Autos in a Skid

For years both Tory and Labor politicians have considered the British auto industry a handy tool for manipulating the economy. Thus the industry has careened along from boom to gloom, with government, labor and management all wrestling at the controls. Last week the auto business was skidding from the effects of the ninth major switch during the past decade in the government's policy on car sales.

In the first half of 1966, the industry sold a record 708,939 cars. Prospects were good for the second half as well. But, in July, the Labor government drastically tightened credit to help the ailing pound. Typically, the anti-inflationary measures bore down hard on car buying. The 25% auto-purchase tax was increased to 27 1/2%, minimum down payments were hiked from 25% to 40%, and the time allowed for payments was cut from 27 to 24 months. British governments invariably excuse such controls by claiming that cars are just luxury items. What with the tough new rules, potential auto buyers could only agree. Last month credit-financed car sales plunged 35% below the September 1965 level, and new car registrations dropped 20% .

The slump has hit hardest in Birmingham and the industrial Midlands. British Motor Corp., the industry's leader, was producing at capacity through August, when stocks of unsold cars began growing alarmingly. Now General Motors-owned Vauxhall, Rootes Motors, and Standard-Triumph as well as B.M.C. have cut work weeks to four days. B.M.C. Chairman Sir George Harriman announced that 12,000 employees will be laid off early next month, "and it does not appear that they will be taken back again." Angry workers have responded with wildcat strikes, and union leaders utter dark warnings of slow downs and more work stoppages.

The drastic measures will cut consumption and restrain an economy that has been living beyond its means, thus helping to stabilize the pound. Or so the government hopes. On the other hand, there may be dangerous side effects. British auto sales abroad are the country's biggest earner of foreign exchange, brought home $2.2 billion last year. Because of the sharp drop in sales at home, British automakers may well have to raise their export prices to uncompetitive levels or sell their cars abroad at a loss. In any case, the leading exporter, British Ford, expects that this year Britain will forfeit its second place (after West Germany) in European auto sales to France.

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