 
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beaker

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Well if they weren't so stuck up and elitist and catered to the civilian market (which is enormous), they would likely be in a better position, but all gun companies are hurting after the Obama gun salesman years, and Hillary losing the election. People aren't panic buying.
 

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Well if they weren't so stuck up and elitist and catered to the civilian market (which is enormous), they would likely be in a better position, but all gun companies are hurting after the Obama gun salesman years, and Hillary losing the election. People aren't panic buying.
This ^
 
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Well if they weren't so stuck up and elitist and catered to the civilian market (which is enormous), they would likely be in a better position, but all gun companies are hurting after the Obama gun salesman years, and Hillary losing the election. People aren't panic buying.
Yet.... no matter what happens 2020 is gonna be a shitshow, I DEFINITELY want a safety cushion of another AR or 2 and ammo before the election get too close.
 
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