Negotiations to end a drawn-out rail walkout broke down Friday, with the state-run rail operator issuing an ultimatum for thousands of strikers to get back to work by midnight or face punitive measures.

Labor and management of the state-run Korea Railroad Corp. (KORAIL) gathered at the negotiating table earlier in the day after resuming the second round of their working-level negotiations to discuss key issues, including a government plan to establish a subsidiary to run some high-speed train services.

"We have failed to reach an agreement after a marathon negotiation from 4:00 p.m. Thursday to 8:00 a.m. Friday," said KORAIL President Choi Yeon-hye at a press conference.

"(The company) has no choice but to take actions against striking employees who do not return to work by midnight," Choi said,

Shortly after the announcement, the union said it has an intention to stop the walkout if the government withdraws issuing a license for the new affiliate that will provide a service scheduled to run from Suseo-dong in southern Seoul to the southeastern port city of Busan.

"The government has to make a decision to not issue the license," union head Kim Myung-hwan said at a separate press conference, further assuring that it is not the breaking down of the negotiations as the union plans to return to the negotiating table.

Three representatives from each side gathered at the negotiation table at the company's Seoul headquarters to end a walkout that has dragged on for 19 days.

More than 8,700 KORAIL workers walked off the job on Dec. 9 in protest against the government decision to issue a license for the new affiliate. The union suspects the move is a precursor to privatizing the rail monopoly.

The government has repeatedly assured that it has no intention of privatizing the planned subsidiary and has promised to revoke the subsidiary's rail service license if stakes are sold to private investors. But labor leaders, opposition parties and other critics

say they can't buy the assurances.

The resumption of talks came after the Jogye Order, the country's largest Buddhist sect, pledged to help resolve the dispute in response to an appeal from the deputy union leader.

Park Tae-man, a deputy union leader, fled to the temple on Christmas Eve with three other members of the union wanted by police to avoid arrest and seek help from the religious community.

The police have court-issued arrest warrants for 25 union leaders for waging the strike that the government has defined as being "illegal." (Yonhap News)