Gm Braces For Life After Lopez

Morale could suffer following the flamboyant exec's defection to VW

It's the question of the moment in the world auto industry: Just what is it about J. Ignacio Lopez de Arriortua that's so special? After a struggle with General Motors Corp., Germany's Volkswagen wrested the Basque executive away from GM by making him one of its top three leaders, in charge of purchasing and production. If Lopez' salary is as high as the $20 million over five years that it's rumored to be, he's now one of Europe's highest-paid executives.

Why all the fuss over a purchasing chief, until recently one of corporate America's drabber specialties? In Lopez' case, it's because at a company bogged down by inertia, he delivered. When Lopez arrived in Detroit last May, he had already played a key role as chief cost-cutter in the turnaround of GM's European unit. Using similarly tough methods in the U.S., he cut more than $1 billion in costs in his first seven months. Analyst John Casesa of Wertheim Schroder & Co. figures Lopez had already locked in two-thirds of his 1993 savings target of $2.3 billion with new contracts. Indeed, Lopez' slashing is a key reason why GM CEO John F. Smith Jr. may keep his promise that GM's troubled North American auto operation will inch into the black this year. "We clearly did not want to lose him," Smith says.

`PIVOTAL.' The question now: Will Lopez' departure unseat GM's fragile recovery? Wall Street doesn't expect it to, but keeping the momentum going will be a difficult task. "In my view, Lopez has been absolutely the pivotal person to effect change at GM," says Elliot B. Ross, co-chairman of Inverness Castings Group, a Bangor (Mich.) supplier. "Before he showed up, there was a lot of talk and little action."

Smith must move quickly to replace Lopez and avoid an exodus of his loyal lieutenants. Among the possible replacements: Alan G. Perriton, Lopez' No.2, a New Zealander who crafted Saturn's innovative long-term ties with suppliers; Robert Hendry, North American finance chief who was GM's top manager at its joint venture with Toyota; and Roy S. Roberts, the manufacturing-savvy GMC Truck general manager. Says Dan Chicoine, president of Atoma International, a Newmarket (Ont.) automotive supplier: "The issue now will be whether the team can maintain his intensity."

STRONG-ARMING? None of Lopez' potential successors has his wacky charisma. Furman Selz Inc. analyst Maryann Keller notes that Lopez fostered a "cult" at GM by instilling a sense of purpose that spread from the staffers he dubbed his "warriors" to other GMers hungry for change. Lopez also understood the power of symbols. He exhorted managers to switch their watches from left to right wrists, to keep them uncomfortable until North American profits revived. Even his odd eating habits became part of his drive for a leaner GM (box).

But the bigger worry is longer-term. Lopez' detractors contend that his strong-arm approach will eventually backfire. Many GM suppliers say Lopez tore up contracts and demanded rapid double-digit price cuts that they can't achieve. Some even say they'll shift their research spending to more conciliatory Chrysler Corp. and Ford Motor Co. Lopez' successor must ensure continued savings while repairing GM's frayed relations with its contractors.

Still, no one expects a repudiation of Lopez' zeal for lower costs. At a dinner just after Lopez left, Perriton shot out his arm to show his watch--still on his right wrist.

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