Other than the Giugiaro styling, the main element carried over from the original design was the PRV engine. Renault had decided not to federalize the R30, but Volvo had introduced a U.S. version of the 2,664 cc (163 cu. in.) PRV V6 in the Volvo 260 Series in 1976 and federalized the larger 2,849 cc (174 cu. in.) engine for 1980. The engines used by DMC were of a hybrid specification, combining the cylinder heads and Bosch K-Jetronic mechanical fuel injection of U.S.-market Volvos with the bottom end of the Alpine A310 version. Since the DMC-12 was lighter than the Volvo 260 Series and the DMC engine was tuned identically, the EPA allowed DMC to skip the otherwise-mandatory 50,000-mile (81,000-km) durability test, which Volvo had already successfully completed.
The DMC-12’s engine had the same output as its Franco-Swedish cousins: 130 hp (97 kW) and 162 lb-ft (220 N-m) of torque. That was about what Bill Collins had anticipated, but Lotus’s structural redesign had left the production car some 500 lb (227 kg) heavier than originally planned. The DMC-12 still met its EPA mileage targets, but the extra weight and taller gearing would take their toll on performance.
Although the Dunmurry factory was finished by early summer 1980, the work at Lotus ran months behind schedule, so DMC Ltd. eventually had to finish some of the contracted work itself. Those delays left DMC painfully short of cash, so in late 1980, DeLorean persuaded the British government to put in an additional £24 million (about $53 million) in development grants and loan guarantees.
Pilot production began in December and the first true production cars rolled off the line on January 21, 1981. It was none too soon; despite the last-minute infusion of government money, DMC entered 1981 with an $18.6 million shortfall, which was actually more than DeLorean had estimated when he asked the British for the additional money.
Still, the excitement surrounding the new car was reaching its peak. The motoring press had faithfully reported each new development, hoping for a chance to drive the car they’d heard so much about. Dick Brown had lined up more than 340 U.S. dealerships, many of whom were accepting deposits of up to $5,000. Celebrity investors like Johnny Carson and Sammy Davis Jr. were waiting eagerly to collect their promised early-production cars.
Spirits were also high in Ulster. Although many employees at Dunmurry were new to the auto business, they were enthusiastic and dedicated. Absenteeism was very low and despite the fact that the plant employed nearly equal numbers of Catholics and Protestants, internal strife was reportedly minimal. DMC Ltd. could not paper over the conflicts outside the factory walls — for example, the death of hunger-striking political prisoner Bobby Sands in May may have led to an apparently accidental firebombing of the factory — but DMC employees and many local residents regarded the operation with pride.
Sadly, the early cars didn’t live up to the hype. The factory had planned an ambitious and rigorous testing schedule, but by spring, there was too much pressure to bring the car to market. Build quality of the first few hundred cars off the line was embarrassingly shoddy; most had to be extensively rebuilt in the U.S. at great cost. The fact that many went to prominent investors only made matters worse.
The American press tried to be generous, acknowledging but excusing the poor build quality while praising the DMC-12’s styling and interior design. Reactions to the DeLorean’s handling were mixed. Despite its pronounced rear weight bias, the fat rear tires mostly eliminated oversteer and the DMC-12 rode and handled well in relaxed driving. Pushed too hard, however, it could feel twitchy and unsettled, suggesting excessive deflection of either the suspension bushings, the mountings joining the fiberglass body and steel frame, or perhaps both.
The greatest disappointment was straight-line performance. With the standard five-speed, DMC claimed 0-60 mph (0-97 km/h) in 8.5 seconds, but most testers found that figure optimistic by a least a second. The factory’s claim of a 125 mph (201 km/h) top speed was generous by perhaps 6-7 mph (10-11 km/h) and top-gear acceleration was leisurely.
The DeLorean’s real-world performance was hardly awful by the standards of 1981, but it lagged well behind other GTs in the DMC-12’s price class. By 1981, inflation and exchange rate fluctuations had pushed the DMC-12’s U.S. retail price to $25,500, more than twice the original target. The DeLorean was still cheaper than a Porsche 911SC, albeit not by much, but was fully 25% more expensive than a Corvette, Datsun 280-ZX Turbo, or Porsche 924 Turbo, all of which were significantly faster. DeLorean dismissed such concerns, saying the typical buyer was more concerned with cruising in style than drag racing. He also promised that a future twin-turbo version would put the DMC-12 firmly in the Supercar category.
