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Executive’s Fall as Dramatic as His Rise

TIMES STAFF WRITER

Jose Ignacio Lopez de Arriortua, the eccentric automotive purchasing chief and self-proclaimed corporate warrior who made a religion out of cost-cutting, fell on his sword Friday.

The resignation of Lopez, 55, from the top ranks of Volkswagen came amid the swirl of international corporate scandal and made his fall as dramatic as his unlikely meteoric rise.

Lopez, plucked from obscurity 10 years ago by soon-to-be General Motors Chairman Jack Smith, brought an industrial engineer’s keen eye to the process of buying auto components. And he turned the once-obscure purchasing agent’s job into a starring role.

Propounding sometimes radical ideas, he first helped turn GM’s Opel unit into the most efficient in Europe. He then proceeded to save billions of dollars for GM by revamping its vast $50-billion parts purchasing operation in North America.

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Suppliers were rankled by his methods, which tended to brutalize companies that sought to sell parts to mighty GM. Some charged that Lopez and his aides--a loyal group of disciples known as “warriors"--were often dishonest and underhanded. While his supporters dismissed such criticism as to be expected from firms forced to change their ways, the harsher view of Lopez is widespread.

“He is a brilliant man who did a lot for GM,” said Maryann Keller, an analyst for Furman Selz in New York. “But he’s not a particularly ethical person.”

It was his bizarre exit from GM in 1993 that led to his demise. Wooed by VW, Lopez announced his resignation--but then changed his mind after being offered the chance to head GM’s North American operations. In an unusual personnel drama played out in the news media, Smith called a press conference to announce that he had talked Lopez out of leaving--and Lopez was a no-show.

Instead Lopez flew to Germany. And almost immediately, GM charged that he had absconded with 20 boxes of top-secret documents that included data about a new small car, supplier costs and plans for an efficient auto factory known as “Plant X”.

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GM has doggedly pursued Lopez ever since, filing lawsuits in Germany and the U.S., and prompting criminal investigations in both countries. “We are seeking justice,” Smith told reporters recently.

Both Lopez and VW adamantly deny wrongdoing.

Lopez, a balding, slight figure with piercing dark eyes, grew up in the Basque region of Spain. He is known both for his eccentricities and his charisma. He fervently preaches the need to save Western civilization through a new Industrial Revolution.

He insists subordinates wear their watches on their right wrists--an uncomfortable reminder that time is running out on achieving their goals. He advocates a lean sugar-free diet heavy on fruit and warns not to mix protein and carbohydrates.

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Smith, then president of GM Europe, discovered Lopez--known by friends as Inaki--on a tour of GM’s plant in Zaragosa, Spain, in 1980. Lopez impressed the boss with his nervous energy and vision for reducing manufacturing costs by 20%.

A few years later, Lopez was promoted to head of purchasing at Opel, GM’s huge German unit. He quickly applied his industrial engineering theories to purchasing. Costs came down, but Lopez became known in-house as “The Inquisitor.”

When Smith was promoted to GM president and chief executive in 1992, he brought Lopez to Detroit. Asked how he hoped to turn GM around, Smith told one confidant: “I’ve got a secret weapon--Inaki Lopez.”

With Smith’s imprimatur, Lopez took the Motor City by storm. Not since Ross Perot, who became a noisy GM board member for a time, had an outside figure cut such a swath through Detroit.

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Lopez used the strength of his personality to wrest lower costs from reluctant suppliers. Many component makers complained bitterly. Some argued that he acted deceitfully--sharing proprietary information with competitors to force lower bids.

“He knows all the tricks--how to use emotion, flattery, jokes, threats, ruthlessness, even lying if need be,” said the trade publication Automotive News in an editorial about his cost-cutting program.

Despite the squeals, GM brass were pleased with the results. In less than a year, the mercurial Spaniard had succeeded in saving GM $2 billion in parts purchases, which freed up desperately needed cash when the company was bleeding red ink.

His effectiveness was not lost on VW Chairman Ferdinand Piech, whose company was suffering many of the same ills General Motors had experienced. He lured Lopez with a high position, a $1.6-million annual salary and a promise to build Lopez’s dream--a “factory of the future.”

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Sure enough, at VW, Lopez went on to perform the same financial magic he had at GM. VW’s parts costs fell dramatically and profits increased after Lopez joined the German auto maker in March 1993.

His defection, however, touched off an international brawl. In the clubby auto industry, it is rare for companies to sue each other. And movement of top executives between firms is common. But in GM’s view, Lopez’s brazen methods were beyond the pale.

The two companies were soon publicly trading insults and filing lawsuits against each other. German authorities began an investigation that uncovered four boxes of confidential GM documents in an apartment of two Lopez aides.

As the investigation in Germany dragged on, GM was pursuing the case on other fronts. Earlier this year, the auto maker filed a federal racketeering lawsuit in Detroit against Lopez, Piech and VW. A federal judge last week denied a VW motion to dismiss the racketeering charges, allowing GM to seek triple damages if it wins.

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In recent weeks, VW executives have acknowledged that Lopez is likely to be indicted in Germany soon. The resignation is seen by some in the U.S. as a move by VW to distance itself.

“He’s the fall guy,” said Eugene Jennings, a retired management professor from Michigan State University. He expects GM and VW to settle their differences now that Lopez is out of the picture.

Ironically, Lopez is stepping down just as VW has begun operation of his “factory of the future” in Brazil. GM says the factory--which relies on suppliers to make components in modules along the assembly line--looks awfully familiar.

* LOPEZ RESIGNS

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VW purchasing chief quits amid claims of industrial espionage. A1


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