This paper offers, in the unique case of the DeLorean Motor Company, an involved analysis of the state-supported carmaker and its ultimate demise in relation to the conflict in Northern Ireland, in which it was based, and also in relation to the industrial policies of James Callaghan’s Labour government and Margaret Thatcher’s Conservative government. Overall, it harshly critiques the role played by the Labour government in securing the DeLorean project and the institutional environment it helped to create in Northern Ireland, as well as the way in which the company was run by its own internal management, which led to an uncompetitive car which sold poorly. In doing so, the Conservative government, often criticised in its handling of government assistance to other British manufacturers, is in this case largely vindicated of responsibility for the failure of the company. Northern Ireland itself is also reappraised as a more friendly and safe industrial environment than has been argued by others. The paper thus provides an entirely new reading of the factors attributing to the company’s collapse, and in eschewing the more pseudo-historical techniques offered in other accounts for social, political and economic methods of analysis, embeds this particular case study into wider discussions regarding automotive history.
List of Abbreviations
AMC – American Motors Corporation
DMC – DeLorean Motor Company
DMCL – DeLorean Motor Cars, Ltd.
DRLP – DeLorean Research Limited Partnership
EEC – European Economic Community
ERM – Elastic Reservoir Moulding
GM – General Motors
IRA – Irish Republican Army
MTF – Margaret Thatcher Foundation
NIDA – Northern Ireland Development Agency
NIDOC – Northern Ireland Department of Commerce
PRONI – Public Record Office of Northern Ireland
TNA – The National Archives
VARI – Vacuum-assisted Resin Injection
UFTM – Ulster Folk & Transport Museum
Much of the scholarship on the demise of the British car industry, understandably, focuses on the case of British Leyland, the nation’s largest manufacturer. However, there is indeed a case for further study of the DeLorean Motor Company (DMC), another recipient of large subsidies from the British government. Later popularised in the cult film ‘Back To The Future’, the futuristic DMC-12, their only model, would be produced in Dunmurry, Northern Ireland, a region plagued by internecine civil conflict.
As will become apparent throughout this paper, DeLorean offers a unique case study in terms of the British car industry in the late 1970s and early 1980s, and also in terms of government intervention in the automotive sector, as it offers an especial example of both Labour and Conservative policy. Moreover, the question is relatively unexplored, with only one scholar broaching the topic directly. As such, this paper will conduct a deep historical analysis of DMC and its role in the aforementioned narratives, utilising previously-unused archival source material in London and Belfast elucidating the manner in which DMC was run and governmental attitudes towards it, along with the existing secondary literature and a wide range of printed primary and documentary sources.
In fully answering the title question, this essay will differ from most of the existing historical accounts of the company, which place responsibility for DMC’s ultimate failure either on the shoulders of John DeLorean, the company’s jet-setting founder and former GM executive, or the Conservative government, under whose oversight the company went into receivership and then bankruptcy. Instead, the argument taken aligns more closely with the work of Graham Brownlow, who previously explained DMC’s demise as result of maladroit Labour policies and a highly-exploitable institutional environment. Indeed, this paper will argue that the Master Agreement concluded between DMC and the Labour government set a course that doomed the carmaker to defeat, and that catastrophic managerial blunders forced the company to act as a drain on Treasury funds and prevented it from securing private finance, causing the government to lose faith and eventually cut its losses. In doing so, the actions of both Labour and Conservative governments will be analysed, as will the internal operations of DMC and DMCL, its Belfast-based, car-producing subsidiary, while Belfast itself, often argued to have hindered the success of the company, will be reappraised as an environment in which to run a large manufacturing business.
Labour Government Policy
In any analysis of DeLorean, it is most important to reflect upon the circumstances in which the government found itself in Northern Ireland, which was, at the time, among the worst employment blackspots in the EEC, as the traditional industries of shipbuilding and textiles declined inexorably. The unemployment rate of West Belfast, where the DeLorean factory was later to be located, was conservatively estimated at forty per-cent, some putting the figure at almost eighty per-cent. Owing to the conflict, inward investment had reached its nadir, 2,600 jobs lost to thirty-one manufacturing firm closures in 1976 alone. As IRA recruits were often unemployed, alienated young Catholic men, a convincing sign that the government could offer jobs and hope in West Belfast would prove a major blow.
The Institutional Environment
Among the decision-makers, however, socio-political concerns often outweighed the economic. Roy Mason, Labour’s Secretary of State for Northern Ireland, argued that ‘At the time the project was launched, social conditions and housing in the province were awful, concerns which orthodox Treasury economics always fail to take into account’. Thus, from the outset, DeLorean was tasked with solving a political problem as well as an economic one, having severe consequences for the way it operated. These conditions led to an institutional environment which the economic historian Graham Brownlow has argued are crucial to understanding the failure of the company.
