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| The Colt Python |
The immediate cause of Colt's imminent demise are the declines in firearms sales due to declines in domestic military and consumer demand. Colt's intentions, at least as announced in late September of this year, is to focus efforts on foreign military sales. That does not appear to be panning out as it hoped.
Bloomberg actually has a pretty good discussion of Colt's problems in a May 2014 article. Some of the key points:
In the 1970s, Colt and other American gunmakers, following the bad example of Detroit’s Big Three automakers, grew smug and lazy. Like Japanese and German car companies, more nimble foreign gunmakers grabbed market share. By the 1980s, Smith & Wesson had lost the U.S. police to Austria’s Glock, while Colt saw Italy’s Beretta snatch its main U.S. Army sidearm contract. In 1985, Colt plant employees who belonged to the United Auto Workers launched a protracted strike for higher pay. Replacement employees weren’t up to the task, and “quality suffered badly,” says Feldman, then an organizer for the National Rifle Association. In 1988 the Pentagon gave Colt’s M16 contract to FN Herstal of Belgium. Four years later, Colt filed for bankruptcy court protection from its creditors. “With the end of the Cold War,” says Hopkins, the firearms marketer, “it seemed like the company might never recover.”
Colt’s unlikely rescuer materialized in the person of Donald Zilkha, scion of a wealthy Manhattan family of Iraqi immigrant bankers. ... [And someone completely ignorant of firearms and the firearms industry].
... Colt, he told the Hartford Courant, “has been neglected for so long.” He would save it by means of austerity. Assuming the post of chairman, he consolidated from its original, onion dome-topped facility to the more efficient, if more prosaic, plant in West Hartford. At a company that employed 15,000 at its peak in World War II, Zilkha slashed the workforce by a third, to 600. He brought in as chief executive officer a former auto industry executive.
[After a failed effort to buy FN Herstal,] Colt then blundered into the vortex of American gun-control politics. In a December 1997 editorial in American Firearms Industry magazine, Zilkha’s handpicked CEO, Ron Stewart, made a pair of proposals that set off alarms in Second Amendment circles. He urged “the creation of a research and development program to further firearm technology toward more advanced methods that promote safety (such as personalized firearms).” And he recommended that Congress require gun owners to obtain a federal permit. “All hell broke loose,” says Feldman.
... In 1999, Zilkha named a new CEO, William Keys, a retired three-star Marine Corps general. The company announced it would end production of all but a handful of civilian handguns and focus on military production. ...
... In late 2002, Rigas [who had taken over management from Zilkha] arranged for the spinoff of the military business into a separate company called Colt Defense. After the dust settled, Sciens Capital and its affiliates controlled the defense company, although Zilkha retained an ownership interest. The withered commercial handgun business—by now reduced almost exclusively to producing copies of classic handguns—was left behind under the name Colt’s Manufacturing. The two companies shared the West Hartford factory. To the consternation of workers, a metal fence was erected to denote the corporate split.
... Over the next several years, Colt Defense went through the private equity leverage wringer. Sciens Capital and its affiliates loaded the company with debt while taking out cash in the form of “distributions” and “advisory fees.” The 2005 SEC filing shows payouts totaling $40 million over the two prior years—a significant amount for a company in such fragile financial health. In 2006, another SEC filing shows, the company redeemed “members’ equity” worth $41 million. In 2007, Colt Defense agreed to borrow $150 million in a “leveraged recapitalization” that featured distributions to “members” of $131 million. In 2009 it borrowed an additional $250 million, while multimillion-dollar payouts continued. For 2010, Colt Defense had sales of $176 million—more than double what they were in 2004—but registered an $11 million loss. “You didn’t have to work at Colt Defense to know it had put itself in a dire situation,” says Merrick Alpert, a Connecticut businessman who began advising the shriveled remains of Colt’s Manufacturing in late 2010 and later became its senior vice president.
