Skepticism creeps up over Foxconn’s future

By: - February 5, 2020 5:00 am

Foxconn’s groundbreaking ceremony in Wisconsin in June 2018, brought out then-U.S. House Speaker Paul Ryan, President Donald Trump, then-Gov. Scott Walker, Foxconn Founder and CEO Terry Gou and Christopher Murdock. The company can receive cash payments from the state because it has other refundable tax credits. It has no taxes to reduce because a manufacturing tax credit virtually eliminated them. (Photo courtesy of White House/Creative Commons)

If there is one constant among residents of the Racine County community that is the site of the state’s most expensive economic development project, it’s how much uncertainty remains about the “Wisconn Valley” Foxconn plant that is still under development.

Foxconn has so far stuck to its claim that the operation will one day employ 13,000 people and live up to the $10 billion investment promised when President Donald Trump and then-Gov. Scott Walker held a press conference in July 2017 to announce the deal to bring the factory to the Racine suburb of Mount Pleasant. 

In return, Walker and the Republican-led legislature promised up to $3 billion in state tax credits tied to job creation, awarded through the Wisconsin Economic Development Commission (WEDC).

Since then there has been progress: a 1-million-square-foot plant, construction of a so-called Smart Manufacturing Center and a High-Performance Data Center, at a cost to date of $372 million, according to county officials. 

“We remain encouraged about the progress we’ve seen and continue to see on the ground here in Racine County,” Racine County Executive Jonathan Delagrave said in a statement. “Our focus is on positioning our residents and businesses to benefit from this unprecedented opportunity in our community.”

But Foxconn’s original promise has met with increasing skepticism.

When Racine County Board Supervisor Fabi Maldonado first ran for office two years ago in the spring that followed the announcement, many voters he spoke with seemed willing to wait and see. Although cautious, they were buoyed by the  promise of jobs with annual salaries topping $50,000, he heard.

Limited communication

Now the questions are growing. 

“Now it’s been more like, ‘Well, I don’t know what’s going on with Foxconn,’” Maldonado tells the Wisconsin Examiner. “They’re asking, ‘When are they hiring people for inside the plant?’”

The voters he talks with assume that Maldonado and his fellow board supervisors frequently hear from Foxconn representatives. “They ask me, ‘What have you heard from the top person? What have you heard from them at meetings?’” Maldonado says. Foxconn executives, however,  “haven’t really come to our meetings.”

Says another supervisor, Nick Demske: “There’s been a lot of movement and change with this project in a million different ways. And when people ask me what’s going on with Foxconn, one of my answers is, ‘Nobody knows what’s going on with Foxconn. Foxconn doesn’t know what’s going on with Foxconn.’

“That’s not necessarily supposed to be a huge insult to Foxconn,” Demske adds. “This is just a massive project.” As such, “there are a million moving parts and they take a long time to really realize.”

Political challenger

But skepticism has prompted at least one Racine County resident to run for the County Board demanding closer scrutiny.

Kim Mahoney’s property was originally threatened with seizure under eminent domain for land for the project, but village officials backed off when she and her husband refused to yield. Now Mahoney is running for an open seat on the board.

“A lot of people like to focus on the state incentives” for the project she says. “Even more at risk are the incentives our local government offered — almost all up-front costs.”

County Board members should have provided more scrutiny for the project and represented the interests of landowners who didn’t want to move, Mahoney says. “I think people are tired of the rubber stamps and want to see some change. They want to feel more represented.”

Foxconn has repeatedly changed its announced plans for the Wisconn Valley plant, now under roof. When the company first arrived, the operation was to make Gen 10.5 screens for electronic devices; then it switched to the older Gen 6 design, followed by a series of changes that had the plant making assorted other products.

“The current project that’s going on in Racine is different than what the contract was negotiated for and entered into,” WEDC Secretary and CEO Missy Hughes said in a statement to the Wisconsin Examiner on Tuesday. “As Foxconn’s business plans are evolving, we’re standing ready to work with them on an amendment to their process so the contract and the project are aligned.”

