Ministers warn against BMW boycott as unions step up their protest over sell-off

A boycott of BMW may fan racism, Peter Hain, Foreign Office minister, said. "It's one thing to be critical of BMW ... It's another thing to incite - as some people are doing - racist behaviour. All that kind of attack on BMW with swastikas is absolutely intolerable."

The warning came as union leaders agreed on a campaign to oppose the Rover sell-off with demonstrations and possibly strikes. Convenors are to seek an "acceptable alternative" to the sale. Birmingham City Council accused the German car-maker of issuing false claims about the amount of money it had invested in the Rover plant at Longbridge.

Yesterday officials from Alchemy Partners, who are to take over Longbridge, arrived to meet managers there, angering some workers. A spokesman for Rover denied reports that production was being cut, with the loss of up to £80 a month for some workers.

Despite ministers' fears, Tony Blair is expected to make his anger clear about the break-up of Rover to the German Chancellor, Gerhard Schröder, at the European Union summit at the weekend.

Sir Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union, who led the calls for a BMW boycott, said: "It isn't good enough for the German chancellor to stand by while BMW rips the Midlands apart."

Stephen Byers, Secretary of State for Trade and Industry, visits Munich on Thursday to meet Joachim Milberg, BMW's chairman. Yesterday Mr Byers said last week's events were over and the task of rebuilding for the future was beginning.

BMW hit back at its critics, claiming it had dropped "numerous" hints that it was intending to sell Rover.