GM, VW Legal Battle Reaches New Heights

CAR WARS

IF it were a movie they would probably call it "Super Lopez and his warriors," or "Car wars." But the legal and verbal battle between General Motors Corporation and Germany's Volkswagen group is bitter reality and a cause of growing concern for the German auto industry and the Bonn government.

The key player is Jose Ignacio Lopez de Arriortua, an eccentric, visionary Spanish engineer whose reputation for drastic production cost-cutting is the stuff of legend among managers.

His contract with VW is reputed to be costly, but the German auto group is convinced it is a good investment.

The Spaniard is credited with having saved GM $1 billion in just 10 months. VW says there have been significant cost improvements since Lopez arrived at the group's headquarters in Wolfsburg, March 17, and that losses were slashed by 355 million deutsche marks (US$209 million) in the second quarter. German investigators and FBI probe claims

But his arrival also marked the beginning of a much-publicized legal battle. German investigators and the FBI are probing claims that Mr. Lopez and several associates who followed him to VW took GM secret data. The auto giants have waged a battle of words that has stunned Germany's conservative business world.

Economics Minister Guenter Rexrodt intervened personally, meeting privately with GM/Opel and VW executives. The minister achieved a lull in the fighting.

Nevertheless, Lopez says that the two auto groups are really on the same side and that he was fighting the same war at VW as he fought at GM. The enemy, he says, is the Japanese and the struggle is one to protect "Western society."

But right now Lopez may face his own struggle for job survival. There is increasing speculation the negative publicity he generated may force him to leave VW. While VW denied this, a German television station claimed that termination of his contract was currently being negotiated.

His reputation has suffered in recent weeks. Investigators found boxes containing GM documents in a Wiesbaden apartment that had been used by two close GM associates of Lopez. The data reportedly included secret plans for a mini car GM's German subsidiary Adam Opel wants to manufacture.

Lopez said earlier this month that he had asked his associates to destroy his personal office contents sent to Wolfsburg saying he wanted to prevent such data from finding its way into VW's possession. Magazine prints charges damaging to VW

In separate proceedings, a court allowed a magazine to print claims Lopez spirited away secret GM documents. In a recent issue, the weekly Der Spiegel claimed that a dozen VW trainees punched GM/Opel data into VW computers at the end of March. A spokesman for the public prosecutor's office in Darmstadt, which is leading investigations, confirmed that VW witnesses will be reexamined, following reports that an employee told a third party she had seen the Opel logo on data she was told to punch into the VW computer system.

GM officials claim that in the weeks before he left Lopez had requested and received numerous sensitive and secret documents. Last December Lopez received GM's list of computer stored details of parts, prices, and suppliers for its European operations. Hans-Willhelm Gaeb, GM's vice-president for Europe said the list was of no use for Lopez at the time. But experts point out the list, the equivalent of 90,000 printed sheets, could make interesting reading for VW executives.

VW, Lopez, and his associates have rejected the claims of industrial espionage. They have accused GM of slander and suggested that GM/Opel may have planted secrets in the Wiesbaden apartment and hacked into VW computers to plant secrets there. At what appeared to be the height of the battle, Ferdinand Piech, the chairman of VW said if GM wanted to sling mud he too would start hurling the stuff.