Los Angles, October 19, 1982- Automotive entrepeneur John DeLorean is arrested after being caught up in an FBI sting operation for attempting to sell cocaine. Investigators say….*Record scratch* (freeze frame). You may be wondering how this happened, and for that, we need to go back to the beginning.
After earning a master’s degree in engineering in 1952, John DeLorean delved straight into the auto business. He had stints at Chrysler and then Packard, but it would be at General Motors where he would become a star. In 1956, he was given a $14,000 per year job ($102,000 in today’s money) working as an assistant to Pontiac Chief Engineer Pete Estes and General Manager Bunkie Knudsen. Knudsen would be DeLorean’s mentor and John would quickly climb the corporate ladder, becoming division Chief Engineer in 1961.
Pontiac was a moribund division in the early 60s, and I suspect that in another timeline, GM would’ve followed Chrysler and Ford in eliminating this seemingly superfluous middle market brand as the other 2 did with DeSoto and Edsel, respectively. But DeLorean had a flash of genius. He dropped a massive V8 engine into the humdrum Pontiac Tempest, renamed it the GTO, after the Ferrari model, and created the first ever muscle car. The GTO revived Pontiac’s fortunes and rocketed DeLorean’s career. In 1965, he became Pontiac’s general manager, at age 40, he was the youngest person ever to be a GM division manager.
DeLorean would find himself frustrated by corporate politics, especially the meddling of the “14th floor”. They vetoed many of his proposed advertising campaigns, and blocked the GTO from getting disc brakes, among other things. When DeLorean wanted to produce a version of the Banshee show car to be a competitor to the Ford Mustang, the 14th floor said no, probably correctly worrying about how a second 2-seater would cannibalize Corvette sale. Instead, he was told he could only make a badge engineered version of the Chevy Camaro, this became the Firebird.
DeLorean’s last big hit would be the Grand Prix. The Grand Prix had been Pontiac’s flagship full sized car, but sales were tanking. DeLorean decided to move it to the personal luxury segment, alongside cars like Buick Riviera and Ford Thunderbird. With a unique style including a very long hood and a distinctive beak at the front, it was a huge hit. DeLorean was rewarded with another promotion. On February 15, 1969, he became the General Manager of Chevrolet.
DeLorean would preside over the troubled launch of the new subcompact Vega, promising, falsely, that it would be “the highest quality product ever built by Chevrolet." But he did achieve other successes. He managed to simplify overhead and achieve a successful launch of the new Camaro. In 1971, Chevrolet sold 3 million cars, almost as much as the entire Ford Motor Company did.
Despite all this, DeLorean was not well liked by other executives. He was a bit of rebel who wore buttoned-down shirts and grew his hair out. His enormous salary (millions in today’s money) allowed him to live a jet set lifestyle. He had interests in the New York Yankees and San Diego Chargers, he was a personal friend of MGM chairman James Aubrey, and most horrifying, he had Ford President Lee Iacocca serve as his best man at his second wedding to a woman who was less than half his age. He dated starlets and was friends with Hollywood stars. In 1972, exactly 10 years before being charged with drug trafficking, he became Vice President of Car and Truck production and it seemed inevitable that he would become the next president of the world’s largest corporation. But it was not to be, in April 1973, he resigned from GM, although some say he was fired. I like to imagine that he shouted “I’ll show you all!” before getting into the elevator. Instead of Delorean, his old boss, Pete Estes, would replace Ed Cole as GM’s President, and he would do an admirable job of steering GM through the malaise era.
In 1975, the DeLorean Motor Company (DMC) was founded. John was able to leverage his connections to obtain significant investment. Entertainer Sammy Davis Jr. and TV Host Johnny Carson were among those who invested. Also, there was program where dealers who invested were given shares in the company.
The car’s shape was penned by Italian designer Giorgetto Giugiaro. The car was called the DMC-12, the name originating from the estimated base price of $12,000 (about $42,000 in today’s money). The car was made of stainless steel and had gullwing doors. DeLorean wanted to build a ethical car; A sports car that would be safe, fuel efficient, and last for a long time. He wanted airbags and a strong plastic frame made using a new technology called Elastic Reservoir Molding. The engine was to be a Wankel rotary.
