Op Ed

Will State Get Conned by Foxconn?

Could cost billions, but still unknown is how many jobs, the pay, how deal enforced.

By - Jul 26th, 2017 02:14 pm
Sign-up for the Urban Milwaukee daily email
Foxconn Jet. Photo by Jeramey Jannene.

Foxconn Jet. Photo by Jeramey Jannene.

“They extract everything they can.”

That’s one expert’s description of how Foxconn, a Taiwanese-based manufacturer of consumer electronics, approaches negotiations over incentives to lure its facilities.

With Wisconsin being targeted for a new Foxconn manufacturing plant, and Gov. Scott Walker in full re-election mode with a desperate need for new talking points to explain away his now 7-year-old unfulfilled promise to create 250,000 jobs in four years, the pump is primed to mortgage our state’s future for Walker’s short-term political gain.

State Senate Republican leader Scott Fitzgerald, who has been privy to the secret negotiations, described the giveaway being offered as potentially including, “huge, big numbers.”

The public, the press and elected officials need to ask some tough questions about what’s on the table and demand some straight answers, now.

Questions like: Will state funds that could repay the millions stripped from K-12 public schools by Gov. Walker and Republicans instead be diverted to boost the profits of a foreign-based corporation?

Or a real basic question, like just how many jobs, exactly, are being promised by Foxconn?

The history of Foxconn promising major investments in facilities and gaudy numbers of jobs versus the reality of what they do, or don’t, deliver ought to create more skepticism.

In Pennsylvania, a 2013 promise to invest $30 million in a new manufacturing facility remains unfulfilled. Overtures in Arizona and Colorado have produced nothing. In fact, there is a global pattern of Foxconn not delivering on promised investments in facilities or job creation.

Today we can’t, or won’t, pay to adequately maintain the roads we already have. Will scarce resources be committed to build roads to nowhere in southeastern Wisconsin, and leave roads and bridges used by actual people going to actual jobs across the state crumbling?

What else don’t we know about the alleged jobs we may pay mightily to lure? Certainly Foxconn’s reputation as an employer raises red flags. In 2010 over a dozen workers at Chinese Foxconn operations reportedly committed suicide or attempted to kill themselves by jumping off rooftops. The company responded by installing “safety nets.”

Wisconsin factories might not need “suicide nets,” but what assurances will we have on working conditions? Will employees be able to choose to be represented by a union? Will they have health care benefits? What will the jobs pay?

And, finally, what happens if Foxconn doesn’t keep promises of investments and job creation? Once spent, will state taxpayers be able to recover the “big, huge numbers” of their dollars thrown at this overseas-based corporate giant?

As part of the efforts to lure Foxconn to Michigan, their legislature passed a tax giveaway worth roughly $200 million per year for 10 years, a $2 billion floor.

In Wisconsin, we have seen Republicans adopt a tax giveaway that nearly eliminates taxes on manufacturing, without requiring job creation. Gov. Walker’s Wisconsin Economic Development Corporation has been a piggy bank for campaign supporters, even giving out a loan that was used by a recipient to make payments on his luxury sports car.

Wisconsin has a hard-working, well-qualified workforce and limitless potential if we believe and invest in ourselves. Or we can join a desperate race to the bottom that mortgages our future for the short-term political gain of Gov. Walker and his fellow Republicans.

Which path will our elected officials choose in their pursuit of Foxconn? It’s time for answers.

This column original ran in The Cap Times.

Scot Ross is the executive director of One Wisconsin Now.

Categories: Business, Op-Ed

23 thoughts on “Op Ed: Will State Get Conned by Foxconn?”

  1. Vincent Hanna says:

    There are many reasons to be concerned and cautious. $1 billion to $3 billion in incentives. The pledge to build in Pennsylvania that never happened. The Wisconsin State Journal says many of the jobs will be filled by Illinois residents. And so on.

  2. Nessa Thi Cao says:

    Seems like a negative view of what clearly is a positive development for Wisconsin. Would like to see much more of this. Appreciate the work done to make this happen.

  3. Vincent Hanna says:

    But that’s the thing. It isn’t clearly a positive development yet. It could be, but ask Pennsylvania how they feel about Foxconn.

  4. AG says:

    While I’m skeptical… or rather I should say I’m weary of this deal, I’m not going to make it out to be negative before I have all the information. It’s unfortunately we’re already seeing partisan politics coming into play when this could have potentially been a bipartisan win (and still could be if incentives must be passed by members of both parties).

