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Can FAW succeed with North Korea plant?
Hans Greimel | 2013/9/10

TOKYO -- There is no shortage of strange news from North Korea. Only a shortage of electricity, food, skilled labor, education and basic human rights.

And that makes Chinese carmaker FAW's plan to build an auto assembly plant in the impoverished country very strange.

According to South Korea's Yonhap news agency, FAW, China's No. 2 in volume and a joint venture partner of General Motors, Volkswagen and Toyota, has signed a letter of intent to build the plant 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.

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 no doubt will have to answer for that. But from the point of view of Kim Jong Un, North Korea's image-conscious leader, 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 in South Korea.

Indeed, North Korea could use the boost. It recently lost a big chunk of its already meager auto manufacturing base. In 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.

According to media reports, the church had 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 fate await FAW?

Pictured: Hans Greimel is Asia Editor of Automotive News.

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