UPDATE 2-Kia union rejects wage deal; Hyundai talks collapse

Wed Jul 27, 2011 6:15am EDT

* Hyundai union walks out of last round of wage talks before holidays

* Hyundai union threatens strike

* Union at affiliate Kia votes down wage deal despite record bonuses

* Tough talks ahead following holiday break (Adds Kia vote, analyst comment)

By Hyunjoo Jin

SEOUL, July 27 (Reuters) - Union members of Kia Motors on Wednesday voted down a wage deal previously reached with the management, while Hyundai Motor failed to seal a wage pact with its union.

The moves may signal tough summer negotiations for the South Korean carmakers which have posted strong global sales and gained market share from Japanese rivals reeling from the March 11 quake and a strong yen.

The negotiations are being closely watched to see whether the duo, which together rank fifth in global car sales, will be able to avoid a strike at a time when their factories are running at nearly full capacity, but cannot keep up with demand.

A union spokesman said Hyundai workers would take steps to strike following the end of the holiday period on Aug. 7 if Hyundai Motor does not compromise.

"I expected it would be difficult for Hyundai to reach a wage deal before the summer vacation (which starts on Saturday). The deal is likely to be reached before September when Hyundai union picks new leadership," said Park In-woo, an analyst at LIG Investment & Securities.

"But Kia's voting results come as unexpected. I can't understand because Kia offered record-high bonuses," he said.

A Kia union spokesman said preliminary poll results showed 47 percent of voters approved the tentative deal.

"We have reached a wage deal too early. Members want to wait until Hyundai comes up with a wage deal," Kia spokesman Kim Tae-young said, adding that a dispute over a proposed two-shift system is also to blame.

The tentative agreement, reached on Friday, included a 5.17 percent rise in basic salaries, a performance bonus equivalent to three months' salary plus a 7 million Korean won ($6,637) payment and 80 Kia shares per employee.

Shares in Kia ended up 1.02 percent at 79,400 Korean won ($75.515) prior to the results.

The latest deal had raised expectations that Kia Motors would be able to avoid a strike this year for two consecutive years during annual talks.

"In the past, union members rejected a tentative wage deal and then received an additional salary/bonus hike. This pattern is expected to be repeated this year," said a spokesman for Korea Employers' Federation, a business lobby group handling labour relations.

HYUNDAI UNION THREATENS STRIKE

On Wednesday, Hyundai and union held the last round of talks before the summer holidays, but Hyundai's union, not satisfied with a management proposal, walked out 10 minutes after they began at 2 p.m. Korea time.

Hyundai, once notorious for its militant labour union, has avoided a strike during wage talks for the past two years.

At the center of contention is a new labour law introduced under South Korean President Lee Myung-bak to limit the number of full-time paid unionists.

Under the so-called "time-off" rule, Hyundai is demanding the union cut the number of full-time paid unionists to 26, or just around one-tenth of the current 233, a call rejected by the union.

"There is no change in the management stance regarding the time-off system. We thought the talks are meaningless," Chang Kyu-ho, a Hyundai union spokesman, said after the group walked out.

"There will be no talks unless the management offers a satisfying proposal regarding the time-off system, salary and others," he said.

A Hyundai Motor spokesman said, "We are sorry that the talks fell apart, but there is still time (to avoid a strike)."

Hyundai Motor shares were unfazed after the news, closing 2.1 percent higher in a wider market that was up 0.26 percent.

Hyundai Motor plans to announce its second-quarter earnings on Thursday, while Kia Motors will follow suit on Friday. (Editing by Jonathan Hopfner and Vinu Pilakkott)

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