Hyundai Walkout Fuels Fear of Unrest

SEOUL, South Korea -- About 40,000 unionized workers at South Korea's top automaker, Hyundai, began a two-day strike on Tuesday to demand higher wages, fanning investor fears over another summer of labor unrest.

South Korea traditionally faces a seasonal rise in union action every summer, but labor strife this year poses a big headache for a government struggling to boost sluggish domestic demand and business spending.

Hyundai's union is the country's largest and most powerful member of the umbrella group Korean Confederation of Trade Unions, which is threatening to unleash a summer of labor discontent, demanding higher wages and better working conditions.

"The strike started at 8 a.m. as scheduled," a Hyundai union spokesman said. "All union members are participating."

"The operation has been halted due to the strike," said a Hyundai spokesman. Hyundai has a total workforce of 50,000.

The strike comes after wage negotiations between Hyundai's management and its union had unraveled. The union, which is seeking a 10.48 percent increase in wage and a hefty bonus payout, earlier held a second six-hour strike Monday after similar action Friday.

A combined 110,000 workers at Hyundai and smaller automakers, textile companies, department stores and other workplaces are due to lay down tools Tuesday, according to the union group, which has a total of 600,000 members.

The labor group has also vowed to protest against sending more troops to Iraq after the killing of a South Korean hostage by Muslim militants last week. The labor minister has urged unions not to link strikes to the deployment.

Separately, unionized workers at KorAm Bank, the country's sixth-biggest lender, which was recently bought by Citigroup Inc., entered its fifth day of strike to seek job security, disrupting operations at most of its branch offices.

Foreign investors cite labor unrest as the number one deterrent to doing business in Korea, and local share prices suffer from the so-called "Korea discount," linked to poor corporate governance as well as frequent industrial unrest.

Unionized workers at Hyundai's affiliate Kia Motors will strike for eight hours Tuesday, while smaller rival Ssangyong will hold a four-hour strike.

Despite the threat of a broader walk-out, analysts said they did not expect the current labor dispute to be violent or disruptive as some previous strikes that took weeks to end.

"This year's labor dispute may not be as intense or prolonged as the previous ones, which is what the market seems to be expecting," said Mark Yoon, an analyst at Merrill Lynch in a note to its clients.