Said institutional environment dates back to the beginning of the conflict in the early 1970s, during which calls for increased public investment, assistance for private industry, and infrastructure programmes were made. The Northern Ireland Finance Corporation, which would become the NIDA, offered arrangements described by the Treasury as ‘designedly more generous’ than those for other deprived parts of the United Kingdom, while Catholic employers received assistance above and beyond this level, proving that exceptions were already being made in the case of Catholic employment. During this period, Northern Ireland was also being given noticeably favourable treatment in terms of public expenditure allocations. As such, Roy Mason in 1977 unveiled a five-year, £950m plan to stimulate Northern Ireland’s economy, £600m of this earmarked to support industry. Thus, Northern Ireland’s institutional environment, at this time, was characterized by enormous, almost excessive financial incentives.
Soft budget constraints, defined by the Hungarian economist Janos Kornai appear “when the relationship between expenditure and earnings is relaxed and a decision-maker within a potential recipient firm expects financial assistance to make good the gap”. The higher the external assistance to a company, the softer budget constraints become, increasing inefficiency. In the case of DeLorean, the political situation arguably exacerbated the softening of budget constraints. The institutional design of the original agreement, which provided for additional finance and focused on socio-political goals such as job creation instead of efficiency, thus provided few incentives for DeLorean to succeed, and was criticized in the media. Indeed, Northern Ireland’s industrial policy framework provided a combination of generous subsidies and weak oversight, which John DeLorean was to take full advantage of.
The Master Agreement
On 28 July 1978, a mere forty-six days after initial introductions, the Master Agreement was signed between the government and DMC. DeLorean himself claimed that there was little negotiation, DMC simply accepting what the government offered. Located in Dunmurry, it was agreed DeLorean would receive £17,757,000 in an equity capital investment from NIDA, with grants from NIDOC totalling £18,718,000 and loans of £6,718,000 for factory construction and equipment, with a further £9,750,000 in employment grants. The Dunmurry production site would also be rent-free for the first three years. DMCL would also pay the government back a royalty of £185 per car for each of the first ninety-thousand produced and £45 for each car produced thereafter. However, the DeLorean Research Limited Partnership (DRLP), the private funding initiative behind DeLorean, was also entitled to the same royalty as the government, despite their investment being much lower at $19.5m. In terms of shares, the government, at £54m, provided 94.5 per-cent of the capital, but acquired only 5.5 per-cent of the votes. Government control was weakened further in that the agreement specified the rights to the car and distribution of it would remain with DMC. William Haddad, a former DMC executive, described this as ‘the deal of DeLorean’s dreams’. Overall then, the Master Agreement was rushed, achieved at great cost to the government.
Criticism of the Project
Though criticism against the venture would come from all angles, we can begin with the decidedly negative reports that preceded the government’s involvement. Governmental discussions with consultants McKinsey & Co. confirmed that the project carried a very high risk, their July 1978 report ridiculing DeLorean’s sales projections and the car’s design. Nonetheless, officials were still prepared to support the project, allowing themselves to be beguiled by John DeLorean’s personality and influenced by other DMC executives, who labeled McKinsey’s report a ‘monument to the non-entrepreneur’. John DeLorean himself urged expeditious handling on the part of Roy Mason, and those negotiating the agreement noted that ‘there is no possibility of undertaking our usual detailed analysis.’ Even publications like the Economist were opposed to government involvement from the start, signifying that the risks of the project were known publicly. Moreover, the government failed to commission impartial studies, relying instead on those prepared for the Puerto Rican government, which had also been prepared to fund the project, and by John DeLorean himself.
Many figures in government itself also had considerable qualms. Joel Barnett, Chief Secretary of the Treasury, informed Roy Mason early on that the Treasury could not support the project without greater private sector participation. Bob Cryer, a Labour backbencher, became a staunch and vocal opponent of the venture, condemning it in parliament as ‘the biggest rip-off since the South Sea bubble’, and the Public Accounts Committee, appointed to officially determine responsibility for DMC’s ultimate failure, accused the Labour government of misusing public resources, misplaced optimism, and ineffective monitoring of the company. Even as the ministerial committee on economic and industrial policy supported the decision to invest in DMC, it warned that ‘the economics of the project were open to serious question’. The project then, was funded by the Labour government in spite of near-universal opposition.
Within English circles, there was general opinion that the price of securing DeLorean was too high. Though the average price of creating a job in Northern Ireland was around £10,000 at the time, compared to £1,600 for the rest of the U.K., each job at DMCL cost £17,700 at the time the agreement was signed, and this would later rise with further government funding. However, the United Kingdom would come to benefit as the main parts supplier, bringing the cost per job down as thousands of indirect supply chain jobs were taken into account.
