UPDATE 1-Skoda Auto workers to strike on Tuesday - union

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PRAGUE, April 16 (Reuters) - Unions at the Czech Republic's largest company, Volkswagen's Skoda Auto, will go on strike over pay on Tuesday, a union official said.

The unions had planned a three-hour warning strike but have decided that each shift would strike for several hours each day in a way that will likely halt production at the company's three plants in the Czech Republic altogether, union official Jiri Hasek said.

"In my opinion it (a strike) can no longer be averted," Hasek said.

"The paint shop will be the first to stop. I expect in about 24 hours everything will be brought to a halt," he said.

Skoda last week scaled back its earlier wage rise offer and now says it is ready to raise base wages by 7.5 percent this year and 3 percent next year. It is also offering to raise various benefits, for an overall pay increase of about 12 percent over two years.

The unions have demanded more, plus a guarantee that a significant pay hike this year is followed by another rise in 2008 that would match inflation.

Skoda is the largest Czech company with sales of 203.7 billion crowns ($9.88 billion) last year, the country's largest exporter and a key customer of dozens of parts makers.

The Skoda Auto group employed 27,680 people at the end of 2006. The average gross manual worker's wage at Skoda is 22,000 crowns, 10 percent above the average wage in the country.

Inflation ran at 1.9 percent in March, but analysts and the central bank expect the rate to rise late this year.

The Czech economy grew 6.1 in 2005 and 2006 due to export-driven companies like Skoda and there have been no major strikes in the past years.

Consumption has however begun to rise, the labour market has tightened with unemployment falling to 7.3 percent in March, and the central bank is closely watching wage negotiations as a sign of future inflation pressures.

Analysts say a union success at Skoda could spark wider wage pressure that may feed into inflation and lead to higher interest rates.