UPDATE: Renault Affair May Spur Crackdown On Industrial Espionage

Renault SA this week is expected to start the dismissal process for at least one of the three managers it suspended for allegedly divulging secrets about the auto maker's electric-car program, while the French government is using the case to press new legislation to protect business secrets.

In comments to a French newspaper, Renault Chief Operating Officer Patrick Pelata said the information allegedly disclosed concerned "vehicle architecture, and. . .the costs and economic model of our vehicle program."

"We have arrived at the conclusion that we are facing an organized system to gather economic, technological and strategic information to serve overseas interests," Mr. Pelata told the newspaper Le Monde, in comments confirmed by a Renault spokeswoman. Mr. Pelata said, however, that no critical information on its program had been leaked.

Still, the case has generated anxiety in France over the vulnerability of French businesses, which have less legal protection against intellectual-property theft than their U.S. counterparts.

Industry Minister Eric Besson said the government is preparing legislation that would punish theft of industrial secrets with penalties similar to those in cases of breaches of defense secrets. The law would make it a crime offense "to obtain, keep, reproduce or transfer to unauthorized third parties secret information of an economic nature," he said in a radio interview Saturday.

According to a person familiar with the matter, Chinese interests may be behind the case. Mr. Besson, asked about a possible Chinese connection, said he wasn't in a position to confirm it.

When Renault suspended the three senior managers last week, it said only that they had been involved in a serious breach of confidentiality that put important company assets at risk. The car maker hasn't yet revealed the managers' names, in accordance with French law. But one of the three, Matthieu Tenenbaum, a senior manager in the company's electric program, has insisted he was stunned by the espionage accusation. He was expecting to be summoned by Renault on Tuesday for a hearing that could lead to his dismissal, said a person familiar with the situation.

Workers at Renault's Technocentre, where the three suspended managers worked, were shocked and know little about what information may have been passed outside the company, said Alain Gueguen, head of the Renault branch of the SUD trade union. He and others were staying up to date on the case via the French media. "It was like a bomb," said Mr. Gueguen. "That directors could do something like this is a first. It's exceptional."

In his newspaper interview, Mr. Pelata said the alleged leak was likely motivated by the ambitious electric-vehicle program at Renault and its Japanese partner Nissan Motor Co., which want to dominate the new market for electric vehicles. "It's obvious that our technology can arouse keen interest, and that this is especially true as we are a pioneer in electric vehicles," he said.

The Renault executive indicated that any technology leak was relatively minor. "We have done a review with our technical teams," he said. "It is clear that no nugget of technology that is strategic for innovation could have leaked outside the company-- including the more than 200 patents registered or in the process of being registered. "Nothing critical seems to have leaked concerning the chemistry of the electrodes, the architecture of the batteries, the assembly of the different components, the charger, or of the motor itself," Mr. Pelata said.

Instead, he said, any leaked information was about the surrounding technology used to incorporate a battery and electric motor into a car. "We think that information was leaked on vehicle architecture, and on the costs and economic model of our vehicle program," he said.

"It's serious, but less so than if the damage had concerned technology," he said, adding that the affair wouldn't change anything in Renault's electric vehicle program.

The core of an electric vehicle is the battery and associated electronics. Electric vehicles require sophisticated power management systems to prevent battery overheating and to extract the maximum amount of energy for the least possible weight. Car makers are striving for a technological breakthrough to extend the driving range on a single charge beyond the current limit of about 150 kilometers.

Renault and Nissan, which share the same CEO, Carlos Ghosn, have invested a combined EUR4 billion ($5.17 billion) into electric vehicles. Mr. Ghosn has forecast that electric vehicles will represent 10% of global automobile sales in 10 years.

--David Gauthier-Villars contributed to this article.

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