On December 1, 2017 the Village of Mount Pleasant in Racine County, Wisconsin issued the execution version of its development agreement for the “Foxconn Project,” under which Foxconn was to build a $10 billlion Gen 10.5 LCD fab in Mount Pleasant and initially employ 3,000 people (growing to 13,000 by as soon as 2022) in exchange for between $3 billion and $4.8 billion in subsidies — the largest subsidy given to a foreign company in U.S. history.
In addition, there were exemptions from various environmental and clean-water regulations. The deal was suggested by Foxconn founder and then-CEO Terry Gou, and vigorously pursued by then-governor Scott Walker, a Republican, and brokered in part by President Donald Trump.
Walker, Trump, and local politicians hailed the deal as a job-creator for Wisconsin and the start of an American manfacturing resurgence. Trump supporters praised his own deal-making prowess, and Trump called it the “Eighth Wonder of the World.” (Lots of politics involved here.) But not everyone was enthusiastic. Economists said it would take many years for Wisconsin to recoup its overly generous subsidy package. It has been projected that each job at the Mount Pleasant factory would cost Wisconsin $219,000 in tax breaks and other incentives.
President Donald Trump, then-Governor Scott Walker, Foxconn Founder Terry Gou, and then-House Speaker Paul Ryan ceremonially break ground for the Mount Pleasant plant.
Old display hands snorted in their beers and reminded anyone who would listen of previous Foxconn development proposals on which the company had failed to deliver. My own (unpublished) comment was “Terry Gou is a lot smarter than Scott Walker.” And, as has been widely reported, it did not take long for Foxconn to start reneging on portions of the deal while still suggesting it was entitled to all of the incentives in the original development agreement.
Now, Josh Dzieza has done an admirable job of in-depth reporting for The Verge (“Showdown in Wisconn Valley,” Dec. 13, 2019), in which he asks “Why won’t Foxconn tell Wisconsin what it’s building?“
Refusal by Inaction
The Wisconsin Economic Development Corporation (WEDC) has repeatedly urged Foxconn to return to the table and amend the deal, but the company has “refused by inaction,” said Wisconsin Department of Administration Secretary Joel Brennan. The WEDC and the administration of current governor Tony Evers (a Democrat) has, in Dzieza’s words,
“urged Foxconn to formally apply to revise its contract to reflect whatever it is actually building, a process that would involve describing Foxconn’s current plans, its expected costs, employment, and other basic details. Foxconn never did.”
Despite the breakdown in meaningful communication,
“Foxconn vice chairman Jay Lee told reporters as recently as last week that the company had hired more than the 520 workers required by the contract to receive subsidies for 2019, a surprising turnaround, given that Foxconn ended last year with only 156 employees and has yet to manufacture anything in Wisconsin,”
reported Dzieza.
“It’s time to get some answers,” said Wisconsin State Assembly Rep. Gordon Hintz. “Wisconsinites deserve better than having Donald Trump show up in May, pulling back a curtain on a bunch of people assembling flat panel TVs and saying, ‘look what we’ve done.’”
(I told you there was lots of politics here.)
When asked what would happen if Foxconn were to apply for tax credits now, Brennan said the subsidies would be withheld.
“The project that they have right now is outside the bounds of the contract,”
Brennan says.
There were a variety of revised statements from Foxconn since the orignal commitment to build a Gen 10.5 plant, which is the only one specified in the development agreement. These included a refusal to build a plant at all, but the current statement is to build a Gen 6 plant and a “smart manufacturing facility” that will make automated coffee kiosks. At another point, Foxconn said the plant would make LCDs for the automotive and health care industries, and a medical facility. Does this sound like equine excrement to you? Me too.
In the event that Foxconn continues its refusal to negotiate in good faith, the contracts are solidly in Wisconsin’s favor. Of course, a lot of concrete has already been poured, public funds have been spent, and Wisconsin would like to salvage something from this. But if the deal goes south it will be Walker and Trump with egg on their faces, not the current Evers administration. (KW)
Ken Werner is Principal of Nutmeg Consultants, specializing in the display industry, manufacturing, technology, and applications, including mobile devices, automotive, and television. He consults for attorneys, investment analysts, and companies re-positioning themselves within the display industry or using displays in their products. He is the 2017 recipient of the Society for Information Display’s Lewis and Beatrice Winner Award. You can reach him at [email protected] or www.nutmegconsultants.com.