  5. Vincent Hanna says:

    I think that’s exactly right at this point AG. Some healthy skepticism while hoping it works out for the best. And we definitely need more information. It was inevitable that this would become a political football as basically everything does these days.

  6. Duane Snyder says:

    So we can’t keep US jobs in the US but we can give billions to a Chinese company in hopes that maybe they will initially employ some 3,000 people. Man, is this country in trouble or what. Thank you President Small Hands for getting tough on China!

  7. JPKMKE says:

    I don’t know how anyone could possibly suggest this is bad for Wisconsin at this stage. How will the capital be funded? What portion will be provided through Federal sources? What is the estimated net job migration expected? How will upfront investments in education sector be impacted? How will these impact cash flows for schools and colleges? How are these offset by tuition and state funding? What is the net increase in payroll taxes expected for the county, city and state? How does that change over time? How will these be distributed to Milwaukee county and city? The size of the incentives cannot be scrutinized until the broader business case is understood.

  8. Vincent Hanna says:

    Not bad at this stage, but skeptical (as we all should be). This is partly why some are skeptical (and your questions are good ones):

    -Getting the the company to come to Wisconsin would take $1 billion to $3 billion in incentives paid over up to 15 years, sources said. At least parts of the package would be tied to job creation.

    If the deal cost $1 billion and the company created 10,000 jobs, the government would spend $100,000 per job. And a $3 billion deal with that many jobs would cost $300,000 per job.

    Steve Deller, a professor of agriculture and applied economics at the University of Wisconsin-Madison, said a $3 billion deal over 15 years is likely “too pricey in terms of potential economic benefit back to the state.”

    “Throwing money into incentive makes a slippery slope,” he said. “(People) get so wrapped up in the winning game, in the headline of ‘we got it’ that they lose sight in a pretty steep price. Hard to say because we don’t know what the package looks like.”

    http://www.jsonline.com/story/news/2017/07/26/scott-walker-heads-d-c-trump-prepares-wisconsin-foxconn-announcement/512077001/

  9. JPKMKE says:

    I’m sure both sides are throwing out maximum opportunity scenarios at this stage to get to the next step. I would also guess that criticisms of the size of investment are using current day economics and measuring cost against this one deal rather than a multi-year/multi-deal growth scenario.

  10. Sean S. says:

    At those numbers in subsidies we might as well just hand out 30K to random people on the street and see what happens.

  11. D says:

    How about we try playing hardball and watch a potential 13,000 jobs, thousands of indirect jobs, thousands of construction jobs, and a building three times the size of the Pentagon go to the other 49 states that would pay these subsidies.

    Wisconsin would never recover from that. We would forever be an afterthought and a laughing stock to foreign investors and the rest of the country.

  12. Vincent Hanna says:

    What’s wrong with not just blindly agreeing to whatever Foxconn wants? A bad deal can hurt the state.

  13. Mark E. Bye says:

    Contestant: “I’ll take Politician’s Lies and Cash Giveaways for $100, Alex”

    Alex: “Scott Walker and Donald Trump recently made promises of bigly improving the employment numbers in the state of Wisconsin which will, in the end, cost taxpayers more than the jobs are worth”

    Contestant: “What is ‘Will State Get Conned by Foxconn?’ “

  14. Mark E. Bye says:

    Good thing our transportation infrastructure is state-of-the-art, cutting edge.

  15. CF says:

    Bloomberg says the corporate welfare is enough to give everyone in the state a new iPhone. Generally job investments are less than $150k per job, this one could be over 300k and even more if a lot more automation is put in place, leaving few jobs for living, breathing organisms that pay taxes and buy consumer goods. If Prebius, Walker, Fitzgerald, Vos and Trump are all enthusiastic about, then it is best to hope that this may not come to fruition or at least not until the UW checks it out thoroughly, Oh, but then with the dumbing down there by the aforementioned individuals, we might not get a correct answer. But if we put Scarmuchhi (Muuch)on it maybe he can show it is a terrific thing to send 3 billion of Wisconsins dollars to China.

  16. WashCoRepub says:

    Let’s ask the powerful job-creating triad of Gwen Moore, Chris Larson and Martha Laning about their plans for economic expansion and opportunity. Wind turbine plants and medical marijuana dispensaries, perhaps?

    Welcome to the Governor’s Race of 2018, Dems. Going to be fun.

