Musical instrument giant Fender Musical Instruments Corporation (FMIC) has seen its credit rating downgraded by Moody’s, with the firm citing significant concerns over the impact of recently imposed tariffs. The downgrade reflects fears of rising operational costs and a potential strain on the company’s financial stability.
Fender’s Credit Rating Downgraded Amid Tariff Concerns
Moody’s has lowered Fender’s Corporate Family Rating (CFR) from B2 to B3, indicating a higher risk of default. The company’s Probability of Default Rating and senior secured term loan rating have also been downgraded. Furthermore, Fender’s outlook has shifted from stable to negative.
The credit rating agency’s report forecasts “very high financial leverage and deteriorating liquidity” for Fender in 2025, attributing this to a “challenging operating environment.” This environment includes labor inflation, increased promotional activities, pricing pressures, currency headwinds from a strong US dollar, and, critically, the impact of tariffs.
President Donald Trump
Specifically, Moody’s estimates that recently implemented tariffs, particularly those stemming from President Donald Trump’s policies, could increase Fender’s operating costs by $20 to $25 million. This increase is primarily due to Fender’s manufacturing operations in Ensenada, Mexico, and China, both of which have been targeted by tariff increases.
While Fender maintains that its products comply with the US-Mexico-Canada Agreement (USMCA) rules of origin, potentially exempting them from Mexican tariffs, the report highlights the potential impact of a 25% tariff on products from its Mexican facility and a 10% tariff on Chinese-made goods.
“While these measures are anticipated to mitigate some costs in the short term, prolonged imposition of tariffs will likely be highly disruptive and costly for Fender,” Moody’s stated. The report also pointed out that the musical instrument industry is already facing challenges, including weakening consumer confidence in the US and an economic slowdown in China.
The impact of these tariffs is expected to be particularly significant in the “entry and mid-tier segments of the market where competition is intense,” according to Moody’s. The agency also expressed concern that “the ability to pass on costs to consumers is constrained in an already high-priced market.”
Despite these challenges, Moody’s acknowledged Fender’s “strong brand recognition and market position” and its “good geographic diversity.” However, these strengths are offset by the company’s “narrow product focus and earnings volatility,” which are further exacerbated by the current economic climate and tariff exposure.
Moody’s indicated that Fender’s credit rating could be upgraded if the company successfully mitigates the impact of tariffs and achieves organic revenue growth. Conversely, the rating could be further downgraded if earnings decline more than expected.
The downgrade has drawn comparisons to Gibson’s financial struggles in 2018, though Moody’s report emphasizes that Fender’s situation is not as severe.
The complete rating report is available on Moody’s website below.
Cheap Fenders?
We saw the announcement during NAMM of the new Fender Standard Series made in Indonesia, and many guitar fans saw this as a way for Fender to sell cheap models with their complete name branding.
Priced at a competitive $599. Manufactured in Indonesia, the Standard Series comprises Stratocasters, Telecasters, Jazz Basses, and Precision Basses, all featuring classic Fender design elements.
- Fender Standard Tele MN WPG Aqua Marine Metallic
- Fender Standard Tele MN BPG Butterscotch Blonde
- Fender Standard Tele LRL WPG Olympic White
- Fender Standard Tele LRL WPG 3-Colour Sunburst
- Fender Standard Strat LRL WPG Aqua Marine Metallic
- Fender Standard Strat MN WPG Candy Cola
- Fender Standard Strat LRL WPG 3-Colour Sunburst
- Fender Standard Strat HSS LRL WPG Candy Cola
- Fender Standard Strat HSS MN WPG Aqua Marine Metallic
- Fender Standard Strat HSS LRL BPG Black
- Fender Standard J-Bass LRL WPG Olympic White
- Fender Standard J-Bass LRL WPG 3-Colour Sunburst
- Fender Standard J-Bass MN BPG Black
- Fender Standard P Bass MN WPG Candy Cola
- Fender Standard P Bass LRL BPG 3-Colour Sunburst
More Fender Price Increase Rumors
However, a Reddit post has shared a letter supposedly being sent to Fender Dealers warning of imminent price rises this April.
Below is the letter that Fender CEO Andy Mooney has supposedly sent out.
It is being shared on guitar forums worldwide.
Dear Valued FMIC Dealers,
As you probably know, a number of new U.S. tariffs came into force today, including an additional 10%
tariff on China-origin goods and the previously delayed 25% tariffs on Canada- and Mexico-origin goods.
We have seen tariffs proposed or implemented recently on steel and aluminum goods, timber and lumber
goods, E.U.-origin goods, and goods originating from any country that imposes tariffs on U.S.-origin goods.
Canada, Mexico, China, and various other countries targeted with U.S. tariffs have also either announced
or implemented additional retaliatory tariffs on U.S.-origin goods. In short, this is a period of volatility for
all manufacturers in the United States and around the world, and the music industry certainly is not
immune to this volatility.
As a direct result of the tariffs announced today and anticipated in the foreseeable future, Fender Musical
Instruments Corporation (FMIC) will be instituting price increases effective April 1, 2025, on all China- and
Mexico-origin FMIC products. Further, given that FMIC sources high-quality maple from Canadian forests
for the necks on its Corona-made guitars, we also will be instituting price increases on certain Corona-
made models at the same time. We will communicate specifics on these price increases as soon as
possible, but you should anticipate increases in the range of 10-25%.
We strongly encourage you to order as much inventory as possible in the month of March 2025, before
these price increases take effect. Current pricing will apply to orders with a commit date in March 2025,
subject to available inventory. Please note that, given market volatility and the ever-evolving tariff
landscape, the timing, size, and applicability of these price increases is subject to change. However, we
will endeavor to be as proactive and transparent in our communications with you as possible as we adapt
our policies and practices to address tariffs and other market conditions.
Separately, we will also be instituting minimum advertised price (MAP) increases on impacted products
under FMIC’s unilateral MAP Policy where possible. Dealers remain free to set their ultimate sale prices
in their sole discretion.
FMIC will continue to lead the way in offering industry-leading products and service while partnering with
our dealers to navigate these market challenges to the best of our ability. We will provide further updates
as the tariff situation continues to develop.
Andy Mooney
What’s Next?
We have no way to report on the authenticity of this letter, but it raises many questions about the future of Fender’s profitability in 2025 and beyond.
Could now be the best time to buy a new Fender before prices rise in the next few weeks?
We will update this article once more official information becomes available.
More Information
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