DeLorean, or the DeLorean Motor Company, was an American manufacturer of automobiles founded in 1975 by John DeLorean. By 1981 it failed to meet its sales targets, and yet by the mid-80s it became a cult through the movie trilogy Back To The Future. DeLorean failed as it suffered from quality control issues owing to a foreign and unskilled workforce. DeLorean Motor Company was purchased by DeLorean enthusiast Stephen Wynne in 1995.
Background
DeLorean, or the DeLorean Motor Company, was an American manufacturer of automobiles founded in 1975 by John DeLorean.
While working as a division head at General Motors, DeLorean felt the time was right to start a new company and revolutionize the stale automobile industry.
He designed a futuristic sports car –the DeLorean DMC-12 – with gull-wing doors and a stainless steel exterior.
The car went into production in 1981 but failed to meet sales targets for various reasons. Less than two years later, DeLorean Motor Company went bankrupt with only 9,000 units ever made.
The interesting paradox is that nonetheless the car commercial failure, it became a cult through the movie trilogy Back To The Future, also thanks to its futuristic look:
At first glance, DeLorean’s demise seems obvious. The company failed because it couldn’t sell enough cars to remain viable.
In reality, the story is rather multifaceted. Let’s tell it below.
Poor production quality
The first batch of cars to roll off the production line was plagued with problems. Assembly line workers were unskilled which led to quality control issues.
Given DeLorean’s desire to put a fast engine in a small car, the industry was also critical of the DMC-12’s lack of power. There were related concerns over poor fuel efficiency and average handling, two characteristics John DeLorean had initially preached as vital to a good car.
Poor business model
DeLorean originally had plans to manufacture his cars in Puerto Rico. However, the company received a better offer from the British government to build them in Northern Ireland.
The currency exchange rate between the two countries was also unfavorable and impacted profitability.
Company insiders would later acknowledge that DeLorean knew it was going to run out of money on the first day of production.
As a result, it became reliant on the British government and private investment to remain in operation.
The price of a DeLorean given its lack of pedigree and production quality was also high. Initially, they were offered for sale at $25,000, over 50% more expensive than the better equipped Chevrolet Corvette of the time.
Bankruptcy
In late 1982, DeLorean was under immense pressure to remain in business. In October of that year, John DeLorean was sensationally arrested in a sting operation conducted by the FBI.
The filmed sting showed DeLorean agreeing to bankroll a fake cocaine smuggling operation to keep the business afloat. The founder was later acquitted on grounds of entrapment, but the company was insolvent and declared bankruptcy one week after he was arrested.
Manufacturing continued until 1983. An Ohio-based company acquired the remaining cars and sold them for $21,000 each.
Potential revival
The DeLorean Motor Company has been owned by CEO Stephen Wynne since 1995. From his Texas workshop, Wynne restores old DeLoreans with the more than 4 million spare parts he received after taking over the company.
In 2019, Wynne suggested he might make a modern SUV or electric-based DeLorean to take advantage of the company’s rejuvenated brand equity.
Key takeaways:
DeLorean was an American automobile manufacturer founded by John DeLorean. The flagship DMC-12 was in production for less than two years before the company filed for bankruptcy.
DeLorean suffered from quality control issues owing to a foreign and unskilled workforce. Its decision to manufacture cars in Northern Ireland also meant its business strategy was not sustainable.
DeLorean Motor Company was purchased by DeLorean enthusiast Stephen Wynne in 1995. There are tentative plans to make a new model from the millions of parts he inherited from unassembled DMC-12s.
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Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
