John De Lorean And The Icarus Factor

Endowed with a reputation for genius by an adoring press and public, John De Lorean came close to pulling off an entrepreneurial miracle. But this ego, like the wax wings of mythology, drew him too close to the sun.

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De Lorean Motor Co. (DMC) posted a $6 million profit in February 1982 for the first five quarters of its operation, a remarkable achievement in the face of overwhelming odds. DMC could still be operating profitably today. Yet the consensus is that John Z. De Lorean, founder and abiding force behind the company, was driven to an alleged involvement in a cocaine deal by his desire to save DMC from financial disaster. That is probably not so. De Lorean knew that DMC was a company in trouble long before his arrest in October 1982 and, in fact, began preparing for corporate bankruptcy about eight months earlier.

This is not a story about DMC, and it is not a story about 220 pounds of cocaine. It is a story about a business dilemma, a dilemma that faces any executive of a big corporation who risks the entrepreneur's route. During the 1960s and early '70s, De Lorean was Detroit's reigning boy genius, a bright engineer who had parlayed his solid track record and considerable style into a dazzling career. He was a colorful and outspoken executive in an industry given to drab anonymity, and the press made the most of him. Every article about him enhanced the image of "maverick auto maker." But, after De Lorean's falling out with General Motors Corp. in 1973 and his decision to build a car of his own, a new phrase was born: "struggling entrepreneur." It was a step down that is always hard to take.

"A person who's managed a large organization may find it extremely difficult to shift from the 'big' to the 'small' mentality," says Karl Vesper, a professor at the University of Washington who is widely regarded as the dean of entrepreneurial studies. "You have to wear a lot of hats; you don't have specialists to help you out; and you have limited resources. Problems occur when you try to do things on the same scale, with the same philosophy you had before."

De Lorean's actions as chief executive officer of his own company show that he had no appreciation of the role GM had played in his successes during his 17 years there, no understanding of his limitations, and no comprehension of the finite nature of capital and other resources. He was, in short, an entrepreneur destined to fail.

The odds against him were imposing and undeniable from the start. Since the turn of the century, there have been some 2,500 attempts to launch new car companies in the United States. But by 1973 only the Big Four and a handful of small-fries -- Excalibur, Avanti, and Checker -- remained. Experts estimate the start-up costs of a complete automobile manufacturing facility at a minimum of $3 billion, while an assembly operation such as De Lorean's (which makes heavy use of components from outside sources) requires something like $300 million. Even Northern Ireland, desperate for the 2,600 jobs the DMC plant would eventually create in Dunmurry (an area with 22% unemployment), had to confront the considerable downside risks. The management consulting firm of McKinsey & Co., when asked to evaluate the project, judged that it had a 1-in-10 chance of succeeding. De Lorean himself, with typical hyperbole, acknowledged the odds: "If it is accomplished," he said, "it will be the most incredible accomplishment in the last 100 years."

Miraculously, De Lorean very nearly succeeded. Capitalizing on his reputation and skills -- ability to sell an idea, acumen in picking a management team, and forcefulness in ramrodding projects through -- he came up with nearly $240 million in funding, built and staffed a factory in Northern Ireland in less than 2 1/2 years, and, within a year, was reporting a profit. Yet almost as quickly as his dream flowered, it shriveled and died. De Lorean's GM experience enabled him to get DMC off the ground, but what he hadn't learned eventually proved his undoing. DMC was an enormous undertaking, one that would have made incredible demands of the man even if his education were thorough. And every indication is that it was not.

"John didn't learn nearly enough at GM," says C. R. Brown, former vice-president of DMC, and the senior executive who remained with the company the longest. "People there aren't aware of what's going on around them -- of marketing, manufacturing, finance, planning. John was overseeing all of these soldiers who were responsible for all of these slivers, but he never got down in among them." David L. Lewis, president of the Society of Automotive Historians and a professor at the University of Michigan, concurs: "I don't believe he learned many of the lessons he should have learned along the way, such as the value of financial controls, market appraisal, production scheduling -- things that would have been learned by the guy who starts in a small way."

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