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Foxconn changes focus of massive Wisconsin project
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Foxconn changes focus of massive Wisconsin project

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Walker and Trump break ground for Foxconn plant

President Donald Trump, flanked by Gov. Scott Walker, left, and Foxconn Technology Group CEO Terry Gou toss dirt June 28 during a ceremonial groundbreaking for the Foxconn facility in Mount Pleasant.

The future of Foxconn Technology Group’s $10 billion high-tech manufacturing campus in southeast Wisconsin was cast into uncertainty Wednesday after the company acknowledged the project was being “adjusted” in response to changing global economics.

The world’s leading electronics manufacturer said in a statement Wednesday that it remained committed to creating 13,000 jobs in the state, which it promised in exchange for more than $4 billion in state and local taxpayer-backed incentives.

Later in the day, the company said it plans in the next 18 months to construct several facilities, including a back-end packaging plant, high-precision molding factory, a system integration assembly facility, a conceptual product testing center and research-and-development data center.

But in an interview with Reuters, a company executive said the bulk of the jobs at the facility would be for white-collar research and engineering jobs, rather than the types of blue-collar manufacturing jobs President Donald Trump touted when he and former Gov. Scott Walker broke ground on the project last June.

“In terms of TV, we have no place in the U.S.,” Foxconn executive Louis Woo told Reuters in a story published Wednesday. “We can’t compete.”

Gov. Tony Evers’ top agency head said Wednesday the administration has been in regular contact with Foxconn, “however, we were surprised to learn about this development.”

Department of Administration Secretary-designee Joel Brennan said members of the administration contacted Foxconn leadership after reviewing the Reuters report and will continue to monitor the project.

Woo said the Taiwanese company wants to create a “technology hub” largely consisting of research facilities along with packaging and assembly operations. To that end, Foxconn has established a North American headquarters in Milwaukee and plans to create technology-focused innovation centers in Racine, Green Bay and Eau Claire.

Instead of manufacturing the TVs in the U.S., Woo told Reuters it would be more profitable to make them in China and Japan, assemble them in Mexico and import them to the U.S.

“In Wisconsin we’re not building a factory,” Woo told Reuters. “You can’t use a factory to view our Wisconsin investment.”

Foxconn chairman Terry Gou has previously said the company plans to replace 80 percent of its workers with robots in the next five to 10 years.

Woo said about three-quarters of the jobs created will be in research and development and design, rather than blue-collar manufacturing jobs.

Industry experts, however, still question whether it’s possible to maintain three-quarters research and development staff with a commitment to 13,000 jobs.

Robert O’Brien, co-founder and president of Display Supply Chain Consultants, said the possibility is doubtful.

“I’m not saying it’s not possible, I’m saying it seems pretty unlikely,” O’Brien said. “You’re talking about the staff of a major research university.”

O’Brien added the manufacturing facilities Foxconn claims it will build typically employ fewer workers and require less capital investment, especially if Foxconn doesn’t manufacture TV screens.

He also suggested Foxconn most likely can’t have it both ways: it either would need to build a research-intensive facility or a manufacturing plant — not both. But with the size of the factory, anything is possible, he added.

“The story doesn’t seem to mesh into a coherent picture with this notion that they’re looking at what looks like a back end of the original complex,” O’Brien said.

Either investment, if fulfilled, could still have a significant economic impact, he said. Knowledge workers are higher paid, having an impact on the surrounding economy.

Foxconn slow to hire

The development Wednesday comes after the Taiwanese manufacturer fell short of its job creation quota in 2018 and failed to qualify for any state tax incentives. The company in 2018 created 178 direct, full-time jobs, Woo wrote in a letter to Mark Hogan, CEO of the Wisconsin Economic Development Corp., which helped craft the tax incentive deal.

The 2018 jobs figure is short of the 260 full-time jobs minimally required under the state’s contract with the company, meaning Foxconn will not receive any tax incentives it could have qualified for this year.

The contract with Foxconn set a goal of 1,040 jobs for 2018 to be eligible for up to $9.5 million in job-creation tax credits. The company is still able to claim those tax credits in future years if it exceeds the jobs target for any verification period.

