South Korea's biggest car maker Hyundai Motor have reached an agreement with unions to prevent a strike.

Unions cancelled a threatened mass walk out on Tuesday, after the company agreed to increase salaries as well as pay special bonuses.

The deal has however yet to be put to the vote among the union's 38,000 members.

Tension has grown between Hyundai Motor and its staff in the past year, Jonathan Harris of HSBC in Seoul told the BBC's World Business Report.

The union wanted a 12.5% pay increase as well as a bonus the workers agreed to forego in 1997 when the company was going through difficult times.

Sharing profits?

However, the company has not agreed to a key union demand - their demand for a 30% share of profits.

Hyundai Motor is one of the South Korean companies which has successfully rebounded since the Asian crisis - something workers feel they should be rewarded for.

The appreciation of the Korean currency could hurt profitability this year, as it will make their cars less competitive on international markets.

Hyundai Motor and its subsidiary Kia Motors control more than 70% of South Korea's car market.

The company has been challenged by the entry of the US giant General Motors, which has acquired bankrupt Daewoo, and the gradual growth of imports.

Hyundai officials are also concerned that government plans to tighten rules on diesel exhausts could affect sales of its best-selling Santa Fe and Trajet XG models.

Hyundai Motor is a top sponsor of the World Cup football finals in co-host South Korea.