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VW Executive Resigns Amid Espionage Claims

TIMES STAFF WRITER

In an apparent move toward settling one of the most celebrated claims of industrial espionage in decades, German automotive giant Volkswagen said Friday that it has accepted the resignation of its controversial purchasing chief, Jose Ignacio Lopez.

The departure of Lopez, 55, whose defection from General Motors to Volkswagen in March 1993 touched off investigations on both sides of the Atlantic, seemed to signal a tacit acknowledgment by Volkswagen officials that GM might have a plausible case against it.

But Volkswagen made clear that it was not severing all ties with Lopez. It said it will welcome Lopez’s services as a consultant and will continue to pay his salary under terms of a contract.

An executive of GM Europe responded coldly to the announcement, calling it overdue and adding: “Lopez’s departure is not compensation for the damages that occurred.”

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He said GM intends to continue to pursue Lopez and Volkswagen through the courts.

“An explanation is still required as to why the management of Volkswagen has stood by a manager for years when it must have known that he had taken an abundance of Opel and GM documents to Wolfsburg,” the official added.

GM contends that Lopez and three of the seven GM executives he lured away to Volkswagen with him systematically stole boxes full of factory plans, component price lists, detailed new-car plans and other valuable documents and gave them to their new employer.

GM also claims that, once the secret information was entered into Volkswagen’s computers, Lopez’s assistants set up a shredding operation in a hotel room near one northern German VW factory where they spent three days destroying evidence.

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GM says these activities constitute industrial espionage.

In addition to pressing for criminal charges in Germany, it is seeking an unspecified but “substantial” amount of damages in federal District Court in Detroit.

The U.S. Justice Department is also conducting an investigation of the Lopez affair.

Until now, Volkswagen has denied each of GM’s angry charges, responding in some cases with counterclaims in the courts.

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Just this month, VW had vowed to let Lopez stay on the job even if the proceedings against him should lead to criminal charges.

Lopez’s lawyers say the filing of criminal charges by German prosecutors is imminent.

Officially, Volkswagen continued Friday to deny any wrongdoing.

Its supervisory board chairman, Klaus Liesen, praised Lopez’s performance in his 3 1/2 years at Volkswagen and said he was departing only so that he could devote his time to preparing a legal defense against the prospective criminal indictment.

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Liesen also repeated previous statements that independent auditors had found no evidence of Lopez stealing trade secrets from GM.

Despite strong rumors over the last few days that officials of the two auto makers have been holding secret meetings to discuss an out-of-court settlement, the GM Europe official insisted that no such talks are underway “at the present time.”

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Before it would consider dropping its lawsuit, GM said earlier this week, Lopez would have to resign, VW would have to issue a public apology, and the German auto maker would have to make a financial settlement.

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In a brief news conference Friday at VW headquarters in the northern German city of Wolfsburg, Volkswagen Chairman Ferdinand Piech said his company had, in fact, attempted three times to negotiate a settlement with GM but that the talks had failed each time.

He said Volkswagen will not return to the negotiating table as long as GM insists on setting conditions in advance. “I cannot imagine that we would enter talks if preconditions were attached,” he said.

Piech said that one of the seven so-called “warriors” whom Lopez had lured with him from GM to Volkswagen is also resigning, but the others will stay.

He said Lopez will form an independent consulting firm and that he would be happy to engage the outgoing purchasing chief as a freelance contractor.

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Moreover, Liesen said the company will continue paying Lopez’s legal fees and will pay his salary through the end of his contract, which runs until March 1998.

But the resignation marked a shift by Volkswagen and appeared to be a response to a recent string of adverse rulings in U.S. and German courts.

Four days ago, a federal judge in Detroit ruled that GM could proceed against Volkswagen under the Racketeer Influenced and Corrupt Organizations Act, which allows plaintiffs to collect three times the amount of the damage they can prove the defendant has caused them.

GM has never specified the amount of damages it seeks, but some industry observers have said that, if the case went to trial and GM prevailed, Volkswagen could end up owing billions of dollars.

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The GM racketeering complaint personally named Piech, along with other Volkswagen executives.

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Meanwhile, Lopez’s German lawyer said earlier this month that he expected a long-delayed criminal investigation by German prosecutors to yield an indictment before Christmas.

A German prosecutor handling the investigation declined to comment Friday on how Lopez’s resignation might affect the chances of an indictment, but the prosecutor added that a decision would be made by the middle of December.

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With an indictment appearing more and more likely, Volkswagen had already moved in recent days to establish distance between itself and its former superstar.

“My company can in no way be connected to espionage,” said Volkswagen supervisory board member Klaus Kocks in an interview this week. “I don’t know what was in the personal belongings of Mr. Lopez [when he arrived at Volkswagen]. I was not there.

“What I do know is that, at one point, Mr. Lopez thought it would be smart to destroy some things. We now know that this was not so smart. But there is a big difference between a foolish move by one man, and industrial espionage by Volkswagen.”

The epic battle between the two huge auto makers began on March 15, 1993, when Volkswagen’s Piech poached Lopez, who had until then been GM’s vice president for worldwide purchasing.

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No ordinary management figure, Lopez had been one of the most important agents behind GM’s turnaround in the early 1990s.

Brought in from GM Europe at a time when the American auto maker was under tremendous shareholder pressure to improve its performance, Lopez revolutionized the way GM purchased components from its suppliers, pushing through innovations that had saved the company more than $1 billion by the time he jumped ship.

* FALLEN WARRIOR

Lopez’s decline was as dramatic as his meteoric rise. Critics say he cut costs and corners. D1

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(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

GM-Volkswagen Dispute

March 16, 1993: Volkswagen names Jose Ignacio Lopez its purchasing and production chief, ending weeks of rumors that the aggressive cost-cutter was leaving General Motors.

March 23, 1993: Several European GM executives quit to follow Lopez to Volkswagen.

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April 7, 1993: GM Chief Executive Jack Smith says the company is signing top executives to employment contracts out of fear that defectors to VW were divulging company secrets.

May 21, 1993: GM says it filed a criminal complaint in Germany against Lopez over stolen document claims. Lopez denies taking documents.

Aug. 6, 1993: VW’s supervisory board backs Lopez but acknowledges that former GM employees may have brought sensitive documents with them. VW says the documents were destroyed.

Aug. 26, 1993: German authorities search VW headquarters and executives’ homes.

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May 18, 1994: GM discloses that it filed a criminal complaint six months earlier against a former top executive and a close confidant of Lopez.

March 8, 1996: GM sues VW in federal court, claiming Lopez and others stole documents.

Nov. 26, 1996: A federal judge in Detroit allows GM to use federal racketeering laws in its suit against VW. Racketeering laws allow the plaintiff to seek treble damages.

Nov. 29, 1996: Lopez quits VW.

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Source: Associated Press


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