A group spokesman said growing exports on the back of the weak Korean won and an anticipated pick-up in domestic sales had contributed to the positive outlook.

But analysts were sceptical of Kia's projections.

"It's very hard to believe Kia Motors can even turn to a profit," said Kang Hun-sok, an automobile analyst at ING-Baring Securities.

Analysts said an exemption from interest payments followinga court-ordered freeze on Kia's debts would help Kia Motors to some extent but not enough to turn a profit.

Kia and its affiliate Asia Motors Corp are waiting for a court ruling on receivership applications they filed last year.

"It doesn't mean Kia's business is doing well. Itjust means it is saving interest costs on loans," Kang said.

The group said Kia Motors posted a profit of 45 billion won in the first quarter of this year, compared with a 2 billion loss a year ago.

Lee Sang-yong, an analyst at KEB Smith Barney Securities, said Kia was more vulnerable to retrenchment following South Korea's bail-out from the International Monetary Fund.

"The only demand out there is for mini-compact cars that run on less petrol," said Lee. "Kia's competitors have introduced such mini compacts while Kia has not."Daewoo Motor Co Ltd has just introduced its Matiz minicar and Hyundai Motor Co Ltd started selling its Atoz last year.

"Kia Motors is getting killed in the domestic market, whose growth on average is expected to fall by 40 to 50 per cent this year," Lee said.Slumping sales have forced carmakers to cut employees and production to stay competitive.

Hyundai Motor, the nation's biggest carmaker, said last week it needed to cut its payroll by about 30 per cent to maintain itsleadership position.Analysts said local reports that the government planned to sell Kia and its affiliate Asia instead of nationalising them had forced the group come up with such an illusory outlook.

"The reports of a third-party takeover motivated them to put out a release saying they were doing okay. They wanted to deflect interest on the group," said Kang of ING-Barings.

South Korea's rival Hyundai Group has said openly it wants to take over Kia Motors, while Samsung Group is believed to be interested though its denies it. But Ford Motor Co, the current main shareholder of Kia, has opposed any Korean company taking over Kia.

Kia Group also announced other steps to normalise its business.It said Kia was negotiating with Ford on a capital infusion and that a detailed plan would be announced soon.

The group also said it was also talking to a global truckmaker on capital investment into Asia Motors. The global truck maker was not identified.It said it would integrate management of Kia Motors andAsiaby 2003, and Asia would raise its equity capital to 800 billion won in a way to allow foreign participation.

The group said it was also negotiating with two Japanese companies on the sale of Kia Steel and planned a public auction for another affiliate, Kisan.It said the group has been also talking with US Delphi and Dana about its autoparts maker and Britain's GKN and Lamb about its heavy industry unit.