Daewoo's fortunes rise

A Daewoo worker protests outside GM's annual general meeting

South Korea's bankrupt Daewoo Motor said on Sunday its operating profit had doubled to 13.5bn won ($10.5m) in May from a month earlier, improving prospects of a takeover by US giant General Motors.

The world's largest automaker is negotiating to take control of bankrupt Daewoo, which is carrying huge debts, as a key element of its Asian strategy.

Daewoo, the third biggest carmaker in South Korea, saw its first operating profit in three years in April, posting 6.7bn won in earnings before interest and taxes.

An announcement from GM on outcome of the sale talks is expected soon.

Daewoo results

Daewoo said the rising profits were the result of tough restructuring and increased domestic sales and exports.

"Whether we can continue to post operating profits depends on labour problems and sales," Daewoo said in a statement.

"Creditors will provide financial support until June, and we think we will be able to run the company independently from July without their assistance," it said.

South Korea has been trying for more than a year to sell Daewoo Motor, but has only made halting progress.

US view

Bloody clashes between Daewoo Motor workers and South Korean police have spooked Wall Street analysts who a wary of the takeover.

Daewoo workers claim GM could put more than 4,000 people out of work by not buying the large Pupyong vehicle assembly plant.

The South Korean workers, disgruntled by state-led restructuring, are gearing up for a nationwide strike on Tuesday, as the government warns it will take a hard line against protestors.

President Kim Dae-jung had to apologise earlier this year for a violent crackdown on Daewoo workers protesting against layoffs and the sale of the carmaker to GM.

GM's Asian strategy

Daewoo fits into GM's strategy to expand its market share in the Asia-Pacific region from 4% to 10% by 2004.

GM also views Daewoo as its sole chance to enter the growing Korean market, Asia's second-largest for passenger vehicles.

"Clearly there are some assets and some capabilities in the company and the (Korean) market access is potentially of great value," GM Chief Executive Rick Wagoner said last week at the automaker's annual general meeting.