As mentioned in section 1.2, Northern Ireland’s institutional environment created, in the case of DeLorean, opportunities for personal gain. In terms of monitoring the company, it was made clear that NIDOC and NIDA would be supplied with management accounts and that NIDA would also designate two of the company’s directors. However, these strings were to prove difficult to enforce, and the two NIDA directors were later revealed to be behind a £400,000 bonus deal for DeLorean executives. Moreover, until March 1984, John DeLorean had, according to the Master Agreement, the option to purchase the government’s equity at a bargain price, meaning the government could not recoup its investment. John DeLorean could also determine exactly what DMC in Michigan would pay DMCL in Belfast for each car, meaning he also personally controlled the flow of profits. S.C. Aveyard has argued that Labour’s activity on the economic front in Northern Ireland was conducted on a largely ad-hoc basis, and the case of DeLorean was certainly no different. It is, indeed, telling that several changes were made to industrial policy in Northern Ireland on the back of the DeLorean experience, from increased precaution before investing to improved monitoring arrangements.
1979 and Thatcher: The Turning Point?
Though Labour’s failings in entering into an agreement with DeLorean were manifold, Margaret Thatcher’s Conservative Party, as the enemy of publicly-owned business, was to be blamed by many for the failure of the company, DMCL appearing a prime target in their attempt to ‘roll back the state’. On balance, however, there is much greater evidence for the Conservatives going above and beyond their original obligations to support DeLorean, despite Margaret Thatcher’s personal belief that the project was a ‘serious mistake’ on the part of the previous administration.
Evidence of Support
Though the Master Agreement was not a contract in law, it did commit the Secretary of State for Northern Ireland to ‘give reasonable consideration to providing more funds as needed’. As such, Humphrey Atkins and James Prior, Roy Mason’s successors in that role, acquiesced to more demands than they were obligated to.
There is evidence of further funding being provided by the Conservatives to DeLorean on three separate occasions. Though the Cabinet itself had considerable misgivings, Atkins agreed with DeLorean in August 1980 to provide a £14m grant covering inflation and exchange rate fluctuations, which had forced the company to raise the price of the car. He had pleaded with Keith Joseph on the question of this extra funding, though he acknowledged the previous inclusion of the clause was a mistake on the part of NIDOC. Indeed, as the company was not in production by then, and could not attract private investment, a refusal to provide the £14m would have ensured DeLorean’s demise. Thus, even voices in the Treasury asserted that the company should be supported until series production began. Even Margaret Thatcher gave her final approval, on the condition that no more money was to be provided afterwards. In this, Atkins made it clear that the government would honour Labour’s commitments, even if their estimation of the project’s cost was highly optimistic, signifying his commitment to seeing the project through.
In February 1981, a further £10m government guarantee on bank loans was approved after being led by Atkins, even though he was warned six times by NIDA about DMC’s poor finances. However, this was only for three months rather than the year sought by DeLorean, reflecting a slightly tougher government line.
Though parliament was again given assurances that the February guarantee would be the last assistance made to the company, DeLorean was in May 1981 granted £7m for riot damage that had interfered with production during the hunger strikes. Thatcher herself supported this decision, despite her growing reservations. At the time, even the Treasury officials who had previously displayed such caution began to support keeping the company in existence, the low absentee rate of ten per-cent ‘a convincing tribute to the desire of the workforce to hold onto their jobs and to make the company a success’. In all of these instances, assurances that the company would no longer receive additional funding were broken, much to the chagrin of the project’s opponents. Funding was also granted in the face of cross-party opposition, providing even more evidence for a conciliatory attitude from the Conservative government.
James Prior in particular held the same viewpoint as Roy Mason with regards to economic counter-terrorism strategy, and was fully supportive of what DeLorean was doing for the province in providing jobs. Privately, he had maintained that the Government had been prepared to support the project so long as there appeared to be a reasonable chance of its becoming profitable. The Conservatives in general had always accepted that closure would run into a range of sunk costs, and for Prior, the criticism that would result from closure, particularly as the largely Protestant workforces of Harland and Wolff and Short Bros. had been provided with considerable funds, was a serious worry. Closure meant the government would have to pay an extra £5.5m in annual social security support, along with £6.3m in yearly tax contributions, while losing £3.4m in royalties and a further 4,000 jobs British supply chains. Withdrawal of support would also undermine confidence in the government’s support for American firms. Though there is evidence that, by February 1981, sections of the government had already lost faith in DMCL and wished to cut their losses, the same officials would later support the May 1981 decision to award compensation for riot damage, albeit with great reluctance. Department for Industry officials, particularly Keith Joseph, found ‘little justification on industrial grounds for extending further financial assistance’, but often acquiesced, as their Labour counterparts had done, on the basis that it was a political project. Thus, in spite of their own reservations, Conservative ministers and civil servants across departments continued their support for socio-political reasons.
These beliefs carried on over into DeLorean’s receivership period, announced in February 1982. Both Prior and Kenneth Cork, the receiver, were keen to save jobs in the factory, and were supported in this by the workforce. Privately Prior and Thatcher had also agreed that a maximum £3.5m of assistance would be provided if necessary during receivership. The government also allowed the receivers maximum flexibility to explore every chance of saving the company. Liquidation was only pursued after a fourth deadline for private finance was not met by John DeLorean.
