It was always highly unlikely that Wisconsin's taxpayer-subsidized deal with Taiwan-based smart phone manufacturer Foxconn was going to fulfill the promises made by Foxconn and the state government. Now, it's worth wondering if the deal will live up to any of them.
Eighteen months after Foxconn bought a building in downtown Milwaukee that was supposed to be the first of several "innovation centers" to be built around the state, the building sits abandoned and empty, Wisconsin Public Radio reports. Other "innovation centers"—partnerships with local colleges and universities, each one supposed to create 100 to 200 high-tech jobs—planned for Green Bay, Madison, Eau Claire, and elsewhere also appear to be on hold.
The innovation centers were secondary to the main Foxconn facility that was supposed to be built in a Milwaukee suburb. But the problems with those other locations seem to reflect similar issues with the major project at the center of the multi-billion-dollar development that promised to create 13,000 jobs in total.
Kevin Vonck, development director for Foxconn's Green Bay site, tells WPR that the company is now "re-evaluating their strategy throughout the state." The Green Bay location, which was originally supposed to open in 2018, could open sometime in 2020, he says.
That's about par for the course. When former Wisconsin Gov. Scott Walker (R) agreed to give more than $3 billion in subsidies to Foxconn, he promised that "working families would reap the benefits." President Donald Trump, who flew to Wisconsin last June to participate in a ceremonial groundbreaking for the plant, said the project was an example of "reclaiming our country's proud manufacturing legacy."
Instead, it's been an excellent lesson in why such crony capitalist deals are a hugely expensive mistake. Foxconn is already failing on its other promises. While the company originally pledged to create 5,200 jobs by the end of 2020, Foxconn said earlier this year that the actual number would be about 1,000.
As TechCrunch has explained in detail, the problems with the Foxconn factory were not difficult to see. Building HD television screens—the main product the company was planning to produce at the Wisconsin facilities—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."
It's also worth noting that Foxconn has made these types of promises in other locales and then bailed. The company walked away from a plan to invest $5 billion and create 50,000 jobs in India, along with similar deals in Vietnam and Brazil. A planned manufacturing facility in Harrisburg, Pennsylvania, was supposed to employ 500 people, but it never materialized either.
Even if everything had worked out this time, the Foxconn subsidies are a bad deal for Wisconsin taxpayers. The state'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.
But everything isn't working out. Which is maybe a good thing, if it means the state can claw back some of those tax breaks. Unfortunately, it's already too late for the properties that were seized using eminent domain to clear space for the Foxconn complex.