Lopez Indicted by Germany in VW-GM Trade Secrets Case

Two weeks after resigning as Volkswagen’s production chief, Jose Ignacio Lopez de Arriortua has been indicted on criminal charges by a German state prosecutor, according to lawyers for Lopez and for his archenemy and previous employer, General Motors Corp.

The long-awaited indictment caps a 3 1/2-year investigation into GM’s accusations that Lopez took company trade secrets when he jumped to Volkswagen in 1993.

A spokesman for the state prosecutor in the city of Darmstadt, near Frankfurt, declined Wednesday to reveal the contents of the new indictment, saying only that further details would be released at a news conference Friday.

But a lawyer for Lopez said in a statement that the indictment cites charges of embezzlement and misappropriation of trade secrets. Each is a felony under German law and carries a sentence of three to five years in prison.

An executive of GM Europe said the prosecutor’s office told the U.S. auto maker that three Lopez associates--two of whom still hold managerial positions at Volkswagen--were indicted as well. The prosecutor’s office declined to confirm that.

GM’s accusations against Lopez have fed a dispute between the two huge auto makers that has been one of the most bitter, personal and potentially damaging in industry annals.

In March, GM filed a civil suit against Lopez and other Volkswagen executives in U.S. District Court in Detroit, claiming triple damages under the Racketeer Influenced and Corrupt Organizations Act.

If the suit goes to trial and GM prevails, some observers say Volkswagen’s obligation could run into the billions of dollars.

Volkswagen’s announcement Nov. 29 that it had accepted Lopez’s resignation was seen by some as an acknowledgment that GM had a case against the company.

Among other things, GM is accusing Lopez of stealing revolutionary plans for a “factory of the future,” which the U.S. auto maker had hoped one day to apply toward making cars as cost-effectively as possible in a new plant.

A Volkswagen truck plant now coming online in Brazil allegedly makes use of those secret plans.

But Lopez’s lawyer, Juergen Taschke, said the prosecutors had decided that this accusation was “unfounded.”

“The public prosecutor’s office itself found that the plan was only a rough study, which would have needed extensive revision before any new plant could have been built,” Taschke said.

With the precise wording and details of the criminal charges still a secret, both sides were rushing Wednesday to claim a victory.

Volkswagen issued a statement headlined, “House of Cards of GM/Opel Allegations Collapses,” claiming that “the public prosecutor’s office considers the allegations by Opel and GM, for the most part, to be unjustified.”

Opel is Adam Opel, GM’s German subsidiary and Volkswagen’s closest competitor for market share in Germany.

But at Opel, executives issued a counterstatement claiming that “with the filing of the indictment, the Darmstadt public prosecutor confirmed the initial suspicion of industrial espionage.”

Until recently, GM had been concerned that the German criminal investigation against Lopez would fizzle. Although Germany prides itself on the independence of its judiciary, the investigation was delayed so many times that some observers wondered whether the problem was prosecutorial reluctance to attack an important national institution such as VW.

In addition to being the largest auto maker in Europe and the source of many jobs in northern Germany, Volkswagen has as a member of its supervisory board Gerhard Schroeder, the governor of the state of Lower Saxony--an important politician rumored to be a possible candidate for chancellor in the next national election.

Wednesday’s news of an indictment also came amid mounting speculation about the future of Volkswagen’s chairman, Ferdinand Piech. He arrived at troubled Volkswagen in 1993 and immediately set about making dramatic improvements in the company’s performance. Wooing star cost cutter Lopez from GM was an important element of his strategy.

Now, with GM accusing Piech not only of hiring Lopez away but also of encouraging him to steal its secrets, several newspapers have noted this week that Piech’s employment contract expires at the end of 1997 and that he will begin renegotiating its terms next March.