Foxconn - Now you see it, now you don't, now you see it...

 What’s the status of the Foxconn flat-screen manufacturing plant in Mt. Pleasant, Wisconsin?  Many conflicting stories in the news these days lead to confusion and uncertainty.  In this item from Yahoo finance, Wisconsin State Assemblyman Gordon Hintz is quoted saying, “We have no idea of what is really going to happen. When they made the announcement at the White House with all the fanfare, it seemed to be a project that was going to have manufacturing jobs coming back to the heartland in Wisconsin. But what was sold to the public, what the president and the governor and others talked about in terms of this resurgence of manufacturing just simply isn't going to happen.”

In a February 1 article, the Wall Street Journal reports “Foxconn Technology Group, a major supplier to Apple Inc., said Friday that it has decided go ahead with the construction of a liquid-crystal display factory in Wisconsin, two days after saying building such a plant would be economically unfeasible.  The Taiwan-based company said it is moving forward with a planned facility that would make small LCD screens after productive discussions with the White House and “a personal conversation between President Donald J. Trump and Chairman Terry Gou.”   
 
“Our decision is also based on a recent comprehensive and systematic evaluation to help determine the best fit for our Wisconsin project,” the company said. Foxconn said the campus would serve as both an advanced manufacturing facility and a technology hub for the region.”  The Wall Street Journal concluded the article by noting that, “The company (Foxconn, formally known as Hon Hai Precision Industry Co.) is in a potentially vulnerable spot as China and the U.S. engage in a trade battle involving tariffs.”

Critics also note that Foxconn has a history of what some might call "bait and switch" - changing plans after commitments have been made.  This is discussed in this February 3 segment of "Up Front with Mike Gousha" on WISN TV, Milwaukee.  In this segment, Milwaukee Journal Sentinel business reporter Rick Romell says Foxconn has made plans for, and then abandoned, plants in Pennsylvania, Brazil and Vietnam.
 
So, while the project may or may not be in a state of flux, the current lawsuit filed by Midwest Environmental Advocates will proceed.  On February 1, Wisconsin Public Radio reported, “An environmental law center suing the state Department of Natural Resources over the decision to divert water to Foxconn Technology Group for its manufacturing plant says the company's change of plans should put the water diversion on hold.
 
Midwest Environmental Advocates in May challenged the DNR's approval of a city of Racine request to divert 7 million gallons of water per day outside the Great Lakes Basin.   Sarah Geers, an attorney with the group, said the reason that Foxconn needed so much water was to manufacture LCD screens. …  "Plans for the site have changed in fundamental ways since this project was first pitched to the public," Geers said. "In light of these dramatic changes, we are carefully evaluating how Foxconn’s new plans affect the city of Racine’s planned diversion of Great Lakes water." 

A DNR spokesman said the department hasn't received a request to modify or rescind the diversion approval so it remains valid.  Geers said while the Foxconn changes are being evaluated, the group will continue with the lawsuit as planned. Midwest Environmental Advocates filed a brief with the judge overseeing the case in December. The city of Racine filed a brief this week.  Geers said she expects a decision within the next few months.
 
The Midwest Environmental Advocates filed a legal action under the Great Lakes Compact in May. The group is representing six entities: Milwaukee Riverkeeper, League of Women Voters of Wisconsin, League of Women Voters Lake Michigan Region, River Alliance of Wisconsin, Natural Resources Defense Council and Minnesota Center for Environmental Advocacy.”
 
The political divides caused by this deal will have repercussions in Wisconsin for years to come.  In an analysis in the Economist on Jan 24, we get a glimpse of how this deal is being watched from outside the US.  “Tony Evers, a Democrat who has just replaced Mr Walker as governor, is no firebrand. He has been cautious about the deal, lest he be seen as opposing decent manufacturing jobs. In office he is loth to scare investors by breaking his predecessor’s legal contract. Urbane, educated and liberal types in Madison, the state capital, may wring their hands. But the blue-collar wing of his party, especially near Racine, is keen. Cory Mason, a philosophical type who was elected mayor of Racine in 2017, is an avid supporter who hopes Foxconn will revive his shrinking city.
 
As a state legislator he was one of three Democrats who backed Mr Walker’s deal. He saw a “breakdown within Democratic voters”, as “class lines defined views” in the party. Those with factory jobs, or who wanted them, cheered Foxconn; those with a college education opposed it, he says. Greta Neubauer, another Democrat, a state legislator and a fifth-generation resident of Racine, agrees. She disliked the deal but, she says, as “this is happening, I want to make the most of it”.
 
But Democrats run a risk in doing so. The Foxconn deal looks financially nonsensical. Mr Walker (pressed by Mr Trump) pledged an immense pile of taxpayers’ money for a foreign firm. Tim Bartik, an economist at the Upjohn Institute for Employment Research in Michigan, estimates that state governments typically offer big investors subsidies worth 3% of wages over 20 years. In luring Amazon last year, New York offered 6%; Virginia, just 1%, for example. Foxconn’s deal in Wisconsin, he says, is worth 30%, ten times the average.
 
Wisconsin has pledged almost $4.5bn to Foxconn, a sum Mr Bartik says is impossible to rationalise. “In 20 years people will point to this as an example of what not to do,” he says. As Wisconsin barely taxes manufacturers, the help will come as relief on sales tax, free provision of land, and direct payments. The effect will be to divert about $350m annually from the state budget for many years to come. Mr Evers has promised no tax rises, so spending, such as on education or health, may have to drop.
 
Worse, Foxconn, which is struggling with weak global sales of smartphones, is backing off its first bold promises. It will not make those big LCD televisions after all. Its local supply chain can shrink, doing without glassmakers. Instead goods will be shipped in and assembled. No one is yet sure what will be made; perhaps small screens for phones.
 
To lower costs, robots will do many tasks, so fewer low-skilled folk from nearby Racine will be needed than expected. Locals are also short on the necessary skills. Mark Muro, at Brookings, a think-tank, has analysed automation and the availability of workers. He says the Racine area is exceptionally short of engineering, computing or maths skills. Instead, the firm will look far and wide for engineers and developers. Foxconn rejects reports that engineers will come from China, but a person well informed about the deal says “a few hundred” Chinese workers already in America may have to move to Wisconsin. “
 
The article appeared in the United States section of the print edition of the Economist under the headline "Makers and takers" on January 29, 2019.

The video below provides a fresh outlook on the issue.

This video link was captured on February 1, 2019.  It shows two commentators on KSMP, the Fox News affiliate in  in Minneapolis, discussing the Foxconn project.  The person on the left is Dan Barriero, on the right is Justin Gaard.