credit insurance sales growth | remington guns

Why Remington Guns Went Bankrupt

Credit insurance sales growth is accomplished in a variety of ways

Gun manufacturer Remington has filed for Chapter 11 bankruptcy protection. The move caps off years of declining sales and mismanagement. To elaborate, Remington’s debts have expanded in the last 11 years to $950 million from $252 million in 2007.

This week a federal bankruptcy judge approved a $75 million loan. The approval allows the company to continue production throughout Chapter 11 proceedings. According to CNN, it has asked for $338 million in loans altogether. The loans will help release over $620 million in debt.

With a dreary future ahead for the 200-year-old company, the question remains: what’s next? Also, what actions could have stopped things from going this far?

To answer these questions, it’s important to know how we got here.


The Downfall of Remington

Remington and other gun companies enjoyed a sales boost during the Obama administration. The Democratic President favored restrictions on gun sales. His outlook was in part due to a rash of deadly mass shootings. In 2012, for instance, a gunman killed 26 at Sandy Hook Elementary in Newtown, Connecticut.

Adam Lanza, the shooter, claimed 20 child victims in the massacre. He used a Bushmaster semiautomatic rifle made by Remington for the crimes.

The notoriety for one of Remington’s flagship products damaged its brand. That said, sales continued to be robust amid uncertainty for the 2016 election. In the blue corner, there was Hillary Clinton. Clinton, a Democrat, threatened to further President Obama’s restrictive gun policies. In the red corner, Republican Donald Trump vowed to fight for the Second Amendment.

A divided U.S. Supreme Court held in the balance. The winner would appoint a potentially tie-breaking Justice. With the Second Amendment an issue-in-wait, gun owners and enthusiasts weren’t sure what to expect. When Trump won the Presidency on Nov. 8, 2016, they were able to breathe a collective sigh of relief. As a result, Remington and other gun manufacturers saw sales suffer.

President Trump appointed Justice Neil Gorsuch. Gorsuch became the 9-member bench’s fifth conservative. It also appeared Trump could appoint a second before the end of his first term. (Liberal Justice Ruth Bader Ginsburg is 85-years-old and considering retirement.)

With a National Rifle Association-approved candidate in the White House, gun owners rested easier. The resulting drop in sales was worse for the North Carolina-headquartered company. The mismanagement of its debt — almost quadrupling in a decade — didn’t help.

It also failed to escape the specter of Sandy Hook. Grieving parents filed lawsuits against the manufacturer, with many still ongoing. Politicians blamed the manufacturer for dealing in death.


How Remington Could Have Stopped Its Downward Spiral

Even with the bad publicity, Remington could have stopped its debt from spiraling. One of the functions of credit insurance, for example, is to help companies decrease bad debt.

Remington had to take on more debt to continue doing business. This action is a hallmark of taking on too much risk before acquiring the rewards. Purchasing credit insurance on a deal-by-deal basis could have protected Remington from risk.

The company suffered from specific exposures. These exposures meant assuming most of the risk in certain transactions. Insuring against these deals may not have helped with existing debt. But it could have cut off the growth of that debt before letting it get anywhere close to $1 billion.

Another area where credit insurance might have helped: sales expansion. Remington’s acquisition of credit insurance could have boosted sales volume. This ability could have extended to both new and existing customers. Credit insurance sales growth is accomplished in a variety of ways:

  • Releasing the tension between sales and credit departments
  • Extending credit limits of existing customers
  • Speeding the sales process along
  • Negating the need for personal guarantees
  • Utilizing credit insurance as a competitive advantage when applicable

With new customers, and new markets, insurance would allow the company to deal with entities otherwise considered too much of a risk as well. And last but not least, it could have worked as a deduction to reduce tax liability.


Role Reversal

Remington’s mismanagement is clear, and its future is uncertain. With partial approval of its loan ask, the company will continue to manufacture. But if the final $620 million in debt goes away, future debtors will think twice about underwriting the company’s transactions.

Of course, the credit insurance option would protect anyone doing business with Remington. But with roles now reversed, the gun manufacturer has become the type of company that provides much of the reason needed to carry this coverage.


Final Considerations

To be clear, credit insurance may not have fixed all the issues in this particular case. Through a variety of factors — some within its control and some beyond — Remington found itself caught in a vortex of misfortune.

For example, it’s safe to assume no one at the company intended their products to become synonymous with mass shootings. Yet, in the production of deadly firearms, there is a unique vulnerability to such risks. Companies in similar situations should take a lesson from this.

You have to take every available measure to mitigate potential damages to your brand and reputation. Credit insurance is an effective countermeasure. All businesses have their share of risks. If your company faces overexposure, consider adding credit insurance protection.

Leykell Insurance has many years of experience helping clients address their vulnerabilities. Additionally, we offer commercial auto insurance, workers’ compensation, property and casualty, and umbrella policies. Let us know how we can be of service.

Credit Insurance Sales Growth

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