HANS GREIMEL

Why a North Korean car plant faces grim realities

Hans Greimel is Asia editor for Automotive News.Hans Greimel is Asia editor for Automotive News.
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 TOKYO -- Which of these recent North Korea headlines is made up?

• Supreme leader Kim Jong Un executes ex-girlfriend by firing squad in front of relatives over self-made porn video.

• Former NBA star Dennis Rodman lands in North Korea to visit his “friend,” dictator Kim Jong Un, and form a basketball league.

• Chinese carmaker FAW -- a joint venture partner of GM, VW and Toyota — to build auto assembly plant in impoverished North Korea.

Amazingly, they are all real. Or more appropriately, surreal.

There is no shortage of strange news from the world’s only hereditary communist regime. Only a shortage of electricity, food, skilled labor, education and basic human rights.

And that makes FAW Group Corp.’s reported gambit all the more remarkable. According to South Korea’s Yonhap news agency, China’s first automaker, and now its No. 2 in volume, signed a letter of intent late last month to build the car factory in North Korea’s northeast, near the border with China and Russia.

The report, which cited North Korea’s official state-run Korean Central News Agency, didn’t offer details such as when the plant might open, what kind of vehicles it would make or how many.

But it said the plant would be built in the city of Rason, which is designated a special economic zone to attract foreign investment. The report cited a Chinese official, whom it did not name, as saying they hope to ship goods from Rason to Shanghai.

The obvious question:

Why throw money at an unpredictable, unproductive country like North Korea, where private car ownership is all but prohibited and export quality is questionable at best?

Some FAW apparatchik will no doubt have to answer for that.

But from the point of view of image-conscious Kim, one reason for courting FAW is the prestige that an auto plant offers. Even if it’s only a pathetic burlesque of the global Hyundai-Kia powerhouse churning out top-notch cars south of the heavily fortified demilitarized zone separating North and South Korea.

Indeed, North Korea could use the boost.

It recently lost a big chunk of its already meager auto-manufacturing base. Last December it was reported that Pyeonghwa Motors, a company started by Sun Myung Moon's South Korea-based Unification Church in 1999, planned to close its factory in Nampo, a port city on North Korea's west coast.

That factory, in which the North Korean government had a 30 percent stake, assembled knockdown kits under license from Fiat and China’s Brilliance Auto.

The church reportedly spent $55 million on the plant.

It had capacity for 10,000 vehicles a year. But actual output was much less -- only in the hundreds.

Does a similar ignominy await FAW?

You can reach Hans Greimel at hgreimel@crain.com. -- Follow Hans on Twitter

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