A Car That Brought You 'Back To The Future': DeLorean DMC-12 Failure Analysis

Back to the Future is a science fiction movie released in 1985. This movie, became blockbuster in the 80’s, tells a story about Marty McFly that travels back to the past and future era with his eccentric friend Dr. Brown. There are many things that become memorable in this movie such as nostalgic moment in the past era to prediction of what ‘future’ technology will be from present moment in this movie.

There is also special treatment in this movie to communicate way of McFly can travel into many eras. Another sci-­‐fi movie brings time machine as a ‘things’ that cubical, complex, or other that far from ‘normal’ daily life. Back to the Future tells you something new about time machine that presents as a sport car: DeLorean DMC-­‐12.

Uniqueness is a key DeLorean DMC-­‐12, can be simplify by ‘DeLorean,’ is sport car manufactured by DeLorean Motor Company (DMC). This car came to America market from 1981 to 1983 (4 years before Back to The Future released). There are strong design characteristics in this car such as metallic-­‐dominant colour, stainless steel outer body, 2 seated, gull-­‐wing doors. Furthermore about uniqueness in this car is the metallic colour in DeLorean panels actually weren’t painted, they were made from stainless steel that we can see in catering products. The uniqueness in overall design is a work from Italian designer, Giorgetto Gluagiaro, that have been invited to collaborate with John DeLorean (the founder of DMC) Before founded DMC in October 1975, John DeLorean is someone who worked in many automobile companies. He was featured as a wunderkind in Business Week magazine (1971). In 1972 he appeared on the cover of Automotive Industries magazine with his overhead cam engine. In 1973, he was GM’s vice president and group executive for North American cars and trucks -­‐ a large swath of the General Motors empire, including Chevrolet, Buick, Oldsmobile, Pontiac, Cadillac, GMC, and Canadian car and truck operations. The group’s total sales at that time were $ 25 billion, placing it among the top echelons was only a handful of other businesses throughout the world.

After its success at Pontiac, DeLorean was promoted to the top position in the company’s Chevrolet division, GM’s main brand. He is the youngest man to ever lead a large division. GM’s CEO recruited DeLorean for the job at the time, because Chevy was in some difficulty, with declining sales and dealer profits falling. Over the next few years, DeLorean executed changes at Chevy, which helped strengthen its management solidarity (although there were a number of ‘errors’ in this period, too, including somewhat diverse records on sub-­‐compact GM, ‘import fighter’, ‘Chevrolet Vega, related to the quality, durability, and performance of the vehicle Delorean, then, would claim that he was ‘called by the company to herald the car far beyond my personal beliefs about it.’) However, under his leadership at the time, In 1971 Chevrolet became the first Big Three division to sell more than 3 million vehicles a year, and that year’s dealer profits also jumped to 400 percent. The car company trends in that time are known as must had a massive financial background, excellent manufacturing and base of distribution to enter the mainstream market. DeLorean vision while facing these trends is designing a high-­‐end sports car, with excellent styling and innovative safety features. He started to run this vision with segmenting relatively small market in car industry, which are luxury and sports car.

DMC development began by using DeLorean’s personal funds as an initial capital of $ 700,000. This capital then grew with an injection of funds from a network of friends and rich celebrities who became DMC investors with a total value of $ 12 million. In addition, he also sold $ 10 million in dealer rights before the production phase. The aim of DeLorean to produce 30,000 cars per year seems manageable with the current condition of the US sports car market totaled approximately 800,000 cars per year. Behind these opportunities, challenges, uncertainties and risks arise in building and selling, distributing, and servicing an average of one hundred cars a day. In 1973 there was a worldwide recession and a surprising inflation rate due to OPEC’s push for oil prices. However, DeLorean that his business can be a great asset in a recession by creating jobs. This was done with a decision in the form of job opportunities from opening a factory planned to build in Northern Ireland. This location of the plant can not be separated from the desire of the UK to open jobs in Northern Ireland. There is also the government’s response in the face of civil unrest in West Belfast as well as the condition of one-­‐third of workforce was unemployed. Some of these considerations open up huge opportunities for the construction of DMC plants that can create several thousand new jobs, although there are reports of external consultants stating that the DeLorean company only has a 10% chance of success. The government won, offering DMC $ 135 million in loans and loan guarantees.

With available financing and attractive new vehicle designs, the DMC began building six-­‐building facilities, 660,000-­‐square-­‐root in October 1978. The plan was to produce 20,000 cars in the first year, rolling out the initial vehicle from the assembly line in late 1979. Unfortunately, at the beginning of the process of moving cars from concept to production, DeLorean, a highly experienced automotive engineer, found that they had to make major changes in car design due to difficulties in finding parts and meeting specifications, and changes in costs. The DMC-­‐12 eventually uses a lower-­‐performance Renault engine, which takes ten seconds (compared to the expected eight and a half seconds) to reach sixty miles per hour, and the sporty Lotus Esprit design with a stainless steel body attached. In the end, the car expected to be sold by DeLorean for $ 12,500 would the sticker price of a Porsche 924 at 15% and a Corvette price by 50%. Some advertisements for cars have also begun, using the theme, ‘The DeLorean: Live The Dream,’ with ad copy showing special car features and noting 345 US dealers will provide ‘excellent service standards.’

