The strike is hurting production at overseas factories too

Hyundai Motor has lost nearly $600m in exports since the on-off pay strikes began on 20 June, a company spokesman said on Wednesday.

"The government has decided to consider invoking its emergency arbitration rights as the labour disputes must not be allowed to continue any longer," a senior official at the Office of Government Policy Co-ordination said.

"The strike at Hyundai Motor... is raising concerns that it will seriously hurt the national economy and undermine (South Korea's) international credit ratings," said the official, Choi Kyoung-Soo.

Cooling off period

Under the procedure, the authorities can force the unions to the negotiating table for 30 days, during which time no strikes are allowed.

Mr Choi urged Hyundai Motor bosses and unions to find a solution "at the earliest possible date". Hyundai said it is due to hold more talks with the unions on 4 August.

If the government does step in, it will be the first time in a decade that the emergency arbitration powers have been used.

Hyundai is South Korea's biggest car maker and is part-owned by Germany firm DaimlerChrysler, which has a 10% shareholding.

The unions, which represent 80% of Hyundai's workers, are demanding higher pay and a shorter working week.

They are holding out for an 11.1% pay rise, having rejected an offer of 9.4% last week.

Left-wing President Roh Moo-hyun's government has come under mounting pressure to take tough action on labour issues.

The Hyundai dispute is merely the latest in a strike wave that has been rolling across different industries for months.

A Hyundai spokesman said the firm was suffering from severe inventory shortages which have forced it to halt production at its plants in Russia, Egypt Malaysia and Pakistan.