Bernadette Hayes and Ian McAllister have argued statistically that very few British voters considered Northern Ireland the country’s most pressing problem. In the face of other, major concerns, it becomes clear that the Conservative government did far more than was necessary with regards to DeLorean.
Evidence of Neglect and Opposition
Despite the clear support given, select MPs were opposed to DeLorean throughout, although more joined in criticising the government as further funds were made available by the Conservatives. However, arguments against the Conservative government are framed more in terms of neglect than in pure opposition. Roy Mason notes that the Conservatives gave further loans to the project, but failed to alter the master agreement to ensure the controlling and supervised spending of the money, which made them more reluctant to continue their support. Indeed, it is difficult to find any evidence for Thatcher’s opinions beyond vague remarks about using public money wisely, evidence not only of the other industrial problems her government had to deal with, but also the insignificance of the jobs in Dunmurry as Northern Ireland became less of a political problem. Indeed, the government simply became less convinced that the sunk cost argument provided a reason to continue subsidy, as policymakers began to worry that DMCL, was beginning to deter investors from Northern Ireland.
Moreover, the Conservative government can generally be defended with regard to the requests for further funding that it actually rejected. $60m in ECGD loans were demanded from the government by DeLorean in early 1982, although the ECGD did not provide loans, only guaranteeing other private loans. Another ill-considered proposal from John DeLorean, for DMCL to forgo debt and royalty repayments for four years, in order to sell the car at a lower price and increase employment, was rebuffed by the government. Finally, a further claim of £10.5m regarding riot damage was also made by DeLorean, but was never granted, owing to the exaggerated nature of his claims, rather than government neglect.
During DeLorean’s receivership period, a consortium led by former DMCL managing director Barrie Wills offered to produce a redesigned Triumph TR8 alongside a reduced-volume DMC-12 to keep the company viable. However, even though it required a mere £80,000 required from the government to secure private loans of £12m, the Treasury was deeply skeptical, and the answer from Margaret Thatcher came as a clear no, reportedly due to a ‘botched’ presentation by Prior. Thatcher maintained that though losses should be minimized, the government would not accept offers below the market value of DMCL’s assets, and this was arguably part of the reason why a buyer for the company was not found. Another argument against the government was their supposed destruction of $12m worth of body dies necessary for DMC-12 production by dumping them at sea while the company was still in receivership. Though some evidence exists to support this claim, it remains difficult to claim outright that the government acted so maliciously. Regardless, on 24 May, the announcement of closure came, and 200 employees were retained to finish the last cars.
DMCL’s factory workers also blamed the government for their plight, perhaps understandable given their treatment in comparison to majority-Protestant businesses such as Harland and Wolff, which was granted £47.6m on 28 April 1982 as DMCL languished in receivership, and other segments of the British motor industry. Some even went as far as accusing the government of ‘industrial genocide’.
Overall, the Conservatives gave DeLorean more than was required of them, though some key criticisms of their attitude retain their validity. The picture becomes clearer, though, once the practices of the business they were dealing with come under scrutiny.
Come up with a section title
The ‘Ethical’ Car
Owing to the 1973 Arab Oil Boycott, which caused gasoline prices and inflation to rise rapidly, it would have been, for many, a nugatory pursuit to start a new carmaker in 1975. John DeLorean’s original DMC-12, however, came on the heels of the safety movement, and was designed to be ‘fun to drive, safe to operate, and long-lasting’, at a time when the American car industry was failing to innovate and still promoting dynamic obsolescence. The famous gull-wing door design would also make the car easier to enter and park, while the stainless steel body would prevent rusting. The DMC-12’s innovative use of ERM, a plastic material stronger than steel, yet half the weight, would enable a smaller, cleaner engine to be used, and also ensured that fuel could be saved without sacrificing safety. The prototype, designed by Giorgetto Giugiaro, took a year to build, and first ran in October 1976. Chances to build further prototypes came quickly however, as dealers purchased equity in the company.
The Development Stage
Work began on the factory site two months after the Master Agreement was signed, and British sports-car manufacturer Lotus was also employed to help develop the DMC-12. Top managerial talent was also quickly recruited, and training and recruitment programmes were also designed with legerity. All this was necessary however, as DeLorean had promised the government a production-ready car eighteen months after the deal was made, something Sutton would describe as a huge mistake on his part.
The lead times used to sell the project to NIDA assumed the car would be built directly from the original prototype. However, Lotus chiefs Colin Chapman and Mike Kimberly immediately advocated for a complete redesign, using a different chassis and a VARI composite to replace ERM. More changes had to be made as supplier costs were found to be prohibitively expensive in many cases, and the airbag, one of the car’s key safety features, was dropped after GM, the supplier, ran into difficulties in development. DeLorean himself conceded that the project took a life of its own early on, and the car adapted to the best of which parts were available, although design changes were also carried out on his own personal whim, setting production back even further. Meanwhile, engineering problems led to repeated delays, and the relationship between DMC and Lotus also became fraught, hindering DMCL’s ability to plan for production tooling. The increasing weight of the car, which reached almost 300lbs over the target weight, also adversely affected performance and fuel economy. By June 1980, the car was only achieving sixteen miles per gallon instead of the promised twenty-seven. Nonetheless, DeLorean continued publicly to make wild claims about the DMC-12’s abilities. McKinsey also noted in their May 1980 report that durability and crash testing had not yet been completed, while the VARI process was not suitable for volume production. By the time pilot production started, only the rear-mounted engine, stainless-steel bodywork and gull-wing doors were to separate the DMC-12 from an ordinary Lotus Esprit.
