Evers says what Foxconn won't - it'll be a lot smaller, if it opens at all

Here is the full CNBC report on the Foxconn development, which aired a couple of weeks ago. It mentions the difficulty Foxconn has had in the last year as Apple's iPhones sales have struggled, and Trump tariffs being slapped on their imports. It's also funny to see soon-to-be-leaving WEDC CEO Mark Hogan already ratchet down the expected amount of jobs in an interview, and claim "it's a marathon, not a sprint."



The report also catches an admission from the project's executive director (Peter Buck) that the facility will be a smaller "Gen 6" facility instead of the Gen 10.5 facility that Walker, Trump, Ryan and Foxconn were selling this time last year. Which leads to the report replaying April's statement of new Governor Tony Evers where Evers said the promises of the Foxconn project "was no longer in play", and that the contract needed to be renegotiated.

Then last week, we got a follow-up interview of Evers by UW graduate and CNBC reporter Scott Cohn. You can see the full interview at this link, but what Evers told Cohn is that he had met with Foxconn officials and gone to the site in the last month.

Evers says he thinks there will be something at Foxconn, but it won’t be nearly as big as the thousands of jobs that Foxconn and GOP officials are still claiming will come to Racine County.

He noted that the company is building a much smaller display panel plant than it originally said it would — a fact that has been extensively reported over the last year — and said he visited the construction site in mid-June.

“The good news is we have clarity, we actually understand what’s going to be built and kind of when it’s going to be finished, the first phase,” Evers said.

He said he believed the factory would employ about 1,500, a figure other officials have advanced but which Foxconn itself has not cited.
That jobs number “certainly is less than the original thought,” Evers said, “although I believe that Foxconn is of the opinion that at some point in time they will have larger numbers of employees there.

“But for Wisconsin, 1,500 employees is important, and so we’re looking forward to working with them and make sure that we understand what they’re doing.”

Tony may feel he has to put up a brave face for the time being, but I’ll believe that number when it actually happens. I’m setting the over-under in Racine County at 500.

Evers’ statement also corresponds well with a report in Wispolitics that says Evers sent a letter to the WEDC Board asking it to be open to changing the contract with Foxconn.

In the letter, Evers wrote his administration is “committed to supporting Foxconn’s success in Wisconsin to bring manufacturing jobs to an area of the state that has struggled for many years.” He also again said the company approached the state earlier this year about revisiting the agreement.

A Foxconn spokesman said the company was aware of the letter but didn’t have an immediate comment.

“Because the project has evolved substantially from what was originally proposed, evaluated, and contracted for, it is necessary to review the revised aspects of the project and evaluate how changes can most fairly benefit both the company and our state,” Evers wrote. “Proposed modifications to the Foxconn agreement or terms for a new agreement should be thoroughly and thoughtfully reviewed and assessed by the WEDC and my Administration.”…

WEDC spokesman David Callender said the agency forwarded Evers’ letter to the full board. He said WEDC, the guv’s office and DOA have “routine discussions” with Foxconn. He also noted it is not uncommon for WEDC to amend contracts with companies during the lifetime of the deal. But he said the agency otherwise doesn’t comment on talks with a company before something would be presented to the board.

Evers offered no specifics in his letter on possible changes but noted the company’s plans “reflect a substantially smaller footprint, less capital investment, and fewer manufacturing workers than its original plans.” Foxconn originally proposed what’s known as a Generation 10.5 facility capable of manufacturing screens the size of a garage door. It now plans a Generation 6 facility, which products LCD screens for TVs, cell phones and other devices.

To me, the bigger number you need to keep in mind with the number of jobs at Foxconn is not 1,500, but 520. That’s how many people need to be working in the state for them to collect 15% of the expenses that go into the facility, and 17% of the salaries of those 520 employees. That could net them a few hundred million dollars without much in terms of job growth.

As bad as typical WEDC deals are, at least they only shell out a smaller percentage of the salaries and/or investments. Given that many companies are adding more jobs and investing more than Foxconn, why are they still allowed to get higher incentives, environmental exemptions, and other special treatment? At the very least the contract should be changed to that.

Granted, the other option is to say that the confirmation of the lesser project shows that Foxconn has broken their end of the deal, and that would be the basis of filing suit and hardballing the company. I think that’s still the better option, because Foxconn isn’t to be trusted anything, and even cutting them a check for $50 million to go away would be better than blowing hundreds of thousands per job for a project that might not last long after the contract runs out in 13 years.

One other interesting sidelight with Foxconn is this event from last night.

Foxconn founder Terry Gou loses Taiwan presidential primary to China-friendly mayor https://t.co/HLAvLNYdPL pic.twitter.com/z7NLqxrPvI

— The Globe and Mail (@globeandmail) July 15, 2019

So does that mean Gou goes back to Foxconn, or is he permanently done with the company and new leadership officially will take over and have different ideas about what (if anything) they do in SE Wisconsin? And will a Foxconn company that's already going through difficulties dump these acres of land after they get a few bucks from Racine County and the State of Wisconsin?

The last 2 years have taught us not to take the words of Foxconn or the GOP. We need to stay on them as the reality of the Fox-con is nothing more than another large warehouse project, and make them pay if they can't even come through with that.