So far, however, the company in media statements has stuck to the 13,000-job-promise.

‘No one really knows…’

“No one really knows what they’re going to be doing, or how many people they’re going to hire,” says Kelly Gallaher, spokeswoman for A Better Mount Pleasant, a Facebook-based citizen watchdog group that has been critical of Mount Pleasant village officials. 

The group, formed several years before the Foxconn announcement, turned its attention to the Wisconn Valley project because of the size of both local and state subsidies: besides the $3 billion in state credits, the company is reaping nearly $1 billion in local subsidies for land in transactions that displaced homeowners and some farmland, as well as reconstructed roadways serving the site.

Gov. Tony Evers ran against Walker calling for a renegotiation of the deal that had brought the company to the state. And since Evers’ election, his administration has been wrangling with the company over those renegotiations on the grounds that the company’s Wisconn Valley product lines were changing. 

In a lengthy Dec. 13 article the online technology news website The Verge reported in detail on the back-and-forth between the Evers administration and Foxconn over plans for the site, with the Evers administration seeking to rewrite the agreement because of the product line switch. 

The Verge, citing state documents the publication obtained, reports that Foxconn first proposed amending the contract, but never actually applied to make the change despite the Evers administration’s repeated appeals for the company to move forward.

Foxconn has “refused by inaction”  to renegotiate, Wisconsin Department of Administration Secretary Joel Brennan told The Verge. “They were continuously encouraged. It’s a relatively recent development, where they have said, ‘No, we don’t want to do anything with the contract.’ Our expectation has been, and continues to be, that they should want to come back and have discussions about this.”

Meetings continue

Those discussions appear to be continuing. 

“Officials from the state, WEDC, and local partners meet regularly with Foxconn to discuss progress on the project and various other aspects,” says WEDC spokesman Dave Callender, while declining a request to discuss specifics. “Because of the number and variety of these discussions, WEDC generally does not provide details of individual meetings.”

So far, however, the project has had a tough time convincing outside observers that it will do what the company, along with Trump and Walker, claimed it would. 

“Mount Pleasant and Racine County are now on track to spend $1 billion to facilitate an LCD [liquid crystal display] factory that is not happening,” says Gallaher of A Better Mount Pleasant. 

She doesn’t believe the company’s statements about its plans, “and nobody does,” Gallaher says. “No one know what they’re actually going to do. We would hope they are going to do what they say, but they are definitely not doing what’s in the contract.”

While Urban Milwaukee Editor Bruce Murphy recently pronounced the Foxconn deal “dead,” Jon Peacock, director of the Wisconsin Budget Project, wrote in an analysis published in December that the company and the state may have both room and motive to maneuver beyond the state’s current deal with the company.

“Even if that agreement ends, Foxconn can continue to benefit from more than a billion dollars’ worth of other subsidies (if it doesn’t move elsewhere),” Peacock wrote. “Second, both sides will be under considerable pressure to reach an accord regarding the annual payments, and I think that was reflected in the Governor’s statements [in December] that he is committed to reaching a deal that makes the project viable.”

For now, Foxconn’s next progress report to the WEDC is due in less than two months, on April 1, and will be used to evaluate tax credits for the project.

“WEDC will make its determination regarding the status of the Wisconn Valley project and its eligibility for tax credits based on the annual April 1 report Foxconn files with WEDC and WEDC’s subsequent verification of the report details,” Callender says, “not on media reports or public statements.”

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Erik Gunn
Erik Gunn

Deputy Editor Erik Gunn reports and writes on work and the economy, health policy and related subjects, for the Wisconsin Examiner. He spent 24 years as a freelance writer for Milwaukee Magazine, Isthmus, The Progressive, BNA Inc., and other publications, winning awards for investigative reporting, feature writing, beat coverage, business writing, and commentary.