I might guess it was the renaults as they pioneered the turbo so were far and away quicker than anyone else but the teakettles were notoriously unreliable.
No teakettles in this story unless you consider the 2nd driver of the team we are talking about to be as useful as a F1 driver as a chocolate one.
Wait, you misled me. It was indeed the teakettles! The turbocharged Renaults were called the teakettles because they had a propensity to boil over. In the 1980 German GP, both of them suffered engine failures. They were presumably the typical Renault turbo engine failures. The wholly inadequate cooling system is overwhelmed by all the additional heat the turbo generates, so it fails, followed by loss of all coolant which makes the engine stop running. That is, if Lew is right. And I only guessed the team. I would never have got the venue or year.
I doubt it was that race. There is very little information about this Grand Prix. I can't really find any. But given that Alan Jones in the Williams qualified on pole and also had the fastest lap, seems to indicate to me that Williams lead a lot of the race.
[EDIT] No, further research seems to agree. On the official F1 website there is an article dedicated to Lafitte, and there is a picture down the bottom right showing Rene Arnoux leading Lafitte at that Grand Prix here: http://www.formula1.com/news/features/2006/7/4623.html.
And this website here indicates that Arnoux's team mate "set the pace initially."
http://kevin-guthrie.suite101.com/1980-f1-racing-season-a79778
OK...
Just to clear this up it was NOT the 1980 German Grand Prix...Although this is an extremely good guess (Jabouille in the Renault lead for the first 26 laps and then both he and Arnoux in the sister car retired within 1 lap of each other) its not the right answer because firstly the 1980 German Grand Prix was the 2nd time not first it was run at Hockenheim after 1979.
Secondly my records show the Renaults of that day were taken out by valve failures and not engines. A bit techy but still not what I am thinking of.
A further couple of clues. Its all a bit more recent that any of the guesses so far. And whilst it was a French team leading that doesnt mean it has to be a French driver.
There I really think that will make it a snap now. Quite surprised this hasnt been answered already.