The Foxconn Con

It was, according to one Donald J. Trump, the Eighth Wonder of the World, which would put it right up there with the Taj Mahal, Machu Pichu and the Great Wall of China. But that’s just DJT, and you have to take most of what he says with a salt mine.

Even if it were destined for wonderland status, we’ll likely never know whether the Wisconsin Foxconn factory would have have lived up to its Trumpian billing. Because it looks like it’s not going to really get very far off the ground.

The deal that Trump was trumping last year was – “one of the greatest deals ever” (believe me?) was with Foxconn, a well-known Taiwanese company that has historically done most of its manufacturing in China:

In exchange for more than $4.5 billion in government incentives, Foxconn had agreed to build a high-tech manufacturing hub on 3,000 acres of farmland south of Milwaukee and create as many as 13,000 good-paying jobs for “amazing Wisconsin workers” as early as 2022. (Source: Bloomberg)

Those good jobs were going to be blue-collar manufacturing jobs, coming back to America – Midwest, Trump-country America – where they belong. Hey, making America great again is easy. Sure, it’ll cost you, but…

What it was going to cost Wisconsin taxpayers, if I’ve got my zeros right, was about $350K per each of those jobs. I know you have to spend money to make money – and Boston, Massachusetts is no stranger to payola schemes – but this seems pretty high to me. (Wisconsin’s calculation is that each job would cost about $219K in incentives. Still a lot.) But:

“As Foxconn has discovered, there is no better place to build, hire, and grow than right here in the U.S.,” Trump said. “Made in the USA. It’s all happening.”

Can I get an ahem?

From the get go, Foxconn Wisconsin wasn’t quite what it was cracked up to be. The components were made in Tijuana and shipped to Wisconsin.

The Wisconsin plant was only handling the last steps of assembly, and some TV displays were still labeled “Made in Mexico.” Pay at the factory started at about $14 an hour with no benefits, much less than the $23 average Foxconn promised. Many people weren’t hired full time—the company filled positions with temps and interns from a local technical college.

Gee, if you’re paying workers $14 an hour with no bennies, that $4.5B subsidy would cover nearly 12 years of employment. More hmmmmm.

Anyway, Trump’s visit was something of a highpoint – a highpoint at which there were 60 folks working there. Not that long after Air Force One took off, the Foxconn interns, comprising one quarter of the 60 person manufacturing workforce, were told that there weren’t going to be any real jobs for them.

And now, it seems, that Foxconn’s Wisconsin facility is going to be used for R&D, not manufacturing.

When the deal was unpeeled, it seems that the White House was conned, and, in turn, got Wisconsin sucked into the con. (They ended up in a bidding war with Michigan and Ohio, by the way. Nothing political going on here…) Nobody bothered to check Foxconn’s record with deals like this, which is a lot of overpromising and underdelivering.

Which is exactly what’s happening in Wisconsin.

The bad news is that there’ll be no 13,000 great manufacturing jobs. The good news, Wisconsin won’t be on the hook for all those incentives. (If the deal had gone through as promised, it’s optimistically estimated that Wisconsin wouldn’t have broken even on the deal until 2042 at the earliest. There are some who believe that the deal would never had paid off, and that the Wisconsin incentives were an order of magnitude “greater than typical government aid packages of its stripe.”)

Foxconn’s backpedaling began by saying that, automation being automation, they wouldn’t be needing all those 13,000 lunch-pail workers, and that the ratio would be tilting more towards “knowledge workers” and away from assembly liners. And somewhere along the line, Foxconn had an epiphany: no matter how they cut things, it was still going to be more costly to build in the US than it is in Mexico or China. Hard to believe they didn’t know about the impact of automation and/or cost differentials from the get go, but whatever…

There’s an entire litany of bad management riddling Foxconn’s operations in Wisconsin, and the impact of the overall global wobbliness in Foxconn’s business, but the bottom line is that there ain’t never going to be 13,000 good manufacturing jobs at Foxconn in Wisconsin. As of last month, there were fewer than 200 full-time Foxconn employees in the state.

Wisconsin is still stuck with some parts of the deal. And Foxconn can’t entirely tear it up and move on without completely pissing Trump off – and currying favor with Trump was one of the prime factors behind the deal to begin with.

Anyway, sorry about those jobs that got away, Wisconsin. But the deal gone bad may have caused Scott Walker’s defeat in his run for re-election as governor, so no one can say that no good has come of it.