Although DeLorean remained buoyantly optimistic throughout 1981, saying the company would soon be selling 30,000 cars a year, DMC was losing money at an alarming rate. Fixing the early build problems cost more than $2.5 million while warranty claims amounted to another $1.5 million. DMC was also obliged to pay the British government £185 (nearly $400) for each car sold, cutting into the company’s per-car margins. DeLorean, meanwhile, was living as lavishly as ever with an annual salary of $500,000 and a generous expense account.
Some observers, including DeLorean’s British office manager, Marion Gibson, wondered how the company had burned through so much money so quickly. In October 1981, Gibson went first to Tory MP Sir Nicholas Winterton and then the British tabloids with allegations that DeLorean was diverting company funds for his own use, but a brief police investigation found nothing.
DeLorean’s solution to the company’s cash deficit was to hire hundreds more workers and double production in hopes of boosting revenues. Customers, however, were becoming scarce. The American economy took a turn for the worse late in the year, thanks in part to an unusually severe winter. Most of the early speculators and wealthy gadflies were now sated. DMC dealers were left with large stockpiles of unsold cars and banks began to cancel dealers’ floor-plan financing.
All the while, the factory kept churning out more cars. With no customers, DeLorean Motor Company of America simply stopped paying for cars. By the end of the year, the American company owed DMC Ltd. around $10 million for cars already delivered, leaving the Belfast subsidiary unable to pay its own suppliers.
DeLorean pressed the British for even more money: another £35 million (about $70 million). Since the Conservative Thatcher government was understandably nervous about the £77 million-odd (approximately $154 million) it had already invested, Secretary of State for Northern Ireland Jim Prior hired Sir Kenneth Cork of Coopers & Lybrand — who had opposed the DeLorean deal as chairman of the NIDA — to conduct an extensive study of DMC’s operations. Sir Kenneth’s report advised against offering further credit without a complete reorganization.
By February 1982, DMC was more than $800,000 in arrears on its interest payments and suppliers like Renault were making threatening noises. On February 19, the British forced DMC Ltd. into receivership, appointing Sir Kenneth and Paul Shewell as the official receivers. DeLorean was no longer in control of DMC Ltd.’s operations. Unless he could come up with another $20 million to pay off its outstanding debts, the company was doomed.
The receivers agreed to keep the Dunmurry factory operating until May 31, albeit with a dramatically reduced staff. There were no new cars, but workers completed the remaining half-assembled vehicles to facilitate liquidation.
Meanwhile, DMC executives were beginning to jump ship. Gene Cafiero was already gone and Dick Brown was fired in March. DeLorean brought in his old business partner Roy Nesseth to clean house and keep creditors at bay; DMC of America’s offices in Irvine, California, had trouble even paying its utility bills.
DeLorean spent the spring and summer of 1982 playing for time. Coopers & Lybrand would not allow him to resume production without an earnest payment of at least $10 million, which DeLorean didn’t have. Finally, in early October, he offered the receivers a deal: DeLorean would invest $10 million of his own money — actually a short-term loan from Virginia-based Financial Services Inc. — and the investment firm Minet Finance Management would then loan him an additional $100 million to cover all the outstanding debts and purchase the DMC Ltd. factory outright.
Sir Kenneth Cork, who was neither charmed nor intimidated by DeLorean and had become increasingly annoyed with what he perceived as DeLorean’s stalling tactics, was skeptical of this convoluted scheme. However, Sir Kenneth declared that it would be acceptable provided it was completed by October 20.
DeLorean didn’t make it. In the evening of October 19, 1982, he was arrested in a Los Angeles hotel room for conspiracy to distribute more than $24 million of cocaine.
Upon learning of the arrest, Sir Kenneth contacted DeLorean’s New York office and found that the loan transaction had not been completed; with DeLorean behind bars, there seemed little chance that it would be. The receivers immediately shut down DMC Ltd., sending its 35 remaining employees home. DMC of America filed for Chapter 11 bankruptcy protection six days later. In November, Consolidated International, the parent company of the Big Lots discount store chain, purchased many of DMC’s unsold cars along with the distribution rights. Some of the remaining cars were re-serialed and sold as 1983 models, but the DeLorean Motor Company was finished. John DeLorean’s troubles, however, were only beginning.