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What the Wisconn Valley can teach 'Voltage Valley' about Foxconn

In Wisconsin, people lost their homes. Environmental regulations were waived. Progress was deferred on other needed projects.  All for a manufacturing campus that has yet to produce anything of significance. But one expert says the Lordstown Motors Corp. deal "is something else."
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In this June 28, 2018, photo, President Donald Trump takes a tour of Foxconn with Foxconn Chairman Terry Gou, right, and CEO of SoftBank Masayoshi Son, second from left, in Mt. Pleasant, Wis. (AP Photo/Evan Vucci, File)

Everything about Foxconn is big.

The Taiwanese mega-manufacturer employs more than 1 million people, mostly in China. It manufactures millions of Apple products every year. It reported revenues of $181 billion last year.

So when company officials made big promises in 2017 about its plans for southeast Wisconsin, many politicians and residents wanted to believe them.

Foxconn pledged to invest $10 billion to build a manufacturing plant in Mount Pleasant, a village of about 27,000 people roughly 25 miles south of Milwaukee. The company said it planned to hire more than 13,000 workers to make LCD flat-screen TV panels with a starting annual wage of nearly $54,000.

In return, the state gave the company economic incentives valued at nearly $3 billion. Then-Gov. Scott Walker and then-President Donald J. Trump stood next to then-Foxconn Chairman Terry Gou, shovels in hand, during a headline-grabbing groundbreaking ceremony. 

The factory would be, Trump said, “the eighth wonder of the world.”

Today, the site sits mostly empty on acres of land — much of it bought from nearby homeowners who said they were pressured to sell — as the company announced a litany of promises that never materialized or vastly underperformed expectations.

The company was supposed to make LCD screens. When that didn’t happen, Foxconn announced plans to produce coffee kiosks, ventilators and server parts for Google. So far, the only thing made from start to finish at the underused campus have been masks needed during the pandemic.

Last fall, workers described conditions to a reporter from The Verge, an online tech publication. They said they had little to do and that Foxconn preferred to hire recent college graduates on student visas, a status they said managers used as leverage. Current online job listings for machine operators and assemblers at Foxconn offer wages between $16.50 to $17.50 per hour, or about $34,320 to $36,400 annually.

The company also promised to hire hundreds of workers in a downtown Milwaukee building it had purchased, but few company employees ever worked there, and the company started leasing out building space, Wisconsin Public Radio reported earlier this year. In 2018 Foxconn committed to donating $100 million to the University of Wisconsin-Madison. So far, only $700,000 has arrived, and university officials don’t expect the pledge to be fulfilled.

Wisconsin officials, under a new governor’s administration, pushed to renegotiate, saying Foxconn failed to meet its obligations. In April, state and Foxconn officials announced a new agreement. The state’s incentive package dropped to $80 million in tax credits. In return, Foxconn has said it will invest $632 million — a far cry from the $10 billion initial announcement — and employ 1,454 workers by 2025. Defenders of the original state deal have repeatedly pointed out Foxconn’s tax incentives were dependent on the company meeting hiring goals and other benchmarks. 

But that doesn’t change the investment that local governments quickly shelled out. People lost their homes. Environmental regulations were waived. The project was the priority for state agencies, by default deferring progress on other needed projects. 

All for a manufacturing campus that has yet to produce anything of significance.

The most recent hope for the Wisconsin site? An electric vehicle plant. After inking a deal with Fisker, an electric car startup, Foxconn and Fisker confirmed they were again talking with the state’s economic development arm, this time about electric vehicle production. 

Then last week came news that Foxconn wanted to buy the Lordstown Motors Corp. plant.

Lordstown Motors, a startup designing electric trucks, had bought the former General Motors plant in Lordstown for $20 million in a deal with GM after the automaking giant came under intense pressure to do something to offset the loss of 1,500 good-paying union jobs in the Mahoning Valley when GM shuttered the plant that had built the Chevy Cruze in March 2019.

In the past two years, Lordstown Motors has seen its own share of problems: prototypes bursting into flames, delayed timelines for production, a cash shortfall and two federal fraud-related investigations.

Enter Foxconn, which is willing to plunk down $230 million for the plant and buy $50 million in Lordstown Motors stock. The agreement still needs to be finalized.

Foxconn’s dealings in Wisconsin aren’t a secret. Lordstown Mayor Arno Hill told the Business Journal last week he knew the company “had some issues” after Wisconsin “gave up the farm” to the company. 

A connection to Foxconn isn’t the only similarity between Ohio and Wisconsin projects. The counties that house both developments — Trumbull County and Racine County in Wisconsin — have about the same population — right around 200,000, according to census figures. However, Racine County is more diverse than Trumbull County, with a sizeable Hispanic population and a lower poverty rate of 12.4%, compared with the 15.4% rate in Trumbull. The median household income is $61,336 in Racine County, compared with $47,280 in Trumbull.

