Labor Pangs : South Korean Government Faces Upheaval--Including Striking Auto Workers--as It Tries to Sell Firms to Meet Terms of Bailout

South Korean President Kim Dae Jung is facing the most serious labor challenge of his administration, with 13,000 auto workers already on strike and a militant labor confederation on Friday threatening broader action against privatization of state-owned firms.

Authorities responded sharply to the escalating strike at Kia Motors Corp., the nation’s third-largest auto maker. Prosecutors on Friday declared the 2-day-old strike illegal and threatened to send in police.

Kia is insolvent, but until workers walked out Thursday it was still making cars under court-ordered bankruptcy protection. Kia employees want the government, which holds 30% of Kia’s debt through a state-owned bank, to maintain the auto maker’s independence. The strike was triggered by concerns that the government will approve a sale of the company to some other South Korean auto maker, which would likely lead to heavy layoffs.

As part of its efforts to meet the terms of a $60-billion International Monetary Fund bailout, Kim’s administration is planning the sale of as many as 155 state-owned companies, research institutes or other organizations. It also has started firing government employees.

“The government must scrap reckless plans to sell state-run companies and should also put 2,400 dismissed public service workers back to work,” the 550,000-member Korean Confederation of Trade Unions declared Friday, threatening to launch large-scale strikes if its demands were not met by the end of next month.

The confederation also said it will stage an anti-privatization rally in Seoul on May 1.

On Friday, Kia workers clashed with police while trying to march on the main government complex in Seoul. After protesting workers spilled into an eight-lane boulevard, police used tear gas to force them back out of traffic.

At an earlier rally, 2,000 Kia workers chanted, “We will fight to the end!”

“Layoffs mean death to us,” said Ko Jong Hwan, a Kia union leader. “We will not just sit and die. We will stand up and fight.”

Meanwhile, at Hyundai Motor Co., the country’s biggest auto maker, union leaders said they will sue the firm to block plans to cut 9,600 jobs by pushing workers into early retirement. Cutting that number of jobs could trim wage costs by $14 million a month.

Government officials and some analysts have expressed fear that an upsurge of labor unrest in South Korea could frighten away the foreign investment desperately needed to overcome the country’s economic and financial crisis.

Kim, a former dissident who was South Korea’s main opposition leader for three decades, has a history of good relations with organized labor. Since his February inauguration, however, he has vowed to be tough with both labor and the country’s powerful chaebol, or business conglomerates, in pushing for the restructuring needed to restore health to the economy.

A presidential spokesman on Friday declined formal comment. But speaking on condition that he not be identified by name, the spokesman backed a tough line by saying it is up to prosecutors to take action if strikers commit illegal acts.

Kim Tae Hyon, director of policy for the labor confederation, said it is South Korean businesses that are breaking the law through “illegal massive layoffs.” Workers have traditionally had strong rights protecting them against being fired. Those rules have been weakened since the bailout, but some restrictions are still in force.

“Privatization of public enterprises without enough consultation with the unions is not acceptable,” Kim added. “Privatization is not a cure-all remedy.”

Richard Samuelson, an analyst at SBC Warburg Dillon Read Securities in Seoul, noted that strikes and threatened strikes “are part and parcel of time-honored negotiating tactics here, which are pretty hard-nosed.”

“I don’t think there’s a lot of public support” for strikes against the government’s privatization plans, Samuelson said. “The public sector is viewed as not having taken its fair share of the burden, so some downsizing is inevitable.”

President Kim has little choice but to quickly take needed but painful actions, such as selling state-owned firms, Samuelson added.

“If he doesn’t act this year, it will be harder and harder,” he said. “You’ll have many more unemployed [next year]. The recession will be in full bloom.”

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Chi Jung Nam of The Times’ Seoul bureau contributed to this report.