A decade ago, Cerberus Capital Management LP purchased Remington Firearms, a company it hoped would show huge returns for its initial investment.Recently, the company has come onto the brink of bankruptcy. Remington has been a defense contractor for the United States since 1816, producing many of the weapons that our police and military use today. However recently it has shown signs of struggle. Historically firearms businesses never survived past the ending of a conflict as the demand for weapons would dry up during peacetime, however in modern day American society civilian demand drives the multi-billion dollar industry we know today.<\/p>\n
The success of many weapons manufacturers rises and falls with the party of the presidency that sits in the White House. Throughout all of Obama’s presidency, gun purchases across the United States reached all time highs. Gun makers such as Remington were able to turn large profits by capitalizing on people’s fears that these guns could be taken away by the government. Since 2008 gun sales for Remington domestically have almost doubled from 300,000 to over 600,000 rifles annually. With Democrat Hillary Clinton expected to win the 2016 presidential election, many gun makers including Remington made capital investments going into the term forecasting demand to stay constant if not increase. This capital investment expected there to be large increases in the sales of guns and ammunition to private civilian owners.<\/p>\n
At the end of 2016, Republican Donald Trump won the electoral vote which resulted in massive plummet in demand and created a result that surprised many as Hillary was heavily favored by many to win the election. Remington, along with many other major manufacturers have since seen large declines in sales of many of their products and in the wake of the Parkland Shootings in Florida, many are beginning to file bankruptcy. This crash in demand has led to huge losses and inability to pay back some of their debts from the large capital investments into manufacturing facilities.<\/p>\n
Remington’s management, along with its parent company Cerberus is now at a crossroads. Management must decide whether demand will go up, down, or stay the same. While this is true in most industries, in the defense industry this demand forecasting is to the extreme, as changes in political climates could quickly make many of their products illegal, or unavailable to the general public overnight. Remington must keep an eye to the future as if demand does skyrocket with an impending gun ban, they may want to be in a position to take advantage of this large market. This forecasting of demand is perhaps one of the most important things the company can do as its survival depends upon it going forward.<\/p>\n
Politics aside, as it is a heavily contested issue currently, what action do you think Remington’s management should take looking toward the future? Should the company be liquidating its assets and downsizing severely due to lack of demand? Should they remain the same? Should they scale up their production to meet future demands?<\/p>\n
https:\/\/www.wsj.com\/articles\/massive-debt-roller-coaster-sales-drive-private-equity-backed-gun-maker-into-bankruptcy-1520946453?mod=searchresults&page=1&pos=3<\/p>\n
https:\/\/www.washingtonpost.com\/news\/business\/wp\/2018\/02\/23\/u-s-gun-manufactures-have-produced-150-million-guns-since-1986\/?utm_term=.3296a460468e<\/p>\n","protected":false},"excerpt":{"rendered":"
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