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Hyundai's planned low-wage plant thrown into uncertainty

South Korean automaker and city of Gwangju fail to agree on wage negotiations

On the assembly line at Hyundai Motor's key plant in Ulsan, South Korea. Strikes by unionized workers are a perennial source of headaches for the automaker.   © AP

SEOUL -- Hyundai Motor and the South Korean city of Gwangju on Thursday shelved the planned signing of an investment agreement for a low-cost production joint venture after talks broke down over terms of payment negotiations.

A project led by the southwestern city would create a 700 billion won ($624 million) venture that will churn out an annual 100,000 units of compact sport utility vehicles for Hyundai, which will take a 19% stake in the business.

The two sides on Tuesday agreed to annual worker wages of 35 million won with no pay hikes for five years and were set to sign the contract Thursday.

But the Gwangju chapter of the Federation of Korean Trade Unions, which had entrusted pay negotiations to the city, raised objections on Wednesday, insisting that the five-year freeze is illegal. In response, the city drafted a new proposal that basically scrapped the five-year freeze, but Hyundai refused to go along with the change.

"We cannot help but to point out the repeated revisions and backtracking" by the Gwangju government, Hyundai said in a statement reported by the JoongAng Ilbo newspaper.

For the South Korean automaker, which grapples with worker strikes every year, the five-year suspension of wage talks is nonnegotiable.

Negotiations continue, and the focus going forward is whether the city can talk the labor group into accepting terms satisfactory to Hyundai. The Federation of Korean Trade Unions is known as a moderate labor group, while the Hyundai union under the Korean Confederation of Trade Unions opposes the venture itself.

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