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Volkswagen Chairman Defends Hiring GM's Lopez : Warfare: U.S. Justice Department and German prosecutors are investigating if auto secrets were part of deal.


WOLFSBURG, Germany — No one ever doubted the engineering prowess of Ferdinand Piech, long an innovator in Germany's auto industry. But what about his leadership as Volkswagen's freshman chief, indeed his integrity?

In the months since he took the helm, the Porsche family scion and former Audi chairman has managed to cast in a sinister light a company that projects, as much as any other, Germany's industrial image abroad.

Piech's priority after his Jan. 1 ascension was to acquire for his recession-bruised company the star cost-cutter at General Motors, Jose Ignacio Lopez de Arriortua.

There was much gushing in Wolfsburg, a one-company town with the world's biggest car factory and what may well be the industry's most expensive work force.

But evidence began to mount that piles of secret GM documents may have been part of the deal. Volkswagen was taking hits almost daily in the German press. "Lopez -- The Unscrupulous" or "The Demonic Duo," headlines read.

It was too much for the 56-year-old Piech, a man who normally shows little emotion and fastens together phrases with machine-tool precision.

Standing firmly behind the innovative Spaniard was not enough.

Piech called a surprise news conference and counterattacked, insinuating that GM documents found in the Wiesbaden apartment of two Lopez loyalists in June might have been planted by GM itself.

"We are waging an economic war," declared the wiry Austrian, his steely blue eyes burning with intensity. "We're in a mudslinging battle and we intend to do what's necessary to win."

"If Volkswagen does not in the near term turn the corner," said Piech, "then German industry, indeed the European auto industry, is kaput."

Here in the klieg lights' glare was the man who became chief of technical development at age 35 for Audi and there oversaw development of such innovations as full-body rustproofing, all-wheel drive and the exhaust-driven air-cooled turbosupercharger.

A technical wizard, perhaps. But at a critical moment for VW, a public relations disaster. German politicians and executives groaned over Piech's nationalistic rhetoric.

"The phrase 'economic war' damages the reputation of German business," complained Edzard Reuter, who as Daimler-Benz chairman heads the country's largest industrial concern.

After his July 28 news conference, the man whose grandfather founded Porsche AG and pioneered the VW Beetle gained a new moniker in German media: "The Warrior."

Ferdinand Porsche was called on by the Nazis in 1939 to build up the VW works during wartime. Now, his grandson was waging a different sort of war, one for survival against the Americans and Japanese.

GM executives were flabbergasted by Piech's July 28 riposte. They had considered their case against Lopez and the seven associates who jumped ship with him to be getting stronger by the day.

Both U.S. Justice Department and German prosecutors were investigating the case--and testimony by GM witnesses had convinced a German judge to foil Volkswagen's attempt to bar the Hamburg newsmagazine Der Spiegel from reporting the story.

But no words of conciliation have come from Piech. Instead, he continues to insist that VW possesses no GM secrets--even after his company admitted this month that some documents that might have contained sensitive information actually made it onto VW property and were destroyed.

Piech, reported to be worth as much as $3 billion, is getting more press than Lopez these days. Germans have learned that he has 12 children by at least three women and is on his second marriage, which a VW official confirmed but only on condition of anonymity.

Piech and his 35-year-old wife Ursula, the former family governess, live with their three children in a thatched-roof home not far from Wolfsburg that has 9-foot walls, videocameras and a police guard, says Bunte magazine. His company biography says he's a skier, sailor and mountain biker.

Colleagues say Piech, who refused to be interviewed by The Associated Press, is a loner who works 18-hour days and operates with the self-assurance of the independently wealthy.

Piech's decisiveness may prove a fatal flaw. Because Piech has wed himself to Lopez, everyone from editorial writers to assembly-line workers are saying that if Lopez is forced to resign, they expect Piech to lose his job, too.

"We can do just fine without this pair," said Heinz-Otto Koerner, a steering assemblage worker at the Wolfsburg plant.

Lopez has "really hurt the reputation of Volkswagen" and Piech only made matters worse by continuing to back him, Koerner said as he left work recently after a shortened shift.

Audi won two car-of-the-year awards under Piech. But its parent company, VW, is getting a black eye over his decision to stay loyal to a man who many GM executives feel betrayed them.

'Inaki' Lopez is Piech's self-proclaimed key to survival--although part of the cost will be lost jobs for 15,500 of VW German workers by the end of next year. Piech contends Lopez already has been so successful--reducing the number of suppliers and soliciting greater worker input to reduce defects and speed production--that VW will break even this year.

But financial analysts are dubious. The VW group--Volkswagen, Audi, Spain-based Seat and Skoda in the Czech Republic--lost $960 million the first half of this year.

Does Piech feel for all the VW workers who'll soon be collecting unemployment? Not if you believe the pop psychologist who analyzed Piech for the magazine Wirtschafts Woche.

Cologne psychotherapist Peter Lauster said Piech is neither amiable nor empathetic--but rather emanates "hardness, control, defense, thinly-veiled aggressiveness."

That fits with another German media characterization of Piech: Benzin im Blut --Gasoline in the blood.

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