Hyundai president Kim Dong-Jin and union chief Lee Hun-Koo shake hands after talks to end strikes

At overnight talks, the company agreed to raise wages by 8.6%, well above South Korea's 3.1% inflation rate.

Seven weeks of strikes at the car maker have cost it an estimated $1.2bn ($750m) in lost output.

But investors and experts fear the company has conceded too much ground, saying the agreement could spell more trouble in future.

'White flag'

Shinyoung Securities analyst Chae Kyoung-Sup said: "The management caved into the labour union with a white flag.

"If the union has 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."

Under the deal, Hyundai also agreed to grant staff a shorter working week and other benefits, including involvement in some management decisions.

Hyundai said the 40,000 member union would vote on the offer by the end of the week.

After a 47-day strike, Hyundai staff have returned to work

The Federation of Korean Industries (FKI) warned the deal would hamper efforts to attract foreign investors.

"It is feared it will damage the competitiveness of Hyundai and other companies. It will have a negative affect on foreign investment," FKI said.

Experts claim the pay increase will take Hyundai wages over the $20 an hour mark, eroding Korean car makers' cost advantage relative to the US.

'Compromise'

But Hyundai president Kim Dong-Jin said: "It was a compromise, with both sides making concessions."

A spokesman for the firm added that union involvement in decisions would be "limited to issues concerning job security".

The union also backed down on earlier calls for an 11% wage increase and representation at board meetings, the company said.

The 47-day strike not only saw Hyundai suffer its lowest domestic sales since 1999 in July, but also hit production at the firm's overseas plants.

Hyundai said severe inventory shortages had forced it to halt production at its plants in Russia, Egypt, Malaysia and Pakistan.