/Foxconn Is Reconsidering Plan for Wisconsin Factory

Foxconn Is Reconsidering Plan for Wisconsin Factory

It was heralded a 12 months and a half in the past as the beginning of a Midwestern manufacturing renaissance: Foxconn, the Taiwanese electronics behemoth, would construct a $10 billion Wisconsin plant to make flat-screen televisions, creating 13,000 jobs. President Trump later known as the undertaking “the eighth wonder of the world.”

Now that prospect appears to be like much less sure.

Pointing to “new realities” available in the market, the corporate stated Wednesday that it was reassessing the plans, underscoring the troublesome economics of producing within the United States. “The global market environment that existed when the project was first announced has changed,” Foxconn stated in a press release.

Company officers had signaled for months that their emphasis was more and more on analysis and growth reasonably than large-scale manufacturing, dampening the potential for blue-collar job creation.

That flip runs counter to Mr. Trump’s imaginative and prescient for the undertaking, which he had cited as a milestone in reversing the decline in manufacturing unit jobs. The twist additionally introduced new friction in Wisconsin, the place the initiative has been politically fraught from the beginning due to its billions of in tax subsidies.

Foxconn stated that it remained dedicated to creating 13,000 jobs in Wisconsin and that it was “moving forward with plans to build an advanced manufacturing facility.” But it didn’t tackle the share of jobs to be dedicated to manufacturing, and economists questioned how such a big work power might be created if the plant’s focus was on different areas.

A White House spokeswoman didn’t reply to a request for remark.

The Foxconn assertion adopted a Reuters report that Louis Woo, a special assistant to the company’s chairman, Terry Gou, had said the costs of manufacturing screens for televisions and other consumer products were too high in the United States.

“In terms of TV, we have no place in the U.S.,” Mr. Woo told Reuters. “We can’t compete.”

Mr. Trump’s campaign promise to revitalize American manufacturing was considered an important factor in his capturing Wisconsin and other battleground states in 2016. Yet the cost of luring Foxconn set off a partisan battle in Wisconsin that extended into the midterm elections last year, when Gov. Scott Walker, a Republican, was defeated.

Mr. Walker and state lawmakers had agreed to more than $4 billion in tax credits and other inducements over a 15-year period, an unusually high figure, for a plant in Mount Pleasant, near Racine.

Wisconsin residents have had mixed feelings about the investment, polls show. And early on, economists questioned whether the large-scale manufacturing plant and the thousands of jobs would come to fruition. The increasing focus on research raised new doubts about the scale of hiring — economists said that strategy could produce a smaller number of higher-paying jobs.

“There aren’t that many R&D facilities in the world with 13,000 people,” said Susan Helper, an economist at Case Western Reserve University in Cleveland.

During the fall campaign, Wisconsin Democrats held up the Foxconn pursuit as evidence that Republicans were focused on businesses, not ordinary people — and too willing to hand out state funds to a single company.

Defending their eight years in power, Republicans countered that the plant would re-establish Wisconsin’s strength as a manufacturing hub, and residents in the southeastern part of the state, closest to the plant, were especially receptive.

On Wednesday, reports of Foxconn’s reassessment set off a new round in that political fight. Republicans who control Wisconsin’s Legislature suggested that the arrival of Gov. Tony Evers, the Democrat who ousted Mr. Walker, was partly to blame.

“The company is reacting to the wave of economic uncertainty that the new governor has brought with his administration,” said a statement from the Assembly’s speaker, Robin Vos, and the Senate’s majority leader, Scott Fitzgerald. “Governor Evers has an anti-jobs agenda.”

Mr. Evers, who took office this month, has indicated that he would not block the Foxconn project, although he and other Democrats called it regrettable.

“This deal was reckless from the beginning,” said Martha Laning, the state’s Democratic chairwoman. “Despite multiple red flags throughout the negotiation process, Wisconsin Republicans put taxpayers on the line for $4.5 billion and rewrote the entire rule book for an election-year talking point.”

The plans for the plant — including what it would produce, and the composition of its work force — have changed over time. Tim Sheehy, president of greater Milwaukee’s chamber of commerce, said Foxconn had initially believed that 70 percent of its hires would be for “plant floor” jobs and 30 percent in design and engineering. Now, he said, those proportions have flipped.

Foxconn’s agreement with the Wisconsin Economic Development Corporation “does protect the state to some extent if Foxconn falls short of promised job creation,” said Timothy Bartik, an economist for the Upjohn Institute in Kalamazoo, Mich. “But the capital investment tax credit, in particular, does not seem to fully adjust for this if Foxconn ends up doing a much less job-intensive and more capital-intensive project.”

At this point, the cost to taxpayers across the state is likely minimal. The company has said it will forfeit tax credits for 2018 because it fell short of the hiring target on which they were based. The company did receive a sales-tax exemption on some purchases of material, Mr. Bartik said.

The village of Mount Pleasant and Racine County have borne most of the preliminary costs. According to Michael Farren, a research fellow at the Mercatus Center at George Mason University in Virginia, Mount Pleasant had acquired 85 percent of the initial 1,200 acres intended for the factory through eminent domain, and turned over at least 65 percent of the land to Foxconn.

Local officials pointed out that Foxconn had already invested $200 million in Wisconsin and built a 120,000-square-foot structure.

But others noted that the company had failed to follow through on grand proposals in the past. It announced in 2013 that it would invest $30 million in a high-tech factory in Pennsylvania that would create 500 jobs. The factory never materialized.

The company laid out ambitious plans in Brazil, too — for 100,000 jobs. That project was mostly left on the table.

“Foxconn has a history of not delivering on its jobs and manufacturing commitments that it’s made,” said Megan Randall, a research associate at the Urban Institute in Washington. “These types of instances are exactly why accountability measures are so important in state and local tax-incentive deals.”

Mr. Bartik said Foxconn’s rationale about changing global conditions was puzzling.

“It is hard for me to see how global conditions have dramatically changed the competitive position of the U.S.’s labor costs in producing flat-screen TVs from when the project was announced in 2017,” he said. Wage growth has accelerated as the labor market has tightened in the past year and a half, but increases have been modest.

It could mean that “this project will end up mostly being a R&D operation in Madison, with a much smaller factory in southeast Wisconsin,” Mr. Bartik said.

Source link Nytimes.com

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