When John Z. DeLorean startled Detroit by quitting his $650,000-a-year executive position at General Motors, it was with the idea of starting his own car company. This was not thought of as the wisest of decisions. No one in his right mind started his own car company anymore. Remember the Kaiser‐Frazer? The Tucker Torpedo? The Bricklin? But now, six years later, DeLorean’s fantasy has_materialized in the form of a two‐seat sports car temporarily named the DMC‐12. By the beginning of next year, the DMC‐12 is scheduled to roll off a Northern Ireland assembly line straight into the hot exhaust fumes of automotive‐industry competition.
DeLorean follows in a classic American entrepreneurial tradition, but his undertaking is still regarded as an outrageous gamble. The last American to start an independent mass‐produced automobile company, and succeed, was Walter P. Chrysler back in 1925. Last year, American auto dealers sold a record 15.4 million vehicles and G.M., Ford and Chrysler maintained their spots in the top 10 of the Fortune 500 list of major American corporations, though Chrysler says it needs a $750 million Government loan to stay in the competition. Yet DeLorean believes he and his new DeLorean Motor Company can overcome the odds against him in the Detroit and foreign‐car markets by concentrating on the prosperous but slightly less competitive American sports‐car field, in which his goal is to sell.
So far, he has disproved most Wall Street and Detroit analysts, who thought he wouldn’t get enough financial backing in the first place. He has, in fact, raised $200 million. In large part, it was his 17‐year record at G.M.’s Pontiac and Chevrolet divisions, where he set longstanding sales records, which lured investors. Some 400 of them include Johnny Carson, who will also be a D.M.C. spokesman; there are also executives of Merrill Lynch and Sears, Roebuck, about 300 car dealers across the United States and the Government of Northern Ireland. DeLorean put up $4 million of his own.
The birth of the new American sports car really began when General Motors made the mistake of promoting John DeLorean in the fall of 1972. After just three years of running Chevrolet — the company’s largest division — he had turned sagging sales into record profits, and so he was made a group vice president. DeLorean tried to resist. “Nobody had ever heard of that before,” he said. Not that this mattered. The style of this 6-foot-4 misfit — his long hair, Gentlemen’s Quarterly dress, his preference for foreign sports cars, for buying into sports teams like the Yankees and the San Diego Chargers, for dating actresses like Ursula Andress and Candice Bergen, between his three marriages — hadn’t conformed precisely with the anonymous, blend-with-the-wallpaper-G.M.-executive
But DeLorean was talked into the promotion and the Detroit intelligence network had him, at 48, all but appointed G.M.’s next president. He was bored by the upper echelon, however, by what he saw chiefly as attending meetings and pushing paper. He also realized that part of his leverage was gone. “In the past, the main defense latio worked had for the way I lived and worked was that I’d made a helluva lot of money for the company,” he said. “Suddenly, ‘When you’re a staff guy, your future is how much they like you.” In fact, one of his staff bosses had told him right off: “Now we’re expecting you to blend in.” So he quit the company in April 1973, shortly after he married a 23-year-old model, Cristina Ferrare. He then spent a year as president of an American business group that seeks to find work for the hard-to-employ. He also began studying the problems and possibilities of starting a car company. The moment G.M. found out about that, it canceled his remaining $600,000 in bonus pay.
With that rather important bridge burned, DeLorean realized he had to speed up or get out and walk; he chose the former, and, as the complete car expert (he once owned 40 cars and trucks), selected the sports car as the vehicle for risking his reputation. For one thing, the American sports‐car market was growing (from 6.3 percent of United States car sales in 1972 to 12.4 percent in 1977) and its affluent clientele was less affected by recessions and fuel crises. From his years at Chevrolet, DeLorean also knew that G.M. sold out its 40,000 Corvettes each year and, in fact, “we had to send back 8,000 sold orders a year because we couldn’t deliver them.” Another revelation came during the 1973 OPEC oil crisis: while large segments of the auto industry slumped by 30 percent, “Corvette and BMW went[]
For a new company planning to do battle against giants, it made sense to attack the smallest link in G.M.’s mighty chain. The Corvette amounts to 0.8 percent of the company’s 6.8 million cars and trucks produced last year, so Corvette’s tooling costs are higher than most of the mass‐produced models, giving DeLorean a chance to compete. Otherwise, he said, “if you try to play them in the Super Bowl, they’re going to kill you.”
