Foxconn’s con: the Big ‘If’

Bill Knight column for Monday, Tuesday or Wednesday, 8-21, 22 or 23

Corporate and government officials on July 26 announced that Taiwanese company Foxconn Technology Group would invest $10 billion in its first U.S. factory in Wisconsin, where 3,000 jobs could be created if it opens in 2020.

The understandable impulse was to cheer (even if Foxconn has for years been criticized worldwide for its labor relations, including unrealistic production demands and forced overtime without pay).

After all, that region recently lost hundreds of jobs when layoffs and closures hit Gander Mountain, Harley-Davidson and Sears, and positives could be area wages increasing with competition for high-skilled workers, and new business for suppliers.

Although no location is set, Foxconn says it’s looking throughout a seven-county area in southern Wisconsin’s 1st Congressional District (represented by Republican Speaker of the House Paul Ryan), stretching from Racine and Kenosha in the east to Janesville in the west. There, on 1,000 acres, Foxconn claims it will manufacture LCD screens for big-screen TVs or computer devices in a 20 million square-foot plant (three times the size of the 6.5 million square-foot Pentagon).

Foxconn also says its facility will produce the huge sheets of ultra-thin glass (which are difficult to ship long distances) to make 90,000 LCD screens monthly – the equivalent of 72 million smartphones a month, or 868 million per year. (Apple sold a total of 210 million iPhones last year.) Further, Foxconn chair Terry Gou claims, the plant could expand to 13,000 jobs.

“There is potential for the payroll to climb to 13,000 in the future – a figure crucial to Wisconsin justifying the expense – but I wouldn't bet your 401(k) on it,” commented Tim Culpan for Bloomberg. “That's because if Foxconn really does dish out $10 billion on this facility, the only way to make it viable is by keeping staffing low and leaning on automation to boost productivity.

“That stated $10 billion investment is more than the group's publicly traded flagship – Hon Hai Precision Industry Co. – has devoted to capital expenditure over the past five years combined … at [its] factories in China and another dozen countries globally,” Culpan added.

There’s a Big “if.”

Several, actually.

Besides logistical challenges – improved roads, new training for workers to develop certain skills – there also are questions of housing and socialization of a presumed influx of employees, and whether a corporation accustomed to low-wage sites in Mexico and China can comfortably fit in the Midwest.

“The reality is that any state would be challenged to provide that many skilled workers in a short priod of time,” business consultant Ron Starner told the Chicago Tribune.

Although Illinois competed to land the employer (others, including Arizona and Colorado, had talked with Foxconn, to no avail), Illinois may have escaped a future broken promise. In fact, Foxconn’s business practices have left behind an economic landscape littered with its failed developments, in Brazil and Harrisburg, Pa., India and Vietnam, and in Jakarta, Indonesia, and Guangzhou, China (the nation where the corporation last year replaced 60,000 workers with robots at its Kunshan factory.)

Future layoffs or unfulfilled staffing beckon – if a Foxconn factory materializes at all.

“If Foxconn builds a factory, it will employ not thousands of workers but rather dozens or hundreds of skilled technicians operating robots,” commented economics professor Luz Sosa in Madison’s Cap Times. Plus, “Trump’s projection of 50,000 workers is no more accurate than his claim about the number of attendees at his inauguration. And Foxconn will demand hundreds of millions of dollars in public subsidies.”

Those subsidies are led by a $3 billion taxpayer-funded incentive in the next decade, a sum that works out to $1 million per promised job. To put that amount in perspective, that incentive could pay for everyone in Wisconsin (whose population is 5,779,000) to get three shares of Facebook stock, or two tickets to “Hamilton” in Chicago, or a new smartphone, or a railpass to take Amtrak anywhere in its U.S. network over 15 days.

Adding injury to insult, besides the financial incentives, Foxconn would be excluded from state environmental regulations under a plan proposed by Wisconsin Gov. Scott Walker.

If it happens.

[PICTURED: Cartoon by Andy Vine/ethicalconsumer.org].