After more than three years of grand promises and missed deadlines, Foxconn and Wisconsin have agreed to adjust their contracts to reflect the reality of a much smaller project. Under the change, which was approved today by the Wisconsin Economic Development Corporation (WEDC), the company will receive much smaller tax subsidies in exchange for more flexibility over what it ultimately does in the state.
Foxconn originally promised to build a massive LCD factory with 13,000 employees and a cost of $ 10 billion. With the amendment, it now says it will employ a total of 1,454 people and invest $ 672 million. In return, the tax subsidies for which the company is eligible have been reduced from $ 2.85 billion to $ 80 million.
“When I ran to run for governor, I made a pledge to work with Foxconn to secure a better deal for our state – the last deal didn’t work for Wisconsin, and it doesn’t work for me,” said governor Tony Evers. in a statement. “Today I deliver on that promise with an agreement that treats Foxconn like any other company and saves taxpayers $ 2.77 billion, protects and ensures that hundreds of millions of dollars in infrastructure investments have already been made by the state and local communities. accountability is given for creating the promised jobs. “
The original Foxconn deal was arranged in 2017 by former Wisconsin Governor Scott Walker and former President Trump, who called the project “ the eighth wonder of the world ” and hailed it as a victory in his campaign to bring production back to the US . The Taiwanese electronics giant had to build a 20 million square meter LCD manufacturing facility. In return, Wisconsin offered the company an incentive package worth more than $ 4 billion, a mix of “refundable” tax credits, land and infrastructure.
The project went wrong almost immediately. LCD production in Wisconsin never made economic sense, but if you let go of the plan, you risked taking Trump’s wrath. Instead, the company has been running wild from idea to idea for years. The huge “Gen 10.5” LCD factory specified in the contract became a much smaller Gen 6, then was canceled and returned. The company announced it was building something called ‘the AI + 8K + 5G ecosystem’, which will be developed in a network of ‘innovation centers’, buildings the company bought to leave empty. It looked at building fish farms, exporting ice and storing boats. It announced plans to build coffee kiosks and fans that never moved forward. Most recently, it said it would build electric cars – although the company may have acknowledged it will in Mexico.
Foxconn’s delays and dead ends put both sides in a difficult position. Wisconsin has already spent at least $ 400 million on land and infrastructure, and Mount Pleasant, the small town where the factory was to be built, took on hundreds of millions in debt to be paid back through taxes generated by the project. Foxconn has dropped orders of magnitude as well as its promises and has invested too much to walk away painlessly. It now owns a lot of real estate in Southern Wisconsin, and it has built a strange collection of buildings, including the million-square-foot structure it dubbed the LCD Fab (although a government report found it looked more like a demonstration facility) and a crystal ball.
For two years, Evers’ government has been pushing Foxconn to review his contract to reflect his current plans, but the company declined. Last October, the latest negotiation attempt failed and the WEDC denied the company what would have been the first tranche of cash subsidies. One likely reason for the company’s refusal to negotiate is The edge Reported last year is that the process to change the contract would involve not going to the LCD manufacturers and revealing in detail what its new plan was, which it didn’t have.
But Foxconn came back to the table, and the result is this change.
The original contract effectively paid Foxconn back 15 percent of its capital investment and 17 percent of its wage costs, provided it met certain hiring goals each year. It was an extremely lucrative grant. If Foxconn built an expensive and highly automated factory that employed few workers, that would add up to about $ 1 million per job. In 2019, at the request of the Evers administration, economist Timothy Bartik drew up a report that found that Foxconn’s incentives would likely drop around $ 172,000 to $ 290,000 per job. Average US incentives are $ 24,000 per job, he wrote.
The grant per job under the change is approximately $ 41,000. The company would receive grants equal to 7 percent of wages and 10 percent of capital investment, which is in line with the general state. Enterprise Zone program.
In exchange for the drastically reduced subsidies, Foxconn will be given flexibility. The contract no longer states that Foxconn will build an LCD facility. Instead, “economic investment activities related to locating and exploiting a technology and manufacturing ecosystem” count, in the words of a summary shared by the state. Foxconn Industrial Internet, a Foxconn subsidiary that came to Wisconsin after the LCD plan fell apart but was not included in the original contract, was also eligible through the change.
In a statement, the company thanked Evers and WEDC for finding a change “that will give Foxconn the flexibility to pursue business opportunities in response to changing global market conditions.” The company said the agreement “is based on Foxconn’s current projections for digital infrastructure hardware products through 2025,” and that “Foxconn is strategically positioned within Mount Pleasant to make Wisconsin one of – if not the – largest manufacturers of data hardware. infrastructure in the world. United States. “
It remains to be seen how Mount Pleasant will perish given the limited size of the project. The city had committed to invest nearly $ 1 billion to acquire land and support the project, an amount so high that it resulted in a credit cut. The state had promised to cover 40 percent of its debt should the project’s taxes fall short.
For Wisconsin and for Foxconn, the agreement ends a costly and embarrassing story. Foxconn’s failure had already kept Wisconsin from paying billions in tax subsidies, but the new deal means the Evers administration is likely to avoid the threat of a costly legal battle. After hundreds of millions have been spent in public money, dozens of people pushed from their homes to clear up land and years of great promise followed by disappointment, the company is just another manufacturer with a small regional presence. Perhaps the new status will allow Foxconn to finally come up with something to do in the state.