ANALYSIS-Grupo Mexico could get Asarco despite labor woes

* Final arguments in battle for Asarco begin next week

* Asarco union threatens strike over Grupo Mexico bid

* Judge recommendations give Grupo offer more weight

MEXICO CITY, Oct 16 - A U.S. District Court could award Grupo Mexico control of the bankrupt U.S. copper Asarco even though U.S. workers say they will strike if the Mexican company regains control and fails to agree to a new contract.

Analysts say the union's threat probably will not sway a judge's upcoming decision on control of Asarco, which has copper mines in Arizona.

Grupo Mexico, the top copper miner in Mexico, is battling with India's Sterlite over control of the Mexican miner's U.S. subsidiary Asarco, which owes more than $1 billion in environmental damage claims.

U.S. Bankruptcy Judge Richard Schmidt in a Corpus Christi, Texas, court has twice recommended Grupo Mexico's $2.4799 billion bid over Sterlite's rival offer, saying the Mexican company is more likely to pay off all of Asarco's creditors.

A U.S. District Court in Brownsville, Texas, will decide the control issue, and both sides will present final arguments in a hearing there on Monday.

Grupo Mexico lost control of the Asarco board due to the bankruptcy. The U.S. government and a large chunk of creditors support Sterlite's bid, but analysts say Schmidt's recommendations gave Grupo's offer more weight.

"If this opposition was having an important effect we would have seen it in the judgment of Richard Schmidt ... We think that Grupo Mexico has a big chance of winning," said Rodrigo Heredia, an analyst at the Mexican brokerage firm Ixe.

Sterlite, part of London-listed Vedanta Resources, says its $2.565 billion plan to take over the company is also backed by Asarco's workers. Grupo Mexico does not yet have a new labor agreement with the union, which says it would go on strike if they cannot reach a deal.

"We have said all along if we don't have an agreement and Grupo was to be the successful bid, we will not work without an agreement. We will strike," Manuel Armenta from the United Steel Workers union told Reuters.

LABOR PROBLEMS AT HOME

Grupo Mexico said Asarco's current union contract would be effective until June 2011 if their offer is accepted, but the union wants to negotiate a new contract and is hoping the Brownsville judge will consider their objections next week.

The United Steelworkers union worries if Grupo Mexico wins, the company will bring its fraught labor relations in Mexico north to Arizona. "We know exactly what they have done to the workers in Mexico," said Armenta.

Grupo Mexico's largest copper mine Cananea near the U.S.-Mexico border has been shut for more than two years due to a strike. Miners laid down tools at Cananea in July 2007 in a dispute that began over health and safety complaints but was complicated by a personal fight between the union's leader, Napoleon Gomez, and Grupo Mexico.

Gomez is living in Canada to avoid corruption charges in Mexico, which he says have been fabricated to destroy the labor organization.

In an economic downturn, the U.S. union may have a harder time organizing labor action, mining analyst Jorge Beristain at Deutsche Bank said.

"When the unemployment rate is 10 percent you are not hearing of that many labor unions going on strike, and Grupo Mexico already agreed to extend the contract one year into the future," Beristain said.