Among other failings, the severed halves of Colt somehow missed the post-2008 “Obama surge” as much as other U.S. gun manufacturers. Whipped up by NRA warnings that the Democratic president intended to toughen gun control, consumers cleared gun store shelves of ammunition and weapons. Better-prepared manufacturers such as Glock saw sales rise sharply. Under the terms of the Colt split, however, Colt Defense could reach the booming civilian market only by first selling its rifles to Colt’s Manufacturing, a debilitated company with sclerotic lines of distribution. Colt’s Manufacturing, for its part, offered only a limited selection of the handguns so much in demand.
So when Colt lost its M-4 contract to FN in February 2013, the writing was on the wall. A fate that wasn't avoided even by merging the military and civilian branches of the Company in July 2013.
Although there are several reasons commonly cited for Colt's decline, all of the reasons eventually lead back to a single factor: over reliance on government military contracts. Because of its military contracts, Colt ignored the civilian market and, for that reason, failed to innovate, update its equipment, focus on cost control, or any of the myriad factors that make a successful firearm company. As Michael Schaus wrote earlier this year at Townhall:
While most American companies scrambled for ways to avoid the Union-led decline into mediocrity, Colt happily hummed along with the help of military contracts, and large government shipping orders.
The iconic manufacturer’s business was booming… Right up until the moment that Unions decided to do what they do best: Go on strike. By 1988, the company had lost a number of high-dollar contracts, and the end of their beginning was clearly at hand.
In the decade to follow, their competitors warmly embraced America’s newfound fascination with the civilian market, concealed carry, and home defense. Colt, on the other hand, decided to take a more pragmatic approach. ...
... The company’s decision to whittle their civilian division down to a few obligatory 1911s wasn’t really doing them any favors, given that their competitors were rushing to fill the demand of a gun-hungry republic. While Joe Biden, Barack Obama, and Harry Reid rambled on about gun control, Colt casually dismissed the idea of focusing on the civilian market. Heck, it was only within the last few years that Colt finally got around to deciding that a pocket pistol (the .380 Mustang) might be a good idea. ...
While Colt's double-action revolvers were highly regarded, the Colt 1911 seemed to always have problems--particularly after Colt switched to the Series 80. In his 1987 book Survival Guns, Mel Tappan noted that "[w]hichever model [of Colt 1911] you choose, be prepared to spend at least as much as the original cost of the gun to make it fully combat ready." (pp. 60 and 66). Although some of the gun smithing was for "nice to have" features, other work, such as polishing of the feed ramp and chamber, were necessary to make the pistol reliable.
Ten years later, not much had changed. Dave Lauk discusses at some length in his 1998 book, The Tactical 1911, problems with the basic factory Colt. (pp. 12-14). He recommends what he calls a basic 1911 performance package to be done by a gunsmith, which included replacing the factory sights, installing a larger safety and extended ejector, a trigger job, beveled magazine well, polishing the feed ramp, throating the barrel, lowering and opening the ejector port, replacing the recoil spring, replacing the barrel bushing, and fitting and polishing of other parts. (pp. 20-27). This doesn't even include other common modifications such as a better trigger, installation of a beaver-tail grip safety, replacing the spur hammer, and using a solid guide rod. Surely Colt should have been aware of out-of-the-box problems with its .45 pistols, but apparently did nothing to address them in the 1980s and '90s.
During the same time frame, Colt phased out most of its other civilian weapons, including its entire double-action revolver line. If you go to its website to view its current catalogue, it is a sad commentary on how the Company neglected the consumer market--what should have been its bread and butter. Although Colt appears to have addressed the issue of "a basic 1911 performance package" by offering various models of 1911s with improved features, it is the lack of any other offerings that stands out. That is, all of the pistols it offers (including the Mustang) are based on the 1911 design--no double-action and no striker-fired pistols are to be found. With the exception of the Mustang (which is .380), all its pistols are .45 ACP. The revolver options are even more depressing--the Single Action Army and the New Frontier, which is simply a variant of the SAA.
The rifle side is similarly barren. It has a couple handfuls of models of the AR, mostly in 5.56, but a few in .308. It also has handful of bolt-action rifles, but they appear to all be competition or police sniper rifles.
Hopefully, whoever buys out Colt after the bankruptcy will be able to resurrect the iconic brand.
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