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."

De Lorean is a talented engineer (he reportedly holds more than 100 patents) with deft instincts. His credits include Pontiac's "wide track" styling, stacked headlights, concealed windshield wipers and radio antennae, and several cars -- the GTO, Grand Prix, and Firebird -- that transformed Pontiac's image even as De Lorean began transforming his own. Both forsook conservative, some would say stodgy, reputations: De Lorean dropped an oversize engine into a mid-size car, the LeMans, producing the GTO, the first "muscle" car of the youth-obsessed '60s; he also dropped 60 pounds, his first wife, and his "organization man" lifestyle.

The GTO was an instant success -- 312,000 were sold from 1964 to 1968 -- and was followed by a second sizzler, the Firebird. But De Lorean, despite the achievements and his steady rise (he became general manager first of Pontiac and then of Chevrolet), was a round peg in a very square hole. "The amazing thing to me," says Lewis, "is that he stayed as long as he did. GM has what I've always called an 'anti-cult of personality." And the restyled De Lorean, with his facelift, dyed hair, flashy cars, actress girlfriends, and model wives (Kelly Harmon and now Cristina Ferrare), was more and more in the public eye. At a time when the auto industry was coming under heavier scrutiny and criticism, all the positive attention may have gone to his head. His rise was based on projects he had been associated with, and he took credit for them, losing along the way an ability to distinguish between GM's resources, clout, and success, and his own.

"Hell," says Brown, "1,000 people were involved in the development of the Firebird, but John never looked back at the people who were supporting him. He took license to these great accomplishments personally. I mean, have you ever heard of a manager of the Pontiac division who failed? You can't fail in that job."

De Lorean's view of capital was certainly shaped by working within one of the world's largest companies. "When you work for General Motors and want to build a new foundry in Tonawanda, N.Y., and you need $600 million," he once explained to a reporter, "you fill out a form and send it away. You might get a phone call or two, or you might not. Then within a few months this document comes back with 100 signatures on it that says 'go spend the $600 million."

Getting the capital for his own project turned out to be a bit more complicated than it was at GM, but De Lorean was highly visible and knew how to capitalize on his reputation. To launch DMC he raised almost $10 million from 345 automobile dealers who were eager to sell his car, which he called De Lorean, and another $18 million from 134 limited partners, including such celebrities as Sammy Davis Jr. and writer Ira Levin. To this he added, eventually, some $200 million in grants and subsidies from the government of Northern Ireland. Remarkably, De Lorean himself put in very little money (less than $20,000 by some estimates) yet wound up with more than 80% ownership of the companies that bore his name. In the recorded annals of personal money-raising, few, if any, have scaled such heights.

Monday morning quarterbacks say that DMC was undercapitalized from the beginning. They are correct. But what De Lorean raised should have lasted considerably longer than it did. Accustomed to the perquisites of his high position at GM ("I don't think the heads of state of many countries came close," he once admitted. "You travel like an oil sheik."), he seemed unable to adjust to his new reality. Virtually from the outset, De Lorean's financial excesses jeopardized the company. De Lorean household servants were carried on the company's books as public relations employees. DMC cars were used, and, on occasion, wrecked by De Lorean's friends. His personal expenses ran $1,000 a week in addition to a $475,000-a-year consulting fee (in lieu of a salary). He made frequent trips on the Concorde, often demanding to be met at the airport by staff. DMC headquarters in the United States was a plush 43rd-floor tribute to Park Avenue ostentation. "You can't sell Gucci shoes from the corner of Broadway and Seventh," De Lorean explained. But a British critic saw it differently. "John," he said, "would sooner be sterilized than go second class."

Lifestyle aside, De Lorean seemed to have difficulty focusing on his central aim: to launch a sucessful auto company. Funds and energy went to dubious projects and goals. DMC paid more than $1 million in legal fees for non-DMC projects -- up to $30,000 a quarter to arrange the purchase of a Utah-based company, which made ski-slope grooming equipment, and nearly $500,000 for an unsuccessful bid to buy Chrysler Corp. According to Brown, $17 million was paid to GPD Services in Switzerland, which provided DMC with no apparent services. Later, De Lorean bought the Utah company with money drawn, in part, from a Swiss account (a "red flag" that prompted one of his key executives to resign). The car company's activities were confused with those of private De Lorean ventures.

