Leading Article: A very strange way to run a car company

AS RECESSION has bitten, staff at companies all over the world have been forced to work harder, more flexibly and for less money. Few, however, have seen the kind of shock that takes place when Jose Ignacio Lopez de Arriortua walks through the office door. When this 52-year-old Basque industrial engineer took over purchasing at General Motors, the world's biggest car firm, he ordered his subordinates in Detroit to go on a special fruit-and-liquid 'warrior diet'. He also told them to wear their watches on the opposite wrist from usual - and to do so until GM, which had run pounds 8bn into the red in two years, returned to profit.

That was nothing compared to Mr Lopez's attitude to GM's suppliers. Many were told to cut their prices by a quarter or more if they wanted to keep General Motors' business. They were also subjected to lightning time-and-motion studies, and ordered to make drastic changes in the way they organised their factories. Many complained; but Mr Lopez and his defenders inside GM were able to point to huge increases in productivity and equally huge cash savings.

Last March, Mr Lopez crossed the line dividing the merely eccentric from the outright bizarre. He decided to leave GM for a new job at Volkswagen, Europe's largest car maker. A few days later, he relented, agreeing to stay in return for a promotion to the No 2 slot in Detroit. Hours before the press conference to announce his new job, however, Mr Lopez vanished. He reappeared soon after in Germany, having decided to take the Volkswagen job after all.

What followed has become the biggest industrial espionage scandal in business history. German prosecutors are investigating allegations that boxes full of secret General Motors documents found their way to a flat in Wiesbaden inhabited by two former GM staff whom Mr Lopez took to Volkswagen with him. VW, while denying that its management sanctioned any spying, now admits that thousands of pages of GM papers were shredded on the premises of a guesthouse it owns.

Two conclusions may be drawn. One is that Western car makers must be in dire straits indeed if they are forced to resort to using shock tactics on their employees and suppliers to catch up with their more efficient Japanese competitors. Another is that no wise company puts its faith so blindly in a single executive. Despite the absence of Mr Lopez, GM now seems set to return to profit; despite his presence, analysts believe Volkswagen is doomed to lose money again this year.

So far, the supervisory board of Volkswagen has supported Ferdinand Piech, the group chairman, in considering Mr Lopez innocent until the prosecutors prove him guilty. Their embarrassment is understandable, but its cure is in Mr Lopez's own hands. His avowed dream is to build a new factory in his home town in the Basque country, where cars would be made even better and more cheaply than in Japan. Since neither VW nor GM is willing to put his plan into effect, he should resign and arrange financing for the plant himself - perhaps to sell its products to an existing manufacturer. In doing so, he would do both his former employers a favour, and earn himself a place in automotive history.