THE BIRTH OF DMC
Although DeLorean was by most standards a wealthy man, his own fortune was far short of what he would need to launch even a low-production sports car. To get his new car off the ground, he would need considerable support from dealers, suppliers, and investors.
To that end, his greatest assets were his reputation and his singular charisma. DeLorean once claimed that he had always been an introvert, but in his early twenties, he had decided to bolster his people skills with a stint as a door-to-door insurance salesman. By the seventies, he was a formidable salesman of considerable personal magnetism. Some skeptical observers, like Irish politician Des O’Malley, found DeLorean’s charm more suspicious than ingratiating, but even people who were predisposed to dislike him (like inventor Pete Avery, who alleged that DeLorean cheated him out of thousands of dollars in patent royalties) found him hard to resist.
With DeLorean’s impressive resume and persuasive powers, he had little difficulty finding wealthy backers. He sweetened the deal with canny financial maneuvering. Although the DeLorean Motor Company was incorporated in 1975, much of DeLorean’s fundraising was conducted through a convoluted array of holding companies, including the John Z. DeLorean Corporation, the DeLorean Sports Car Partnership, the DeLorean Manufacturing Company, and the DeLorean Research Limited Partnership. The main purpose of these corporations was to maximize the potential tax benefits for investors, but the array of different companies made a thorough analysis of DeLorean’s financial holdings a daunting proposition. To the end of his life, DeLorean maintained that it was all perfectly legal, but the complex paper trail would add fuel to later charges of financial malfeasance.
THE PROTOTYPE DELOREAN DMC-12
By October 1976, DeLorean and Collins had a running prototype, built by Triad Manufacturing Co. The prototype was cosmetically finished, but it was far from production spec. The chassis was based on that of the Fiat X1/9, with the engine and transaxle borrowed from a Citroën CX and a front suspension cobbled together from Ford Pinto/Mustang II parts. Some features, like the promised airbags, existed only on paper and the Elastic Reservoir Molding (ERM) process that was supposed to form the frameless plastic body structure was still just a talking point.
DeLorean allowed the press to see and sit in the prototype in early 1977, but he refused to let them drive it, saying it wouldn’t be representative. It didn’t matter — DeLorean’s name was still golden and the gullwing prototype made the cover of nearly every car magazine in the world.
Although the Triad prototype had a four-cylinder Citroën engine, DeLorean and Collins wanted a V6 for the production car. (Early talk of using the two-rotor Comotor Wankel from the Citroën GS Birotor died with Citroën’s bankruptcy in 1974.) They considered Ford’s Cologne V6, used in the Ford Capri, Granada, and Mustang II, but they ultimately settled on the new PRV engine, a 90-degree V6 developed as a joint venture between Peugeot, Renault, and Volvo. The 2,664 cc (163 cu. in.) PRV engine was more expensive than the Cologne V6, but was lighter and more powerful. Since Renault had more capacity than they could use, they were also more open to a deal. Furthermore, Renault and Volvo already had plans to federalize the PRV engine, which would allow DMC some money-saving shortcuts in the EPA certification process.
The adoption of the PRV engine imposed the first of many compromises to the original design. Since the DMC-12 was going to use a Renault engine, it was expedient to use Renault transaxles as well: the five-speed manual and three-speed automatic units from the Renault 30. While these were far less expensive than developing a bespoke transmission, their use necessitated mounting the (longitudinal) engine behind the rear axle rather than in front of it, making the DMC-12 a rear-engine car. (Renault did much the same thing with its rear-engine Alpine A310 sports car in 1976.) DeLorean dismissed the switch from a mid-engine to a rear-engine layout as trivial, but the move raised some eyebrows, especially after his attack on the handling of the rear-engine Corvair became public.
Although DeLorean and Collins had yet to install the V6 in an actual car, they didn’t hesitate to offer projected performance figures: 0-60 mph (0-97 km/h) in a bit under 8 seconds, a top speed of 130 mph (209 km/h), and EPA city/highway mileage of 22/29 (25.2 mpg combined, 9.3 L/100 km). Those figures promised to make the DMC-12 almost as fast as a 12-cylinder Jaguar XJ-S with about half the Jaguar’s thirst.
DeLorean optimistically proclaimed that production would begin by the fall of 1978 and he had already hired Dick Brown (who had previously established Mazda’s U.S. distribution network) to line up dealer franchises. All DeLorean needed to start building the DMC-12 was a factory, workers, and another $87 million to pay for it all.
A MODEST PROPOSAL
DeLorean had already lined up some financing and was confident that he could find more, but it would not be nearly enough. He also recognized that he could not expect to raise the rest of the money through stock offerings alone. The target for DMC’s initial public offering, floated in mid-1977, was 2 million shares at a starting price of $5 per share, still insufficient.
