The Glock Spiel

In Tucson, Jared Lee Loughner allegedly used a Glock 19-a lightweight, $500 semi-automatic commonly carried by law enforcement officials-to kill six people and injure 13 more, including Rep. Gabrielle Giffords. In 2007, Cho Seung-Hui used the same gun, along with a Walther P22, to kill 32 people at Virginia Tech before committing suicide. And Giffords herself boasted to the New York Times in 2010: “I have a Glock 9 millimeter, and I’m a pretty good shot.” For a company that has been doing business in the United States for only a quarter century-one of its competitors has been in business in America since 1852-Glock has been remarkably successful. Glock declines to provide specific sales figures, but the company is the leader in handgun sales to American police departments-indeed, a whopping 65 percent of them use Glock guns. On top of that, it has considerable global sales and remains popular with the private citizens who buy most of the guns in the United States.
The Austrian manufacturing company was founded in the 1960s and expanded into the weapons business in the ’70s and ’80s. In 1986, led by the enigmatic Gaston Glock, the company won the right to start selling its guns in the United States. (The United States has rigid regulatory requirements for gun makers and sellers.) At first, the Glock guns, initially designed for the Austrian military, caught on in police departments. There were two main selling points, according to Patrick Sweeney’s The Gun Digest Book of the Glock. First, Glock manufactured-and still manufactures-unusually light guns, made out of plastic and other synthetic materials as well as metal. That makes them easy to carry, manipulate, and shoot.
Second, and more important, Glocks held more ammunition than the standard-issue guns usually did at the time. With gang-driven gun violence rising, police departments decided to give the guns with the extra rounds a try. They caught on and then gained popularity in the consumer markets. (They also developed a particular cachet among criminals, then broader cultural recognition, including numerous citations in rap lyrics.) By 1996, Sweeney writes, Glock had sold more than 1 million guns in America. As Bloomberg BusinessWeek reported in an excellent 2009 story on Glock, the company’s success might also be due to some questionable business practices. The company has come under fire, in a manner of speaking, for making secret political contributions. It has also been accused of dodging taxes and regulations through shell corporations. (Because the company is based in Europe and is privately held, it does not need to disclose nearly as much sales or legal information as a public U.S. company.) Corporate intrigue and violence are part of the picture, too. Gaston Glock’s former business associate, a man occasionally known as “Panama Charly,” is currently incarcerated in Luxembourg, convicted of taking out a hit on his boss in 1999. (The hitman was a former professional wrestler and, bizarrely, the attempt came not with a handgun but with a large rubber mallet to the head. Glock survived.)
Still, Glock remains a main player in U.S. gun sales, and the Glock 19 popular. The company boasts that it is “safe and ingeniously simple: Contrary to conventional, the trigger is the only operating element. All three pistol safeties are deactivated when the trigger is pulled and automatically activated when it is released.” Thus, it is quick to shoot-and can shoot a lot. Loughner, for one, reportedly used an extended magazine carrying 31 rounds. (Congress outlawed such magazines in 1994, but let the ban lapse in 2004.)
So will the incident dampen sales of the Glock guns? Unlikely. In fact, Bloomberg cites Federal Bureau of Investigation data showing that in Arizona, one-day gun sales were 60 percent higher on Monday than on the Monday before the incident. Several other states showed a significant sales bump. And national sales increased about 5 percent. All in all, Americans-not military or police, mind you, but private citizens-own more than 270 million firearms, about 85 guns per 100 people. No other country has such high rates of gun ownership, or absolute numbers of guns in the general population.
So how profitable are companies like Glock? Again, we don’t know, because it keeps such information private. But the BusinessWeekstory says Glock estimated its “profit margin per pistol” at 68 percent. And consider a major Glock competitor: Massachusetts-based Smith & Wesson, established back in the 1850s. The company’s last annual report cites a gross margin of 32 percent.
The company does cite two big hurdles to business, though. The first: federal and state laws. “Compliance with all of these regulations is costly and time consuming,” the company writes. “Although we take every measure to ensure compliance with the many regulations we are subject to, inadvertent violation of any of these regulations could cause us to incur fines and penalties.” The second: lawsuits. “We are currently involved in numerous lawsuits, including a law suit involving a municipality, a securities class action lawsuit, and two purported stockholder derivative lawsuits,” it notes, dryly. That seriously cuts into the bottom line.
Still, the business looks OK as long as demand remains high. And despite (or because of) tragedies like last weekend’s in Tucson, Americans aren’t likely to end their love affair with their guns-all 270 million of them.