Scandal! The DeLorean saga

He tried Puerto Rico and the Republic of Ireland. But the best offer came from the UK government, and the Industrial Development Board for Northern Ireland. James Callaghan’s Labour government was keen to boost employment in the UK’s most troubled region. It also thought well-paid skilled jobs would help reduce sectarian violence: the IRA ruthlessly exploited inequality and poverty.

DeLorean was a gifted auto exec, but his greatest skill was salesmanship. He persuaded Callaghan and Northern Ireland Secretary Roy Mason that the striking-looking car would sell and claimed – incorrectly – he had secured 30,000 advanced orders. The UK government initially injected £54m of taxpayer’s money, more than half the total start-up cost. A site in Dunmurry in west Belfast was chosen for what would be one of Europe’s most advanced car factories. The area had the worst unemployment in Western Europe. Roy Mason said the plant’s success would be a ‘hammer blow’ to the IRA.

DeLorean had a design, the funding and a site. What he didn’t have was a thoroughly engineered car. Initially he wanted power to come from a lightweight and compact Wankel rotary engine, sited in the mid-rear of his new car. But when the European Comotor project to build rotary engines floundered, the car was redesigned to accommodate a rear-mounted V6. The Douvrin V6, used by Peugeot, Renault and Volvo, was chosen.

That still left the thorny job of turning the new DeLorean from a striking concept into a practical road-going sports car. Porsche was approached. It said DeLorean’s proposed 18-month development time was unreasonable. Then DeLorean asked BMW. The Bavarians also wanted more time and more money than DeLorean’s timescale and budget allowed. Which is where Colin Chapman and Lotus enter the story.

Chapman needs little introduction to Ti readers. He was Britain’s greatest F1 engineering mind and founder of Lotus. By 1978, Jim Clark, Graham Hill, Jochen Rindt, Emerson Fittipaldi and Mario Andretti had collectively won six Drivers’ World Championships for Chapman. From the early 1960s to the late ’70s, no F1 team had enjoyed more success.

Nor did his innovation stop at engineering. Chapman’s Lotus was responsible for ditching national liveries and replacing them with commercial sponsorship. His Gold Leaf Lotuses of 1968 introduced the concept of the flying fag packet. Never mind that Chapman hated cigarettes and that smoking was banned at Lotus.

A genius and a rogue, a great but not a good man, Chapman was famous for exploiting loopholes in technical regulations. He had a similar knack at exploiting tax loopholes. He once said: ‘Tax evasion is a crime. Tax avoidance is a science.’ In the 1960s, he and Lotus finance director Fred Bushell – whom we shall be meeting later – established an offshore company, registered in Panama but with offices in Geneva. Called GPD – for Grand Prix Drivers, but later for General Product Development – its initial purpose was to pay professional driver fees without channelling funds through the UK, thereby avoiding UK tax. It would later serve other tax avoidance purposes and, as we shall see, would land him and Bushell in big trouble.

Chapman was also incensed that DeLorean was getting generous government support. Conversely, Lotus – a proud and famous British manufacturer of British-engineered sports cars – had just had an application for a government grant rejected. Plus, DeLorean’s main market was the US, crucial to Lotus’ profitability. The UK government was inadvertently helping to subsidise Lotus’ demise, or so Chapman thought. By the late ’70s, Lotus was also in financial trouble. New safety regulations were hurting crucial US sales.

Rebuffed by Porsche and BMW, DeLorean now wanted Lotus to develop his new car, offering Chapman much-needed cash. But the American was also interested in buying troubled Lotus outright. After four days of negotiations in a Geneva hotel, in November 1978, Chapman refused to sell. Deeply contemptuous of the DeLorean design – and with a personal dislike of John DeLorean – he also wanted to reject overtures to develop the new car.

Fred Bushell would persuade him to change his mind. As Bushell put it bluntly: they needed the money. So, Chapman agreed to redesign the DeLorean, if money was paid in advance. Investigators would later discover that DeLorean gave him a cheque for half the $17.65m development budget, paid to Chapman’s Panama-registered Geneva-based offshore firm, GPD. DeLorean allegedly kept the other half. Virtually none of it was spent developing the car and none went to Lotus. (DeLorean later claimed Chapman got it all, up front.) The money would later disappear, though liquidators clawed back some from Swiss bank accounts owned by Chapman and DeLorean.

