* Domestic sales in March fall to 6,272 units vs yr prior
* Total sales for month slip to 41,260 vs 50,850
* Local sales had tumbled 48 pct in Feb (Adds GM proposal on Bupyeong No. 2 plant, sales figures of other automakers)
By Haejin Choi and Hyunjoo Jin
SEOUL, April 2 (Reuters) - General Motors Co's South Korean unit has proposed suspending one of two shifts at a plant near Seoul, an internal union newsletter seen by Reuters showed, increasing uncertainty about the fate of the factory as the U.S. automaker grapples with slumping sales.
GM Korea said on Monday its domestic sales for March more than halved from a year earlier, deepening a decline in the aftermath of the announcement of planned restructuring of the money-losing operation.
The parent company said in February it would shut down its factory in the southeastern city of Gunsan and decide on the fate of its three remaining plants in South Korea amid mounting losses in the country.
"We have to fight so that the future of the No.2 assembly line (in the city of Bupyeong) does not follow that of the Gunsan factory," union workers at the assembly line said in the newsletter.
The newsletter showed the proposal to suspend the second shift at one of two factories in Bupyeong was made on Wednesday, during a meeting with union delegates at the plant.
A GM Korea spokesman said the firm is considering changing a shift system at the plant, but has not yet discussed the matter with the union.
About 2,600 workers at GM Korea, equivalent to about 15 percent of its staff, have applied for a redundancy package that the U.S. automaker has offered as part of restructuring, union officials have said.
The spokesman said the No.2 plant, which makes Malibu sedans and Captiva sport utility vehicles (SUV) on the outskirts of Seoul, was running at 50 percent of capacity. The Bupyeong No.1 plant, however, which makes the Trax SUV, was operating at full capacity, he said.
GM Korea's exports have declined in recent years since the U.S. automaker pulled its Chevy brand from Europe, a major market for the Korean output.
"The proposal is worrisome," a union official told Reuters.
The plant is running at two shifts, but for only two days a week, and will see more declines in production, with the production of the Captiva to end this year, he said.
"The company's image is in free fall since it announced the plant shutdown. The company, not the union, is to blame," he said.
While the automaker's presence in the South Korean market is small with most cars made there destined for export, the continuing decline in sales highlights reluctance among prospective customers to own GM vehicles, given the uncertainty about its operations, market-watchers said.
GM Korea posted a 58 percent drop in local sales for March to 6,272 units versus a year prior, the company said in a statement.
The automaker recorded total sales of 41,260 vehicles in March, including exports, compared with 50,850 a year earlier. Its domestic sales had plummeted by 48 percent for February, year-on-year.
Rivals gained, with Hyundai Motor Co increasing domestic sales by 6 percent and Kia Motors Corp's up 2 percent.
Reporting by Haejin Choi and Hyunjoo Jin; Editing by Muralikumar Anantharaman and Christopher Cushing