Honda Motor <7267.T> said on Friday it settled a labor dispute at a Chinese car parts plant after almost three weeks of disruption, allowing it to build cars again in the world's fastest-growing market.

Workers at the transmissions factory in Foshan, south China, met managers on Friday after putting a strike on hold to see whether the company would give in to additional concessions such as an annual salary increase of at least 15 percent.

The workers threatened to go back on strike if management rejected their demands.

We've reached a conclusion, and production at the parts plant and car factories will go back to normal, Honda spokeswoman Akemi Ando said.

Japan's No.2 automaker said the last remaining holdouts at the 1,900-strong parts factory agreed to the company's original offer of a 366 yuan ($53.60) hike in monthly starting salary for regular workers, and other concessions after compromises made on both sides.

It did not disclose the nature of the other concessions.

A union representative said that Honda had agreed to provide an additional 134 yuan per month for workers, with five months of the extra amount payable as a single sum on Oct 1.

The settlement allows Honda to go back to building the Accord, Civic and other popular cars at its four assembly plants in China, whose market accounted for 17 percent of its global car sales last year.

Honda restarted assembly at all four plants on Friday as the supply of transmissions flowed for the first time in more than a week.

Honda said it expected to recoup the thousands of units of production losses through additional shifts in future.

HIGHER WAGES, MINIMUM BONUSES

The unusually long strike at Honda's supplier came at a time when foreign companies in China have been hit with a string of worker disputes, raising questions about how long China can remain the world's center of cheap manufacturing.

Salaries at Honda's parts plants are way too low and they also hire a lot of interns to cut costs, said Chen Wenkai, CEO of gasgoo.com, a Chinese online auto parts trading platform.

These kind of policies are outdated as the younger generation of migrant workers are no longer as obedient as their parents.

He added that Honda could suffer in the near term in China due to the negative publicity generated from the dispute.

Honda had put the politically sensitive negotiations in the hands of local government experts and government-backed union members, some of whom clashed with factory workers earlier this week.

About a third of the plant's 1,900 workers are interns, who as vocational students typically receive lower wages and fewer benefits than regular employees. The interns are among those pushing for better conditions.

The kids' lives are pretty tough here, said Mr Chan, a driver at the parts factory. I saw four of them share a few pieces of tomato, a plate of greens and several eggs to go with rice for supper. That kind of food costs them 300 yuan per month -- a third of their wages, he said.

The interns had sought, among other demands, an 800 yuan ($117.2) monthly salary increase -- versus the less than 500 yuan initially offered -- an annual increase of at least 15 percent, year-end bonuses not less than the preceding year's, salaries during the strike period, and a new chairman to lead a restructured union.

Honda said the interns also got a wage increase in Friday's settlement, but did not provide a figure.

Strikes are usually stamped out quickly in China, but more labor disputes have been erupting lately between workers resentful of large income disparities and harsh working conditions, and employers trying to rein in rising costs.

Honda's labor dispute is an alarm bell for other cost-conscious Japanese and Korean automakers, said John Zeng, an analyst with IHS Global Insight.

Times have changed; the low-cost business model in China can't continue forever. If they don't move quickly, who knows who will be the next one to get hit.

($1=6.828 Yuan)

(Additional reporting by Fang Yan in SHANGHAI and Doug Young in Hong Kong; Editing by Don Durfee and Chris Lewis)

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