(FORTUNE Magazine) – Some would call it "cloud talk," the Korean term for pie-in-the-sky dreaming. At the very least it's a $13 billion gamble. That's how much Samsung Group, the South Korean giant known for making everything from ships to chips, is investing on a bet that it can become a serious contender in the crowded global auto industry. Though it has never made a car before, save for a few unprofitable electric vehicles and some trucks, Samsung aims to be turning out 1.5 million autos a year and to rank among the world's top ten automakers by 2010.

Samsung's ambitions seem all the more bold because the global auto industry is wallowing in excess capacity, even in fast-growing Asia, which carmakers had once counted on to absorb new production. "The world is not waiting breathlessly for a Samsung car," says Maryann Keller, analyst at Furman Seltz in New York. "There's no logical opening in the marketplace where Samsung can step in and fill a vacuum. Its sales will have to come out of someone else's hide."

Then why do it? For an answer, look no further than Samsung Chairman Lee Kun Hee, 55, the son of Samsung's late founder and the man who effectively controls ownership and management of the company. A billionaire car buff, the reclusive Lee passionately wants autos to become Samsung's centerpiece. Lee sees autos as a natural next step for a group with four main businesses--electronics, finance, machinery, and chemicals. He also figures that Samsung's strength in electronics, its largest activity, gives it an edge in cars.

Like many of the giant conglomerates, or chaebol, that dominate Korea's economy, Samsung has the financial endurance to stick with its project until profits roll in, even if that takes a decade or more. These companies are more devoted to creating new industries and protecting jobs than to chasing quick earnings. Samsung, for instance, has promised that none of its 160,000 workers in Korea will be laid off. And Chairman Lee seems unperturbed by the fact that his 28 companies last year earned a mere $235 million on $85 billion in revenues. The company's view of the move into autos is summed up by a billboard outside Samsung's new Pusan plant: "Our dream and Korea's future."

That's why analysts say it would be a mistake to underestimate Samsung's ability to make its dream a reality. "Many people say that Samsung's plans are crazy and too risky, but the Korean economy has developed on gambles," says Richard Pyo of Credit Suisse First Boston in Seoul. For instance, Samsung plunged into the supposedly saturated semiconductor industry in 1983 and has emerged as the world's leading exporter of memory chips.

But Samsung will have some formidable competitors in its own backyard, where it plans to sell about half the new cars. The four existing Korean carmakers--Hyundai, Daewoo, Kia, and SsangYong--have an average 30% excess capacity and last year sold 2.2 million passenger cars worldwide without turning significant profits. Annual sales growth in Korea's protected domestic market has slowed to 5% after a decade of double-digit expansion. In export markets, where Korean autos have long made cheap prices their major selling point, sales are getting tougher too, and labor costs are rising at home even as an image of low quality lingers.

Samsung figures that it can overcome these obstacles simply by making better cars. How? Using Japanese technology, licensed from Nissan. "The Korean auto industry is a bit behind the times and has been producing cheap cars," says Im Kyung Choon, 65, an electrical engineer who is chief executive of Samsung Motors. "Our strategy is to make high-quality, superior cars." This is the first time a Japanese automaker has been willing to provide comprehensive help to a Korean company. Nissan has shared its production know-how, set up an aluminum engine plant in Pusan, and trained 1,000 Korean engineers. It also helped develop Samsung's first model, a version of the midsize Maxima. In return Nissan gets fees and 2% of the factory price for each car sold--a deal that could eventually could be worth a total of $1 billion to Nissan.

Still, starting from scratch in the highly competitive car business is a daunting and costly task. So far Samsung has poured $3.5 billion into the venture, about $1 billion more than originally planned for this period. Samsung's toughest job will be differentiating its cars from those of its many competitors. What does Samsung have to offer that other carmakers don't? Company executives vaunt their experience in complex manufacturing projects like aircraft parts or shipbuilding. They point in particular to Samsung's prowess in electronics--an increasingly important element in the car industry, which plans to introduce in the coming years such electronics-heavy features as a control system to keep cars a safe distance apart and satellite navigation. Some 30% of car parts involve electronics today, and that percentage is growing. But rival carmakers like Hyundai and Daewoo also have big electronics divisions.

Where Samsung just may have an edge is--believe it or not--in quality. Explains Jeong Ju Wha, 58, Samsung's production boss: "The problem with other Korean automakers is that they go through the trial-and-error process while actually mass-producing the car. Then they sell it. That's the main reason they tend to have quality problems." By contrast, Samsung will spend the rest of this year rehearsing with limited experimental production before it actually launches sales in 1998. "Workers have to do their jobs 60 to 100 times before they can memorize the right sequence," says Jeong. "At first they may leave out some parts and spend an hour performing a task that should take only a minute or so in mass production." A year of trial production runs will be costly, but Jeong says, "It's the only way we can win."

One surprising difficulty for Samsung in its quest for quality has been lining up experienced makers of parts. Evidently, existing Korean automakers dissuaded suppliers from serving their new rival. Says Jeong: "The other automakers say we are getting a free ride by taking advantage of existing suppliers, so I think they applied behind-the-scenes pressure. Many parts companies at first agreed to work with us, then decided not to do so." About half of Samsung's 88 suppliers are new to the auto business and are getting infusions of know-how from Nissan suppliers in Japan.

Nissan engineers continue to oversee the pilot production in Pusan, where the Japanese influence is much in evidence, from the factories decorated with flowers and fine-art posters to the press shop, where every machine bears a photo of its operator and a handwritten pledge in his own words. Sample: "I will try my best to produce the best car in the world." Samsung, which has no unions and whose employees own 30% of Samsung Motors, has escaped a wave of militant strikes that have hit other Korean companies lately.

Even if Samsung succeeds at making a car that's a cut above in terms of quality, it still needs to get that message to potential buyers. Samsung Motors has stirred interest by running ads in Korea showing the upper silhouette of its new car. Taking a cue from Detroit, it has also signed up 1.5 million Koreans for a charge card that gives users credits that can be put toward the purchase of a car. Ultimately, Samsung Motors may bolster its marketing power by taking over one of its Korean rivals. Samsung executives have looked seriously at Kia Motors, which last year sold more than 770,000 cars, earning a slender $8.2 million on revenues of $7.7 billion.

Still, Samsung has a long road to travel before reaching its goal of making cars its biggest business. The company's dedication to building quality products is a promising start, but the toughest task lies ahead: persuading international customers, one by one, to buy a Samsung car.