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2009/04/05 09:00 KST
Gov't considers delaying auto industry support to win union concession

   SEOUL, April 5 (Yonhap) -- The government is weighing the possibility of delaying support measures for the auto industry in order to win meaningful concessions from union workers, official sources said Sunday.

   Sources in the Ministry of Knowledge Economy that planned to announce sweeping assistance measures last week to help local carmakers, said they may wait until the results of annual union-management talks are concluded before making any commitments on assistance.

   Proposed support measures that have been floated include substantial cuts in consumption, registration and acquisition taxes for newly purchased vehicles. Such a move could allow people to save millions of won.

   The talks that usually begin in April, are used to discuss pay hikes, work conditions and various outstanding welfare issues that are forwarded by workers.

   Depending on the outcome of such talks, the auto industry can be affected by protracted walkouts that affect production, exports and regional economies in cities like Ulsan and Gwangju.

   Without going into details, senior officials said that since the government is willing to receive public flak for helping carmakers and parts manufacturers when the overall economy is struggling to cope with the worldwide economic crisis, manufacturers and the union workers in particular must show "good faith."

   Seoul may be waiting for companies to reach compromises that could encompass a freeze on all wage increase this year, a pledge not to engage in strikes or disrupt production and decisions by management to cut prices on their cars to fuel sales.

   "Announcement like union workers agreeing to allow (the production of) several types of cars in the same assembly line is inadequate since such measures were needed in the first place to help raising productivity," Cho Seok, deputy minister at the ministry's industrial growth office said.

   Building several types of cars model on the same assembly line had been opposed by union workers in the past because it would increase their workload and raised the likelihood of injury, and could pose problems for quality control.

   Other officials in the ministry in charge of the country's industrial policy and trade promotion, however, said that putting off supporting measures indefinitely may result in problems for car companies that have urged the government for emergency relief since last year.

   The auto industry said production fell 34.1 percent on-year in the first two months of 2009. It said exports plunged 37.9 percent compared to the year before, while sales in the country contracted 14.7 percent as consumers cut back on spending in the face of economic uncertainties.

   Such sluggish sales could pose problems for companies like GM Daewoo Auto & Technology Co. and Ssangyong Motor Co. that have been hit the hardest by hard times. Hyundai Motor Co. and Kia Motors Corp. have hinted they are feeling the pinch of weak sales although not as seriously as smaller companies.

   "On the one hand we must show the public that carmakers have made sacrifices for the support that is being given, but at the same time not miss the timing to give aid that is crucial for the industry and the economy as a whole," a official, who declined to be identified said.

   Related to government support measures, chief executives at Hyundai, Kia, GM Daewoo, Ssangyong and Renault Samsung Motors said they plan to invest a combined 2.6 trillion won (US$1.94 billion) into the development and early production of eco-friendly, energy efficient cars. Such a move could fuel demand for components makers and create jobs.

   Some companies have said they are making headway in more flexible production processes and work-sharing practices.

   "Companies are on the whole are making an all out effort to resolve current difficulties and considering new channels of dialogue between labor and management to speed up mutual understanding," a executive at Hyundai said.

   He said more tangible results of such agreements may be announced in the coming week that may allow the government to implement support measures.

   Carmakers are anxiously awaiting state support measures since some estimates have said sales could go up by 250,000 units this year.

   Because monthly sales currently stand at 80,000 units, if the measures are implemented immediately, it could boost sales by 35,000 units per month for the rest of the year.