Not surprisingly, like new cars, especially those from untested organizations, the DMC-­‐12 has significant design and assembly problems. One problem is that the door panels do not sit flat on the body of the car, which forces the company to rebuild most of the vehicles when they arrive in the United States from Northern Ireland. Other problems also arise. For example, although stainless steel body panels protect against rust and corrosion, they show dirt and dust and all types of signs, including fingerprints, spoiling some of the appeal of the car. Despite massive advertising, national dealer networks, and tremendous publicity, demand for DMC-­‐12 is far from DeLorean’s initial projections. The sticker price of a $ 25,000 in a difficult economy puts huge sales pressure on the DMC. Even old car models with a price tag exceeding $ 10,000 never have annual sales of over 20,000 units. With financial break-­‐even at 10,000 vehicles per year, DMC sees the problem ahead. However, DeLorean remained undaunted, and in December 1981 the West Belfast factory built nearly 7,000 cars, although DeLorean only sold 3,000 units. To keep government happy, DeLorean violated the rules of the cardinal car industry: he produced cars to fit the manufacturing model instead of fulfilling dealer orders. DMC ran out of cash. Wall Street guarantor told DeLorean that they would not try to raise money with an IPO unless the factory could produce one hundred cars a day. The company’s viability was a problem, and the US Securities and Exchange Commission (SEC) was worried that it would force the DMC to cancel the $ 27 million IPO in January 1982. The government refused to provide additional funding, and the DMC was forced to lay off 1,100 Irish workers, leaving 1,300 remaining employees in just five months later.

Under Pressure

Sometimes desperate people do desperate things. To have the opportunity to save his company, DeLorean needed more money quickly. In a last-­‐ditch effort to raise more than $ 20 million in new capital, DeLorean became involved in the cocaine smuggling scheme in late 1982. This operation turned out to be an FBI Management Technology Case Report -­‐ Pande Bagus Widyantara -­‐ 1506725640 4 arrangement, and the US Drug Enforcement Agency arrested DeLorean in video footage in a publicized sting operation. Soon after, DeLorean Motor Company ran out of options and filed for bankruptcy. A federal judge acquitted John DeLorean of all charges in 1984, concluding that U.S. law enforcement agencies has acted improperly. When asked by reporters if he planned to return to the car business, DeLorean replied, ‘Would you buy a used car from me?’ DMC fails for a variety of reasons, including inadequate resources given the dimensions of what DeLorean is trying to achieve, poor implementation in design, manufacturing and financial matters, unfavorable time given what happened in the US economy when the DMC-­‐12 will come to the market, and targeting a niche market that is too small with products that are too expensive. One might expect that experienced automotive executives like DeLorean will know how to unite the pieces of this puzzle. Even though he did many things right, he didn’t have enough right to turn his vision into reality.

Lessons to Learn

Starting a car company from the ground up might be one of the most challenging of all new businesses. Will the new car company formed today try to take advantage of the opportunities felt around electric vehicles and hybrids learning from DeLorean’s mistakes by increasing sufficient capital, developing quality products and cost structures to survive, building a large dealer network, eluding product recalls, improve their manufacturing operations appropriately, build cars with sufficient characteristics to stand out from the constant flow of new offers from more established global producers and other aggressive and creative new companies, have the opportunity to take advantage of rising oil prices, and avoid pressure Which macro economy can curb demand? Map of past mistakes should help

Unfortunately, highly visible, expensive, and newly established company inventories that never achieve sustainable profitability overwhelm success stories. The difference between succeeding in a failed gap often comes to some poor management decisions, inadequate planning, unexpected surprises, or empty bank accounts. Sometimes, management’s lack of experience explains these shortcomings, but even those who have relevant backgrounds and responsibilities or years, such as DeLorean, often do not comprehend the difficulty of successfully launching a new company. However, a new business is challenging to pull off in the first place, reminding us how impressive that achievement is when the company succeeds.

References

1. Trotta, M. (n.d.). Classic-­‐car-­‐history.com. Retrieved March 06, 2019, from https://classic-­‐car-­‐history.com/delorean-­‐car.htm
2. J.d. (n.d.). Retrieved March 06, 2019, from https://www.pophistorydig.com/topics/tag/john-­‐delorean-­‐cocaine/
3. Harris, J. A. (2012). Transformative entrepreneurs: How Walt Disney, Steve Jobs, Muhammad Yunus, and other innovators succeeded. New York: Palgrave Macmillan.