VW Guru Predicts Quick Turnaround for Carmaker

GURUS always seem to exude charisma and attract controversy, and Jose Ignacio Lopez de Arriortua is no exception.

Mr. Lopez - a board member of Volkswagen AG and the automobile industry's most prominent efficiency improvement guru - is now predicting prosperous times just around the corner for the German auto giant, even as the VW group reels after reporting a whopping 1993 loss of $1.15 billion.

During last week's annual VW media event to announce earnings, Lopez offered his far reaching vision for VW. In the coming years, VW will become one of the world's most efficient automakers. The introduction of new products also will help VW maintain its strong position in Latin America and Asia, while achieving a dramatic rebound in North America. And it will all add up to a quick return to profitability.

When?

``Sooner than you expect,'' was Lopez's mantra-like reply every time reporters pressed him for a time frame.

Some of the pronouncements may seem preposterous, but the confidence in Lopez's voice can easily convince listeners to think twice before writing off some of his projections.

It has been just over a year since Lopez - a sinewy Spaniard who comes from the Basque country and has a soft spot for Barcelona - made the stunning switch from General Motors Corporation to VW. The move launched criminal investigations in both Germany and the United States, as GM charged Lopez with stealing secret GM documents when he went to VW.

The controversial probe over the document theft is ongoing. Lopez, however, says it is not distracting him.

His top priority is improving productivity. VW has had in recent years some of the highest unit-labor costs in the automotive world. Already, Lopez and other company officials say, the break-even point for VW factories has been lowered to about 79 percent of capacity from an almost unbelievable 102 percent.

VW says it wants to further lower the break-even capacity utilization standard to 65 percent in coming years. To achieve that, Lopez is counting on ``continuous improvement process'' workshops, which promote greater employee involvement in production.

Since his arrival at VW, 2,000 workshops have been held, and 5,000 more are planned this year. By the end of 1994, about 84,000 of VW's 100,000 work force will have gone through them.

``We have to give a sense of ownership to employees. And we must implement their ideas,'' he said.

The other key for VW's turnaround, in Lopez's view, is a resurgence in the US market. VW of America posted a loss of about $233 million last year and has seen its US market share shrink from about 5 percent in the 1970s to under 1 percent today. Last year, VW sold only 50,000 cars in the US, but Lopez said the company will be able to sell 500,000 annually in about five years' time.

How?

By launching a revamped model of VW's most popular car: the Beetle. The new-look Beetle is still in the ``concept stage,'' but Lopez promised it will go into mass-production. ``This car is magic. We must build it,'' he said.

Lopez's comments about the Beetle - along with a prediction that VW would become financially stable enough by 1996 to abandon a four-day workweek at German plants - seemed to annoy some of his fellow VW board members.

Chairman Ferdinand Piech contradicted Lopez, saying the four-day workweek method of operation could stretch beyond 1996. The plan is designed to cut costs by more than 20 percent.

Meanwhile, Ulrich Seiffert, VW research and development chief, said a final decision on Beetle production had not been made. Safety improvements and chassis modification had to be made before the car could enter the market, he added.

Jens Neumann, board member responsible for North American operations, bristled when he heard of Lopez's US sales prediction. ``I'm only thinking about this year,'' he said.

Indeed, VW is facing an uncertain 1994. Mr. Piech estimated the loss for the VW group - including VW, Audi, Spanish producer Seat, and Czech carmaker Skoda - was about $238 million in the first quarter this year, compared with a roughly $753 million loss in the same period in 1993.

He said the 1994 outlook for VW and Audi was relatively stable, but added that large losses could continue at Seat, and Skoda would be hard-pressed to stay out of the red. Overall, the company in 1994 hopes to break even.

``This year we are better prepared for surprises than we were last year,'' Piech said, a reference to Seat's 1993 financial collapse that caught executives off guard.