Spare on details, do we know enough to be excited about public incentives for DeLorean?
San Antonio could be the home of a rebooted DeLorean Motor Company if city and county incentives pass.
Financial columnist Michael Taylor recently wrote a piece in the Express-News titled, "I tried to understand San Antonio's DeLorean delusion. I came away with more worries."
The column shows the problems with announcing a deal that could include public subsidies, tax breaks or other incentives without being able to ask basic questions about what makes the company a good bet for San Antonio taxpayers. City staff have not announced details of what the public incentives will be yet, but have indicated it could be a grant paid out only after jobs are created.
TPR's Paul Flahive spoke with Taylor about the deal that local media and local leaders are fawning over.
This interview has been edited for length and clarity.
Paul Flahive: The idea of bringing DeLorean to San Antonio was announced shortly after the relaunched manufacturer ran a Super Bowl ad about an all-electric version of its iconic '80s vehicle. And so what? What was your reaction to that?
Michael Taylor: It's pretty. And we all remember Back to the Future in DeLorean. Certainly you get the flash of the advertisement. And I was then curious, about what is the substance to go behind the flash?
PF: Well, and that's the theme of your column that you wrote two weeks ago, just dealing with trying to understand why San Antonio leaders are so interested in the deal. What is your initial reaction to making this a joint venture, backed by San Antonio taxpayers?
MT: In the announcement that followed the Super Bowl ad, we had the city mayor, the county judge, a council person, say, "This is historic, this is a real coup for San Antonio." And yet, there's almost nothing about this company that exists now that would, I think, justify the excitement.
PF: Yeah, the car, I mean, is an iconic one. The idea of it has survived 40 years of new brands and vehicles. It's the power of this idea that prompted the CEO Joost de Vries to leave his career at Karma Automotive for DeLorean. So obviously this idea, this icon, this memory is really driving the narrative of the company. And you're saying that's that's a problem?
MT: Right. I've seen subsequently the CEO of DeLorean say, with this brand, we can sell a lot of cars. And I don't doubt that — a brand matters a lot if you essentially have a startup in the electric vehicle space. They've never built a car. They don't have a timeline for building a car. It's hard to build cars, it's hard to make money with a de novo electric vehicle automaker, it's a crowded space, I find myself extremely skeptical that this is a good, plausible bet for public subsidy and public excitement about attracting this company.
PF: The car hasn’t built a demo, but plans to roll one out at the Pebble Beach Auto Show in August. But this car company is iconic for another reason, it famously failed and it failed big.
MT: The only things we remember, as ‘80s kids, were that (John) DeLorean had a cocaine dealing problem and was arrested for it, the company went bankrupt, and then it had a really cool cameo in the Back to the Future movies. But that's about all — and of course, the wing doors, which are awesome. But I don't think that's enough to say, okay, this is a plausibly successful electric vehicle startup for which we should pay a lot of attention to or highly celebrate in San Antonio, that we've landed this brand.
PF: I mean there are many warning flags for this past company. But then we're reminded time and again, this isn't that company, this is a completely different company. The company as it exists now, as you write about is, the trademark of it is largely used to sell merchandise and to maintain the current fleet of of the thousands of original DeLoreans that still exist. You've invested most of your life, how would you see this as an investment for yourself?
MT: It is notoriously hard to back startups, professional investors who do in the world of venture capital, private equity, most of their investments fail, and that's an expectation. And that's built into their model: you back a lot of startups, you're hoping for one or two big hits. I find it even less plausible that public officials would have a good track record and putting public resources towards startups.
PF: And you know, as you point out in your piece, your frustration largely is about the fact that you couldn't get information that is very basic about the deal. And you couldn't get it from private individuals with the company or with public officials that are going to be continuing to negotiate that deal as it goes forward. This is what CEO Joost de Vries told TPR San Antonio would get out of it:
I would say that we plan to be around 400-450 people over the next few years. And the average salary should be just under $150,000 a year. So pretty well paid jobs for this market.
He's saying this is a great deal for San Antonio, we're gonna get high paying jobs. How could this go wrong?
MT: I'm really skeptical that 450 engineering and management jobs should exist for a company that has fewer than a few dozen (employees), probably currently. Of course, they won't say how many employees they have — another red flag. They won't say what their source of financing is.
It's admittedly a thing that people don't always talk about out front but if you have your hand out for public subsidy, I think you should be up front with how many employees do you have? What’s your timeline for (building) a car? And what's the financing source that makes this a plausible bet?
On all of those points, the CEO said, "I don't have to tell you, I'm not a public company." Economic development officials told me the same thing. I understand they may have non disclosure rules about that. But the CEO has started with his hand out, so I think you can't say I'm purely a private company. I think you should be able to answer the questions of what's the size and source of your financing? How many employees do you have? And what's your timeline for building a car that we could look at? He refused to answer all those questions, which bothers me.
PF: To what extent do you think that this announcement by the company and by San Antonio was just a problem of timing? The Super Bowl was coming up, they have the ad, either the city officials or company officials want to capitalize on that advertisement that DeLorean spent probably a good deal of their capital on. And they launched without maybe having answers to many of the questions you're putting forward.
MT: That sounds right. It was definitely about the branding and the advertising. I can't speak to the motivations. But that sounds right there. There isn't any substance. So branding matters, and messaging matters. They took advantage of that.
When an economic development official says to me or a public elected official says to me, "We have a really exciting deal for San Antonio," but then cannot come up with the basic answers to the basic questions that I'm not sure they even asked — when you present that deal in the breathless way that they did — and then it's nonsubstantive. It puts into question, other deals or even their entire process.
It is not fair to say, "Trust us. We're the economic development officials. We've got this." Because in fact, there's a track record of backing ideas like InCube from 10 years ago, which went nowhere. It was a colossal waste of money.
So I don't think "trust us" is the right answer for deals like this. I think the right answer is — you're committing public resources — you need to be more transparent upfront. And you probably need some checks and balances on your process for announcing or being excited about deals.
Michael Taylor is an author and financial columnist for the San Antonio Express News. He's also the host of the TPR podcast “No Hill For A Climber.”