Bruce Murphy
Murphy’s Law

Is Foxconn Double Crossing Walker?

Latest admission by company gives the game away.

By - Jul 3rd, 2018 10:42 am
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Foxconn chairman Terry Gou and Governor Scott Walker signing a memorandum of understanding. Photo from the State of Wisconsin.

Foxconn chairman Terry Gou and Governor Scott Walker signing a memorandum of understanding. Photo from the State of Wisconsin.

Back on May 23 the Nikkei Asian Review did a story citing industry sources who said Foxconn was going to scale back its plans for Racine County and would not build the kind of plant it promised the administration of Gov. Scott Walker. 

Oh no, said Foxconn officials, quickly releasing a statement denying the story: “Foxconn can categorically state that our commitment to create 13,000 jobs and to invest US$10 billion to build our state-of-the-art Wisconn Valley Science and Technology Park in Wisconsin remains unchanged,” the company said, as a story in the Milwaukee Journal Sentinel assured its readers.

But others in the media did some investigating and found the story was true. As Arthur Thomas reported for the Biz Times on June 20th: “The first LCD fabrication facility on the Foxconn Technology Group campus in Mount Pleasant will be a Gen 6 plant, not a Gen 10.5 plant as originally planned.”

This is not a small change. Bob O’Brien, a partner at Display Supply Chain Consultants, told the publication a Gen 6 plant produces roughly 5 foot by 6 foot glass panels “while a Gen 10.5 plant produces 10 foot by 11 foot panels. He also said a $10 billion investment makes sense for a Gen 10.5 plant, but a Gen 6 plant would require a $2 billion to $3 billion investment.” 

That’s a massive scale-down of the proposed project, both in size of the plant and products manufactured. Gen 6 factories typically produce smaller display panels, for up to a 39-inch TV, versus 65-inch or 75-inch television screens at Gen 10.5 plants.

The change came because the larger glass panels cannot be transported long distances and Foxconn had hoped to have a Corning factory, which manufactures the glass panels, co-locate at the Foxconn site. But officials at New York-based Corning Inc. made clear they’d need a subsidy for as much as two-thirds of the cost of this facility and officials with the Walker administration said they could not give any more subsidies.

The implications of this change are enormous. For starters it means Foxconn will not be building the kind of factory it first promised to the delegation lead by Gov. Walker last year and which helped sell the huge taxpayer subsidy: Walker was shown the plant run by Foxconn subsidiary Sharp in Japan, which manufactures the large screens. 

It could also mean Foxconn never gets close to a $10 billion investment or 13,000 employees. Foxconn officials now say the Racine plant will be built in “phases” and it could eventually add a facility to manufacture the larger screens. But this is the same company that promised to invest $5 billion and create 50,000 jobs in India, only to cut it to a fraction of that. “Similar results were seen in Vietnam, where Foxconn committed to a $5 billion investment in 2007, and in Brazil, where Foxconn spoke of a $10 billion plan in 2011,” and the plans were never realized, the Washington Post reported. And then there is Harrisburg, Pennsylvania, where Foxconn’s promise to invest $30 million and hire 500 workers never happened.  

True, the state subsidy is set up to reward the company in increments, so Foxconn would only get a portion of the promised $3 billion from the state if it falls short of the 13,000 jobs. But all the other subsidies, worth more than $1 billion, will happen regardless of how many jobs are created. That includes $764 million in local subsidies, $164 million in new state and local roads to serve Foxconn, a $120 million electric power line paid for by utility customers, and some $7 million on a state-paid ad campaign to attract workers for Foxconn. On a per-job basis, a smaller, $3 billion plant would actually cost taxpayers even more. 

The reality is that Foxconn has the state over a barrel. If Walker gets reelected, that gives the company four more years to squeeze him for ever more money. It can push for a subsidy for Corning (surely Foxconn knew all along Corning would want a subsidy), and for other giveaways, or refuse to go beyond the smaller plant. As the business publication Bloomberg predicted in an editorial lambasting the deal, Foxconn could “come back again and again, as blackmailers tend to, seeking yet more blandishments.”