And Wisconsin isn’t the only cautionary Foxconn tale. Closer to home, Foxconn announced a $30 million investment to bring 500 jobs to Harrisburg, Pa., in 2013, only for the deal to quietly fade away. Company and state officials later pointed fingers at who was to blame. 

No factory was built, and the jobs never materialized. 

‘This is something else’: Foxconn not seeking government incentives in Lordstown Motors deal

When Foxconn and Lordstown Motors announced their deal last week, it was in a press release after the companies’ talks were first reported by Bloomberg.

No politicians showed up at the Lordstown plant for a big ceremony with executives — a key difference from the announcement in Wisconsin.

Willy Shih, an international trade and manufacturing expert at Harvard Business School, said such announcements in China are known as “state visit projects,” where high-ranking officials make grand pronouncements for economic plans. In China, it’s understood the plans may change radically based on economic realities, whereas in the U.S. the public expects a company to follow through with the announcement.

“This is not a state visit deal. This is something else,” Shih said of the Lordstown Motors and Foxconn agreement.

“This looks like a commercially motivated transaction between a potentially interested buyer and motivated seller, a seller who is struggling,” he said in an interview. “Maybe it's a good match.”

And at least right now, Foxconn does not appear to be seeking any state or local government subsidies. 

That’s a good sign, said Kim Mahoney, who kept her house near Foxconn’s Mount Pleasant facility after rejecting what she called a low-ball offer to sell to make way for development. 

She said she and her husband made several offers to sell their house and property for a higher price, based on their research, appraisal and increased cost of land and building supplies after the Foxconn deal was announced, and never heard back. She can see Foxconn’s campus from her backyard. They are the only homeowners left in what’s known as Area 1 of the development.

“For the most part, it's really quiet because there's not a lot going on here,” she said in an interview.

Over the past four years, she’s grown increasingly frustrated with Foxconn’s broken promises and the public officials’ actions, including threatening to use eminent domain.

“My advice is if you do offer incentives, make sure they’re based on actual performance metrics — not promised performance metrics but actual ones,” Mahoney said, of her message to the Mahoning Valley. 

“Make sure the loopholes are buttoned up. ... But again, it's only if they are offering incentives. Otherwise, I mean, really the town, the village, they really have no reason to try to stop them.”

Still, she offered this word of caution about Foxconn: “Don’t believe a word they say. They've made these promises in different states and different countries and don't follow through on them.”

Foxconn does have a well-known interest in manufacturing electric vehicles. That’s why it entered into an agreement with Fisker in May. Fisker executives had said they were considering three or four states to make what they call Project PEAR, which has been teased as an electric crossover SUV, though details are not clear. 

The deal with Lordstown Motors showed Ohio won out.

“It would not surprise me to make it look more like an outsourcing deal, which is [that] Foxconn will take over the factory and run it producing products for Lordstown and others,” Shih said. “That would make sense.”

Based on a news release from Foxconn, that’s exactly what the company has in mind. The two companies intend to negotiate a manufacturing agreement as a condition of the plant sale in which “Foxconn would manufacture Lordstown Motors’ Endurance full-size pickup truck at its Lordstown facility.”

“Foxconn does know how to manufacture,” Shih said. “Have they manufactured motor vehicles before? No. But they would probably get all their manufacturing engineers in the deal from Lordstown Motors.”

The release also said the Lordstown plant “would serve as a speed to market asset” to support Fisker. 

If Foxconn does build Fisker’s Project PEAR at the plant — as has been suggested by that company's executive, Henrik Fisker — it would not be the first time a Fisker company took over a former GM factory.

Before Fisker Inc., there was Fisker Automotives, founded in 2007 and an early competitor to Tesla. 

Fisker Automotive received millions in Department of Energy loans to bring its product, Karma, to market. President Joe Biden, then vice president, proudly announced the company’s purchase of a former GM plant in his home state of Delaware.

Fisker Automotive ran into a host of problems. Its battery supplier declared bankruptcy. It couldn’t find the financing its founder said it needed. It defaulted on the federal loans. It never built a car in Delaware.

Fisker Automotive declared bankruptcy and sold its Karma design and the Delaware factory to a Chinese auto parts group. Fisker, the founder, then launched a new company, Fisker Inc.

What happened to the former GM factory?

It was demolished

An Amazon warehouse now stands on the property and plans to employ 1,000 workers making a minimum of $16.25 per hour.

Ashley Luthern grew up in the Mahoning Valley and was a reporter for The Vindicator from 2010 to 2013. She now lives in Milwaukee, Wis., where she has continued her work as a journalist.

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