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Foxconn jobs, tax credits could be renegotiated in Wisconsin

By SCOTT BAUER
Associated Press

MADISON, Wis. (AP) — Gov. Tony Evers and Foxconn Technology Group officials are talking about making changes to a contract signed in 2017, when everyone involved though the company would be building display-screen factory that would be bigger than the one now proposed.

But neither side is saying much about what might made different. So how might the deal be changed? And what’s at stake for each side?

Here are five things to watch as talks continue, according to interviews with people familiar with the Foxconn deal and others like it:

JOBS: It makes sense that Foxconn would want to open up the deal because it appears unlikely it will be able to meet its original jobs goals, said Bob O’Brien, president of the U.S. company Display Supply Chain Consultants, which tracks the global flat-panel industry.

Foxconn already came up well short of its first-year goal of creating 260 jobs, costing it $9.5 million in tax credits. This year’s jobs goal has doubled to 520, and the 2020 goal — when Foxconn says production will begin — is nearly 2,000 jobs.

Starting in 2027, it must have at least 10,400 workers.

Given that the company has such lofty goals, it makes sense it might want to renegotiate its contract, O’Brien said.

The current contract would award Foxconn as much as $1.5 billion worth of tax credits if it hired 13,000 people by 2023 making an average salary of $53,875.

Alan Yeung, Foxconn leader for strategy in the U.S., this week suggested there’s no way to predict whether Foxconn will meet the jobs goal.

“Who has the crystal ball to predict if 13,000 jobs will be created by the year 2032? Esp in April ’19,” he tweeted, despite the company’s repeated assurances it would hire that many.

SIZE OF FACTORY: Foxconn could get another $1.35 billion in tax credits if it spends $9 billion on capital investments, primarily building construction and purchases of machinery and equipment.

The original contract had Foxconn building what’s called a Generation 10.5 facility. But Foxconn now plans to build a Generation 6 plant, which will make smaller display screens for cellphones and other devices.

Opponents have said that wording referring to a Generation 10.5 plant would the entire contract at risk if Foxconn built a smaller factory.

But Evers, in an interview, discounted that concern.

“I think that we’re past that point and I don’t think anybody would have ever called them out and say we’re going to negate this deal because of that,” Evers said.

LEVEL OF CREDITS: Although Foxconn may want to lower its minimum job-creation numbers to get credits, the state may want to make the benefits less generous.

The credits for job creation and capital investment are much richer than for most economic development projects, a point that critics repeatedly point to as a fault in the contract.

Foxconn now can receive a 15% capital-investment credit for expenditures on land and buildings, more than the typical 10%. It’s eligible for a 17% credit on wages, more than double the usual 7%.

Wisconsin went with the larger incentive payments because of the enormous promised scale of the project, which was projected to have massive benefits for the state’s economy.

President Donald Trump heralded it as the “eighth wonder of the world” and said it was a sign of a resurgence in American manufacturing.

But with the project’s size reduced, and the hiring numbers in question, there will be pressure on the state to lower its commitment.

CHANGES IN LEADERSHIP: The project has been in flux almost from the moment it began. The election of Evers, a Foxconn critic,, followed by the announcement earlier this month that Foxconn CEO Terry Gou plans to run for president of Taiwan, has added uncertainty.

Gou was personally involved in the Wisconsin deal, traveling to the state many times to negotiate with then-Gov. Scott Walker and his administration and meet Trump.

There are more changes to come. In September, Evers will be able to appoint a new leader to the Wisconsin Economic Development Corporation, which wrote the contract.

NEW REQUIREMENTS: Renegotiating the contract would give Evers a chance to insert new environmental safeguards, but those would come at a cost that Foxconn would surely want to offset. Evers could also attempt to put in place new requirements forcing Foxconn to do business with Wisconsin companies and hire workers from the state. The state may also want to include protections for local governments, which have already spent about $190 million on the project, O’Brien said.

“To me it’s a partnership and we’re going to be working together to solve it,” Evers said. “I suppose at some point in time we might not agree and then it becomes somewhat of a negotiation. But I truly believe that the changes that are made will be reasonable to all sides. Of course, you go in knowing it might not be.”

Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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