WHAT began as a transatlantic shouting match between two of the
world's biggest automobile companies has blown up into a bare-fisted
legal battle in Germany involving accusations of industrial espionage,
ungentlemanly conduct, and unfair business practices.
At the centre of the case, which is being heard by a court in the
central German city of Darmstadt, is Jose Ignacio Lopez de Arriortua, an
eccentric and austere production executive with troubled car-builder
Volkswagen AG.
General Motors of Detroit, the world's leading volume carmaker, and
its German subsidiary, Adam Opel AG, have accused Volkswagen -- Europe's
leading car builder -- of poaching Mr Lopez, who once held a senior
executive's position with the US company, and of acquiring large
quantities of industrial secrets, including Opel's production plans.
Volkswagen, based in the German city of Wolfsburg, has vociferously
denied any wrongdoing and has said it will defend itself in the courts.
The dispute between the two automobile giants began last March when
the Spanish-born Mr Lopez, who was then in charge of GM's $50 billion
purchasing budget, defected to Volkswagen. Mr Lopez jump-started a
revolution that shattered the powerful, entrenched bureaucracy that had
dominated GM's production system for decades.
While working at General Motors' European division and at the
company's world headquarters in Detroit, he re-ordered GM's relationship
with its outside suppliers of components, mainly by forcing them to
drastically cut their costs at the expense of losing business with the
auto giant.
These radical measures, which created a lot of waves at GM and among
its suppliers, coupled with a degree of ruthlessness rarely seen even in
the high octane world of automobile production, earned Mr Lopez, a
devout Roman Catholic and practitioner of Jesuitical bodily denial, the
nicknames ''the Grand Inquisitor'' and the ''Russelheim Strangler''.
Russelheim is the site of the Opel headquarters.
Mr Lopez brought an impressive passion to General Motors. He sent
teams of GM officials into suppliers' factories to improve their
production techniques, told his colleagues to eat a ''warrior's diet''
heavy on fruit, and instructed executives working under his supervision
to wear their watches on their right wrist instead of their left until
victory over GM's competitors was achieved.
Mr Lopez produced results and the bottom-line looked good. GM
estimated that he had cut costs by more than $2000m, or almost 10%, in
less than a year. While at Detroit, he began talks with Volkswagen and
forced VW and GM to bid for his services. There was talk of the Germans
employing a high-powered head-headhunter to recruit Mr Lopez and a
five-year contract worth an estimated $20m -- a figure recently
subsequently denied by the German firm.
After an unseemly tug-of-war between the two companies, General Motors
thought it had snagged Mr Lopez. GM management called a news conference
in mid-March to announce that Mr Lopez was to become president of its
North American operation only to discover an hour before the news
conference was to have taken place that he had resigned and was
preparing to leave for Germany. GM managers felt jilted and embarrassed.
Accusations flew across the Atlantic that Volkswagen had behaved
dishonorably.
The US company was apparently miffed that Volkswagen had forsaken the
fairly civilised ground rules laid down by the clubby German business
establishment and had resorted to more ruthless North American practices
such as poaching executives.
Most German firms normally recruit executive talent from universities
and technical colleges. Executives are often given some shopfloor
experience and are gradually promoted as they acquire experience and
produce results. Once hired, an excecutive with a big engineering or
manufacturing company usually stays with his employer for life.
Foreigners are seldom brought in.
At VW, Ferdinand Piech, the new management board chairman, decided he
needed a fresh team to stem the company's huge losses and halt falling
production levels even if it meant abandoning old Prussian virtues and
practices. The arrival of Mr Lopez at Volkswagen marks a dramatic break
with the past. Other German firms are watching his performance with
acute interest.
The war of words between VW and General Motors rose several octaves in
April and May when seven more GM executives, top members of Mr Lopez's
buying team, were lured to Wolfsburg. The Americans also accused Mr
Lopez, who has an intimate knowledge of GM's European operations, of
taking a large quantity of secret information with him. GM asked the
state prosecutor in Darmstadt to investigate. It has filed a
strafanzeige -- a criminal complaint -- against Mr Lopez, claiming he
stole GM secrets.
''We believe that confidential documents have been taken from us and
that is against the law in Germany,'' said Louis Hughes, GM Europe
president.
Mr Lopez says he is innocent. '''I can only imagine that General
Motors was so upset at my departure that they want to destroy my
credibility by means of a deliberate campaign,'' he said recently.
The state prosecutor in Darmstadt has asked GM to provide more
documents to substantiate its case and says the investigation could take
six months.
General Motors also applied for a temporary injunction to stop their
seven former executives -- five from GM USA and two from Opel -- from
working at Volkswagen. However, a court in Frankfurt has tossed out that
case but GM says it will consider further legal action against the
seven.
Mr Piech, who took over the helm at Volkswagen in early 1993 with a
promise to cut costs and return the company to profit, re-affirmed his
support in Mr Lopez and backed him up against the charges made by GM.
''The way in which the attempt has been made to discredit not only the
impeccable reputation of Mr Lopez and his colleagues but also the image
of VW as a whole, is incomprehensible to me,'' Mr Piech said.
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