Chapman totally redesigned the new DeLorean, while retaining Giugiaro’s futuristic styling. He used the Esprit’s steel backbone chassis as the base, instead of its original, revolutionary but impractical composite frame. Instead of ‘adding lightness’ – his mantra – Chapman had added weight. In many ways, the new DeLorean had become a stainless steel-clad rear-engined Lotus. It was the only way the work could be done in the rushed timeframe, and it clearly made the DeLorean a better car.

But still not a very good one. Reviews were mixed. Yes, it looked spectacular but performance was indifferent, the handling poor and the quality mediocre. Many of the workers had never had a job before, let alone any car making experience. It showed.

Quality would improve but sales did not. At $25,000 in the US it cost almost as much as a 911. Plus, the US was entering a recession. It was a bad time to launch a pricey new sports car.

Just 8500 DeLoreans had been built, from the start of production in early 1981 to early 1982. Fewer than half had been sold. In February 1982, the now Conservative British government led by Margaret Thatcher put the company into receivership – the amount spent now standing at £84m, close to £300m in today’s terms.

When the receivers interviewed Chapman, he denied any knowledge of the $17.65m upfront fee, guaranteed back in 1978 in that Geneva hotel meeting with DeLorean. Later, he claimed it was an introductory fee. Much later again, investigative journalists discovered a letter guaranteeing the funds to GPD. Chapman and Bushell had failed to declare this to Lotus shareholders.

As the law was catching up with Chapman, so his behaviour became erratic. Friends said he was taking amphetamines and discussing his own death. His company was facing bankruptcy. Shareholders were plotting to oust him from running the business. His F1 team was floundering and had not won a single race since the DeLorean deal had been signed. (In August 1982, Elio de Angelis won the Austrian GP, Lotus’ first win for four years. It would be the last in Chapman’s lifetime.)

Meanwhile, John DeLorean was desperately trying to save his car company. The desperation went so far as to attempt drug dealing, to raise cash. In October 1982, he thought himself on the verge of raising $24m by financing an operation to smuggle 100kg of cocaine from Colombia. In a Los Angeles airport hotel, he met supposed drug dealers to discuss the deal. In fact, they were undercover FBI agents. It was an elaborate sting operation and DeLorean was arrested.

That same day, by coincidence, the Thatcher government closed the DeLorean car factory for good. Westminster’s Public Accounts Committee would later slam the project as ‘one of the gravest misuses of public resources’.

DeLorean was never convicted. His defence successfully argued entrapment. Knowing DeLorean was financially vulnerable, an FBI informant and former drug smuggler had suggested the scheme, which DeLorean accepted. On 16 August 1984, he was found not guilty. But he knew his reputation was trashed. ‘Would you buy a used car from me?’, he quipped.

He was later charged with fraud, for his half of the missing $17.65m of investors’ money. Prosecutors alleged the money was used to pay off loans for a sideline business in snow machines and for personal purposes. He was acquitted. His lawyer would later admit he was lucky. Attempts to extradite him to face justice in Britain failed.

In 1999, he declared personal bankruptcy and became a born-again Christian, moving into a one-bedroom flat. In March 2005, he died of a stroke, aged 80. His tombstone shows a DeLorean sports car, gullwing doors opened.

And what of our other major protagonist? The Chapman story would end much sooner. On 16 December 1982, in the early hours of the morning, Britain’s greatest F1 engineer suffered a massive heart attack and died aged just 54.

Ten years later, Fred Bushell pleaded guilty to fraud and was sentenced to three years in jail. At his trial, the judge said Chapman would likely have got 10 years, on the evidence before him.

The judge would say: ‘Bushell, along with the late Colin Chapman of Lotus Cars and John DeLorean himself, had been engaged in a barefaced, outrageous and massive fraud.’ Bushell died in a nursing home in January 2006. He was Chapman’s loyal lieutenant and – in many people’s view – the fall guy of the DeLorean scandal. Yet the judge also accused him of being the brains behind the fraud.

The unsung victims of this scandal, the 2600 Northern Irish workers, all lost their jobs, as the DeLorean dream turned to nightmare. But the car they made achieved unlikely fame as one of the biggest star cars in movie history.

Chosen for its futuristic design, a DeLorean was used as the time-travelling machine in the 1985 hit Back to the Future. Unlike its star car, the film was a huge commercial success, the biggest grossing movie of the year.

In another victory for DeLorean, it was chosen despite lobbying and a juicy financial incentive from Ford, which wanted the producers to use a Mustang. To which co-writer and co-producer Bob Gale replied: ‘Doc Brown does not drive a fucking Mustang.’ If only the true story of DeLorean had had such a happy ending.