Trump called Foxconn's Wisconsin factory an 'incredible investment,' but evidence is mounting it's a terrible deal

GettyPresident Donald Trump and Foxconn Chairman Terry Gou.
  • Foxconn is building a giant factory complex in Wisconsin, enabled in part by $US4.5 billion in taxpayer subsidies.
  • But Foxconn is increasingly backing away from some of its promises to Wisconsin politicians and President Donald Trump.
  • Wisconsin could be subsidizing Foxconn up to $US1 million per job created, according to The New Yorker.
  • Now Foxconn is looking to bring Chinese engineers over to the US because it can’t find enough skilled workers for the plant,The Wall Street Journal reported.

Foxconn Chairman Terry Gou didn’t become one of the most powerful people in technology by being bad at negotiating.

And increasingly, it seems as if he and his company, which manufactures electronics like Apple’s iPhone and Microsoft’s Xbox, negotiated a stunning package to build a 21.5-million-square-foot factory complex in Wisconsin.

For building that massive factory, which Foxconn said at the time could create 13,000 blue-collar jobs, the Taiwanese electronics giant received:

  • More than $US4.5 billion in taxpayer subsidies, most of it in “direct cash payments from taxpayers,” working out to $US220,000 to $US1 million per job created.
  • An exemption from limits on smog pollution and other environmental rules, allowing it to reroute streams during construction and operation, and from filing an environmental-impact statement.
  • Special court privileges, including the ability to appeal directly to the Wisconsin Supreme Court.
  • Expanded eminent-domain privileges, which may help the government seize the property of holdouts who do not want to sell their properties to Foxconn.

In total, the factory was estimated to cost $US1,800 per Wisconsin household, according to The New Yorker.

But Foxconn promised 13,000 jobs before starting to roll back the scope of the facility, according to The Verge. All of a sudden, that promise seemed like a reach, a goal that might never be met.

In May, it was revealed that Foxconn had scaled back its plans. Instead of producing giant, 10-foot-by-11-foot panels for TVs, it would create smaller glass panels for smartphones and displays. Eventually, Foxconn officials said, it could make the “Generation 10.5” plant originally promised, but it might take a while.

Six weeks later, it backtracked. Foxconn could never build the plant it originally promised because of competition from China. Instead, the Wisconsin factory would focus on what the company called “AI 8K + 5G,” a change that would mean employing 10% assembly workers and 90% “knowledge workers,” and relying heavily on automation.

And on Tuesday, The Wall Street Journal reported that Foxconn was likely to bring in employees from China to help staff the plant because it couldn’t find enough skilled engineers in Wisconsin. In a statement, Foxconn told The Journal it still planned to hire 13,000 workers.

‘Mr. President, the eagle flies’

Trump Gou FoxconnGettyGou and Gov. Scott Walker of Wisconsin survey the site before breaking ground on the plant on June 28.

The Wisconsin factory was the culmination of a secret bidding war among states to offer as many incentives as possible. Wisconsin officials told subordinates to monitor the packages that others like Michigan were offering, according to records reviewed by Business Insider.

Though the factory ended up being a win for Wisconsin, President Donald Trump touted it as a victory for his administration when the location was revealed in July 2017 at a White House press conference. (The deal was officially signed in November 2017.)

“Thanks especially to my friend, one of the great businessmen anywhere in the world, Terry Gou,” Trump said at the time. “I would see Terry, and I’d say, ‘Terry, you have to give us a couple of those massive – these are massive places that you do such great work with.’ And he’s going to be doing that in a state that’s very close to my heart, Wisconsin.”

He added: “To make such an incredible investment, Chairman Gou put his faith and confidence in the future of the American economy. In other words, if I didn’t get elected, he definitely would not be spending $US10 billion.”

Gou said that each of the three times he had met Trump, the president “emphasised the importance of manufacturing in America.”

“Mr. President, the eagle flies,” Gou said, referring to the project’s codename, “Project Flying Eagle.”

Ultimately, it’s not Trump or even Sen. Paul Ryan feeling the repercussions of a deal that doesn’t look great for Wisconsin, but Republican Gov. Scott Walker, who is facing a difficult reelection fight on Tuesday. Polls have found him to be neck-and-neck with his Democratic opponent, Tony Evers.

The argument Walker is facing is that he knew exactly what and how much he was giving up to score a talking point about bringing jobs to Wisconsin – and still overpaid. After Wisconsin, the next closest state in offering incentives was Michigan, at $US2.3 billion, according to The Verge.

The public couldn’t have known about the details of the deal beforehand either, making it important that elected officials would try to drive a hard bargain.

For example, in July 2017, Business Insider requested the presentations and documentation that Foxconn had provided the Wisconsin Department of Revenue. A Wisconsin secretary told Business Insider in an email:

“I am withholding emails that contain information relating to [the Wisconsin Economic Development Corporation’s] consideration of pending grants, loans or economic development projects with Foxconn, pursuant to section 238.08, which provides that records relating to pending WEDC grants, loans or economic development projects that must remain confidential to protect the competitive nature of the grant, loan or project.

“Also, in balance, public disclosure of records relating to pending or potential opportunities is less beneficial than nondisclosure, because disclosure impedes the WEDC’s ability to productively negotiate with companies about potential projects that will create jobs, increase investment in the state, and generate additional state revenue for state and local governments. Such disclosures would hamper WEDC’s efforts to attract new businesses to the state or negotiate with existing companies seeking to expand their operations in Wisconsin, and could impede economic development in this state, to the detriment of the State and its citizens.”

Wisconsin may have successfully attracted Foxconn, but it’s increasingly looking as if the entire factory project may be to the detriment of its citizens.

Know more about the Foxconn factory in Wisconsin? Email the author at [email protected] or direct message on Twitter @kifleswing. Secure messaging available on request. You can also contact Business Insider securely via SecureDrop.

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