After a three-and-a-half year odyssey during which Apple’s largest manufacturing partner, Foxconn, has dangled the tantalizing prospects of manufacturing jobs and American-made products in front of citizens and politicians, the Taiwanese-based company settled on Wisconsin for a future $10 billion flat-panel factory.
The announcement, made last week at the White House, was a victory for President Trump and Speaker of the House Paul Ryan, who have struggled passing their agenda despite the GOP’s control over two branches of the federal government. This was also a win for past presidential contender Governor Scott Walker, whose promise to create 250,000 jobs during this term in the Badger State has in part made his re-election next year far from certain.
“This is a great day for American workers and manufacturing, and for everyone who believes in the concept and the label, ‘Made in the USA,’” said the president at the East Room ceremony showcasing the deal.
But it has not taken long for critics of the deal to crunch the numbers and question whether the amount of taxpayers’ money to be spent on luring Foxconn to Wisconsin is really a wise investment, or a windfall for a foreign-based company. Environmental groups have also objected to the subsidies package as it includes exemptions from certain regulations.
Foxconn has said it will invest as much as $10 billion in the factory, but most sources have estimated that Walker will put Wisconsin’s state government on the hook for $3 billion. That is about $1 million the state will pay for each new Foxconn job, the salaries of which will average $54,000 annually. Wisconsin’s state economic development agency claims the construction of Foxconn’s new facility will generate 10,000 construction jobs over the next four years along with 6,000 indirect jobs. Analysts at the agency project the Foxconn factory could have at least a $7 billion annual economic impact on the state.
Not so fast, said Tim Culpan of Bloomberg.
“Politicians, lobbyists and Foxconn can make the figures work by being generous with the facts,” wrote Culpan shortly after the deal was announced. “For example, if every one of those jobs came to fruition, they can claim 29,000 positions for $3 billion, or $103,000 per job. But that's not going to happen.”
Culpan argued that even if Foxconn follows through and invests that promised $10 billion in the plant, that will amount to more capital investment than the company spent over the previous five years combined. If Foxconn really wants that return on investment, the only option for this factory to make any financial sense is to rely on automation. The other option is to have the plant heavily staffed. But the factory will not experience both.
“This package could buy an iPhone for everybody in the state,” sniffed Culpan in summarizing the deal.
The deal poses a huge risk for Wisconsin, as one local paper estimated that the subsidy the state is willing to give Foxconn is 50 times larger than any package previously given to a company.
Some Wisconsin politicians have questioned whether spending anywhere from $300,000 to $1,000,000 per job makes the Foxconn deal worthwhile. ““Wisconsin taxpayers should not be subsidizing private corporations at the expense of our children, schools, and roads,” State Representative Jimmy Anderson said during an interview with a local radio station.
As several news reports have also pointed out, Foxconn has a record of announcing impressive-sounding statements for U.S. factories that never materialized. In 2013, the company said it would open a factory in Pennsylvania that would hire 500 workers. But the buzz subsided, Foxconn never opened such a factory. Similar promises also fell through in Brazil, Vietnam, Indonesia and India.
The Trump administration needs this deal to pan out, however, especially after another chaotic week that resulted in the president lagging even further down in the polls.
While Trump was quick to boast about Foxconn’s Wisconsin deal despite a lack of direct involvement, another company has already broken a pact it supposedly made with the Trump administration.
Carrier has begun layoffs at an Indianapolis factory the president claimed he persuaded to stay open. Over 600 workers will start losing their jobs this month, but so far Trump has not commented on Carrier’s about-face.
Image credit: InWisconsin.com
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's worked an lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.