By Gram Slattery

SANTIAGO (Reuters) - Chile's government admitted defeat on a major bill on Friday, saying it will not try to revive any measures of President Michelle Bachelet's landmark labor reform that were struck down by a court.

The reform, aimed at strengthening organized labor in the South American country, was initially passed by the Senate in March after a bruising battle that opened divisions within the governing Nueva Mayoria coalition.

But Chile's Constitutional Tribunal in April rejected a provision of the bill that said companies could only negotiate with legally designated unions during collective wage talks.

It also struck part of a measure that prohibited companies from extending many benefits to non-unionized employees.

Those measures were considered central components of the legislation, and the government had pledged in early May to veto the struck components in order to send them back to Congress for discussion. However, a period of prevarication followed among government officials.

In Friday's announcement, the government said it would in fact follow through with the veto. However, it would not attempt to replace the bill's struck parts, as the government lacked the necessary votes in Congress.

"The government did everything it could, we talked with all the actors, and it wasn't possible to construct an agreement," said Labor Minister Ximena Rincon.

The move is likely to ease the regulatory burden on employers in the top copper exporter, many of whom feared the legislation would bring significant increased costs.

However, some provisions such as restrictions on replacing striking workers were never challenged in court and will go into effect. And as some of the bill's valid sections reference stripped sections, the legislation could lead to significant judicial wrangling.

"A lot of court cases will probably take place to determine what one can and can't do," Rincon said.

Politically, the decision is likely to heap pressure on the already unpopular Bachelet, who campaigned on a broad reform program that included overhauls to higher education, health, and labor relations.

(Reporting by Gram Slattery)