Has our government yet learnt the lessons from the De Lorean debacle? #20yearrule

The evidence discloses a shocking misappropriation of public and private money … there was misplaced optimism by Government and its advisers when the original investment decision was taken and when additional investments were made, and that there was ineffective supervision of the project as it proceeded …

[The Department and Public Bodies] were left with virtually all the risk but with no financial control.

Those sentences could be from some future report into the Renewable Heat Incentive scheme. However, those are the words from the 1994 Public Accounts Committee report into the £77m of financial assistance given to De Lorean Motor Cars Ltd.

If you want a financial scandal in Northern Ireland that predates NAMA and RHI, then the injection of public cash into the ill-fated De Lorean project is perhaps one of the greatest.

You’ll need to set aside a few hours if you visit the Public Records Office of Northern Ireland’s Reading Room and request file CENT/3/103. A large reinforced cardboard box will be wheeled out on a trolley to your desk and inside it you’ll find Kenneth Bloomfield’s personal papers relating to the ill-fated De Lorean affair. [You can read a tiny fragment of the hundreds of sheets of paper and ring binders in these two PDFs, timeline and McKinsey report on lessons.]

While this file is only the latest in a large number that have already been release, it contains internal papers that track the early optimism through to eventual downcast and doom, copies of Telexes exchanged between an exasperated Bloomfield in Belfast and a bolshy John De Lorean in New York, a detailed timeline prepared for appearances at the Westminster Public Accounts Committee and copies of a December 1982 McKinsey consultancy report on lessons from the debacle.

The summary of McKinsey’s requirements for public investment in a high risk project were:

  1. Avoid rush decisions
  2. Assess the man as well as the project
  3. Take the risks into account when evaluating the project and planning funding needs
  4. Seek investments where a phased commitment is possible
  5. Agree monitoring arrangements in advance
  6. Cancel the project immediately if agreed performance targets are not met, unless there remain committed ‘champions’ of the project in Whitehall.

Historians will really value the two timelines – a five page overview followed by a much more detailed chronology – that were produced to aid Ken Bloomfield as he gave evidence to the Public Affairs Committee. A huge effort was invested in the collation of multiple years of activity and correspondence into one coherent sequence. You’ll find them in the ring binders at the bottom of the box.

Back in 1978, the Northern Ireland Development Agency (NIDA) announced its backing for the car manufacturing plant in Dunmurry. The Minister of Commerce, Labour MP Don Concannon, wrote in August of that year to Dennis Faulkner, chair of NIDA, to underline the importance of “close and regular liaison between Agency and Department … so that I can be alerted well ahead of the event to any likely divergence from programme or planned performance”.

The letter noted that editorials and features in the British national press “second guessing the decision” to fund, but was expressed reassurance that “the points to which [the press] have drawn attention were fully considered in the company’s Business Plan”. Defending the decision and refuting the points made in the press “would merely fuel … debate” and “critics will only shift their stance … when cars of proper quality are rolling off the production line in adequate quantity and are being sold commercially at a competitive price”.

The company’s approach and performance to date suggest that it sets about matters in precisely this business like way – and this characteristic was, of course, a factor in the confidence which the project generated as time went on.

Sitting just underneath this artefact in the large cardboard box of correspondence and reports is a February 1982 letter to Coopers & Lybrand who had been appointed as receivers of De Lorean Motor Cards Limited.

The early confidence did not last long.

The majority of the paperwork in the newly released public record reminds modern readers that the cars that eventually rolled off the production line in 1981 were not of high quality, at least not in the initial batch, and confidence in the company’s approach and performance were very quickly undermined.

Even before the fist shipment of cars headed to the US in April 1981, a March letter from Ken Bloomfield (Permanent Secretary at the Department of Commerce) briefed the Minister of State Adam Butler regarding allegations made in the Financial Times about letters John De Lorean had sent to NIDA. The correspondence “could represent either another attempt to screw more help out of Government, or part of a carefully prepared record to protect his own reputation in the event of the project failing”.

There are copies of the Telex messages that between Minister Butler and Ken Bloomfield in Belfast and John De Lorean in New York in March 1981. They have a firm yet gracious tone, in one sentence confirming “that I am unable to consider any variation in the terms of assistance provided for the DMC-12 car project”, admitting that “the provision of public funds for this project is widely recognised as generous” [Ed – quite an understatement!] while in another saying “I am grateful for your words in acknowledging the Government’s support” and sending “best wishes for the launch”.

A week later and the initial shipment of cars had slipped back and the cash flow from sales was thus delayed. Two months later and Permanent Secretary Ken Bloomfield was writing to the MD of the Dunmurry plan to say he was “shocked and saddened to hear of the fire bomb attack on your company’s premises”, adding that he hoped that “this vicious attack will not have a serious impact on your vital production programmes”.

A mob attacked the plant on Monday 4 May destroying personnel records and some production drawings. The three quarters of staff who turned up for work the next day were “urged by loudhailers to leave the plant [after lunchtime] and go into mourning for [Bobby] Sands” who had died. Staff shortages affected production rates and the shipment of completed cars to the US was again postponed.

In the inimitable words of Ken Bloomfield, this “’missing the boat” (metaphorically and literally) was entirely due to the “civil disorder affecting the company” which caused “unavoidable cashflow consequences”. He continued:

“Just as we could not justify any further aid to the company in an ordinary commercial situation, so we could not justify allowing it to be closed down in these new circumstances … I am fortified in this view by the impressive degree of loyalty to the company exhibited by the substantial majority of its workforce in the face of considerable pressures”.