Meanwhile, DMCL invented the process of simultaneous engineering, a process in which workers were trained and equipment designed as the factory was being built, which would become the industry standard. Nonetheless, all the aforementioned factors, along with the appreciating pound against the dollar, caused the release date to slip back to January 1981, and then to April, along with an inflation in the car’s price from the original $10,000 to $25,000. McKinsey had first warned the government of these consequences months earlier. DMC dealers began to grow agitated, and Conservative MPs faced searching questions in parliament. However, dealers remained positive with regards to the factory and the car, news of their full order books justifying high sales targets. Going ‘from cow patch to production’ within thirty-one months was, McKinsey made clear, a substantial achievement, even though it fell short of the twenty-four months promised. The consequence, however, was a car that was anything if production-ready.
A Production Car
Because DMCL had to recruit from an unskilled labour force, it proved difficult to train workers comprehensively in the timeframe, and quality suffered. By July 1981, DMC’s quality assurance centres in California and New Jersey were spending nearly $3,000 on each car just to make them saleable, though this figure improved as time went on. In the early cars, problems were prevalent, with limited visibility, blemished bodywork and electrical problems. Because water could get in the door sills, cold weather would freeze them shut, and the windscreen would often not defrost. Most worryingly, if the car rolled over, the driver would be trapped. Though American dealer responses initially positive, critical response was less than glowing. Magazines Car and Driver and Road & Track reported instability at high speeds, and all testers complained of the car’s poor visibility, disappointing performance and claustrophobic interior. Motor Trend compared it unfavourably to the Esprit it was based on, comparing the chassis to ‘something sectioned out of a railroad trestle’. All of these issues dented sales confidence, and while most manufactures averaged three or four warranty claims for each car produced in a year, DeLorean was receiving the same number every month. Then, early in the Autumn, 350 cars had to be recalled secretly for front suspension issues. In mid-November, after the replacement nuts holding together the suspension began to come undone, a public recall of 1,715 cars was made, the first time a carmaker ever had to recall a car twice for the same issue.
Managerial decisions compounded the impact the poor car would have. If employment at Dunmurry fell below target levels, NIDOC was entitled to demand immediate repayment of its £24m loan. Moreover, reaching the target of 2,000 factory workers ahead of time would enable DeLorean to convert government loans into non-repayable grants, both consequences of the institutional environment discussed in section 1.2. DeLorean realised that were his company to falter, hiring more workers made it more difficult for the government to refuse further support and close the factory. Higher output would also make a public stock offering, which DeLorean had been planning for some time, more attractive. Thus, one-thousand workers were hired in the summer of 1981, bringing the total to two-thousand employed, achieved more than a year ahead of schedule. Hundreds more were hired towards the end of 1981, with the introduction of an extra shift in 1982 as production was increased from fifty to eighty cars per day. Production quality fell dramatically, while DMCL overhead costs soared and suppliers struggled to keep up. As such, the political and economic sunk costs actually declined in importance, lessening the chance of further government funding. DeLorean’s critics argue that these hiring and production decisions, made unnecessarily did more to destroy the company than anything else.
In the winter of 1981-82, after unusually heavy snowfall, several states in North America were declared disaster zones. Combined with the ongoing recession, car dealership traffic collapsed, with sales of all car imports falling 8.5 per-cent in December 1981 compared with December 1980, the DMC-12 inventory growing to a ninety-two day supply as dealers began to offer the car at a discount. However, while the American car market had crashed, its luxury sector had actually grown. Porsche and Jaguar nearly doubled their sales during the period. What, then, was the reason for DeLorean’s poor performance? The Times argued that ‘as sports cars are more immune to recession, it is likely that customers have simply lost interest in it’. Moreover, McKinsey’s January report also shows several headlines from Automotive News that report on downward American market trends as early as November 21. At this time in mid-November, DMC was maintaining full production at four-hundred units per week, despite retail sales falling at one point to just twenty-five units. DMC executives, therefore, were aware of market conditions and waning consumer interest, and so blame must be apportioned to them for failing to run down production in tandem. Low sales and overstaffing led DMCL to put 1,760 workers on a three-day week in January 1982, though the excuse given publicly by management was that the company was forced to by a two-day strike at Sealink ferries, which DMCL used to transport DMC-12s to North America.