The next problem was where to build the car. DeLorean got some great tax incentives from Puerto Rico and it seemed like that would be where it would be built, but then he saw some very attractive deals being offered by the Northern Ireland Development Association. Northern Ireland at the time had been devastated by “The Troubles” and the British Government thought that the 2500 jobs provided by the factory would be crippling to the IRA. The plant in Belfast was built between Protestant and Catholic neighborhoods, and people of these two religious backgrounds would find themselves working side by side. The deal was quite generous, the government put up 55 million pounds while DeLorean only had to contribute 546,000 pounds. Never mind that NIDA’s own research determined the business had a 1 in 10 chance of succeeding.
While the factory was coming along, the car was falling behind schedule. DeLorean went to Lotus to make it production-ready. Colin Chapman, Lotus’ boss, threw out the plastic chassis and replaced it with conventional fiberglass. Chapman wanted the car to be midengined, but DeLorean wanted space behind the seats for a set of golf clubs, so it was made rear engined. Airbags were also deleted and after the rotary engine they wanted went out of production, they chose to use a V6 engine designed by Renault, Volvo, and Peugeot. The engine made a pathetic 130 hp in US spec, 0-60 took 10.5 seconds, and it certainly struggled to hit 88 mph. While the stainless steel body didn’t rust, it left lots of fingerprints, it also couldn’t be painted, meaning, to paraphrase Henry Ford, you could have it any color you wanted so long as it was silver. The locks on the gullwing doors would regularly fail, leaving people trapped inside. There was also no room for the windows to roll down, so there was just a tiny opening. The build quality was so bad that many of the early cars shipped to the US had to be rebuilt before being handed off to the customer. The worst part was the price, which ballooned to $26000 by the time production started in 1980 ($70000 in today’s money), for the same price you could get a Porsche 911 or a Mercedes SL, both vastly superior in every way. The DMC-12 was, in a word, crap.
But none of this mattered to DeLorean. He was planning to launch an IPO in DMC, which would’ve made him an extremely wealthy man. To do this, he sped up production to make it look attractive to investors. Speeding up the line further worsened quality problems and meant unsold DeLoreans were piling up. But then, disaster. A secretary, Marianne Gibson, released documents showing that DeLorean was embezzling company money (which in turn came from taxpayers) to pay for his lavish lifestyle and not putting up the cash he promised. A police inquiry launched by Britain’s government found nothing, but in the scandal the IPO bid was dropped. By the beginning of 1982, DeLorean did not even have enough money to pay wages.
The British government was done bailing out DeLorean and told him that unless he came up with $10 million, they weren’t giving him any more cash. The company went into receivership in February 1982 and most of the workers were laid off. In a desperate bid to raise money, he resorted to brokering a cocaine deal. The deal turned out to be an FBI sting operation, and he was arrested. DeLorean was acquitted because the judge found him to be a victim of entrapment. At the end of the trial, he quipped “Would you buy a used car from me?”. But his troubles were not over. When the receivers looked through the books, they found $17 million had gone missing. It turned out that DeLorean and Colin Chapman had created a Swiss bank account tied to a snowmobile company in Utah through which to launder money. Chapman died of a heart attack before he could be put on trial and DeLorean only avoided prison time because the jury mistakenly believed they had to be unanimous. After the judge informed too late that they could declare themselves a hung jury, they realized they had made a huge mistake.
A British parliamentary inquiry from 1984 was scathing. It noted that the boondoggle cost 77 million pounds of taxpayers dollars. It criticized the government for giving such assistance to DeLorean despite all the skepticism in Britain and the US. It also noted some of the shady business practices such as bringing in untrained recruits onto the line. It called it “one of the gravest cases of misuse of public funds”. In the end, of the 7000 cars that were built, only half were sold by the time of bankruptcy. The rest were auctioned off for whatever they’d receive.
While DeLorean avoided prison time, he did get some punishment. His wife left him and he lost custody of his kids. He declared bankruptcy in 1999 and forced to give up his lavish lifestyle. He died in 2005 at age 80.
No discussion of the DeLorean is complete without Back to the Future. The time travelling trilogy made the DeLorean cool again and helps us forget what an awful car it was. Originally, the time machine was to be a refrigerator, but the directors didn’t want kids to start climbing into their fridges and parents suing them as a result, so they chose a car instead. They went with the DeLorean for its space age appearance.
But back to John himself. What a tragedy. Here was a wildly successful automotive executive who was destined to become the President of the world’s largest company but due to his greed and narcissism, found himself reduced to selling drugs.