Monday, October 12, 2020

Foxconn officially fails. And we can't let it be forgotten

You figured this might have been coming, but it was still a surprise to see the headlines today about the absurd boondoggle in the SE Corner of Wisconsin.
In a letter sent Monday to the Taiwan-based company's Vice Chairman Jay Lee, Wisconsin Economic Development Corp. Secretary Melissa Hughes said "Foxconn’s activities and investments in Wisconsin to date are not eligible for credit" under the more than $3 billion contract first signed back in 2017. The letter also underscores that negotiation attempts between the state and company this summer failed to result in a new contract.

"As we have discussed numerous times, markets, opportunities and business plans can and often need to change," Hughes said in the letter to Lee, which was obtained by the Wisconsin State Journal through a records request. "I have expressed to you my commitment to help negotiate fair terms to support Foxconn’s new and substantially changed vision for the project."

In other words, Scott Walker's 2017 scheme to give a foreign company unprecedented incentives isn't going to be anything close to what Foxconn, Scotty and President Trump claimed would happen.
Now that a non-grifting administration is in charge of WEDC, they are holding Foxconn accountable for not delivering on the jobs or products they claimed they would. And I have little doubt that if Walker were governor today, he'd be covering up this fact and still trying to sell to rubes that "Foxconn will be a great investment."

Josh Dzieza of The Verge has been all over the Fox-con for several years, and here is his excellent summary about how Foxconn fell far short of what was promised, and why the state isn’t going to pay them for the handful of jobs they did add in Racine County.
Though the state has spent money on infrastructure and other expenses related to the project, this would have been the first installment of the nearly $3 billion in refundable tax credits that made up the bulk of former Gov. Scott Walker’s record-breaking subsidy package. The credits, likely to be made in the form of direct payments to Foxconn, were to be released each year after Foxconn met certain employment targets. In 2018, Foxconn needed to hire at least 260 eligible employees, and Foxconn fell so far short of that goal it didn’t apply for subsidies.

In 2019, Foxconn needed to hire at least 520 people, and the company’s submission to WEDC showed 550 employees at the end of the year. But WEDC estimates that only 281 of these employees would likely be eligible under the terms of the contract. WEDC’s response notes that this is an initial estimate and that a full verification was unnecessary given the project itself was not eligible under the contract. It did not say why the other employees Foxconn submitted were ineligible, however, a large number of them were hired in the final weeks of the year, and Foxconn would have had to pay them in 2019 for them to be eligible. Employees could also be ruled ineligible if they made less than $30,000 per year or were not based in Wisconsin.
Do you think a Scott Walker-run WEDC would have checked up on Foxconn's claims? HELL NO! They would have handed out tens of millions of taxpayer dollars just so they could continue to say "See, Foxconn is working out!"

Dzieza also mentions that not only is Foxconn's Wisconsin plant not making the large screens that they claimed they would, it isn't making much of anything at all.
But the larger problem is that those employees weren’t working on the project described in the contract. The instructions WEDC included for Foxconn’s subsidy application repeatedly refer to the definition of the project in the original contract: a larger Gen 10.5 factory. Furthermore, as part of the third-party audit conducted by Deloitte for the subsidy process, WEDC included a survey of employees asking what projects they were working on. (Documents show Foxconn initially objected to this question but later acquiesced when the language was changed.) Answers included working on the globe Foxconn is building, developing office software, and making circuit boards, but none, unsurprisingly, mention a Gen 10.5 LCD factory.

“The Recipients are ineligible for tax credits because of their failure to carry out the Project,” WEDC wrote in its letter to Foxconn, quoting the passage defining the project as a Gen 10.5 in the original contract. “The fact that the Recipients have neither built, nor started to build or operate, the required Generation 10.5 TFT-LCD Fabrication Facility (the “10.5 Fab”) is not in dispute. The Recipients have acknowledged that they have no formal or informal business plans to build a 10.5 Fab within the Zone, and WEDC and the State of Wisconsin have corroborated that fact from observation, evaluations, and from industry experts hired to provide consulting services.”

The issue of factory type is more than a technicality. The state’s economic impact analysis was predicated on an enormous factory rapidly scaling up to employing 13,000 people and tapping into local supply chains. This hasn’t happened. In Foxconn’s original WEDC application, the company said it would invest $3.3 billion by the end of 2019. Its 2019 subsidy application shows it has invested only $280 million. (For unclear reasons, WEDC’s estimate in its response shows approximately $300 million, but either way, it is less than 10 percent of Foxconn’s target.)
A few hundred jobs and maybe $300 million in new buildings and equipment? Not really what these guys were selling 3 years ago, was it?
By the way, Hughes and WEDC are actually trying to give Foxconn a break - offering to redo the contract in a way that allows Foxconn to be treated as any other WEDC jobs incentive package. But even with the jobs and capital investment credits going away, don't forget that Foxconn still was given hundreds of millions of taxpayer dollars in road upgrades, electrical grids, water, and other infrastruture. All for a project that isn't going to yield a fraction of the jobs that a typical Amazon warehouse will.

What a pathetic waste. And even though most Wisconsinites have already accepted that Foxconn is at best a disappointment (if not outright higheway robbery), I would love to see Wisconsin politicians hammer on every Republican that signed off on this scam for the next 3 weeks. We can't forget that the GOPs were more than willing to flush billions of taxpayer dollars and change our environmental laws in exchange for Foxconn's photo ops and cheap headlines.

And while we're at it, maybe someone could ask the President about Foxconn's failure when he comes to Janesville next weekend for a COVID rally The dimwit probably doesn't even know how dead this thing is, and would anger a whole lot of Wisconsinites as he tries to sell something that most of the state stopped buying into a long time ago.

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