Coopers & Lybrand, the accounting firm hired to evaluate the company’s prospects before it went into receivership, concluded that DMCL’s business plans were impractical from the start, with little attention paid to production costs, a lack of effective market research, and managerial decisions defined by over-optimism, assertions supported by both politicians and former executives. In the context of company sales targets of twenty-thousand units for 1980 and thirty-thousand for 1981, just 3,347 were sold in total, out of 8,333 produced. These catastrophic figures were undoubtedly the result of grave errors in development and production, though were compounded further by a profligate corporate culture, which irrevocably damaged DeLorean’s image in the British media.
Pivotal in the public perception of DeLorean was the scandal surrounding documents provided by Marian Gibson, a disgruntled DMC employee, which substantiated existing rumours of excess and financial irregularities among DMC’s management. Most revelatory was an inter-office memo from Haddad to DeLorean, which expressed grave concern over what would happen if DMC’s expenditures were made public. The papers presented by Gibson provided evidence for, among other things, a £10,000 Harrods bill for golden faucets installed at the factory guesthouse, company checks being used for personal expenses, and lavish hotel and restaurant bills. While an expensive lifestyle was not illegal, it contrasted heavily with DeLorean’s repeated requests for further funding. Though within government itself, the amounts concerned were considered trivial in the context of overall government assistance, and a police investigation found nothing of real substance to support the claims, DeLorean’s reputation in Britain took a serious blow, deterring the government, already incensed by the indulgence displayed in DMC’s state-of-the-art New York offices, from investing more, and also damaging DeLorean’s chances of a stock offering. Bruce McWilliams, a former DMC executive, argued convincingly that the episode ‘did not bring on the company’s collapse, but symbolised a point of view and a method of operation that led to it’.
Other accusations of financial improvidence were more serious in tone. As early as December 1979, Bill Haddad uncovered personal employees of John DeLorean on the DMC payroll, some paid salaries as high as $75,000. Sports cars were also delivered to his wife, claimed as benchmarking vehicles. Hundreds of thousands of dollars was spent on office artwork, and DeLorean hired an expensive public relations firm with company cash merely to promote himself. Moreover, DMC had a budget of $30,600,500 in 1982, an increase from the previous year despite DeLorean’s ongoing financial difficulties, with the executive payroll alone accounting for millions. Despite a clause in the Master Agreement dictating that DMCL could not lend to DMC, £4m had been transferred even by November 1980, presumably to cover the aforementioned expenses. In a final characteristic of extravagance in 1982, while the firm was under receivership, DeLorean flew his seven directors from Belfast to New York on Concorde at a total cost of £15,000. A severe lack of financial control harmed the company’s prospects, and must be attributed to the corporate culture that John DeLorean himself created.
John DeLorean’s Conduct
Indeed, part of the reason why DMC came to rely on government money was DeLorean’s alienation of Wall Street. DeLorean was invited by Alfred Bloomingdale to be President of AMC, who would fund the DMC-12 project in return for the jump in the share price John’s association would give them. However, John began to overplay his hand in negotiations and AMC pulled out. The same would come to be true of his dealings with the British government.
One DMC executive recalled that in the company direction came from the sides, rather than top-down, and that John DeLorean provided little leadership. Sutton also argues that DMC became top-heavy in terms of finance and administration, with 286 managerial staff at the company’s height, and as the months ticked by, factions began to appear, much of the core management team falling apart over the course of the project. All in all, perhaps Bruce McWilliams was correct in labelling him ‘a terrible manager with no sense of prudence, financial restraint or organisation’.
Additionally, DeLorean carried with him a hostile attitude towards the Conservative government, eventuated by his paranoia that DMCL would be made ‘the prime example of the extravagance of the previous administration’. In attempting to secure extra government funding, he would often make threats, such as withholding royalty payments, and threatening closure of the factory. Ignoring his accountability to them, DeLorean would openly boast that he had the government ‘over a barrel’ in terms of their negotiating position.
John DeLorean’s increasing paranoia and irrationality extended beyond his attitude towards the government. Working under ‘intense emotional strain’, he lived in constant fear that GM, his former employer, would seek to put him out of business, destroying his reputation by ‘outing’ him as a closeted homosexual. He would also attempt to slander executives who went against him, and prevented them from exercising their stock options, estimated to be as high as $18m in total. While Brownlow correctly argues that psychological discussions should not be the sole category in analyzing DeLorean, they remain difficult to ignore.
It can also convincingly be argued that DeLorean lost interest in his company sometime in early 1981, as he elected to pursue his dreams of heading up his own conglomerate, composed of multiple business interests. Ed Lapham revealed that while working on the DMC-12, the project he was being publicly-funded to bring to market, DeLorean also at various times explored a further twenty unrelated ideas, from acquiring other manufacturers to selling branded sunglasses. $300,000 was spent on chasing shipbroking projects alone, and DMC spent considerable time developing a bus venture with the American government. Considerable funds were diverted to research many of these ventures.
