VW shatters dream of revolutionary car plant in Spain: Lopez's pet project of super-lean factory for his Basque homeland is hit by economic constraints

VOLKSWAGEN has no intention of building a revolutionary car plant in Spain in the foreseeable future, thus shattering the dream of its controversial purchasing chief, Jose Ignacio Lopez.

In an interview with the German newspaper Die Welt, Ferdinand Piech, VW's chairman, said: 'If you look at the overall economic situation, then there can be no question of it for now. I have told Mr Lopez this. Contrary to other reports, this decision is final.'

It was the belief that Volkswagen would carry out his pet project - to set up a super-lean plant, capable of producing cars in less than 12 hours, in his native Basque country - that was apparently behind Mr Lopez's tumultuous departure from General Motors in March.

Mr Lopez, now Mr Piech's number two, recently told a Spanish audience that he was confident his dream plant would go ahead. Speaking in Madrid on 14 June he left little doubt that the plant would be built in his home town of Amorebieta, a town that has a high rate of unemployment and whose citizens treat Mr Lopez as a hero.

Mr Piech's rejection will come as a severe blow to the mercurial Spaniard, who described GM's decision not to go ahead with the Basque project as a great disappointment.

GM had subsequently warned Mr Piech about possible legal implications should VW seek to go ahead with the revolutionary plant, which the American company argues is very similar to the project Mr Lopez had developed in Detroit.

Mr Piech dismissed GM's instigation of legal proceedings against Mr Lopez - on suspicion that he took large numbers of confidential documents when he left for VW - as a personal campaign by Louis Hughes, GM's European chief, who was beaten to the Volkswagen chairmanship by Mr Piech.

However, Georg Nauth, spokesman for the state prosecutor's office in Darmstadt, said yesterday that the investigations into the missing documents were being extended to the United States. GM documents found recently in a house in Wiesbaden formerly occupied by two GM managers who followed Mr Lopez to VW 'confirm the grounds for GM's charges', Mr Nauth said.

Mr Piech said he was confident that VW would break even this year, despite a DM1.25bn loss in the first quarter. He said that the first stage of a radical DM8bn cost-cutting programme had been completed.

A key part of the efficiency drive, spearheaded by Mr Lopez, will see the VW marque slash the number of its suppliers from the current 1,500 to about 100 main, or first-tier, suppliers. These will deliver complete sections of the vehicle for assembly. 'By comparison, Toyota has 220 such suppliers,' Mr Piech said.

Mr Lopez was unavailable for comment last night.