The DMC‐I2 will be in the Corvette / Porsche 924 $14,000 price range. At this end of the scale, profit margins are also higher. DeLorean explains that, if you compare the fenders and bolts on an old Chevy Vega with a four‐cylinder BMW, “there’s almost no difference on paper. They’re made within a fraction of the same percentage of rubber, copper, aluminum, plastic, vinyl and steel.” Yet, while their costs of assembly are also about the same, there are astonishing differences in the performances of the cars, their prices and their profitability, principally because of design and prestige. “At that point Chevys were selling for $1.25 a pound,” DeLo“ and BMW’s about $6 or $8.”
To get his car into the $8-a-pound price range, DeLorean, who started out himself as an auto engineer, persuaded one of G.M.’s top engineers, William T. Collins, to leave the company after 20 years, and Collins teamed up with the celebrated Italian car stylist Giorgetto Giugiaro (who works on Maseratis) to design DeLorean’s prototype.
The most striking feature of the DMC‐12 is its stainless‐steel skin, and, like Henry Ford, DeLorean is offering his car in only one color a slightly huffed stainless steel whose tone varies slightly with the hues of the sky. DeLorean expects his car to last at least 25 years without rust, thus avoiding what he calls “this dynamic obsolescence kick,” which programs the average American car out of existence in 10 years. In his office, DeLorean keeps photos of a special 1936 stainless‐steel Ford that is still in pristine condition after three engines and 200,000 miles.
Since stainless steel never needs painting or waxing, DMC‐12 owners will only have to worry about scratches, which are rubbed out with special steel‐wool pad. One result is that the body factory will have no spray booths or paint ovens, so the employees “won’t find out 20 years from now they have some funny lung disease,” says Delorean.
A second major innovation is the body chassis, made of a new molding process with glass fiber and urethane foam saturated with resin. The result is a chassis that is light but strong, with a front design whose aim is to enable passengers to survive some 80-mile-perhour crashes. DeLorean says safety considerations will be more important than ever in the next decade as consumers change from big to small cars. The DMC‐12’s manually operated gull‐wing doors are regarded as safer than conventional ones because they are not jarred open as easily. Plus, says DeLorean, “they add sex appeal.”
Because the DMC‐12 is light — at 2,200 pounds, it is 1,900 pounds lighter than a Corvette — it can take a smaller engine and get 32 miles per gallon on the highway and 28 in the city and still be what car buffs call Porsche‐fast. It can accelerate from 0 to 60 m.p.h. in less than eight seconds.
Except for the chassis, DeLorean’s company will do little of its own manufacturing. It is buying V‐6 engines from Renault, air‐conditioning from G.M., tires from either Pirelli or Goodyear. DeLorean is keeping the car’s options to a minimum to prevent any inventory problems, although there is a choice of five interior colors and automatic or five‐speed transmission.
DeLorean maintains that the result of all this is a $14,000 car that handles like a $50,000 Ferrari, that is more energy efficient than a $13,100 Corvette and can ‘match the pickup of a $14,600 Porsche 929. “We have the characteristics of an exotic car, but it’s not exotic,” he says. “You don’t need a little Italian mechanic with a timing light and a screwdriver to chase it around.” Whether or not DeLorean’s claims are correct, of course, cannot be established until the car is rigorously tested.
After DeLorean’s plans became public, the experts were skeptical. David Healy, a Wall Street analyst, said, “The thing is a long shot.” Healy concedes that “DeLorean did have a good record at General Motors, but once you strip a G.M. executive of the financial support and technical talent, the world becomes a cold place.” Although Healy now expects DeLorean will sell a lot of cars in the first year, he warns that, “after the novelty wears off two, three, four years later, the momentum will be hard to sustain.” Healy’s rating of the chances for ultimate success: “Damn near zero.” Edward Lapham of Automotive News puts the chances at 50‐50. “I am certain that he’ll get a pilot run into production, but his long‐term difficulties are still legion.” Lapham cites the “untested production process” of the DMC‐12 body chassis, in addition to the unknown reliability of the work force in strife‐torn Belfast, where DeLorean’s assembly plant is located. Merrill Lynch’s Harvey Heinbach invokes the historical precedents for possible failure now. “We’ve seen attempts fail in the past that were similar, most notably the Bricklin. DeLorean has more expertise, better people and financing, so we’re looking at a better chance. But it’s still a long shot.”
Indeed, the memories of Malcolm Bricklin’s failure hung heavily over DeLorean’s early fund‐raising attempts. In 1973, the 34-year-old Bricklin, a smooth‐talking promoter who made his first million by age 25 with a hardware‐store chain, decided to build a sports‐car company, although he bragged openly about his ignorance of the car business. Bricklin set up his plant in New Brunswick and induced the local and Canadian governments to kick in $20 million; a Philadelphia bank put up another $5.5 million. He then signed up 200 dealers to sell his own two‐seat, gull-wing sports car.