Even in receivership, DeLorean was inimical to the success of his own company. From the start, DeLorean was opposed to Sir Kenneth Cork’s involvement as receiver, attempting to spin the story for his own personal benefit. DeLorean also had his own receivership report commissioned by accountants Peat Marwick Mitchell & Company, which showed that, were operations to be cut back and an investor found to inject £20m, the company could be viable. Cork agreed to this, and throughout the period DeLorean would lead him and the government on with potential investors that never proceeded beyond preliminary talks. Moreover, DeLorean continually refused to relinquish his distribution rights, while Cork also had to publicly refute DeLorean’s threats to relocate his factory and sue the government. Cork’s final rescue plan, which recommended the British assets be sold to a new company that would take over existing management and ownership of distribution rights in America, was refused by DeLorean. It was to be his only real chance of salvaging a Belfast operation before his eventual arrest.
Financial ruin, as argued by Coopers & Lybrand, can be said to have been brought about by delays in reaching series production, technical issues resulting from rushed development, a lack of control over indirect costs, and high corporate costs. This was certainly the case, and much of it can be attributed to the impulsiveness and ineptitude of John DeLorean.
Belfast: A Difficult Environment?
Owing to the size of the government’s investment, it was often posited that Belfast, as a region engulfed in political violence and lacking labourers with automotive expertise, was an inauspicious environment in which to launch a car manufacturer. On balance, however, Belfast provided a reasonably safe environment, a strategic location, and a labour force that, while unskilled, was enthusiastic and experienced few tensions.
Many expressed doubts over DMCL’s ability to recruit and train a workforce in time for series production. John DeLorean defended the workforce continuously, terming them highly-motivated, skillful and interested, carrying with them the pride of their manufacturing history, and appeared unfazed regarding terrorism in the province. Unemployment also meant there was a large reserve of unskilled labour to select workers from. In addition to the financial incentives, Dunmurry also provided a good location for the plant owing to low costs, favourable labour conditions, transport links to the United States, and membership of the EEC. Despite concerns over a poor work ethic, psychological tests performed on prospective workers found little difference between them and others across the continent. DeLorean also made use of the manufacturing base in Northern Ireland, relying on it as a supply base and even purchasing a stake in trim supplier Chamberlain Phipps.
Additionally, the project received a warm reception in the local community, with religious figures from Seymour Hill and Twinbrook, the Protestant and Catholic housing estates that bordered the factory, both praising the decision. At the factory’s groundbreaking ceremony, attended by community figures across the religious and political spectrum, DeLorean noted that ‘The cooperation we’ve had from local people has been remarkable’.
Many employees and managers recount stories of security worries at the plant, but most conceded the perils of Belfast life had been exaggerated by the media. For the British employees, who were potential targets, the Coventry purchasing office provided a compromise. The province’s reputation was also effective in discouraging suppliers from visiting the plant, though this did not prevent DMCL from securing a good supplier base. While John DeLorean did have great sympathy for Catholics and the human rights situation they faced, he never stayed overnight in Belfast. Though he was assured that the IRA did not bomb people out of their work, and that having a factory would bolster security in the area regardless, DeLorean was badly shaken by the string of high-profile murders of Northern Ireland industrialists throughout the 1970s. Nick Sutton, however argues the company could operate fully in his absence, and Belfast’s reputation in general had little impact on the setting up and running of the company.
DMCL jobs were to be shared equally by religion, determined this from the addresses of the applicants. DMCL signed the 1976 Fair Employment Act, and although equal employment was difficult to keep track of, internal company studies confirmed it had been achieved.
One key worry among the project’s opponent was that social tensions could find their way inside the factory and affect the company. Instead, there was growing evidence to be found that Mason’s economic plan to combat the IRA was working, with some Catholic and Protestant workers within the factory becoming firm friends. For most workers, keeping a job was considered far more important than any religious affiliation. Former managing director Barrie Wills argues DMCL showed the Northern Irish that they could, indeed, get along. Instructed upon beginning their employment that religious tolerance was to be observed by all staff, management noted that sectarianism stopped at the factory gates. Moreover, the factory did not, as some of the secondary literature claims, separate entrances for those coming from the Catholic Twinbrook and Protestant Seymour Hill areas. Fallon and Srodes also note the plant was calm by British standards, with just one two-day strike taking 250 workers out of the factory. Indeed, social differences between Catholics and Protestants had, throughout history, negated the formation of a working class consciousness experienced in other countries.
The Hunger Strikes
Perhaps the most serious incident stemming from the Belfast environment was the death of Westminster MP and Republican hunger striker Bobby Sands, which spurred riots in Twinbrook, his home town, causing damage to the factory and consequent slippages in production. Striking to gain political status for Republican prisoners, while being perceived as criminals by the British government, the episode caused intensified violence, riots, marches and demonstrations.
