Militant South Korean union stumbling

SEOUL (Reuters) - A South Korean auto union's failure last week to win its long, and violent, strike to keep jobs is another blow to the influence of a militant labor movement that has troubled investors in Asia's fourth-biggest economy for years.

It compounds problems facing the Korea Confederation of Trade Unions (KCTU), the more combative of two major umbrella unions and which had sought a role in the 2- month strike at bankrupt Ssangyong Motor Co (003620.KS) that ended last Thursday after riot police repeatedly stormed the factory.

The union group, long a dominant and disruptive force in South Korean industry, is already bending under the impact of a rape scandal, mass defections, the economic downturn and, as much as anything, a conservative government set on curbing what it considers the KCTU's investor-scaring ways.

"Labor union issues are a persistent discount factor for South Korea, along with the North Korea (threat) ... The power and influence of unions are getting weaker now, partially due to the economic slowdown," said Lim Ji-won, an economist at JPMorgan Chase.

The number of work days lost to strikes has been on a decline but it still outstrips competing economies in the region. In 2007, according to International Labour Organization data, South Korea had six times more strikes than in Japan, whose population is more than double the size.

Many of those have been linked to the KCTU, which grew up with the country's democracy movement in the 1980s that eventually pushed aside years of autocratic government.

It claims 750,000 membership. The other major union group, the more moderate Federation of Korean Trade Unions, says it has almost a million members.

Labor unrest adds to what many see as the already-high cost of South Korean labor whose economy still relies heavily on exports of manufactured goods that can increasingly be made more cheaply elsewhere, notably in neighboring China.

An official with one foreign business group said that labor issues are a major concern of potential investors in South Korea. "It is the whole labor environment, it's not as flexible as they'd like," said the official, who asked not to be named.

President Lee Myung-bak, once the CEO of a major conglomerate, has made no secret of his desire to curb what he views to be excesses by unions.

His ruling party is trying to push a bill through parliament later this year that will double to four years the period a company can employ contract workers.

That is likely to further erode the power of the unions and also labor laws which employers complain make it very difficult and expensive to lay off full-time staff.

The government argues the change is needed to make the workforce far more flexible and break away from years of rigid labor practices that have hamstrung some leading industries.

Some analysts point out that Hyundai Motor Co (005380.KS), one of the world's biggest car producers and which has long battled strikes at home, has built all its recent factories overseas.

ATTEMPTED RAPE

To some extent, the KCTU has caused its own problems.

Last year a member of the KCTU leadership -- now in jail -- attempted to rape a woman. That was embarrassing enough, but the entire leadership was eventually forced to step down after word leaked out that some of them had tried to pressure the woman not to go to the police to avoid hurting the KCTU.

Then, last month, one of its biggest members, the telecom giant KT, pulled out, saying the KCTU was too political and not doing enough to look after the interests of its members.

The Federation of Korean Industries (FKI), which groups the country's major conglomerates, accused the KCTU of trying to turn the 2- month strike at Ssangyong Motors into an ideological battleground.

Several analysts said the prolonged strike, to demand all employees be kept on even though the manufacturer was losing heavily, put even more at risk the future of a company which has long been struggling to sell its vehicles.

"I hope Ssangyong development will weaken the union movement. But definitely, it will take time," said Bae Sang-Kun, director of the Federation's economic policy research division.

But he warned that it may try to compensate for its waning influence by being more militant.

The KCTU dismissed suggestions it was on the wane, insisting that it often played a role in resolving disputes.

"Talk of a decline is just wishful thinking by management and the government," said KCTU spokesman Lee Seung-chul.

"Many have criticized militant unions in South Korea for blocking investment. But that's not true. Unions in France, the United States, Germany and Britain launch strikes but they still get investments."

"In South Korea, the managements are too authoritarian and do not admit the union as a partner in a negotiation. That forces us to launch a strike," he said.

Cho Seong-tae, a research fellow at the Korea Labor Institute, said the government had deliberately sidelined the KCTU in the Ssangyong dispute.

But he added: "It is premature to conclude that power of overall unions in the country would get weaker due to Ssangyong ... (But the KCTU) should think more about what benefits its members than its ideology."

(Editing by John Chalmers)