SEOUL (Reuters) - Kia Motors Corp. reached a tentative wage deal with its labor union on Tuesday after a dispute that South Korea's second-biggest car maker estimates has cost it more than $400 million in lost production.þþThe agreement, subject to a vote by union members, includes a 6.9 percent increase in basic salaries, similar to terms agreed to last week by affiliate Hyundai Motor Co.and its union.þþAnalysts said the increased labor costs could be more of a burden for Kia than the more profitable Hyundai.þþ``Kia's operating margin is lower than Hyundai's, but it had to agree to similar wage terms to persuade the union to end the strike,'' said Ahn Soo-woong, an analyst at Hanwha Securities.þþ``Kia probably wanted to end the labor unrest by paying some cost, rather than having it extended and hurting revenue further.''þþBut Ahn said that for Hyundai, the wage increase would not be too much of a burden.þþLabor unrest is cited as a key deterrent for foreign investors to do business in South Korea, and is one reason -- along with corporate governance and tensions with North Korea -- that local share prices trade at a discount relative to other Asian markets.þþPoor labor relations are also seen as an obstacle to Hyundai's goal of becoming one of the world's top six automakers by 2010, from its current position as seventh.þþThe union at Hyundai, South Korea's biggest car maker, voted on Monday to accept a wage deal tentatively agreed last week.þþUnionized workers at Kia had stopped work for several hours each business day since August 29, pressing management for an agreement. Hyundai had suffered similar stoppages that cost 591 billion won in lost production.þþOnce deals are accepted, South Korean unions usually agree to step up production to make up some of the losses incurred during strike action.þþKia and its union said in separate statements they had agreed to a 6.9 percent increase in basic monthly salary, a bonus in 2005 amounting to three-months' salary, and a one-time payment of 2 million won (about $2,000) per worker, among other benefits.þþThe union said its members would return to normal working hours from Tuesday and vote on the agreement on Thursday. Kia's union has about 27,200 members.þþBoth Hyundai and Kia also agreed to seek to introduce a new shift system in 2009, under which its plants would run 18 hours a day instead of 24 hours.þþMeanwhile, Hyundai's union said that more than 60 percent of its 42,800 members voted to accept a deal with similar terms that had been tentatively agreed to last week.þþAnalysts say regular labor disputes could accelerate moves by Hyundai and other key manufacturers to shift production overseas.þþHyundai opened its first U.S. plant in Alabama in May, and Kia aims to pick a site for its own U.S. plant by the end of 2005, with Mississippi considered the strongest candidate.þþShares in Kia fell 1.1 percent by 0455 GMT and Hyundai Motor shed 1.4 percent. The wider market (.KS11) rose 0.21 percent.þþ
Source: NY Times