Upon the return of Sands’ body to his mother in the Twinbrook estate, a riot erupted. A pincer movement by the British Army forced the rioters towards the Dunmurry plant, where a hijacked car was driven through its flimsy outer gates to reach the inner fence, homemade bombs thrown onto the roofs of nearby offices. The official company line was that the employment office which was situated in the terrapin buildings, had all its records destroyed in the fire. Other accounts note that the destroyed buildings housed scores of DMC staff, from the material control departments, to the production engineering group, whose records dating back to 1978 and computer terminals were destroyed, while staff, salary and wage paperwork was lost, along with all the purchasing records and engineering data. Every record and plan had to be painstakingly recreated, taking weeks.
Following the riot, the British Army was positioned on site to protect DMCL against the random, sporadic attacks that continued through the day. Executives were instructed to move their desks so they no longer had their backs turned toward the windows. Production was lost over the next few weeks as absenteeism rose, resulting in negative cashflow. Management also had to plan production around the other hunger strikers, receiving reports from the police predicting when each would die. Though bomb threats forced DMCL to evacuate the factory occasionally, production eventually carried on as normal. On the days of the funerals, absenteeism rose particularly among Catholic workers, as the IRA set up checkpoints to persuade Catholics to avoid work. Two or three evenings a week the same demonstrator would use a megaphone to demand that all inside go on strike. Occasionally, demonstrators would toss missiles over the factory gates, and there were ten firebomb attacks in the period from May to June 1981.
Haddad, who had gotten to know many Twinbrook Catholics, asserted that the rioters did not intend to damage the factory, only to intimidate the security forces, and that the community was largely appreciative of DMCL. Additionally, company director and NIDA executive Shaun Harte made the point that the occupants of the damaged buildings were to be moved to the main building in a few weeks anyway, and that most of the drawings could be replaced. Additionally, engineering records had not been damaged as the department had already moved out, and the purchasing department had copies of their drawings in their Coventry office.
Nonetheless, John DeLorean, who Brownlow argues came to rely increasingly on the political situation for his firm’s poor performance, pounced at the opportunity to exploit the government’s momentary weakness, stating publicly that DMCL had lost more than half of their offices, vital engineering, purchasing and employment records, as well as two to three weeks of production. He claimed that his executives had been subjected to sniper fire, and that the factory had been bombed 140 times. Police records, however, recorded only four firebomb incidents within the factory gates, and one anonymous executive told the Daily Mirror that DeLorean’s claims were greatly exaggerated. The total fire compensation claim, calculated by Peat Marwick, an accountancy firm brought in by John DeLorean, was valued at £14m, and was approved by a local loss adjuster. Many, including Haddad, argued this was a simple attempt to extract more money.
However, government documents revealed that after the riots, the absentee rate went up to 33.3%, meaning that a shipment of 350 cars had to be cancelled with the severe consequence that the company would run over its £10m line of credit. Humphrey Atkins, informed by his officials of the damage, was also convinced by the more serious reports of damage and lost production, which led to his support for extending a further £7m of government guarantees for borrowing.
Though it can convincingly be argued that the riots following the deaths of the hunger strikers amounted to a pivotal moment in the context of the failure of the firm, in general, Belfast, as a socio-political environment, provided a relatively secure environment in which DMCL could prosper.
The case of DeLorean is certainly a confusing one, in which, on the surface, few individuals involved with the company can effectively escape blame. This analysis, however, has attempted to show through archival documents that, contrary to the existing literature on the topic, Margaret Thatcher’s Conservative government can be largely exonerated of its perceived liability in the company’s collapse. The indubitable record of funding provided by the Conservative government, in spite of their lack of obligations on the matter, as well as the clear sympathy displayed by powerful politicians such as Humphrey Atkins and the government’s acceptance of DeLorean as part of a socio-political rather than simply an economic strategy, drives this point home. This paper has also demonstrated that Belfast, while understandably perceived as an unpropitious environment by contemporaries, actually provided a relatively auspicious environment for which DMCL to conduct business, leaving the company largely unscathed in the midst of the ongoing conflict.
Instead, it has been argued that failure was made inevitable through a combination of naivety and ineptitude on the part of the Labour government which, along with NIDA and NIDOC, brought the company to Northern Ireland, and the egregious managerial decision-making on the part of John DeLorean, which resulted in a slipshod production car with concomitantly appalling sales figures. At the root of this argument, we find the institutional environment, which, owing to the difficulty in attracting private firms to the conflict-hit region, offered enormous financial incentives and weak monitoring arrangements, which would encourage John DeLorean to overplay his hand in negotiating with the Conservatives.
There exists a sizeable historiography regarding government intervention in the motor industry, epitomised by the case of British Leyland. This paper has explored the problem from an alternative angle, with a company supported by the taxpayer from the beginning, with a view to solving what was, ultimately, a socio-political problem. In such a context, it has been argued that government intervention does not work in this regard, failing to contribute to a peaceful solution to the given conflict, which would continue for years, and burdening the given company with numerous objectives beyond simply surviving, and eventually providing a financial return. Perhaps further analyses will approach the topic with different lenses, and incorporate DeLorean further into the narrative history of British industrial policy.
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