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.