Charismatic GM Executive Calls It Quits : Automobiles: Purchasing chief Lopez achieved impressive cost savings, but his tactics strained relations with suppliers.
Jose Ignacio Lopez de Arriotua, the charismatic executive who put fear and loathing in the hearts of automobile suppliers, is quitting as purchasing chief of General Motors and is expected to take a top-level post at Germany’s Volkswagen.
The resignation, widely rumored for several weeks, was announced Thursday by GM Chairman John F. Smith, who had lured Lopez from Europe in 1992 to cut costs in the company’s troubled North American operations.
In a statement, Smith said Lopez’s most important contribution was putting in place a strategy and staff to achieve cost-reduction benefits. “The team and process remain intact,” he said.
Analysts agreed that Lopez’s departure would not impair GM’s ability to continue wringing savings from suppliers. In fact, they said his resignation could improve relations with suppliers and union workers, who were often rankled by Lopez’s intractable demands.
“Instead of getting just the iron fist, you may now get a velvet glove with the iron fist,” said David Garrity, an analyst with McDonald & Co. Investments.
But Wall Street is likely to view the departure negatively. Although his resignation was not announced until after the market closed, GM stock closed Thursday at $38.75, down $1.375 a share, as rumors of his departure circulated earlier in the day.
“It means less to GM than to GM’s stock,” said David Healy, an analyst with S.G. Warburg & Co. “Lopez’s cost-savings have been part of the turnaround story that has been widely believed on Wall Street.”
GM, the nation’s leading auto maker, has made some progress toward returning to profitability. The company reported an operating profit of $92 million in 1992. It also drastically cut losses last year in North America and vowed to turn a profit there in 1993.
Lopez’s efforts were a major factor in the improvement. He implemented a controversial strategy designed to help suppliers cut costs and thus lower prices for GM. This often involved sending teams of GM engineers into supplier plants to root out waste and install lean-production methods.
Those moves resulted in productivity gains of 50% or more in some cases. But he also rankled suppliers, many of whom refused to bid on GM contracts or complained about lower profit margins.
“I think a lot of U.S. suppliers will be rejoicing because he put a hammerlock on them,” Healy said.
Some of these same suppliers could soon be facing a similar situation with Volkswagen, where Lopez is expected to become chief of production and a member of the board of directors. It would put him in the upper ranks of Volkswagen, much higher than the post he held at GM.
Volkswagen can certainly use the help. Although it is Europe’s sales leader, it also is the highest-cost producer. The German car maker’s profit fell 13% in the first nine months of its current fiscal year, while sales increased 12%.
Volkswagen officials could not be reached for comment. But Ward’s Automotive Reports said the company would announce Lopez’s promotion on Tuesday, along with numerous other management changes.
GM attempted to keep Lopez, a native of Spain. Smith recently promoted him to vice president and group executive. But sources said Lopez, who was raised in Europe and worked there most of his career, was under family pressure to return to the Continent. He also may have seen his chances for further promotion at GM limited.
Lopez, known by his nickname Inaki, will leave a void in Detroit, if only by dint of his strong personality. His purchasing group became a close-knit family, who referred to themselves as “warriors” and often mimicked Lopez’s habits, such as eating vegetarian meals.
Volkswagen of America spokeswoman Maria Leonhauser told the Associated Press that she didn’t know whether Lopez was offered or had accepted a job with the German auto maker, which is plagued by labor and productivity problems in its Mexican operations.
