In a bold move to head off a new round of wage-price inflation, the British government today announced a boycott of the Ford Motor Co. because the firm violated the government's 5 percent pay standard in its new labor contracts in England.
The action could cost the U.S. subsidiary $120 million in government sales as well as other government aid.
The government said it had reached its decision "reluctantly" after the company settled a nine-week strike by granting 17 percent pay increases to 57,000 auto workers. Officials said they had little choice in taking the boycott action.
Government officials warned that if Prime Minister James Callaghan's Labor government had allowed the Ford increase to go unchallenged, it would have encouraged a wave of pay increases that would smash any hope of restraining inflation. The boycott will remain in effect for a year.
The action by the British government came less than 24 hours after President Carter urged state and local government officials in the United States to boycott any firms that violated his government's new voluntary wage-price guidelines.
Like the British government, the Carter administration has threatened to use its procurement powers, such as defense contracting to punish companies that violate the wage-price guidelines.
Although the British action today will halt the government purchase of 25,000 Ford cars, the impact of the boycott is expected to be tempered somewhat by consumer demand for cars as a result of the strike.
In addition to the government sales, Denis Healey, Chancellor of the Exchequer, told the House of Commons that Ford could lose government handouts to promote investment and exports. But the key word is "could" and neither move is likely. The company has been given $300 million to put up an engine plant in Callaghan's constituency near Cardiff, and it is unthinkable that Callaghan would take away a penny of this.
But the mere fact that Ford has been punished for giving in to its own workers has brought angry protests from the opposition Conservatives, the Labor left and the company itself.
The Tory leader, Margaret Thatcher, denounced the "blatant injustice" of singling out a firm that had tried but was unable to resist its workers' pressure. Her Shadow Chancellor, Geoffrey Howe, called the affaire "an exercise in tyranny that had deteriorated into farce."
An unperturbed Callaghan retorted that the national interest was at stake that the "government was not going to let the big fish get away and just catch the tiddlers."
This last was a reference to the fact that the government had last year punished small firms who breached guidelines and looked the other way when Ford did it too.
Healey, Callaghan's chancellor, insited penalties were demanded in fairness to the half million workers who have already settled for 5 percent or less. His real concern, however, is the 10 or 12 million union workers whose contracts are still to be negotiated.
Sir Terence Beckett, the Ford chairman here, was scathing. He said the action shows no company "can be sure of steering a rational course between the government and the trade unions when they are at loggerheads." The move, he said, was "arbitrary" and "will be far more serious and damaging that the government even now appears to appreciate."
"We may be a hobbled tiger," the Ford boss said, "but we do not intend to become a lame duck."
"Lame duck" is British jargon for a failing company bailed out by the government. One such is British Leyland, the only domestic auto company producing here. In contrast, British Ford is highly profitable. The typical Ford worker now makes about $200 a week.
Sir Terence had on Monday made a strong private plea to avoid sanctions in a long time session with three ministers. He pledged that Ford would not seek price increases to cover more than five percentage points of its 17 percent deal. The rest he said would be absorbed by Ford because it is offering its men attendance bonuses to avoid wildcat strikes. Ford was hit by 1,000 of these last year alone.