Wisconsin has negotiated a dramatically scaled-back deal with Foxconn

https://arstechnica.com/tech-policy/2021/04/wisconsin-drastically-scales-back-politically-charged-deal-with-foxconn/

by pseudolus • 5 years ago

164 141 5 years ago

Invictus02• 5 years ago

Can someone explain to me why Foxconn didn't build the plant? Why would they go through the trouble of negotiating this deal, which ended up phenomenally in their favor, just to throw their hands in the air and walk away?

pen2l• 5 years ago

In a nutshell, it mistook the nature of labor folks are used to here and its costs. Indeed wildly different from China and elsewhere.

AlexandrB• 5 years ago

This is a take that's wildly generous to FoxConn, painting them as the "aww schucks" kinda honest guys that just didn't know about the challenges of the US labor market.

The alternate take is that the whole deal was made in bad faith and FoxConn was hoping to collect subsidies and line its pockets. This version of events has some precedent[1]. It's especially hard to believe that FoxConn didn't know about US labor when this same situation played out in Pennsylvania in 2013[2].

[1] https://www.marketwatch.com/story/foxconns-history-of-broken...

[2] https://www.washingtonpost.com/business/economy/how-foxconns...

al2o3cr• 5 years ago

Short story shorter: Terry Gou is a serial bullshitter

https://www.theverge.com/21507966/foxconn-empty-factories-wi...

Timshel• 5 years ago

Good article on the subject: https://www.theverge.com/21507966/foxconn-empty-factories-wi...

My take it was probably mainly a political stunt, lcd was never really possible (slump + wages + supply issues) and then they didn't know what to do.

sandworm101• 5 years ago

Politics. Political capital. There are international advantages to having the US president endorse you, your project and your company. Those photos were probably worth the hassle.

Frost1x• 5 years ago

Not just the photos but the initial publicity. People remember the beginnings of things if they're broadcasted through mass media. I recall many people claiming this a 'big win' at the time and attributing to the sitting president. I recall also being highly skeptical and suspecting a political stunt but completely forgot about the status until reading this.

Meanwhile, people at large don't follow progress of these endeavors. Some journalists may but there's selection bias from the journalist and the news consumer as to what they ultimately see and stay informed of. These stunts are forgotten by most (myself included) in the daily scramble of things we have to keep track of and manage. Did it fail? Did it succeed? Do I even remember it or just the emotion it attributed to something else I actually do remember?

Ambiguity hiding in complexity of daily life lets people say and do a lot of things and get away with it. It's often far too difficult and time consuming to unravel the ambiguity and complexity to show if something succeded, failed, or to even have cognitive capacity to keep track of. The end result, as you point out, is political capital people walk away with. The emotional impression at the time is what was sold and stuck to most people. "MAGA", "bringing back manufacturering", links to nostalgic economic golden eras for many workers.

sct202• 5 years ago

Scott Walker, the governor, who signed the deal lost his office a year after it was signed in part due to backlash over the deal.

Think about it from Foxconn's perspective, if you got a sweetheart deal and the person who gave it to you got canned for it, are you going to follow thru and put in billions of your dollars on the assumption that you'll still get billions of government subsidies in return?

analog312• 5 years ago

I wonder if it might have been water. They may have needed more than a sweetheart deal with the state. I think a big reason for the location was the water supply via Lake Michigan. They got a waiver of state environmental laws as part of the deal, but they still had to contend with federal laws, and a treaty with Canada that governs water use in the Great Lakes watershed.

There was quite a controversy over the environmental impact of this plant. The "word on the street" is that LCD manufacturing is a dirty industry requiring a lot of water.

MomoXenosaga2• 5 years ago

Realized Americans don't want to live in factory compounds for 10 months doing repetitive labour.

jerry19792• 5 years ago

I think it shows the idea that "Americans can't do business well", and historically, doing business well has been one thing that Americans pride themselves on.

edit I should add that I believe that spreading that kind of message has geopolitical implications, and that groups might want to create that image for strategic reasons.

jcranmer2• 5 years ago

From what I can tell, Foxconn never actually intended to build the plant. (I'm getting a lot of this from an interesting long-form article on the history of this deal; unfortunately, I don't remember where I found this article, sorry).

Essentially, Foxconn thought that the Wisconsin deal would work more typically as its deals in China went. Glad-hand the government officials, get sweetheart deals on land and investment, and as long as you're not totally incompetent in making use of it, they won't care what you do with it, even if you fail to live up to the original promises. It's not clear to me that Foxconn actually seriously considered producing LCD screens here given this light; the announcement would have been more to make Walker and other government officials ecstatic about the deal than an actual commitment to follow through. The fact that outrage towards the deal would lead to Walker losing reelection and his successor keeping a much closer eye on performance (or lack thereof) seems to me to have caught Foxconn completely off-guard.

