* Ssangyong management, union agree to massive job cut
* Outlook remains dark, but shares jump by daily limit
* SAIC to lose major stakeholder status, Ssangyong says (Adds SAIC, paragraphs 8,9)
By Cheon Jong-woo
SEOUL, Aug 6 (Reuters) - Workers at Ssangyong Motor Co on Thursday ended 2-½ months of increasingly violent protests and agreed to big layoffs at South Korea's smallest carmaker, for months on the edge of bankruptcy.
Its struggles, which analysts say are still far from over, have been seen as a test of the conservative government's willingness to let a major employer go under in the current economic downturn and to stand up to powerful labour unions.
The aggressive tactics of the unions, a number of analysts say, have deterred both local and foreign investors.
Though the courts have protected Ssangyong from its creditors who want it liquidated, the last few days have seen ferocious battles between riot police and Molotov cocktail-hurling strikers at Ssangyong's plant outside Seoul and which by Thursday ended with the union finally agreeing to major job losses.
"The outlook for Ssangyong remains very dark as the company does not have a clear schedule for a new model. Its sales to Europe are also falling as its cars do not fit environmental regulations there," said Michael Sohn, an auto analyst at Woori Investment & Securities.
Despite the common gloom over the company's difficulties, which predate the global economic crisis, news of a union deal sent shares in the carmaker up by the daily limit of 15 percent, easily outperforming the wider market.
The two sides had agreed a deal and that workers had ended their occupation of the factory, Cha Ki-woong, a company spokesman said.
Shareholders in Ssangyong, including top Chinese car maker SAIC Motor Corp, will face a writedown in their equity stake as the maker of the Rexton has been under court receivership since February, another company official said.
SAIC, which has a 51 percent stake in Ssangyong, will lose its major stakeholder status, Ssangyong said in a statement.
JOBS CUT BY A THIRD
Ssangyong wanted to cut its about 7,100 workforce by more than a third.
Some 1,670 employees have already quit. But hundreds more refused to go, occupying the factory for 76 days, stopping production lines and costing the company, by its estimate, 316 billion won ($258.5 million) in lost production.
Last month, it sold just 71 vehicles, compared to more than 10,000 a year earlier.
The union agreed that of the remaining 974 workers targeted for the sack, 52 percent would be laid off and the remainder put on unpaid leave or be transferred to sales positions, Cha said.
The deal also comes after management threatened to go into liquidation because of the failure to reach a deal with the union.
The dispute has highlighted concerns over the power of the unions over Asia's fourth largest economy which is trying to shift from industrial production, using an increasingly costly labour force, and place more emphasis on the service sector.
Critics of the country's long-militant unions say their resistance to change and laws making it extremely difficult to lay off workers is undermining competitiveness especially against huge neighbour China.
But the deal by the Ssangyong union, which had originally refused to accept any job losses, is likely to be seen as another blow to the more militant labour unions which dominate the work force in several of the country's industrial giants but whose power may well be on the wane.
Hyundai Motor Co, the world's fifth biggest automaker, has the biggest unionised workforce in the country. But every new plant it has opened in the past decade has been abroad.
President Lee Myung-bak, a former top company boss, has made it clear he wants to tame the unions and is trying to bring in reforms that would allow company's to employ contract staff for much longer periods, something likely to erode the influence of unions in the workplace. ($1=1222.4 Won) (Additional reporting by Jack Kim; Writing by Jonathan Thatcher; Editing by Jeremy Laurence)