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Hyundai reaches wage deal with union

Hyundai Motor said it had reached a tentative wage deal with its labour union after months of negotiations, potentially ending the union's industrial action that has hit production at the South Korean carmaker.

The tentative deal, which will be put to vote on Wednesday by Hyundai's 47,000 unionised workers, will raise monthly base pay by Won98,000 ($93). Employees will also receive one-time incentives totalling Won8.9m and a bonus payment equivalent to four and a half months' salary. The union said the deal was likely to be approved by its members.

The package came after the company's unionised workers resumed partial strikes last week in protest at the motor group's $10bn purchase of land for a new headquarters, which has undercut investors' hopes of higher cash returns from Hyundai, South Korea's second-biggest company.

Hyundai had cash and cash equivalents of Won25.2tn at the end of June, but its dividend payout ratio stands at just 7.2 per cent - well below its Japanese rival Toyota's 28.7 per cent.

Hyundai held a meeting with local analysts on Friday and is meeting overseas investors this week to allay widespread concerns that it overpaid for the trophy asset.

"The company is trying to get some understanding of investors by promising capacity expansion, higher R&D spending and bigger dividends," said Suh Sung-moon, an analyst at Korea Investment & Securities.

The news boosted Hyundai shares, as investors expressed relief at an end to the labour unrest, in spite of lingering concerns about the company's governance problems.

Shares in Hyundai and its affiliate Kia Motors have risen 2 per cent and 1.3 per cent respectively over the past two days, after the market capitalisation of Hyundai, Kia and their affiliate Hyundai Mobis fell by a cumulative Won8.4tn on September 18, when the property deal was announced.

Analysts estimate that partial work stoppages in August and September would cost Hyundai about Won910bn in lost production. But this is smaller than last year's production losses of more than Won1tn due to strikes, and workers are likely to recover lost production by working overtime, Mr Suh said.

However, the partial strikes are likely to hurt Hyundai's earnings in the third quarter, coupled with the stronger Korean won against the dollar.

Strikes over pay negotiations at Hyundai and Kia have become a near-annual tradition, although their factory wages are among the highest in the automotive industry.

Bonus payments were at the centre of this year's wage negotiations, following a supreme court ruling last year that regular bonuses should be assessed as base wages, which would lead to higher pensions and overtime pay.

Hyundai will continue separate negotiations with the union on the issue by the end of March, while Kia's workers are still in talks with management over wages.

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