SEOUL (Reuters) -- The strike-ending deal at Hyundai Motor that will increase wages 8.6 percent has investors worried that strikes will follow in other industries.
Hyundai shares fell five percent as analysts said the deal, reached after overnight talks, would hurt Hyundai Motor's profits and potentially encourage further wage-hiking strikes in other industries. The strike cost South Korea's biggest car maker $1.2 billion in lost output.
"The management caved into the labor union with a white flag," said Chae Kyoung-Sup, an analyst of Shinyoung Securities.
"If the union had elicited such a big concession this time, it can make more and stronger demands in the future and this will weigh on its management and revenues."
Under the agreement, the car maker pledged to raise base pay by 98,000 won ($82.62) a month, or 8.6 percent, and to award one-off bonus and incentive payments, the union said in a statement published on its Web site. The hike is more than double South Korea's core annual inflation rate of 3.1 percent.
Hyundai also agreed to award 100 percent of monthly base pay plus one million won immediately, while another 200 percent bonus would be paid at the end the year depending on performance, according to the statement.
Hyundai Motor also agreed not to lay off workers without the union's consent and to allow the union a bigger role in management decisions, in addition to reducing the working week to 40 hours from 42 hours.
Hyundai shares fell to 33,700 won, underperforming the broader index that finished down 1.9 percent.
"It was the outcome where we could get the most," Lee Jae-In, a union member of the auto maker, told Reuters. A Hyundai Motor spokesman declined to comment on the deal.
Production volume at domestic plants will stay at the current level and the company will not close or reduce domestic facilities without the union's agreement, the union said.
The strikes by nearly 40,000 unionized workers lasted for 47 days. They were demanding wage increases and better working conditions. Hyundai Motor's sales fell 40 percent in July from a year earlier.