Studying a prototype of the new $14,000 DMC‐12 are, from left, company officials John DeLorean and Eugene Caliero with consultants Colin Chapman and Mike Kimberly.
From the start, Bricklin’s problems and inexperience were paramount. There were production delays, problems of meeting the payroll, and Bricklin, who hoped to turn out 75,000 namesake cars per year, produced only 2,900 in his first and last 12 months. And many of those cars had problems: They leaked in the rain, which caused their electric gull‐wing doors to short-circuit. The delays also inflated the Bricklin’s price from $6,000 to $9,000, and dealers lost interest. The Canadian Government lost its money and took the company into receivership.
Bricklin’s disaster, however, only followed the tradition set by would‐be American automobile magnates Henry J. Kaiser and Preston Tucker Jr., in the car‐starved period after World War II. Kaiser, a shipping and steel tycoon but a novice in automobiles, began the Kaiser‐Frazer Company in 1945. For a decade, it competed reasonably well with Detroit’s big three, before collapsing in 1955 after it suffered losses of $100 million.
Tucker was a part‐time engineer and a full‐time salesman. He came up with a radically designed sedan called the Tucker Torpedo and 54,000 people bought $40 million worth of stock in his enterprise. But his inexperience and his problems with the Securities and Exchange Commission, which charged him with mail fraud, torpedoed Tucker after only 51 cars were hand‐crafted.
Unlike Kaiser, Tucker and Bricklin, DeLorean has impeccable credentials from the automobile industry. Consequently, his venture has kindled excitement along with the skepticism. James Wallace, an auto analyst for Chase Manhattan Bank and former marketing head at Chevrolet under DeLorean, says, “Everybody who’s tried it failed. But they don’t know John. To be honest, if he pulled it off it would be all but a miracle. But I always thought John could do it. I’d almost say, only he could do it.”
In the stylish offices of the DeLorean Motor Company on the 43d and top floor of the Banker’s Trust Building on Park Avenue, DeLorean talks about what he thinks was his toughest obstacle — the financing. He had had little experience in fund raising, and says that “for quite a long time, our key executives were not even paid. … We just didn’t have the money.” After he lost his General Motors benefits, he began to sell off his ranch property as well as his 10 percent interest in the San Diego Chargers football team. He says with obvious pride that his wife, Cristina, who earns $2,100 a day as a model, “supported us a couple of limes.” Eventually though, his idea, experience and salesmanship drew in $200 million in investments, which are now spread through a pyramid of companies: the John Z. DeLorean Corporation, the DeLorean Motor Company and DeLorean Motor Cars Ltd. DeLorean also enticed employees from G.M., Chrysler, Ford, Mazda, Aston Martin and elsewhere to give up years of security to join up.
One of those, Walter Strycker, put aside a financial‐consulting career. “John has a very creative mind,” he says of DeLorean. “He’s always going 110 percent. Some executives make fine custodial managers, but John’s approach is to create assets.” DeLorean’s reputation also helped him set up a dealership network, despite the warning on the cover of DeLorean’s prospectus, pointing out the high‐risk nature of the venture — which should be considered only by those “who can afford a total loss.” Thus far, 300 established dealers have signed on and DeLorean expects to have another 100 by the end of the year, with the heaviest concentration in California and Texas, the country’s two biggest sports‐car markets. Not surprisingly, the highest number are Chevrolet, Pontiac and Cadillac dealers who had previous experience with DeLorean. “The dealers love him. They’d support him if he came up with a $15,000 go‐cart,” says Edward Lapham.
Wil Smyly of Smyly Buick in Malden, Mass., was one of the first to sign on. Each dealer agrees to buy $25,000 worth of DeLorean stock, issue a $100,000 letter of credit and purchase between 50 and 150 cars. Smyly was so impressed he also took up an option to buy another $150,000 worth of stock, and has traveled to Belfast to look over the factory.
Smyly has been in the dealership business since 1955. “There’s a definite need for DeLorean’s car in this market,” he says. “The styling is exciting and the plastic‐laminated concept of assembly and using stainless steel, especially today with so much rust in domestic cars — that’s appealing.”
As Smyly talked up the virtues of the DMC‐12, I noticed a DMC tie clip he was wearing, in addition to color photos of the car on his wall. Like most of DeLorean’s loyalists, the dealers have been busy, already selling the car without aid of a prototype in their showroom or even any advertising pamphlets. “We’ve sold 35 already, strictly by word of mouth among sports‐car people,” Smyly said. “Oh, they’re excited.”
