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Analysts: Automaker Unshaken by Departure of Purchasing Chief

March 12, 1993

DETROIT (AP) _ The departure of J. Ignacio Lopez de Arriortua from the new team of cost- conscious managers at General Motors Corp. won’t slow the automaker’s drive to become profitable again, analysts say.

Lopez, a Spaniard with a doctorate in engineering, resigned Thursday as vice president of global purchasing, less than a year after GM President Jack Smith hired him to revamp GM’s fragmented buying system.

Volkswagen announced today it has hired Lopez to work at Europe’s biggest automaker.

Lopez’s strategies saved GM millions of dollars on its $50 billion in annual supply purchases. His demands that GM suppliers cut prices by 20 percent and rebid for existing contracts were among his boldest and most- criticized moves.

They also got fast results.

″GM has already got about 70 percent of the $2 billion in cost reductions Lopez promised for this year in the bag,″ Salomon Brothers Inc. auto analyst Jack Kirnan said. ″I really do not detect any significant change in what GM is going to do.″

Other observers said Lopez, who came to Detroit from GM’s European purchasing operations, has spread his notions of efficiency far enough through GM - first in Europe and for the last 10 months in North America - that others can pick up the mantle.

″I don’t think it’s a material event,″ said analyst Doug Laughlin of Bear, Stearns & Co. in New York. ″I don’t think it changes anything for GM. The programs will continue just fine.″

Smith promised that the purchasing team and policies initiated by Lopez would remain intact. GM did not immediately name a successor to Lopez.

For weeks, GM has tried to quell rumors that Lopez would leave the world’s largest automaker for Germany’s Volkswagen AG. Lopez kept the speculation alive by declining to deny talk of such a move.

Volkswagen today announced from Germany it is hiring Lopez and will name him to the board at its next meeting Tuesday. Spokesman Hans Blechinger said from Wolfsberg headquarters he didn’t know when Lopez would start work at Volkswagen.

Volkswagen posted a loss in the last quarter of 1992 as Germany’s economy slipped into recession, and like most other German automakers, VW put some workers on short shifts early this year to counter slumping sales.

Lopez met Thursday afternoon with his GM staff, then left his office.

GM, which promoted Lopez to executive vice president last month, apparently knew it was about to lose the colorful executive whose demands for lower prices, higher quality and better service had rankled some U.S. suppliers.

Last week at the Geneva Auto Show, Smith was asked whether he felt Lopez would stay or go. Smith responded by motioning toward the nearby Volkswagen display, saying, ″They’re playing with his head.″

Lopez often spoke emotionally of his ″love for my leader,″ a reference to Smith. Lopez served under Smith at GM of Europe before moving to Detroit last May.

In what turned out to be his swan song at an awards program for suppliers Saturday, Lopez continued to press even those makers of parts that had performed well enough to earn his Worldwide Supplier of the Year honor.

″Please, don’t use any more excuses like ‘Our prices are already low’ and ’Our profits cannot be cut further,‴ Lopez said.

European suppliers will be getting their second dose of Lopez’s methods. As purchasing boss for GM Europe, Lopez helped turn that operation from an also- ran into the most profitable in Europe.

Laughlin, the Bear Stearns analyst, said despite Lopez leaving, GM is making plenty of good moves these days, such as pledging to break even in North America before interest, taxes and health care costs this year.

″I don’t think he’s the only thing going right at GM,″ Laughlin said. ″I think he’s a product of the system, not the cause of the system.″

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