A further £7m guarantee was offered in May 1981.

Fast forward two years to July 1984 and the publication of the “highly critical” Public Accounts Committee report on financial assistance to De Lorean Motor Cars Ltd. That report has been in the public domain for over thirty years, but you’d struggle to put your hand on a copy. Conveniently an original printed version sits at the top of Ken Bloomfield’s box of papers.

… the De Lorean project represents one of the gravest cases of the misuse of public resources to come before [the Public Accounts Committee] for many years. The evidence discloses a shocking misappropriation of public and private money … there was misplaced optimism by Government and its advisers when the original investment decision was taken and when additional investments were made, and that there was ineffective supervision of the project as it proceeded …

DOC/NIDA [Department of Commerce/NI Development Agency a precursor to IDB and Invest NI] were left with virtually all the risk but with no financial control.

Yet without the benefit of hindsight, the De Lorean project soldiered on. It was only at the end of 1981 that the Government was clear “there could be no question of any further assistance to the DMC 12 project” other than allowing the existing bank guarantees to roll forward.

The day after Secretary of State Jim Prior’s visit to the Dunmurry plant, John De Lorean attended a meeting in the Chichester House headquarters of the Department of Commerce. Ken Bloomfield notes:

“Mr De Lorean was (for him) in a relatively relaxed mood. (I think he only used his favourite work “asinine” once!)”

John De Lorean’s proposal to dispose of his shareholding if a Public Offering went ahead was viewed dimly by Bloomfield, suggesting that “if it were to appear in the future that you were reducing your personal interest in the operation [this would] increase the presentational difficulties”. Yet he signs off the short letter sent late December with the pleasant barb:

“May you fulfil all your objectives for 1982.”

The 8 January 1982 Telex from De Lorean to Bloomfield griped about the lack of Export Credits Guarantee Department (ECGD) financing that “NI’s largest exporter and the UK’s 32nd largest exporter” felt “automatically entitled to”. If further direct aid was not available he raised other possible sources to inject cash into the ailing film’s cashflow.

The Telex reiterated that the £10m of damage to its office block and vital records was related to the Troubles and the state insurance should pay out immediately as “We need the money today – and we cannot await the outcome of lengthy legal processes”. The two page Telex also bemoaned “the smear campaign launched against us by disaffected employees and a backbench MP”.

None of the allegations would have had any public credibility except that it was announced that the Prime Minister had authorized a ‘police investigation’ of the allegations against the company. While this was denied by the Solicitor General shortly afterward, the damage was done – particularly in the US where our order backlog dropped by 80% almost immediately from 32,000 units on order to less than 6,000. Our entire marketing image has been the ‘ethical car’. The Prime Minister’s announced ‘police investigation’ destroyed that image. In the UK as a result of the same publicity we have become ‘politically dangerous’ – as a result we are not being given our due.

Asked in a 20 January 1982 meeting in Belfast about his Board’s likely reaction to the potential effect of no further Government support, John De Lorean said “his recommendation would be that they seek to contain the situation by closing down the plant by Friday 29 January, seeking an accommodation with creditors, and concentrating on working down the accumulated inventory through a vigorous sales approach”. One month earlier in December the same Board had approved “‘substantial bonuses’ to company executives” which NIDA and Department of Commerce urged to be reversed.

Interviewed for The Times, De Lorean was quoted as having expressed the view that the company had been “talked into” Northern Ireland and that “it had made a serious mistake in launching its business in Belfast”.

The blame game was well underway. Minister Butler said in a Telex to De Lorean that “I would require a great deal of convincing that the present problems of the company flow from difficulties producing the car in Northern Ireland rather than from difficulties of marketing it in the United States”.

In February 1982 Dr Paisley and Peter Robinson met Ken Bloomfield at the Department of Commerce “regarding possible further EC aid for the De Lorean project”. (It’s one of the few mentions of local political interest or intervention in the project that are noted in the thick set of papers.)

Bloomfield could “not readily see any EC pocket out of which new aid could be provided and it is likely that the EC would be very wary in dealing with any proposal for new aid”. He added that “The European Investment Bank refused to provide loan finance in 1980 because of doubts about the viability of the enterprise”.

In December 1982 – long before the publication of the Public Accounts Committee report – McKinsey consultants produced a report on lessons that could be learned from “the De Lorean Affair”. McKinsey had been commissioned by the Department of Commerce in July 1978 to look at the risks involved in the project and had continued to assess performance in the years that followed.

  1. Avoid rush decisions
  2. Assess the man as well as the project
  3. Take the risks into account when evaluating the project and planning funding needs
  4. Seek investments where a phased commitment is possible
  5. Agree monitoring arrangements in advance
  6. Cancel the project immediately if agreed performance targets are not met, unless there remain committed ‘champions’ of the project in Whitehall.

McKinsey admitted that while “some [of the lessons] we pointed out at the time, others have come into sharper focus with hindsight”. But none of the “six main requirements that will need to be met if any public investment in a high-risk project is to stand a reasonable chance of success … was met in the De Lorean case”.

While De Lorean was an external project, much of the learning can no doubt be transferred across to the Renewable Heat Incentive omnishambles. But will it?

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