Wisconsin promised more than $3 billion in subsidies to Foxconn, a Taiwan-based manufacturer of smart phone parts, to lure the tech giant to suburban Milwaukee. Former Republican Gov. Scott Walker promised that "working families would reap the benefits" of the giveaway, and President Donald Trump flew to Wisconsin last June to participate in a ceremonial groundbreaking for the plant. The project was an example of "reclaiming our country's proud manufacturing legacy," Trump said.
Now? There may not be a Foxconn factory built in Wisconsin at all.
"In Wisconsin we're not building a factory," Louis Woo, a high ranking assistant to Terry Gou, Foxconn's chairman, tells Reuters. Instead of a manufacturing facility that was supposed to create 13,000 blue collar jobs, Foxconn is reconsidering its plans and is likely to turn the Wisconsin facility into a "technology hub" that would include research facilities and the production of specialized tech products. The jobs created are likely to be "knowledge" positions—in other words, not blue collar jobs—Woo tells Reuters. That's something Foxconn had already acknowledged was likely in November when The Wall Street Journal reported that the company was planning to import workers from Taiwan and China to meet its hiring goals in Wisconsin.
Foxconn is already lagging well behind its job-creation promises. While the company originally promised to create 5,200 jobs by the end of 2020, Foxconn said earlier this month that the actual number would be about 1,000.
Woo says that Foxconn is shifting its strategy because the company can't make television screens in the U.S. and remain competitive in the global marketplace. But if that's true now, then it was certainly true a few years ago when the company was making promises to Walker's government—and when Walker was promising that "LCD displays will be made in America for the very first time, right here in the state of Wisconsin."
As TechCrunch explains, the problems with the Foxconn factory were not difficult to see. Building television screens with relatively expensive American labor was always a major question mark, and it was never clear how Foxconn planned to operate a huge manufacturing center "in what was essentially the middle of nowhere, without the sort of dense ecosystem of suppliers and sub-suppliers required for making a major factory hum."
There were plenty of warning signs that Foxconn would have trouble following through with those promises. Foxconn previously walked away from a plan to invest $5 billion and create 50,000 jobs in India, and similar deals in Vietnam and Brazil. Even in America, there was evidence that Foxconn should not be trusted to make good. A planned manufacturing facility in Harrisburg, Pennsylvania, was supposed to employ 500 people and come with a $30 million investment, but it never materialized.
Even if everything had worked out, the Foxconn giveaway was a bad idea. Wisconsin's Legislative Fiscal Bureau, a number-crunching agency similar to the federal Congressional Budget Office, calculated that it would take the state until 2043 to recoup the $3 billion handout, which was the largest such subsidy in Wisconsin history. Even if all 13,000 promised jobs went to Wisconsinites, the tab would be more than $230,000 per job created.
Another lousy part of the deal is the fact that eminent domain will be used to remove residents of Mt. Pleasant, Wisconsin, where the new facility is to be built. As Reason has previously reported, Foxconn will receive more than 1,000 acres of land for free, the logic being that the subsequent increase in land value will pay for itself eventually in the form of higher property taxes.
It was always pretty unlikely that the Foxconn deal with live up to the promises made by the company, Walker, and Trump. That it is failing so spectacularly, and so early, should serve as a stern warning to the next politician who considers a similar scheme.