As this incredible bait and switch by Foxconn has occurred, the Journal Sentinel’s contribution to the discussion was to repeat the reporting already done by Biz Times and then ask for a comment about Foxconn’s change of plans from Mark Maley, a former JS mid-level editor who now serves as spokesperson for Walker’s Wisconsin Economic and Development Corporation.

Said Maley: “Foxconn is one of the largest companies in the world and has a 44-year history of success, so we’re confident it will continue to make decisions to ensure that continued success. It’s not the state’s role to get involved in the business operations of one of the largest and most successful companies in the world.”

Right, the state isn’t involved in Foxconn’s operations. It has merely created a plan that if fully implemented, will charge everyone in Wisconsin $1,774 per household in taxes to subsidize the company, and even if the plan turns out much smaller will still leave taxpayers paying up to 13 percent of the cost to build and equip Foxconn’s plant and 17 percent of the wages of its employees. The plan will also waive state environmental rules for the company, allow it to skip the state appeals court and go straight to the Supreme Court on legal issues, a benefit enjoyed by no other company in Wisconsin, and will charge utility customers over a vast swath of the state for Foxconn’s electric power. One can only imagine what the Walker administration would do if it did choose to get involved in Foxconn’s operations. 

And we may well see more state involvement, depending on the November election results. If Bloomberg’s prediction is right, there could be more blackmailing of the state and its taxpayers as soon as Walker wins another term.  

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More about the Foxconn Facility

21 thoughts on “Murphy’s Law: Is Foxconn Double Crossing Walker?”

  1. PMD says:

    As people are buying larger TVs more and more, it seems ominous that this plant will likely max out with 39-inch TVs.

  2. Kamy says:

    2 words:

    FOX

    noun
    1. a carnivorous mammal of the dog family with a pointed muzzle and bushy tail, proverbial for its cunning.
    synonyms: red fox, silver fox, arctic fox; literaryReynard
    2.informal a cunning or sly person.
    “a wily old fox”
    verb
    1.
    informal
    baffle or deceive (someone).
    “the bad light and dark shadows foxed him”

    CON
    kän/Submit
    informal
    verb
    1.
    persuade (someone) to do or believe something, typically by use of a deception.
    “I conned him into giving me your home number”
    noun
    1.
    an instance of deceiving or tricking someone.
    “when depositors, realizing that the whole thing is a con, demand repayment”

    Foxconn. What is there to hide?

  3. Jake formerly of the LP says:

    This scam gets worse with each detail that is known. The only positive of the facility being smaller is that the taxpayer costs is less to build the factory, but even a $3 billion factory will cost us $450 million before a single job is added. And do you count on Walker’s WEDC to make sure Fox-con isnt doing cost overruns and fraud? HECK NO!

    Gov Dropout had been taken for a ride on this deal, and the only way Wisconsin gets off the ride is to fire Walker and the GOPs who backed this crooked boondoggle

  4. Dumbledore says:

    This is yet another example of the private sector playing the public sector by creating projects that are “too big to fail.” The die has been cast already by Walker, and neither he nor his successor – whether in 2019, 2023 or some other date – now have so much sunk costs invested by the state that Foxconn will be able to demand more since they will be seen as too big to fail.

    Just today, the state has announced a $500,000 grant to a private firm to redevelop the old dog track property in Hudson. How many state dollars were sunk into infrastructure (roads, sewer, etc) and other support for the original dog tracks? Now the state is investing more to redevelop a site because it’s just too big to fail.

    In the meantime, more state highways go unrepaired.
    https://www.wiscnews.com/saukprairieeagle/news/local/wildman-dot-has-no-immediate-plans-to-fix-highway-in/article_1dd51739-d7e6-5cf2-bb0a-d4a229e05e2d.html

  5. A Prire says:

    Kamy

    Love it, in all it’s irony!

