The British government declared De Lorean Motor Cars insolvent today and refused to give it any more money. U.S. automaker John Z. De Lorean immediately called in the receivers in a last-ditch effort to save his Belfast-based car company.
British taxpayers have poured nearly $148 million into the ailing firm in the past three years, and Northern Ireland Secretary James Prior told Parliament there could be no question of further public financing.
De Lorean, former General Motors Corp. executive and whiz kid of the U.S. car industry, decided to start his own company 10 years ago. The British government, desperate to attract new industry to economically depressed Northern Ireland, agreed to back him.
But his luxury, stainless-steel, gull-winged sports car, made only for the American market and retailing at $26,000, was badly hit by the U.S. recession and strong competition. Fewer than 5,000 of the cars have been sold.
The receivers said that between $75 million and $95 million was needed within the next five weeks if the company is to survive, and that a new trading company was being started immediately.
"Our objective will be to do everything possible through a reconstruction of the business to maintain the operation in Belfast," the receivers said in a statement.
They added that a number of high-powered businessmen were interested in investing in the company and there was "a very good chance" of saving it.
But Prior told Parliament that "there can be no guarantee that through reconstruction a secure way ahead can be found."
He added that there had been "very considerable marketing and management mistakes" over the estimate of car sales. Until recently, the plant was assembling about 400 cars a week. About 2,000 models are still in stock.
Control of the Belfast plant, structured as a subsidiary of the U.S. company De Lorean Motor Cars, has now been shifted to Sir Kenneth Cork, a former lord mayor of London and the man who proposed the reorganization plan. Cork said his objective was "to do everything possible" to keep the factory, which employs 1,500 workers, open.
Its collapse would be a bitter blow to the province, which has the highest unemployment level in Britain, with one in five of the work force unemployed.
The state-owned shipyard, Harland and Wolff, one of the province's biggest employers, may have to dismiss 1,000 of its 7,000 workers if orders for the De Lorean cars do not pick up soon.
Prior said that unemployment had been "very much on my mind" but that "the time had come when the government just had to say 'no' to more money."
He told the House of Commons that there was some doubt, with the "benefit of hindsight," whether De Lorean was the right project for the province.
De Lorean's mistake was to produce too many cars while he had not found markets for them in the United States.
"It was far too ambitious to talk of sales of 18,000 to 20,000 cars," said Prior. "A more realistic figure would have been 8,500 to 9,000."
De Lorean's competition includes Cadillacs, BMWs and Mercedes Benzes--all with big marketing and service organizations behind them, which De Lorean's tiny outfit lacked.
De Lorean, looking tired and strained, showed no signs of changing his life style as he flew by Concorde from London to New York today.
"I am delighted with the outcome," he told reporters at London airport. "It means that the government has effectively wiped out $70 million worth of debts and that is very positive."
Prior later rejected that view, describing it as "what one might call De Lorean license."
De Lorean was at pains to draw a distinction between his company's voluntary receivership and Laker Airways, which went into enforced receivership a couple of weeks ago. "In the United States they don't understand the difference between voluntary and enforced receivership," he said.
It was not immediately clear what future De Lorean himself would have within the company if it were rescued.
"I want him to keep the selling operation in the United States going," said one of the receivers. "He never had much to do with the operation in Belfast."
"He is undoubtedly a salesman, and he did have a dream," he added.