In the three instances, money may have been drawn against one De Lorean holding to pay another. His sideline wheeling-dealing, which involved, among other things, a potato farm, a bus-building scheme, maritime services, optical lasers, replica cars, and an attempt to import Alfa Romeos, Suzukis, and Daihatsus, kept him from the principal task at hand and yielded minimal results, several lawsuits, and numerous cries of "crook." At a certain point, Brown began to question De Lorean's motives, wondering aloud whether the point of the company was to build a car or to generate a cash flow capable of maintaining the founder's lifestyle and illusions. When he finally called De Lorean on his use of "other people's money," De Lorean told him, "It's my company, and I'm going to do it my way. When you get your own company, you can do it your way."

De Lorean's use of management was early as wasteful. He had assembled a talented and experienced team -- including William Collins and Robert Dewey, formerly of GM; Eugene Cafiero, the esteemed ex-president of Chrysler; and Brown, who had taken Mazda's U.S. sales from zero to 120,000 units per year in just two years. DMC's relatively smooth start-up and auspicious introduction were largely a tribute to the team's efforts. The dealer network, the plant, quality-assurance centers, car financing arrangements -- all were the handiwork of the men De Lorean had hired. But, as he had at GM, De Lorean took all the credit. "John arranged it so that it looked like he was doing everything," explains Brown. "If the press did anything on the company, John was there. . . . What the press didn't realize was that John was there only when it was."

At the same time, De Lorean pitted himself against his top people, played one against the other, and ignored recommendations that didn't corroborate his conceits. They dissuaded him from issuing a 25-year warranty on the De Lorean body panels but didn't prevail on the gold-plated car. "I told him he would rue the day he thought of it," recalls Brown. DMC built two of them (De Lorean had wanted a fleet of 100) at a cost of about $125,000 each and sold them for $85,000 apiece. According to Brown, DMC still has about $50,000 worth of gold-plated panels in inventory. "It was not a credible activity for a neophyte car company," he remarks dryly.

In its brief life, DMC went through four chief financial officers. "They couldn't do what they felt was right," says Brown. "They couldn't serve both their charter as a CFO and John's objectives." Several executives quit, and Brown was "terminated" after he refused to let De Lorean's people seize cars that technically belonged to Bank of America, which had financed them. DMC's board proved equally ineffective. When it nixed one proposal (DMC's assets were meant to secure a $600,000 loan from De Lorean's personal corporation), it was quickly reconstituted.

All this occurred in the face of considerable obstacles to the success of DMC's product. Originally conceived as a competitor to Chevrolet's Corvette, the De Lorean was expensive and had a limited market. As production time lengthened, the initial target price of $10,500 rose to $25,000, narrowing the market further. "As you go up the price ladder, the volumes fall off damn quickly," one analyst explains. Worse, people weren't buying as many cars as they had in De Lorean's halcyon days at GM. Rising gasoline prices forced sales down beginning in 1978; by 1980, the Big Four were reporting aggregate net losses of $4.2 billion.

De Lorean's own analysts estimated that he could sell 6,000 to 8,000 units a year (he pegged breakeven at 10,000 to 12,000 cars), but he wanted a plant capable of producing 20,000 cars in its first year, 30,000 in its second. "He couldn't gear himself down to piddling numbers," observed J. Bruce McWilliams, DMC's former vice-president for marketing in the United States. "That plant was built to start big and be expanded," remarks Edward Lapham, senior editor of the trade newspaper, Automotive News. "It was nearly as though he wanted to be an instant General Motors."

De Lorean's misuse of money and people set the stage for disaster, but it was his dogged determination that brought down the final curtain. When critics were finally conceding his company a chance of surviving, he committed it, and possibly himself to a suicidal course.

