Jose Ignacio Lopez de Arriortua, also known as “The Inquisitor” is the man behind one of the most prolonged legal battles in the automotive industry. Ignacio ‘Inaki’ Lopez was a Spanish national who had the chance of sitting at the helm of two global vehicle-manufacturing companies. As the General Motors’ purchasing manager, Lopez introduced a wide range of reforms that turned around the fortunes of the automaker. Nevertheless, Lopez’s career as a purchasing agent came to a close shortly after his controversial move from General Motors (GM) to Volkswagen (VW). Opinions are divided when it comes to the evaluation of Lopez’s methods. Some people feel that Lopez was an industry trailblazer while others feel that Lopez was an underhanded executive who used unethical methods to accomplish his missions. This paper explores the Lopez affair and the intricacies surrounding it.
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Jose Ignacio Lopez was born in Spain in 1941 and proceeded to start a career in Industrial Engineering. Lopez’s career started at the Firestone processing plant in Basauri but in the year 1980, he became a GM employee at Zaragoza. When Jack Smith visited Zaragoza’s GM branch, he was impressed by Lopez’s cost cutting ideas. Later on, Smith promoted Lopez to the position of Global Purchasing Manager (Nauss 1). Nevertheless, Lopez’s cost cutting ideas were a game changer for GM and they saved the company over $1 billion in the first year. Lopez was able to cut purchasing costs by a further $2.4 billion in his second year as GM’s purchasing manager.
Lopez’s methods involved renegotiating existing contracts and cancelling others. Jack Smith, the former head of GM once claimed that Lopez had managed to ‘stop the bleeding’ at the automaker (Nauss 1). The presence of Lopez at GM continued to be felt in a positive manner until he announced that he was leaving GM for Volkswagen in 1993. GM’s board of directors attempted to woe Inaki by giving him a better position “as the president of North American operations” (Nauss 1). However, Lopez went ahead with his planned departure from GM. Consequently, GM accused Lopez and three other individuals of racketeering, theft of trade secrets, and fraud among other things.
Furthermore, GM filed a civil suit against Volkswagen leading to a mega legal war that dragged on for years. Lopez also faced criminal charges in both Germany and the United States. Lopez was eventually cleared of any wrongdoing in Germany but he is still wanted in the United States to answer to criminal charges. As part of a civil suit settlement, Lopez resigned from his position at Volkswagen.
The Lopez Affair (as the scandal is famously known) is quite significant in the history of purchases management. Lopez gave prominence to a position that was previously low-profiled. Before the Lopez Affair, the role of purchasing managers was usually overshadowed by the boardroom deals that characterized supply contracts. In addition, the role of purchasing managers was to tow the line and work to maintain longstanding relationships with suppliers. However, Lopez is responsible for changing this dynamic by actively pursuing cost-cutting ventures.
Some people have rejected Lopez’s methods for being controversial and going against the standard business ethics (Rudzki 19). As purchasing manager, Lopez is said to have voided existing supply contracts and demanded unconditional cost cuts from suppliers. Some of these methods go against the spirit of global purchasing and supply management. For instance, traditional purchases and supply management promotes lengthy affiliations that link companies with their suppliers. Lopez’s approach ignored the importance of longstanding relationships between GM and its suppliers. Lopez’s sole purpose was to cut purchasing costs without considering existing relationships.
The competition for Lopez’s services presents an interesting scenario where two industry leaders agree on a similar strategy. Both Welch and Smith recognized the need to have an effective purchasing manager in their companies. Nevertheless, other industry heads still believed that supplier-purchaser partnerships were an integral part of corporate governance. However, the heads of VW and GM vigorously pursued Lopez’s purchasing methods. The actions of these two executives can be explained by the state of the automotive industry in the late 1980s and the early 1990s. During this period, automakers were desperate to cut any costs that were related to the production process.
For instance, some automakers were pursuing other cost cutting methods such as relocations and labor-cuts. Therefore, Lopez’s purchasing methods failed to achieve validation across several industries because they were specific to a single industry-problem. However, Lopez brought forth the realization that huge costs could be cut by harnessing the purchasing and supply management process (Rudzki 100). Consequently, several companies adopted Lopez’s methods in the course of their operations. For instance, the purchasing manager who replaced Lopez at VW proceeded to implement Lopez-like methods. Furthermore, most companies consider efficient purchasing and supply management as a best practice.
Lopez’s contributions to purchasing management practices are undeniable. Lopez is responsible for putting the purchasing manager’s position on the map. In addition, his contributions to purchases management were an industry game-changer. Although Lopez left the corporate scene in a controversial manner, he will always be credited with the introduction of a new dimension to purchases and supply management.
Nauss, Donald. “Executive’s Fall as Dramatic as His Rise.” Latimes. LA Times Mag. 1996. Web.
Rudzki, Robert. “Straight to the Bottom Line: An Executive’s Roadmap to World Class Supply Management.” Purchasing Magazine 29.1 (2006): 3-270. Print.