UPDATE 2-Daewoo Motor Sales sees record H1 profit

(Adds analyst quotes, closing shares, more details)

By Samuel Len

SEOUL, July 31 (Reuters) - Daewoo Motor Sales Co, the marketing arm of South Korea's third largest automaker, said on Wednesday it expects record first half net profit as it benefits from restructuring and investment plans by General Motors.

Daewoo Motor Sales put preliminary first half net profit up by almost 130 percent at around 50 billion won ($42.44 million), against about 22 billion won a year ago.

Shares of Daewoo Motor Sales, which trade as a proxy for Daewoo Motor Co, closed up 2.6 percent after having fallen more than 1.5 percent at one point. The broader stock market index ended down 0.84 percent.

But analysts said the company faces a bumpy road, because of the prospect of changed business conditions under General Motors Corp .

In April, GM agreed to invest $251 million in a joint venture with Daewoo Motor creditors, which will give the world's biggest automaker a 42.1 percent stake -- the largest -- while its business partners will hold 24.9 percent.

"Restructuring measures, including a switch to a performance-based wage system for sales staff and brisk sales of the new Kalos (compact passenger car) contributed to the increase," Daewoo Motor Sales spokesman Kim Ki-ho told Reuters.

"An improved image due to GM's acquisition of Daewoo Motor's assets also contributed to the increased profit," he said.


Song Sang-hoon, an auto analyst at Dongwon Economic Research Institute, said it remained uncertain how the sales commission of Daewoo Motor Sales might be affected after the launch of the joint venture, expected later this year.

"Profitability is not expected to improve since GM may lower the commission it pays Daewoo Motor Sales," he said.

He said GM may also enlist the services of other companies to distribute GM-Daewoo automobiles, cutting into profits for Daewoo Motor Sales.

Daewoo Motor Sales was left out of the GM joint venture, but will continue to serve as an independent domestic distributor.

First half operating profit at Daewoo Motor Sales rose to 58.2 billion won from 16.1 billion a year ago, Kim said, confirming preliminary data provided by the regulatory Financial Supervisory Service (FSS).

Sales rose to 1.8 trillion won from 1.6 trillion won over the same period, Kim said.

Daewoo Motor Sales laid off 12 percent of its workforce, nearly 400 of its 3,400 workers, in February. Some 520 employees opted for voluntary retirement last year.

The GM-Daewoo joint venture consists of two of Daewoo Motor's South Korean plants, one in Vietnam and a number of units in Western Europe and one in Puerto Rico, most of them sales units.

Japan's top minivehicle maker, Suzuki Motor Corp , said last month it would take a 14.9 percent stake in the joint venture, paying $89 million for the holding.

GM owns 20 percent of Suzuki. ($1=1178.1 won)