A valuable boost came when Johnny Carson plunked $500,000 into DeLorean’s company and agreed to become a spokesman. DeLorean said Carson liked the car and the idea of “demonstrating that free enterprise, even in this business, still works.” Carson has already appeared at one dealer trade show with the DMC‐12 and helped lure people away from G.M. and Ford presentations.
A group of 15 Merrill Lynch executives, including vice president Paul Schneider, have put in $475,000. Schneider said, “At first I thought about the risk, Bricklin, different things. But DeLorean could run a car company from top to bottom. And the fact that the man was personally at risk was impressive.” Once Schneider actually saw the DMC‐12 prototype, he “was so excited 1 felt like a little boy at F.A.O. Schwarz.” It was hardly necessary to ask if Schneider was thinking of buying a DMC‐12. “Oh, I’ve already got mine on order,” he said.
Another problem was finding a place for his assembly plant. After years of shopping around in Detroit, Pennsylvania, Alabama, Ireland, Spain and Puerto Rico, DeLorean was finally persuaded by the Northern Ireland Government — and the lure of $120 million in development grants — to set up shop in west Belfast. For years, Northern Ireland has sought out foreign industry to help boost employment and tranquilize terrorism; west Belfast’s unemployment rate has been unofficially reported as 35 percent, and that of Northern Ireland as a whole is about 12 percent, nearly three times the United Kingdom’s.
DeLorean has received grants for construction of a 550,000-square-foot factory, plus employee training, and some working capital. By 1982, D.M.C. expects to produce 30,000 cars a year and employ 2,000 workers. In return, D.M.C. will pay the Ulster Government $398 a car for the first 90,000 sold, and $187 a car thereafter for 10 years. Critics in Britain have attacked the Ulster Government for risking so much public money on such a long shot, questioning particularly the logic of investing what amounts to $50,000 for each job.
Outsiders also look at Belfast and see just another set of eggshells for the DeLorean Motor Company to negotiate along the road to success. DeLorean admits Belfast’s political situation caused him to think carefully about locating there. But despite Belfast’s political unrest, DeLorean claims its worker-attendance record is higher than that of the United States, and he will have only three labor unions to negotiate with. Belfast has supported a shipbuilding industry but its workers have not assembled automobiles. “The way we go about building a car is quite different, and if they’re going to get bad habits, let them get our bad habits.” Another bonus for DeLorean is the $4.25 an hour Ulster factory workers earn — one third what Detroit’s auto workers get—though he says his “dream is having a company that’s owned by the workers, the dealers, the management … all pointed in the same direction.”
DeLorean’s rosy assessment does not wash with everyone. Edward Lapham visited Belfast and concludes, “He’s working with an unknown work force. There are two theories: one, the people there do have some skills; the other is they do not have a work ethic — they’ve been unemployed for four generations.” As part of an attempt to deal with that issue, DeLorean commissioned Renault to conduct psychological tests on prospective workers, and those tests showed very little difference in productivity between Irish and European workers, for example. Training programs have been under way for several months for the Belfast workers, and the company says it will attempt to keep the work force evenly divided between Catholics and Protestants to try to keep the calm.
DeLorean knows he and his people must produce a car of high quality any recall for defects could be disastrous — and he flies to Belfast twice a month to monitor assembly operations. In part as a result of these trips, his work week averages about 80 hours; Sundays, he says, he saves for his wife and two children.
John DeLorean was born in Detroit in 1925, the oldest of four sons of a Ford worker. He got his mechanical talent from his father and cultivated it by tinkering with cars as a teenager: taking them apart and putting them back together to race them. After graduating from Lawrence Institute of Technology, he studied in the Chrysler Institute work‐study program and earned master”s degrees in both auto engineering and business. In 1952, he left Chrysler to join the smaller Packard Motor Car Company as an assistant transmission engineer. It was the perfect environment for a young car workaholic. By the time he left the foundering company, he had already become Packard’s director of research at 31. Then, in 1956, Semon (Bunkie) Knudsen brought him to Pontiac, which was at the time General Motors’ weakest division. “Pontiac was an old man’s car designed by old men,” DeLorean recalls. Knudsen, DeLorean and Pete Estes turned the division around, with sales jumping from 238,000 cars in 1956 to 938,000 in 1968. During that time, in 1965, he became, at 40, the youngest general manager in Pontiac history, and, four years later, the youngest at Chevrolet.
At Chevrolet, DeLorean faced an awesome variety of problems. For one thing, his colorful style (he was about to marry his second wife, a beautiful 20-year-old socialite) and business success had sparked a blaze of publicity and jealousy. His new boss, the late Roger Kyes, snapped at him, “You weren’t my choice for this job. I don’t like the way you do things. I don’t like your clothes. I don’t like the way you cut your hair.” For another thing, as DeLorean reports now, the profits of the division — G.M.’s biggest had fallen in the previous seven years from nearly SI billion to $150 million.
