Oct. 16 (Bloomberg) -- Wal-Mart Stores Inc., the world's biggest retailer, said it closed a unionized Quebec tire and lubrication shop because of costs tied to the first labor agreement imposed at any of its North American locations.

The closing is effective immediately because it would have raised operating costs by at least 30 percent and triggered ``dramatic'' price increases on products, the Bentonville, Arkansas-based retailer said today in a statement. The Quebec Labour Relations Board imposed the three-year labor contract in August after the union and company failed to reach an agreement.

``The union contract that was imposed is simply unworkable,'' Wal-Mart Canada spokesman Andrew Pelletier said in a telephone interview.

Wal-Mart rose $4.57, or 9.1 percent, to $54.62 at 4:05 p.m. in New York Stock Exchange composite trading.

Under the contract, wages would have increased by a third, or more than 10 times the average hourly rate of Quebec companies this year, the company said in the statement. Wal-Mart Tire and Lube Express's six employees in Gatineau won't be fired and will be offered jobs at other regional shops.

``A major cost increase like that can't be sustained'' in a lube shop, Pelletier said. Wal-Mart, which has about 300 stores in Canada, closed eight lube shops during the past two years because of rising costs, he said.

Union Pressure

Wal-Mart is telling employees ``that if you join a union, they're going to close your shop,'' Wayne Hanley, Canadian president of the United Food and Commercial Workers, said in a telephone interview.

``It's hard to see how the additional labor costs were going to drive up the price of a cheap oil change, while at the same time they rake in multi-billion-dollar profits every year,'' Hanley said.

Craig Herkert, Wal-Mart's chief executive officer for the Americas, said in an Oct. 6 interview that the contract was ``onerous.''

``Given the fact that our value proposition is everyday low prices,'' a contract like this would put us at a ``cost basis wildly out of reach of every one of our competitors,'' he said.

Wal-Mart Watch, a U.S. worker advocacy group, said the shop closing shows the retailer is willing to do anything to prevent workers from receiving better wages and benefits.

``The closure in Canada clearly shows that Wal-Mart has no desire to change,'' it said in an e-mailed statement.

To contact the reporter for this story: Frederic Tomesco in Montreal at tomesco@bloomberg.net.

Last Updated: October 16, 2008 16:09 EDT