bitman
If Les Pauls would be 600.00 again or less, they wouldn't be able to make em fast enough. But no.... The have the Cadillac syndrome and it's taking them down.
I think it would be pretty difficult to out cutthroat the makers of really cheap, while still reasonably playable, guitars. The only clear winners in the post-2008 world are the purveyors of luxury goods, for which the new even more wealthy gladly spend much more than value for the status of the brand. These luxury goods did well even through the depths of the recession, and lowering the price of such commodities devalues the brand dramatically. Most of the big guitar makers have introduced a variety of value lines, that sell at a quarter to half the price of their status instruments, but that may just represent a strategy of competing against themselves.
One issue is the massive decline in guitar sales to young musicians, for which the popularity of rap and hiphop are largely to blame. The days of five guitarists and a drummer mounting the stage for an hour of pandemonium as the norm, have been replaced by lesser poets reciting doggerel while a crew of twenty guys with nothing in their hands wanders about the stage aimlessly. If you can get laid, let alone rich, without having to bruise your fingers or learn to do anything except speak, then taking up guitar is not so attractive.
The other major impact on the guitar market is the trend for young musicians to produce their work in the box, using SONAR or one of its many easier to master competitors. If you want to do that, then it makes more sense to pick up keyboards, than fretboards. Even with that keyboard incentive, the sales of wood and wire pianos has largely tanked. Why spend the money on a device that cannot talk to your computer?