Nearly seven weeks of strikes at Hyundai Motor that cost the car maker $US1.2 billion in lost output ended on Wednesday, but the strike-ending deal to hike wages 8.6% worried investors, Reuters said.

According to the news agency, 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 management caved into the labour union with a white flag,” Chae Kyoung-sup, an analyst of Shinyoung Securities, told Reuters, adding: “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.”

Reuters said that, under the agreement, the car maker pledged to raise pay by 98,000 won ($US82.62) a month for each employee, or 8.6%, and to award one-off bonus and incentive payments.

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 the introduction of a five-day working week from September 1, the news agency said, citing a union statement.

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, according to Reuters, which noted that the strikes by nearly 40,000 unionised workers lasted for 47 days and Hyundai Motor’s sales fell 40% in July from a year earlier.

Reuters said the pay increase would take wages over the $20 an hour mark to $21.05 and erode the cost advantage Korean makers enjoy in selling cars to the United States – US car workers were paid $25.63 an hour in the second quarter of 2003. Before the pay hike, Hyundai wages were about 75% of those to Japanese car workers, Reuters added.

A company spokesman told Reuters the strikes had cost 105,000 units of lost production, or around a third of its normal output.

Hyundai Motor, 10% owned by DaimlerChrysler, estimated 1.38 trillion won ($1.16 billion) in lost production from the partial strike, Reuters said.