However, DeLorean soon discovered an intriguing alternative. The economic travails of the seventies had led governments in many areas to offer substantial incentives to industry in hopes of creating local jobs. Many of those incentives were in the form of tax credits, but some governments were willing to make direct equity investments. If DeLorean played his cards right, it might be possible to build his factory with taxpayer money.
DMC made overtures to various state and local governments in the U.S. as well as the governments of Spain and Portugal, but none offered the kind of investment DeLorean was looking for. In early 1977, he learned that the Commonwealth of Puerto Rico was very interested in establishing an automotive plant outside Aguadilla, on the site of the former Ramey Air Force Base. With the support of the U.S. State Department, the Puerto Rican government put together a cash incentive package worth some $64.8 million, enough to put DMC’s initial funding targets within reach.
Although the Puerto Rican deal sounded very promising, the negotiations dragged on into 1978. During that time, DeLorean sought to hedge his bets by making a similar pitch to the Republic of Ireland’s Industrial Development Authority (IDA). Although the IDA ultimately rejected his proposal, his trip was not in vain. A local attorney suggested to DeLorean that there might be a richer opportunity in British-controlled Northern Ireland.
Northern Ireland was then in the throes of the Troubles — an almost comically banal euphemism for a decade of riots, bombings, and assassinations that had left more than 2,000 dead. Roy Mason, the Labour Party’s Secretary of State for Northern Ireland, responded by jailing hundreds of suspected insurgents, but a devastated economy and harrowing unemployment provided a steady stream of recruits for the Provisional Irish Republican Army. Mason concluded that the only effective way to undermine support for the IRA was to improve the local economy, which meant creating new jobs.
In the spring of 1978, DeLorean approached the Northern Ireland Development Agency (NIDA), proposing the establishment of a DMC factory in Ulster that would create at least 2,000 jobs in the region. The factory would be a symbol of hope for the troubled Belfast area and potentially the beginning of a new industrial base. NIDA chairman Sir Kenneth Cork was skeptical, but Roy Mason and Northern Ireland Minister of State Don Concannon supported DeLorean’s proposal and a deal was reached in only 46 days.
In late July 1978, the British government agreed to give DMC £16.5 million (about $31.7 million) in loans and £22 million (about $42.2 million) in grants, plus an additional £17.8 million (about $34.2 million) as an equity investment in a new holding company, DeLorean Motor Cars Ltd. The holding company’s principal asset would be the new factory, to be built on a 72-acre (29-hectare) marshland in the village of Dunmurry in West Belfast. The package brought DMC’s total capitalization to a claimed $156 million.
The DMC deal sat ill with Britain’s Conservative Party. The previous Labour government’s nationalization of the troubled British Leyland auto consortium a few years earlier had been a disaster, leaving the Conservative opposition extremely wary of direct subsidies to industry. Nonetheless, the violence in Northern Ireland was an ongoing political liability and the Tories were hesitant to block a deal that seemed to offer some hope. Whether they liked it or not, the British were now stuck with DeLorean.
LOTUS AND DELOREAN
With the British investment, DMC’s future looked bright, but the car itself was still not ready. To the frustration of Bill Collins, the second prototype, built by Detroit’s Creative Industries, had been a poorly finished mess. With groundbreaking on the new factory slated for October 1978, Collins admitted that DMC needed outside engineering help.
Collins and DeLorean approached Porsche and BMW, but both companies wanted far more money and more time than DMC could afford. DeLorean then turned to Colin Chapman of England’s Lotus Group, which had considerable experience with plastic bodies. That fall, Chapman signed a contract for Lotus to re-engineer the DMC-12 for production.
Bill Collins left the company for AMC in March 1979, frustrated that his suggestions for improving Lotus’s engineering efforts, which he considered slapdash, were being ignored. To replace him, DeLorean appointed Mike Loasby of Aston Martin as director of engineering and hired former Chrysler president Gene Cafiero as DMC’s president and CEO.
The DMC-12 project was a major undertaking for Lotus, involving more than half its modest staff. Since time was short, Lotus engineers discarded much of Collins’ original design, substituting features from the contemporary Lotus Esprit. The biggest casualty was the ERM plastic body, which was replaced by a two-piece fiberglass structure using Colin Chapman’s patented Vacuum Assisted Resin Injection (VARI) process, licensed from Lotus at considerable cost. Because fiberglass lacked the strength and rigidity of ERM, Lotus was obliged to add a steel backbone frame, similar to that of the Esprit. Discarded in the process were the long-promised 10 mph (16 km/h) bumpers and airbags. The latter would have posed a great challenge; at the time, few off-the-shelf airbag systems were available and neither Lotus nor DMC had the resources to design and test their own.