Crunch time for Volkswagen: Industrial espionage claims are hounding VW. John Eisenhammer reports

THE FURORE surrounding Jose Ignacio Lopez de Arriortua, the former purchasing chief of General Motors who now stands accused of industrial espionage, will intensify this week when a German court delivers its judgment.

The scandal that has engulfed Mr Lopez and Volkswagen, his new employer, is threatening to discredit Germany's largest motor manufacturer and has already depressed its shares.

A civil court in Hamburg will give its verdict on Tuesday on a hearing called by Spiegel, a leading German magazine. Spiegel is trying to lift an injunction from VW preventing it from repeating allegations of industrial espionage against Mr Lopez. It has called in numerous senior GM executives, who have directly contradicted sworn statements by Mr Lopez concerning the collection of large quantities of confidential GM documents prior to his departure for VW. GM alleges these documents have been missing since then.

Mr Lopez holds a key position in VW. He left GM abruptly earlier this year - to the dismay of Jack Smith, GM's chairman - to join VW as head of production, to spearhead the company's recovery from recent heavy losses. He has been given free rein by Ferdinand Piech, the head of VW, to reduce the company's manufacturing costs and modernise its production processes.

Keen to take advantage of this first opportunity to launch a full- scale public assault on Mr Lopez's credibility, GM came to the Hamburg hearing with 22 executives as witnesses, accompanied by 4 corporate lawyers. Against Mr Lopez's statement that he had received only four or five charts shortly before he left GM, John Howell, director of business planning at GM, said he personally gave Mr Lopez a pile of documents two centimetres thick on future models and engineering programmes. 'It is clear that Lopez had lots of documents, many that had nothing to do with his job, and there is a strong possibility that he took them with him,' said Konrad Bennicke, counsel for Spiegel.

Separately from the Spiegel case, the Darmstadt state prosecutor, who is investigating GM's accusations of industrial espionage, is now seeking to interview Mr Lopez and two of his former GM colleagues on the basis of what are described as 'strong suspicions' provided by two sets of newly-discovered secret GM material which were apparently part of the missing property. And GM confirmed that the US Justice Department has also now been brought in to investigate possible document theft by former employees.

Concern that the war of claim and counter-claim between GM and Volkswagen appears to be swinging against Mr Lopez led last week to first signs of nervousness in financial markets. VW shares dipped on Friday. Frankfurt traders spoke of growing rumours among American investors that Mr Lopez's days are numbered, fuelled by news of the US Justice Department intervention. 'It looks increasingly like Lopez actually did take documents when he left GM, and the question we must ask ourselves is whether Ferdinand Piech knew about it,' said one trader.

The documents now in the hands of the Darmstadt prosecutor are potentially the most damaging items. Mr Lopez and those close colleagues who followed him to VW had delivered sworn statements that they took no proprietorial information. Sources said the matter was too delicate to reveal details about the latest material acquired, beyond stating that they are some of the documents missing from GM; that they had belonged to a former employee; and that they had been brought to the prosecutor's office by 'someone else'.

Another four cases of documents had been found in a Wiesbaden flat previously rented by two of Mr Lopez's colleagues, Jorge Alvarez and Rosario Piazza, who worked for GM's European subsidiary Opel, and who are also now with VW.

The documents include top-secret details of Opel's new small car project, coded the O-car, which is to rival Volkswagen's planned Chico. It was the O-car that Mr Lopez wished to produce in a revolutionary lean- production plant, which he had hoped GM would build in his native Basque country. Details revealed for the first time during the Hamburg court hearings show that Mr Lopez believes his revolutionary plant could build such a car in just six hours, half the very best times managed by the Japanese. It was disappointment on learning that GM did not intend to build his 'dream plant' in Spain, but probably in Hungary, that Mr Lopez gave as his reason for suddenly switching to Volkswagen.

Sworn statements given by senior GM executives to the Darmstadt prosecutor 'confirm GM's complaint about the missing documents', said a spokesman for the prosecutor's office. 'They confirm that these are important papers for the firm, and were found where they should not be.' He would not say whether a direct link had been found between the documents and Mr Lopez.

VW's defence so far - apart from keeping a deliberately low profile - has been to say that there was nothing unusual about the fact that Mr Lopez and his colleagues collected such large and diverse quantities of confidential material. 'This only proved how committed they were, and how hard they worked for GM,' said Michael Nesselhauf, counsel for VW at the Hamburg hearing. There is no proof that the documents were taken away, said Mr Nesselhauf.

This is the point that the Darmstadt prosecutor's criminal investigation is seeking to establish. The Hamburg hearing was a civil affair, in which GM itself was only indirectly involved.

Such was GM's alarm at the manner of Mr Lopez's departure, that it took the unusual step of ordering searches of his office the day after he left, as well as those of his colleagues even though some had not even formally given notice yet. Asked if this was normal practice, Alan Perriton, a GM executive who conducted the searches, told the court he was acting on strong concerns expressed by GM's legal department. None of the missing documents was found.

(Photograph omitted)