Foxconn gets Covingtonned

I have decided to create a new verb: “to Covington,” which means to jump to conclusions about a particular thing well before even most of the facts are in. It comes from, of course, the Covington incident.

George Mitchell explains:

The lesson I try to keep in mind recalls the immediate reaction — almost all of it wrong — regarding the March for Life incident involving students from a Catholic high school in Kentucky.

Trying to keep an open mind, it will be helpful to read factual analyses that one hopes will be forthcoming from public sources such as the Legislative Fiscal Bureau and private researchers at the Wisconsin Policy Forum.

It is entirely possible, as Democrats today gleefully proclaim, that Wisconsin was snared by a gigantic bait and switch.  The most substantive support I have seen for that position is a statement attributed to Foxconn that the market has dramatically switched in the last 18 months. Really? All of a sudden it makes no sense to manufacture here what they said they would make?

Alternatively, the structure of the state’s contract with Foxconn might mean that both the benefits to the state and its costs are proportionally lessened. This will be true if the pledges were correct that the bulk of taxpayer subsidies were/are linked to tangible results.

I would have voted for the Foxconn “deal.” I considered it a risky big bet that was worth taking. I am prepared, once more facts are available, to acknowledge an error in judgment. Or, the truth might support a view that the potential of Foxconn still is a net benefit for Wisconsin. We don’t know enough yet to decide.

Three Racine County officials felt the need to correct yesterday’s hysterical media reports:

To date, Foxconn has invested over $200 million in Wisconsin. We have seen much of this
locally – including Foxconn’s investment in more than $100 million in construction contracts
that have transformed the project site, the completion of the first 120,000 square foot
building on the campus and the entire 3 million square foot pad that will serve as the base
for the next phase of construction, which will begin in Spring 2019.

Contrary to what was reported by Reuters, Foxconn reiterated to us, today, its commitment
to building an advanced manufacturing operation in Wisconsin, in addition to its commitment
to create 13,000 jobs and invest $10 billion in Racine County. As Foxconn has previously
shared, they are evaluating exactly which type of TFT technology will be manufactured in
Wisconsin but are proceeding with construction on related manufacturing, assembly and
research facilities on the site in 2019.

We understand that Foxconn must be nimble in responding to market changes to ensure the
long-term success of their Wisconsin operations. We fully expect that Foxconn will meet its
obligations to the State, County and Village.

Both the local and state development agreements are legally binding and include strong
protections for taxpayers. The state agreement, which was largely based on job creation,
ensures that Foxconn only receives state tax credits if it meets or exceeds its targeted hiring
amounts in any given year.

The local development agreement stipulates that, if, for any reason, Foxconn’s investment
on the campus falls short, the company remains obligated to support a minimum valuation
for the project of $1.4 billion, which will more than pay for all public improvements and
development costs for the project.

The Milwaukee Business Journal, which unlike most media knows something about business, adds:

Top Foxconn Technology Group executive Louis Wooreconfirmed for Wisconsin Gov. Tony Evers and Milwaukee-area economic development officials Wednesday that the company is proceeding with its $10 billion project in Racine County while dismissing as inaccurate a Wednesday story from Reuters news service.

Woo made big news in Wisconsin via the Reuters report that the Taiwanese technology firm is reconsidering whether to produce LCD video screens there at all. Woo, who is special assistant to Foxconn founder and CEO Terry Gou, was quoted by Reuters as saying Foxconn may shelve plans for an assembly plant in Mount Pleasant and that “in Wisconsin, we’re not building a factory.”

Leaders of the Milwaukee 7 regional economic development group, which played an instrumental role in recruiting Foxconn, “were totally taken aback by the Reuters story,” said co-chairman Gale Klappa, who also is chairman and CEO of WEC Energy Group in Milwaukee. Klappa said he and Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce, emailed Woo Wednesday morning for a response to the Reuters article.

The information in the Reuters article was “completely inconsistent” with what Foxconn representatives have been communicating to the Milwaukee 7 about the Mount Pleasant project, Klappa said. Woo’s response eliminated Klappa’s concerns, as the Foxconn executive said he was quoted out of context, Klappa told the Milwaukee Business Journal.

A spokesperson for Reuters and Woo could not immediately be reached for comment.

Klappa said Woo told him and Sheehy that the company has not changed its commitment to expand in Wisconsin and still plans to hire up to 13,000 employees.

Klappa said Woo also called Evers Wednesday morning to give Evers assurances that the Reuters story does not represent the company’s plans.

Evers’ office issued a statement at 12:10 p.m. Wednesday from Wisconsin Department of Administration Secretary-designee Joel Brennan in response to the Reuters article.

“The administration is in regular, weekly communication with senior leadership at Foxconn; however, we were surprised to learn about this development,” Brennan said.

Some of the information in the Reuters story has been previously reported, Brennan noted. Other details about the continuing evolution of this project “will require further review and evaluation by our team,” Brennan said.

“Our team has been in contact with Foxconn since learning this news and will continue to monitor the project to ensure the company delivers on its promises to the people of Wisconsin,” Brennan said.

The Evers administration will continue to commit time, resources and personnel “to ensure that the interests of Wisconsin workers and taxpayers are protected and promoted by our approach to the Foxconn project,” Brennan said.

Evers told the Milwaukee Business Journal in January that he had held discussions in person and on the phone with Woo and Foxconn executive Alan Yeung in an effort to open lines of communication. The company is eligible for billions of dollars in state tax credits, depending on its total hiring and capital expenditures.

The Wisconsin Economic Development Corp., which administers the state’s contract with Foxconn, issued a statement Wednesday afternoon that the contract “provides the company the flexibility to make these business decisions, and at the same time, protects Wisconsin’s taxpayers.”

“Over the past 45 years, Foxconn’s success has been based on the company’s ability to foresee and adapt to technological advancements,” WEDC said. “Foxconn’s long-term success both globally and within Wisconsin is centered around the alignment of its business model with ever-changing global economic conditions, including evolving customer demands.”

Woo did reiterate his remarks from recent months that the company’s employment needs for its planned $10 billion campus in Mount Pleasant would likely require more engineers than assembly workers, which is a reversal from the company’s initial plans.

Klappa pointed out that Woo’s email said the company is rethinking what technology it will build in Wisconsin due to “the changing dynamics of the economy the past two years.”

Foxconn will proceed with six components of the Mount Pleasant project over the next 18 months, Woo said in the email, according to Klappa. They are:

• A liquid crystal module packaging plant;

• A high-precision molding factory;

• A system integration assembly facility;

• A rapid prototyping center;

• A research-and-development center;

• A high-performance data center; and

• A town center to support employees in Mount Pleasant.

The Reuters story also states that “a company source” said Foxconn would employ about 1,000 workers by 2020 rather than the initial plan to employee 5,200.

Klappa said Woo’s email did not specifically address that point. However, Klappa said he believes Woo’s assurances.

“Frankly, given Louis’ comments on the overall accuracy of the story, I’m dubious about anything” in the article, Klappa said.

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