  17. daniel golden says:

    AS an old small town lawyer once told me ” no deal is better than a bad deal”. The fact that there has been an agreement announced indicates that the parties know the details, but for some reason, we do not. I agree with the U W business Professor that this whole arrangement has the potential for a financial gain for Foxconn and a huge hit for Wisconsin taxpayers. This company has worn out it’s welcome in China, for heaven sake, and has already conned other states (no pun intended). It has been a negotiation between unequals, as Foxconn has been doing this for years all over the world, and we are represented by a college dropout and his crew who previously gave a half a million taxpayer dollars to a con artist from Fox Hills who used it to pay off his luxury car loans. Walker’s stooge, who masterminded this fiasco, wanted to give yet another million to this nonexistent company. Walker of course had received 10,000 dollars in donations from the recipient of these loans, and so rewarded the state official in charge with a cushy job on the Public Service Commission. That is Republican accountability for you.

  18. Mark says:

    Glad to see that at least one news source — the Wisconsin State Journal — has taken into account the very real likelihood that a fair number of the thousands of jobs created will be filled by workers from Illinois. Don’t get me wrong; as a resident of the City of Milwaukee, I think it’s interesting to finally see some let-up in the “drop dead” attitude of the Republicans in Madison toward Southeast Wisconsin. And no slam on our neighbors to the south, but the shared economic benefit with Illinois really needs to be factored into the gushing going on about all these jobs coming to Southeast Wisconsin. I would think that it would give some pause to people living in economically struggling parts of outstate Wisconsin to all the enthusiasm over all this money being committed to a plant like this being built in what is essentially the southern arc of the Milwaukee orbit without adding the northern arc of Chicago to the mix.

  19. JPKMKE says:

    Back of the envelope…after the 15-year incentive period using the data announced so far, and not including cost of capital:
    Foxconn will have paid out $12.4B in salaries, $14.8B in wages and benefits
    The average Foxconn employee has made $1.2M
    Other employers have paid $20.3B to employees in 22,000 indirect jobs (using BLS Mean construction wage data as proxy)
    Total payroll taxes paid by Foxconn and other employers for the period = $2.6B

    You don’t build a road and sewer for one house or one business. I don’t think these numbers necessarily add up to a bad deal for the people in Wisconsin. Let’s see what other details are announced.

  20. Eric Jernberg says:

    if Walker can walk away from 800 million in fed transit money for rail, why not make sure this is a good deal, and if not walk away as well. Oh that’s right that doesn’t fit his ideology.

  21. Vincent Hanna says:

    Does anyone really believe this will result in 13,000 new jobs (up from the promised 10,000) at an average pay of $53,000 a year plus benefits? If you do I have a great deal on a bridge in Alaska. Hit me up for details.

  22. MKE kid says:

    Sorry. Anything that Walker is enthusiastic about stinks to high heaven. His track record of a slimy self-serving career politician and corporate puppet speaks for itself. How many of his former staff members from his tenure as a sorry excuse of Milwaukee county exec are still serving time?

  23. Vincent Hanna says:

    The New Wisconsin Foxconn Plant Will Probably Be Staffed By Robots—if It Ever Gets Built

    “But as Tim Cuplan at Bloomberg points out, $3 billion for 3,000 jobs means the state is paying $1 million per job. But let’s be generous and factor in the construction jobs that would go into building the plant, which the state estimates could total 16,000 jobs, and the long-term estimate of employing 13,000 people at the plant. Those 29,000 jobs would still cost more than $100,000 a person in state subsidies.

    But there’s an even bigger problem than recouping the state’s investment. Foxconn’s history and the future of manufacturing in general both suggest Wisconsinites shouldn’t bust out the six-pack just yet.

    For one, Foxconn has a track record of promising factories to cities in need of jobs and not coming through. It happened in 2013 in Harrisburg, Pennsylvania, when Foxconn promised a $30 million factory that would employ 500 workers. The announcement made headlines, adding to both Foxconn’s and the Pennsylvania politicians’ political capital, but it was never actually built, and there’s no sign it will ever happen. Very little was made of the deal’s quiet death. It also happened in Vietnam in 2007 and Indonesia in 2014.

    Even if a plant gets built, it could fall short of expectations. In 2011, Foxconn promised a plant in Brazil that was projected to create 1000,000 jobs. In 2015, the factory reported it employed roughly 3,000 people, and the company never explained why it fell short of its projections, according to Reuters.

    Last year, Foxconn boasted that it replaced 60,000 workers with robots at a single factory in China. The company even makes its own industrial robots, dubbed Foxbots, that work on its assembly lines. Foxconn was making about 10,000 Foxbots a year in 2015.”

    http://www.slate.com/blogs/future_tense/2017/07/27/the_wisconsin_foxconn_plant_will_be_staff_by_robots.html

Leave a Reply

Your email address will not be published. Required fields are marked *