Butcher, saviour, soldier . . . spy?: General Motors says its miracle man stole secrets when he defected to VW. John Eisenhammer reports

WHEN Werner Niefer, then head of Mercedes-Benz, accused Volkswagen in late April of bringing the lawlessness of the wild west to Germany, he had little notion just how apt his imagery would be. For shortly after those words were spoken, General Motors rode into town, with the meanest look in its eyes that anyone can remember for a long time. The American giant wasted little time setting in motion a criminal investigation into suspected industrial espionage by several of its senior executives who had defected to Volkswagen.

GM's wrath was directed above all at one man - an enigmatic 52-year-old Spaniard, Jose Ignacio Lopez de Arriortua. Formerly General Motors' head of worldwide purchasing, he suddenly switched in March to become in effect the number two at Volkswagen, Europe's biggest car manufacturer. Seven of Mr Lopez's close colleagues at GM soon joined him at VW.

It was bad enough for GM to lose the man on whom it pinned many of its hopes for restoring the loss-making North American operations to profit. But GM feared far worse. 'In their last few months at GM, Lopez and his colleagues got a lot of information, confidential information, far more than they needed for their work,' said David Herman, the 47-year-old head of Adam Opel, GM's European subsidiary. 'After they left, we could no longer find this information. The question is, where the hell is it?'

That is the public line. Privately, the top echelons of GM and Opel are now driven by a thirst for vengeance against a man the corporation is convinced has betrayed it on a grand scale. 'We are going to nail the bastard,' is how one top GM manager put it, off the record.

Mr Lopez has denied taking any GM documents or information to Volkswagen. 'I went only with what I had in my head,' he said. During the past week, however, his defence has suffered a series of blows. On Thursday, the office of the state prosecutor in Darmstadt, Dorothea Holland, made a formal statement on the criminal investigation that provided, for the first time, a possible link between Mr Lopez and a cache of secret GM documents. Four boxes of material had been found at a flat in Wiesbaden occupied by two former employees of Opel, who were among the group that followed Mr Lopez to VW.

On the basis of statements from GM executives, some of the material was identified as having come from Opel's technical development centre in Germany, and contained top-secret plans for a new generation of small car scheduled for the latter half of the Nineties, codenamed the O-car. The boxes also contained sales strategy papers, cost-saving programmes, and details about the new Vectra model, sold in Britain as the Vauxhall Cavalier. According to the prosecutor, GM executives had claimed that some of the overhead projector transparencies and slides 'had been prepared and translated into German at the express wish of Mr Lopez'.

The state prosecutor said she now wanted to focus inquiries on Volkswagen employees, notably Mr Lopez, his right-hand man Jose Gutierrez, and the two close colleagues connected to the Wiesbaden flat, Rosario Piazza and Jorge Alvarez.

Jose Ignacio Lopez de Arriortua is no ordinary manager. He sees himself as the saviour of the European motor industry, leading a crusade against the Japanese infidel. 'The battle for the automobile industry is the final struggle,' he says. 'If we lose it, we shall become second-class citizens in second-class countries.'

His language resounds to the sounds of war. He calls his closest colleagues 'centurions'; the members of his feared cost-cutting hit squads are his 'warriors'. All are urged to heed a special Lopez fruit-based diet which 'heightens the fighting spirit'. Mr Lopez, who was Opel's purchasing chief during the late Eighties and the beginning of the Nineties, drove himself and his warriors with an intensity bordering on fanaticism, pushing production costs down, forcing suppliers to reduce their prices by as much as 20 or 30 per cent. He became known as the Butcher of Russelsheim, where Opel is based, evoking a mixture of fear and respect, and an almost sect-like devotion among his close colleagues. Such was the efficiency of his methods that Jack Smith, who became head of GM in early 1992, brought Mr Lopez to work his magic in Detroit.

But GM was not the only company in need of salvation. Volkswagen was heading for disaster. It saw earnings collapse by 87 per cent last year to DM147m (pounds 59m), despite a 12 per cent rise in sales to DM85bn. The company had become so inefficient that it was losing money on every car it sold. In the first quarter of 1993, VW lost a staggering DM1.25bn. Even before he became head of Volkswagen in January of this year, Ferdinand Piech had begun wooing Mr Lopez.

How VW finally won in March the tug of war with GM over the man both companies regarded as their saviour is still a mystery. At the heart of it, however, appears to lie Mr Lopez's obsession with building what he calls his 'dream plant', a factory that would manufacture a car in six hours, half of the best times the Japanese can manage. He wants it to be built in his home town of Amorebieta, in the Basque country. For Mr Lopez is not content to go down in history merely as the man who saved Europe's car industry. He has political ambitions as well, and his dream plant is to be the stepping stone.

It was disappointment at learning that GM had no intention of building his revolutionary factory in Spain, but possibly in Hungary, that led Mr Lopez to look elsewhere for a mentor. He found one. And increasingly desperate Volkswagen executives are asking themselves whether they got rather more than they bargained for.

The sudden acceleration in the Darmstadt state prosecutor's criminal investigation came days after the verdict in a separate civil hearing in a Hamburg court. Volkswagen lost in its effort to maintain a gagging order on the German news magazine Der Spiegel. On the evidence of numerous GM executives, which directly contradicted sworn statements by Mr Lopez, Judge Harald Ficus ruled that the magazine may continue to publish allegations about large-scale document theft by the former GM employees.

Importantly, the Hamburg hearing also cast doubt, for the first time, on the word of Volkswagen's chairman, Mr Piech. Der Spiegel was freed to report allegations that Mr Piech and Mr Lopez were already in agreement about the switch to VW at the beginning of 1993. Yet both men had given sworn statements that they had reached their decision only on 9 March, six days before Mr Lopez flew to Germany.

Judge Ficus emphasised that the Hamburg court was not ruling on whether the allegations were true - that is for the state prosecutor to establish - but rather whether there was enough evidence to allow the continued reporting of 'reasonable suspicions'.

The sight of one GM executive after another flatly contradicting Mr Lopez's word has been too much for many investors. The hurricane of negative publicity began to lash with ever greater intensity against the portals of Volkswagen's headquarters in Wolfsburg. 'Lopez-VW: 5 years in jail?' boomed the banner headline in Germany's most popular newspaper, Bild. VW's share price began to slide.

On Friday, Mr Piech was summoned to a meeting in Hanover with senior members of VW's supervisory board, and his handling of the Lopez affair was harshly criticised. One thing was made absolutely clear - should any of the industrial espionage claims be proven, the guilty party would be fired forthwith.

Beleaguered Volkswagen officials reacted to the bombardment of questions with increasing irritation. 'The accusations concern individuals and what they did while GM employees. It does not affect VW,' said Lutz Schilling, the company's spokesman. But it is affecting VW, and visibly so. As the tension mounts with each new setback for Mr Lopez, one question keeps being asked with ever greater urgency. Is it really possible that a man recognised by many in the motor industry as an exceptional talent could have been so stupid as to collect, systematically and openly, vast quantities of confidential material, and then walk out, taking it with him?

(Photographs omitted)