VW calls crisis talks over business woes and Lopez affair

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VOLKSWAGEN'S supervisory board is to hold an extraordinary meeting tomorrow evening, amid signs that the business recovery programme is veering perilously off course, and growing internal ructions over the Lopez affair. Klaus Liesen, chairman of the supervisory board, broke off his holidays to call the meeting.

He has come under sharp criticism, along with VW's chief executive, Ferdinand Piech, for their handling of the controversy surrounding VW's production chief, Jose Ignacio Lopez de Arriortua, accused by his former employer, General Motors, of industrial espionage. VW spokesmen were quick to dampen speculation that Mr Lopez would be dismissed.

Just before the announcement of the meeting, VW said it would be cutting 3,000 jobs in Germany, on top of the 12,500 scheduled to go by the end of 1994. Analysts saw the unusual calling of a supervisory board meeting at the beginning of August as indicating growing alarm within the company that Mr Piech's pledge of a turnaround before the year's end is no longer realistic. Mr Piech himself admitted earlier this week that VW would not reach break-even if turnover fell by more than 5 per cent in 1993.

Deutsche Bank Research is forecasting a decline of 8 per cent in VW sales. With orders continuing to decline in June, the outlook remains grim.

VW made a loss of DM1.25bn in the first quarter of this year, and Hans- Joachim Pilz of MM Warburg expects another loss of around DM500m for the second quarter. VW's sales plunged 29 per cent in June compared with a year earlier. 'It is quite clear now that there will be no break-even this year,' Mr Pilz said.

Concern at the difficult business climate has been sharply aggravated by the perceived setbacks to VW's image and morale, as GM relentlessly steps up the pressure in its legal onslaught on Mr Lopez.

Having first tried virtually to ignore GM's allegations of mass document theft by Mr Lopez and other colleagues who switched to VW, Mr Piech suddenly went on the counter- offensive last week. His outburst, accusing GM of dirty tricks, was widely felt to have backfired.