  6. Bruce Thompson says:

    This is what happens when bureaucrats don’t believe in markets.

  7. Eric J. says:

    How could Terry Gou resist when he got more than everything he could have wanted from Walker. ( Kind of like the Trump north Korea deal )

  8. George Wagner says:

    No one has laid it out better than you, Bruce. Keep it up! And shame on the Journal Sentinel for not making this a bigger deal.

  9. happyjack27 says:

    The article betrays what the title conceals: It is not Walker who pays the price, it is us.

    Walker cannot be double-crossed by Foxconn. Foxconm cannot lighten his pockets, for it is not to the depths of them their hands go, nor can they diminish the faith of his supporters, for they are unfettered by facts. He cannot be double-crossed because he is conplicit.

  10. Kenneth says:

    I’m looking over my dead dawg Rover that I overran before. One leg is missing, the other is gone. One leg is scattered all over the lawn. No use retaining the dead dawg remaining that I overran before. GAWD BLESS AMERICA!

  11. tom says:

    The corrupt Walker does not care about citizens of WI. Scott Walker has never cared about anything other than Scott Walker’s political future. The scum is oozing from this slimy politician.

  12. Rita says:

    Foxconn, North Korea and Russia all have the US well-manipulated….

  13. James says:

    The $764 million spent by local governments for infrastructure is to be paid back through TIF district property tax revenues generated from Foxconn spending at least $9 billion. The State of Wisconsin is obligated to reimburse the local governments for 40% of any property tax revenue shortfall. Local governments will pay the remaining 60%.

  14. Dumbledore says:

    @James – good points that the locals will not be fully reimbursed for infrastructure costs if Foxconn fails to entirely build out the planned infrastructure. Even worse, locals will also be on the hook for maintenance and long-term sustainability of what could easily be overbuilt infrastructure.

  15. Karen says:

    Many of us saw this coming. Walker needs to go down once and for all. Wisconsin has suffered enough and we will feel the devastating repercussions for years.

  16. Bill Mack says:

    Some Dems just don’t want to give Walker or Trump any credit, only time will tell if it was a good investment.

  17. Eric J. says:

    Trump gets credit for :
    -North Korea ” deal ” / disaster. ( Nothing in writing)
    -Tariffs that by Nov. elections will be felt by many of his supporters. ( How do you like me now !)

    Walker gets credit for :
    -Not raising taxes ( crappy or long delayed) roads .
    -State debt at levels never seen before (You can have a ” balanced budget” and still have excessive debt levels )

  18. DAG999 says:

    Bend over Wisconsin Taxpayer…you will be getting the shaft (if not sooner, maybe later in about 10 years). In the meantime, the people of ILLINOIS thank you, because how ever many jobs are created, the majority of them will be taken by qualified ILLINOIS workers.

    And, knowing how the State of Wisconsin, and the present administration is always behind in the curve, 20 years from now we will be wondering what to do with all of the leftover landlocked parcels that FOXCONN reneges on. Maybe a few dozen empty strip malls will be in the future for those thousands of acres.

  19. Concerned WI says:

    WI wake up!!! Your home could be next. Your city could be next. Still those concerned with the environment are not being heard as our state’s natural world is being destroyed by the puppet for the Brothers K. Permissions to Foxconn, Mining and large factory farms.Crimes against the Earth and living beings for greed.

    Those of us concerned about big game hunting in Wisco. are not being heard. Bear baiting is deadly and cruel to both dogs and bears. They are creating more bears by feeding the cake and candy, another business.

    The list goes on and on. The call themselves Chrsitian. Their religion is Money!!!!!

  20. A Bus Driver says:

    Again we are provided more evidence that old Scooter doesn’t just look dumb he is dumb.

  21. A Bus Driver says:

    Are the voting public of Wisconsin as dumb as Scooter? Will you be dumb enough AGAIN to keep him as governor?

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