De Lorean Motor Cars Ltd. (DMCL), the manufacturing subsidiary, broke ground for its plant outside Belfast in October 1978, and 2 1/2 years later, the first commercially produced De Loreans rolled off the line. The cars reached the United States in June '81 and began selling briskly against pent-up demand (some 3,500 in the first six months).

But the impressive debut was short-lived. By December 1981, the recession and one of the worst winters in recent history took hold, severely cutting into new-car sales. "Unit sales dropped from 650 in December to 350 in January," recalls Brown, "but that was still a breakeven for the U.S. operation. We were manufacturing 30 to 35 cars a day. We could handle that, the market could absorb it, and we could break even. We could have gone on forever at that pace, and grown slowly."

But De Lorean was busy selling a stock offering for the De Lorean Motors Holding Co. (which would have become the parent of DMC). He ordered that production be more than doubled, ostensibly to dress up the offering, but also, claims Brown, simply because De Lorean wanted it.

Alarmed by the implications, Brown and two other DMC officers called De Lorean from Belfast. "We told him that we had to cut back on production," says Brown. We explained the situation in the U.S. -- the market conditions, the season we were in, the problems we were having with the car. [Because De Lorean had insisted on starting up so quickly, workers were undertrained; as a result, more than $1,500 in repairs were required on each car when it hit the United States.] We explained that we'd blow our line of credit."

But De Lorean wouldn't hear of it. John just went through the roof. He came back with a lot of obscenities: 'You'll kill the offering,' he told us," says Brown. "I said, 'John, the offering is small potatoes compared to the problems that may occur if we don't cut back on production.' He said, 'Ah, bullshit, all you have to do is sell more cars."

A second telephone call later that day proved equally unpersuasive. Some 1,200 untrained workers were added to the plant's payroll, and production increased as De Lorean had demanded.

"He was a man in a hurry," says Brown. "He wanted it all now -- he couldn't wait."

That decision Brown says, was "a critical one," and it was compounded by an attack De Lorean had recently launched in the press on the British government, which was reluctant to provide another $60 million for a sedan project. "If he'd played it straight, and been nice to the Northern Irish and British, they would have given him anything he wanted. They would have subsidized him forever, if need be, if he'd just been a gentleman.

"What would it have taken to save the company?" Brown says. "If you hadn't had the increase in production, and if John had been a nice guy to the British for what they'd already done -- those two things alone would have saved it."

But by overproducing cars, DMCA quickly exhausted its $33 million financing credit line with Bank of America and devoured DMCL's working capital. In February, the British government declared DMCL insolvent and demanded that De Lorean come up with $22 million.

On October 19, 1982, their demand unmet, the government officially closed the facility. Seven hours later, in a hotel room in Los Angeles, John Z. De Lorean was arrested in connection with a cocaine deal that allegedly would have netted him up to $60 million in about five weeks.

"He says he did it to save the car company," says Lapham of Automotive News. "Well, clearly, there's a lot of room for doubt on that aspect."

William Haddad, former DMC vice-president for communications and planning, agrees. "I'll tell you what he'll say in the courtroom" he told one reporter. " He'll say, 'I did it for the poor Irish Catholic workers who have been oppressed.' That will be his defense, and it's horseshit. He didn't care one iota for those people. All he cared about was John."

"In the large environment, there are checks and balances, common standards, acceptable norms of behavior," notes Howard Stevenson, a professor of entrepreneurial studies at Harvard's Graduate School of Business Administration. "A person becomes all-powerful in a smaller, private situation." And, he adds, "In times of economic difficulty, people may take more extreme positions."

"I had hoped that the organization would serve as a discipline on John," says Brown. "I had hoped that the [Securities and Exchange Commission], the British government, or Arthur Andersen, the CPA firm, would serve as a discipline. But John took each one as a challenge, as a bone in his teeth."

Even De Lorean, describing his own mid-life crisis in Gail Sheehy's book Passages, confided that "the hard thing is always to give up the structure. Corporate life is a security blanket."

"In the final analysis," says Brown, "I think that John needed GM a lot more than he ever realized, and certainly a lot more than GM ever needed him."