DeLorean spent three months talking openly with dealers (“We’d sit down and have just an absolute bloodbath”) and with second-echelon Chevy employees (“Some of these guys were absolutely shattered because no general manager ever went into their offices and sat down to talk”) to figure out what was wrong. Eventually, he peeled away needless layers of communication at Chevy and installed a new computer system and strict quality controls. Three years later, Chevrolet became the first American car division to sell three million models, and, again, DeLorean was promoted.
DeLorean left General Motors but General Motors has never quite left DeLorean. Its specter has continued to hover over his infant motor company. In part, this mystery is fueled by a book DeLorean wrote, with former Business Week reporter J. Patrick Wright, called “On a Clear Day You Can See General Motors: The Confessions of a $650,000-a-Year Executive.” In 1975, when Playboy Press was set to put it into print, DeLorean withdrew it. The two authors agree that the hook was intended as an honest behind–the-scenes look at a giant corporation, and not a vindictive swipe at former colleagues of one of them; nevertheless, it was said to have contained stories that raised questions about General Motors’ ethics, including suggestions that the firm knew its Corvair was unsafe long before Ralph Nader did.
DeLorean now claims the book was withdrawn simply because Wright had altered the ideas and “used it as a vehicle to relieve his own hostility.” Wright, however, insists that DeLorean approved the final version before suddenly changing his mind. Wright also maintains that DeLorean admitted to him, “Look, the book is exactly as I wanted it written. But I can’t publish it now. I want to bring out this car and G.M. could make a great amount of difficulty.”
Since 55 percent of DeLorean’s dealers are also G.M. dealers who are nonetheless independent contractors and can legally sell competing Corvettes and DMC‐12’s, General Motors is, indeed, in a position to put enormous pressure on DeLorean dealers. Wil Smyly, the Massachusetts dealer, said he wasn’t worried about any problems, but admitted, “I heard about one Cadillac dealer who was told in an offhanded way by a G.M. factory official not to go into the DeLorean deal. And that was his reason for dropping out. But, in all honesty, I can”t see why G.M. would be afraid of John”s
(Continued on Page 55) products.” There are two theories about whether G.M. will indeed apply its resources of pressure. One is that it will not because the new company is just too small to be a threat; but the other is that there are those at General Motors who still despise DeLorean because of the way he flaunted his unconventionality and will be anxious to try to crush him. General Motors’ official position on the matter is no position. Its spokesman Philip Workman said, “It just wouldn’t be appropriate to comment on DeLorean’s possible success or failure.”
Even DeLorean, usually a loquacious interviewee, danced somewhat gingerly around the whole G.M. issue, finally agreeing with the position that he is such a small fish that “G.M.’s accounting system couldn’t comprehend an error the size of our whole company.” Earlier, when DeLorean was running Chevrolet, he recalled, he had had difficulties in getting Chevy dealers to be open with him because of their fear of retaliation. “Any guy in the corporation can cut off their heads. He’ll give you all the cars you need, except they’ll be the wrong model, the wrong color at the wrong time. Well … you’re dead.”
James Wallace of Chase bank says, “John knows what Chevy’s like. He created the finest marketing division in the automobile industry and they’re not going to sit around and do nothing if Corvette’s sales start to hurt.” A move is already afoot to move the Corvette plant and increase its production beyond its current 42,000‐car total.
The little motor company’s long‐range hopes received a boost when Eugene A. Caller°, former president of the Chrys- ler Corporation, joined it last spring as its president. Cafiero should help relieve some of the burden on DeLorean, a burden the company at pres- ent evaluates in the form of a $20.million insurance policy on him.
Within 18 months of the time the first cars come off the assembly line in January, Delorean Motor Company plans to add a four‐seat stainless‐steel sedan. In addition, it is trying its luck on the Federal Government’s ill‐fated, but lucrative, Transbus program. Right now, a package of 530 city buses, specially designed for the handicapped, is waiting for a bidder. General Motors was the last American firm to drop out, primarily because of the high costs of retooling. However, with the buses selling for about $200,000 each, there are profits to he made.
Still, the biggest priority is the DMC12. The company thus far has for the most part kept the car under wraps, and no one outside the DeLorean circle has driven it. As with a Broadway production, the moment of truth will come only after the public has had a chance to judge the show — in this case, walk around the showroom, kick the tires and take it for a spin.
By Barry Stavro
October 28, 1979, Section SM, Page 11
