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Behind-the-scenes report details Foxconn's failure to live up to its promise in Wisconsin
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FOXCONN | BEHIND THE SCENES

Behind-the-scenes report details Foxconn's failure to live up to its promise in Wisconsin

From the Keep up with the latest news on Foxconn in Wisconsin series

Foxconn Technology Group’s southeast Wisconsin project is still “an empty shell” of a building that has so far failed to live up to promises made by the company nearly three years ago, according to a bombshell report released Monday.

Citing interviews with 19 former employees and “thousands of pages of public documents,” online technology outlet The Verge on Monday reported the company recently changed the use for one of its new buildings from manufacturing to storage; 60% of employees included in the most recent tax credit application were hired in the final two months of the year; and several employees interviewed reported being given little direction or supplies and were reduced to tears.

The report details that Foxconn officials scrambled to come up with viable business options as its original plan to build large LCD screens became unlikely to succeed. The company spent two years exploring ideas to generate revenue such as fish farming with water piped in from Lake Michigan, exporting ice cream and storing boats. In addition, golf carts were purchased to retrofit into autonomous vehicles that would cart in employees, but the idea never reached fruition.

“As the divisions bickered, bored employees would come down from the Milwaukee headquarters to race the carts around the empty building, until the batteries finally died,” the Verge reported.

The report also said a once-planned ribbon-cutting event scheduled for May — and then September — with President Donald Trump, who once touted the project as the “eighth wonder of the world,” was ultimately scrapped when there was nothing to cut a ribbon for.

In a statement on Monday, Foxconn disputed the report’s claim that the company hired employees only to achieve tax incentives. Foxconn, which has said in the past that it does not comment on employee personnel matters, did not address the other allegations in the report, which cites unnamed employees, many of whom are no longer with the company.

“Many Wisconsin employees have found success embracing our challenges such as the assimilation of cultural differences, adapting to changing business needs, and finding ways to contribute to the company as their roles have evolved,” the company said.

Foxconn founder Terry Gou said in a separate statement Monday that the company “will remain committed to the completion and continued expansion of our project and investment in Wisconsin as long as policymakers at the federal, state, and local levels remain committed to Foxconn and the very important technology development goals driving the company’s investments, as President Trump has done.”

“Foxconn will work as a partner with those who treat the company as a partner,” Gou said, adding that the company has invested an estimated $750 million in the state.

A Foxconn spokesperson said on Monday the initial ribbon-cutting event planned for May was postponed due to the COVID-19 pandemic and state rules limiting large gatherings at the time and the rescheduled event in September ultimately was postponed again due to ongoing public health concerns.

Foxconn also refuted a claim in the report that in September the company received a permit to change the use of an LCD factory from manufacturing to storage.

“Permits have also been granted for assembly and office spaces which Foxconn plans to move into within coming weeks,” the company said.

During an interview with WisconsinEye last week, Wisconsin Economic Development Corp. Secretary Melissa Hughes said she toured one of the buildings on the Foxconn campus recently and saw a demonstration by employees building motherboards. She said employee enthusiasm was “infectious” during her tour, but added she did not see the inside of Foxconn’s 1 million-square-foot facility.

The Verge’s report comes just one week after WEDC told the Taiwan-based company it had been denied billions of dollars in state tax credits until officials with the company come to the table to draw up a new contract. The company was told late last year it would not receive subsidies until a new agreement was reached.

While Wisconsin has not yet doled out any tax subsidies to the company, a recent state estimate shows that the Foxconn project in Mount Pleasant has cost the state nearly $237 million so far in state and local road improvements, sales and use tax exemptions, grants to local governments and for worker training and employment.

“All of that was in anticipation and expectation of the Generation 10.5 facility to be built in Mount Pleasant and Foxconn has not lived up to that very specific contractual obligation,” state Department of Administration Secretary Joel Brennan told the Wisconsin State Journal Monday.

The contract

Under the contract with the state, signed in 2017 by former Gov. Scott Walker, Foxconn would earn incentives totaling as much as $3 billion over 15 years if the company reached the 13,000-employee benchmark and made a $10 billion capital investment in the state.

However, state officials say tax subsidies agreed to in the contract are tied to jobs and capital investment for specific projects, which Foxconn is failing to deliver. Foxconn’s contract calls for a Generation 10.5 facility that would build larger panels for TV screens, but the project has downsized to Generation 6, which would manufacture small screens for mobile phones, tablets, notebooks and wearable devices.

Speaking at a campaign rally Saturday in Janesville, Trump once again promised that Foxconn will be a success. The president also seemed to indicate that Democratic leaders, primarily Gov. Tony Evers, are to blame for the project’s setbacks.

“They don’t want to invest with these people,” Trump said. “I get in, companies like that will put more money in than they even promised.”

Last month, White House trade adviser Peter Navarro told the State Journal he was confident the Foxconn project will reach completion when the nation recovers from the COVID-19 pandemic.

“I think that will bear great fruit down the road as the world economy recovers and they come online with all of their facilities,” Navarro said.

Difficult talks

Even if Foxconn were to receive state funding, the company could face financial penalties through claw-back provisions included in the existing contract if a new agreement isn’t reached.

Hughes told WisconsinEye that negotiations with the company seeking an amended agreement never came to fruition. Part of the challenge stems from a lack of details from the company on what exactly Foxconn plans to do in Wisconsin.

“We just weren’t able to narrow down what their project looks like and how Wisconsin can incentivize it,” Hughes said.

While Foxconn said the company has about 550 employees, WEDC determined the company employed fewer than the minimum required 520 full-time employees and had invested roughly $300 million in capital expenditures. The report states that only 281 of Foxconn’s reported jobs would be eligible under the current contract.

Foxconn reiterated Monday that WEDC’s decision not to grant state subsidies “was a surprise that threatens the good faith negotiations.”

“While we are disappointed with the WEDC actions, we are confident that Foxconn and WEDC will be able to resume discussions and work together to reach an agreement that will support our efforts to bring smart manufacturing technologies and jobs to Wisconsin,” the company said.

But Brennan pointed out that state officials, including those appointed by Evers and Walker, have been consistent with Foxconn regarding the need for a new contract.

“This should be of no surprise,” Brennan said. “In fact it’s been entirely consistent … that, in order for the state to be able to support Foxconn’s continued growth in southeast Wisconsin, we needed to be able to align the contract with their existing project.”

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