Foxconn’s original deal with Wisconsin to build a manufacturing plant in exchange for mammoth subsidies was controversial from the outset. Originally, the Wisconsin facility was to serve as a major hub for Foxconn in the United States, building high-end TV panels. Now, the firm has announced it will drastically scale back its own plans, despite being handed $4B in subsidies to make the original facility work.
The effort to build the Foxconn factory has been controversial from the start. The original $3B offer from GOP governor Scott Walker amounted to a tax rebate of $231,000 per job. Then the state threw in another $1B in subsidies, bringing the per-job cost up to $307,000. Then, Foxconn announced that instead of building large glass panels in the US, it would switch to smaller sizes and wouldn’t need as large of a workforce.
Reuters now reports that the company has effectively canceled the original plan(s) it worked out with Wisconsin. Instead of 13,000 jobs, it’ll hire 1,000 people. Instead of hiring skilled line workers, it’ll mostly focus on researchers and engineers. Foxconn describes these as “knowledge” positions. Instead of manufacturing, it wants to create a high-tech research hub.
Foxconn, to be clear, is still insisting it will somehow reach the 13,000 job threshold — but even if it does (somehow), it expects those jobs to be in R&D and engineering. According to Foxconn’s internal projections, the plant will need to be in operation for 25 years or more before Wisconsin recoups the value of its massive subsidy — and that was under the old math when the company was expected to hire some 13,000 people.
“Every step of the way Foxconn has overpromised and under-delivered,” Democrat Gordon Hintz, the minority party leader in the state assembly, said in a Wednesday statement. “This news is devastating for the taxpayers of Wisconsin.”
While the tax credits promised to Foxconn total $4B, the company was required to hit certain milestones in order to continue to receive them. It missed the first of these milestones in December when it only hired 178 people, rather than the 260 it was required to hire to receive a $9.5M tax credit. Without knowing more about how the deal was structured, we can’t estimate what percentage of the original $4B Foxconn might still be able to receive, even with a dramatically downsized deal.
The deal has been controversial in Wisconsin from the beginning, given the mammoth tax reduction and how long it would take for the state government to break even on the investment. Reuters notes that “The company may be prepared to walk away from future incentives if it is unable to meet Wisconsin’s job creation and capital investment requirements, according to the source familiar with the matter.”
Foxconn has a long history of promising the moon and then failing to deliver. Foxconn has previously promised to open manufacturing plants in Pennsylvania, Indonesia, Vietnam, and Brazil. None of these initiatives came to anything like what the company had originally promised, either in terms of direct jobs or indirect economic benefits to local economies. Wisconsin is just the latest in a long string of broken promises. And while we’re on the topic, it’d be nice if the government returned the land it seized through eminent domain to build the no-longer-existent factory.
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