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GM Sues VW Executives in Continuing Battle Over Claims of Stolen Secrets

TIMES STAFF WRITER

Escalating a long-running international dispute over purloined trade secrets, General Motors Corp. on Friday sued its former purchasing czar and the chairman of Volkswagen for allegedly conspiring to steal vital vehicle product and pricing data.

The suit, filed in U.S. District Court in Detroit, breathes fresh life into a three-year battle that began in 1993 when the big German auto maker lured Jose Ignacio Lopez de Arriortua away from Detroit for a top job with VW in Wolfsburg, Germany.

GM, saying it was frustrated over a lack of progress in an investigation by German authorities, said it took legal action here because a three-year statute of limitations for seeking U.S. civil damages is about to expire.

The 98-page lawsuit documents a start-to-finish scenario for the alleged espionage, for the first time naming VW Chairman Ferdinand Piech as being directly involved. The U.S. auto maker held media briefings here and in Wolfsburg announcing the action.

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GM’s general counsel, Thomas A. Gottschalk, described a sophisticated and elaborate scheme allegedly used by Lopez and several of his lieutenants to transfer countless volumes of highly sensitive material from Detroit to VW’s computers in Germany in the months before Lopez switched jobs.

“After GM became aware of the theft and notified law enforcement authorities, Volkswagen officials reaching all the way up to its current chairman, Ferdinand Piech, participated in a stonewalling cover-up, including palpably false denials and mammoth document-shredding, evidence-destroying operations,” Gottschalk said.

“If there has ever been a more brazen case of industrial espionage at the highest levels of a company, we are not aware of it,” he said.

GM is seeking unspecified monetary damages that executives said would be in the millions of dollars. GM claims the data pilfered from the company has allowed VW to lower its costs, develop new products and become profitable again.

In a statement Friday, VW said GM’s allegations “are without foundation” and that it would seek to have the lawsuit dismissed.

The legal brawl pits two of the world’s largest industrial corporations against each other at a time when global competition in the auto industry is heating up and concern about industrial espionage is growing in the United States.

Federal law enforcement and security officials are pushing for stronger legislation to combat industrial espionage. FBI Director Louis J. Freeh told Congress last week that his agency is investigating 800 cases of economic espionage in the United States.

The Lopez case has also helped spur fresh concerns in Europe, particularly in Germany, about loose business ethics. This is but one of several high-profile cases in recent years involving alleged corporate cheating in Germany, including bribes taken by top executives of GM’s Adam Opel subsidiary.

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In fact, one of the defendants in GM’s lawsuit, VW executive Francisco Garcia-Sanz, is identified as a former Opel executive also under investigation in connection with unrelated kickbacks made while he was still at Opel, GM’s German auto unit.

In addition to Lopez, Piech and Garcia-Sanz, GM’s suit names VW, its U.S. subsidiary and nine other VW executives in Europe and the United States as defendants. It comes just weeks after German authorities said they had completed a criminal investigation of the matter. German officials said they would not decide until this spring whether charges will be brought.

The slow pace of the investigation highlights the complexity of the case, as well as its political sensitivities. VW is not only a symbol of German industrial power, but is 20%-owned by the German state of Lower Saxony, giving public officials a direct stake in the outcome of the investigation.

Lopez, 55, emerged as a controversial figure in Detroit after John F. Smith, GM chief executive, brought him from Europe in 1992 to cut the costs of buying components from the thousands of companies that supply GM.

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The energetic, emotional Spaniard assembled a loyal team of “warriors,” who wore their wristwatches on their right hands to remind them that times had changed at GM, and who followed a lean diet of fruit and no sugar.

Suppliers were angered by Lopez’s demands and style. He demanded contracts be torn up and that prices be reduced. Some suppliers accused him of improperly sharing their proprietary prices and processes with competitors.

But as GM’s supplier costs fell as much as $1 billion a year, Lopez became a celebrated figure. When rumors arose in early 1993 that he would leave for VW, Smith, in a rare public romancing of a corporate executive, got him to momentarily change his mind with the promise of a powerful new job at GM.

Instead, Lopez bolted to VW for a salary of $1.6 million--four times his GM wage. With him went seven of his warriors and, GM says, 20 boxes full of confidential data on the company’s future-product plans and pricing information on 60,000 auto components.

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According to GM’s lawsuit, Piech first contacted Lopez in the summer of 1992 and in the fall began to discuss his joining VW. During these talks, Lopez and some of his associates secretly began to amass voluminous documents on GM’s parts costs, future products and the development of Plant X, a new manufacturing concept designed to reduce dramatically the time it takes to build a car, the suit says.

The suit claims that Lopez’s daughter Irene was involved in some of the activities and that Piech himself traveled to Detroit and “sent faxes to persons in Michigan in furtherance of VW Group’s illegal conduct.”

While telling GM that he had decided against going to work for GM, he was meeting secretly with VW, the U.S. auto firm claims. He allegedly continued to attend GM strategy meetings in Europe and the United States, taking copious notes and ordering the copying of GM documents.

The suit further alleges that Lopez shipped stolen information from Detroit to Wolfsburg via a VW corporate aircraft and that the German auto maker provided equipment to copy and input the GM data into computers before shredding it.

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* MORE PLANTS CLOSE

Walkout at 2 GM factories has idled 8 plants. D2


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