UPDATE 1-GM Korea reaches tentative wage deal, averting strike

Mon Jul 28, 2014 5:32am EDT

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(Adds union comments)

SEOUL, July 28 (Reuters) - General Motors' South Korean unit reached a tentative wage deal with its labour union on Monday, averting a potential strike at one of its key Asian production bases.

The agreement came after GM Korea CEO Sergio Rocha earlier this month warned that potential labour unrest could lead to further production cuts for the company in South Korea.

The deal is subject to a union vote on Wednesday and Thursday.

The U.S. automaker said in December it would stop selling its Chevrolet-branded cars in Europe by the end of 2015, a move that hit output at its plant in Gunsan, South Korea, which produces most of the Chevy cars sold in Europe.

As part of the labour deal, GM reversed an earlier decision not to make the next-generation Chevrolet Cruze at the Gunsan plant. However, the new Cruze will not be produced until 2017, according to GM's proposal to the union that was seen by Reuters, meaning the Gunsan plant may remain underutilised until then.

"We can't win it all. We will leave the deal to the judgment of our union members," union spokesman Jang Kyung-dae told Reuters.

The company said the two sides had reached a deal in "a smooth and peaceful way," and confirmed the new wage and bonus terms.

GM's South Korean workers earlier this month voted to go on strike over stalled wage talks.

Under the deal, GM Korea agreed to pay a combined 10.5 million won ($10,200) in bonuses and incentives to each worker and raise the basic wage by 63,000 won.

The bonuses and incentives are slightly higher than last year's, while the basic wage increase was less than last year's rise of 92,000 won. For workers with 20 years experience, the basic wage increase is about 3.3 percent, according to a union official.

The company also agreed to revamp its wage scheme, which has been in place since 1953, after the country's supreme court ruled late last year that regular bonuses should be counted as base wages.

South Korea is one of GM's biggest Asian manufacturing bases, producing more than four out of 10 Chevrolet vehicles marketed globally.

($1=1,025.95 Korean won) (Reporting by Hyunjoo Jin; Editing by Clarence Fernandez, Tony Munroe and Matt Driskill)

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