Hogan, in a statement Wednesday, emphasized the agency’s contract with Foxconn protects Wisconsin’s taxpayers and provides the Taiwanese manufacturer flexibility to make business decisions.

The 2018 jobs report isn’t the first time the company has received scrutiny. National media outlets have previously reported Foxconn has considered building smaller screens and making a lesser initial investment in Wisconsin, prompting critics — especially Democrats — to argue the economic development project was a bad deal for taxpayers. Foxconn at the time denied those reports.

Foxconn has promised jobs elsewhere that it failed to deliver on. In 2013, for example, Foxconn said it would invest $30 million to hire 500 workers for a new factory in central Pennsylvania, but the factory was never built. The company has also made commitments in Indonesia, India and Brazil, but has fallen short, according to the Washington Post.

An audit in December found WEDC had intended to award tax credits for employees who did not perform work in Wisconsin. A WEDC spokesman earlier this month said the agency had not planned to change that policy.

Evers on the campaign trail had been critical of both the Foxconn project and WEDC, which he had vowed to dissolve. He backtracked on that promise, saying he would not include any changes to the agency in his upcoming budget request.

Republican lawmakers have continued to champion WEDC, and in their December lame-duck session passed legislation barring Evers from appointing the agency’s CEO for nine months.

Evers has said he hopes for transparency and success for the project. Reuters reported Gou plans to meet with Evers later this year. An Evers spokeswoman has not confirmed the meeting.

Republicans blame Evers

Foxconn is eligible for nearly $1.5 billion in job creation credits through the year 2032. That doesn’t include capital investment tax credits, which Foxconn will be eligible for at the end of 2019. The company could receive up to $1.35 billion in such credits by the end of 2025 under the contract. In total, state tax incentives for capital investment and job creation amount to about $2.85 billion.

Foxconn has previously said it would invest up to $10 billion in Wisconsin, however, the figure was absent in its statement Wednesday.

Assembly Speaker Robin Vos, R-Rochester, and Senate Majority Leader Scott Fitzgerald, R-Juneau, in a statement Wednesday lauded Foxconn for its investment so far in the state, and blamed the changes on Evers.

They specifically cited Evers’ plan to scale back a manufacturing tax credit that virtually eliminates Foxconn’s state tax liability — a benefit that was not tabulated as part of the company’s deal with the state.

“The company is reacting to the wave of economic uncertainty that the new governor has brought with his administration,” Vos and Fitzgerald said in a joint statement.

Foxconn did not mention Evers in its statement, which comes as demand for iPhones and other smartphones Foxconn manufactures has declined. Woo told Reuters the company is re-evaluating in light of the high cost of labor in the U.S.

Meanwhile, Assembly Minority Leader Gordon Hintz, D-Oshkosh, who recently appointed himself to the WEDC board, took to social media to slam their argument, writing on Twitter “there is nothing more pathetic than legislative leaders responsible for selling taxpayers a bag of coal evading even a whiff of any responsibility and accountability.”

Vos and Fitzgerald emphasized the state’s contract with Foxconn protects taxpayers by not doling out tax credits to the company until it produces jobs.

Mount Pleasant and Racine County, however, have already spent money on infrastructure improvements and land acquisition.

According to the Milwaukee Journal Sentinel, they’ve so far borrowed $355 million and spent $190 million, mostly to buy land. Foxconn has contributed $60 million for the village to use. The newspaper reports the entire project will require about $912 million in local government spending, which officials say will be covered by additional property taxes generated by the development.

Foxconn’s contract requires it to provide enough money to cover local costs even if it undertakes a smaller investment.

In a statement, Village of Mount Pleasant President David DeGroot, Racine County Executive Jonathan Delagrave and Jenny Trick, executive director of the Racine County Economic Development Corporation, brushed off the Reuters report.

“Contrary to what was reported by Reuters, Foxconn reiterated to us, today, its commitment to building an advanced manufacturing operation in Wisconsin, in addition to its commitment to create 13,000 jobs and invest $10 billion in Racine County,” they said.

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