I think there's another level going here in relation to internal Foxconn politics, but my recollection is too hazy to make a coherent explanation, and I don't want to make any false accusations here, so I won't go into any more detail.

KZZ3• 5 years ago

For information, the plant has been built. The building is there, just empty.

MAGZine• 5 years ago

I believe you're remembering this story:

https://www.theverge.com/21507966/foxconn-empty-factories-wi...

luckylion3• 5 years ago

Is it just me or has it become more common for journalists to write about decreases by saying "X-fold" or "x times"?

I always get confused, I find it much easier to say "by 97%".

fooqux• 5 years ago

Many people don't have a clue what "30-fold" even means, and therefore it sounds big and scary. Basically, it's just one of the tools in the sensationalist headlines toolbox.

afavour• 5 years ago

…is that true? I understand “30-fold” to mean “30x” and I’m pretty sure I have from a very young age. I haven’t checked but I’d be surprised if my peers weren’t the same.

lordgrenville• 5 years ago

I think for x > 1 "x-fold" is clearer. "Ten times bigger" sounds simpler to me than "1000% growth".

dasil003• 5 years ago

Yes, for growth. But in this case they are using x > 1 or shrinkage.

notRobot3• 5 years ago

This phrasing always confuses me, slashes 30 fold means that it is now 1/30th the ordinal?

notRobot3• 5 years ago

This phrasing always confuses me, slashes 30 fold means that it is now 1/30th the original?

clankyclanker• 5 years ago

Yes.

realityIsntHere• 5 years ago

Percentages can be just as bad.

Increase by 100% is 2x

Invictus02• 5 years ago

It's terribly confusing. I made this graph to show why: https://i.imgur.com/7wYWWfs.png

Fold decreases are parabolic, fold increases are linear.

flavius29663• 5 years ago

so confusing, I always assumed 30 fold was the same as 30x, meaning 30 times smaller.

myrmidon• 5 years ago

I believe everyone (with a basic education) should be able to understand both, but I think the X-fold representation is much clearer-- just compare how similar decreases by 80%, 90%, 95% appear at first glance-- but there is a full order of magnitude between EACH of those (while 50% and 55% is basically the same thing)!

Calling it a 5-fold, 10-fold or 20-fold decrease makes the difference between them much more immediately obvious, IMO.

Its similar with the miles/gallon vs. liters/100km metrics for fuel consumption, where one of them just seems immediately more intuitive to grasp and use (to me).

luckylion3• 5 years ago

I find x-fold to be totally clear and intuitive for increases, but I find it weird for decreases. "We've decreased it by 5 times" sounds to me like "We've decreased it by 500%", which it obviously doesn't mean. "We've decreased it to 1/5th", "we've decreased it by 80%" makes more intuitive sense to me.

Maybe it is similar to miles/gallon vs liters/100km and depends on where you grew up. I feel like the usage frequency changed, but it could just be that I'm noticing it more.

phailhaus• 5 years ago

It's because percentages are more misleading for humans than "x-times". 95% and 97% sound very close, right? They're not. 95% is a 20x reduction, while 97% is a 30x reduction. Percentages create a singularity at 100, which is why the effect is more pronounced the closer you get to 100.

It's just like how saying something is "95% effective" sounds very convincing until you realize that's a 1-in-20 failure rate.

function_seven• 5 years ago

My favorite example of this were the labels on lunch meats back in the day. They'd say things like, "97% Fat Free!", or "98% Fat Free!".

So one of them had 50% more fat than the other, but they both look pretty close to "Fat Free"

neartheplain• 5 years ago

The massive downward revision of this deal, and of Foxconn's commitment to create jobs in Wisconsin, is hardly a surprise. Foxconn has a history of reneging on promises to build factories, as was widely reported when this deal was first made in 2017:

https://www.marketwatch.com/story/foxconns-history-of-broken...

https://boingboing.net/2017/08/09/potemkin-factories.html

https://urbanmilwaukee.com/2017/08/20/op-ed-the-many-broken-...

kimar• 5 years ago

There's a great Reply All podcast about local politics in the town where this plant is to be built. Beware, it's slightly infuriating.

https://gimletmedia.com/shows/reply-all/wbhjwd

pchristensen• 5 years ago

More than slightly!

josefdlange4• 5 years ago

I grew up in Racine County (which contains Mount Pleasant). Let me tell you, SE WI is a strange place. Caught between so many sensibilities and hit so, so hard by economic shifts of the last two decades. I think it suffers, like many places in the American Midwest, the phenomenon of an historically working-class population, who, a few decades ago, would have organized for labor and other rights very vocally and outwardly, but who now are radicalized to the right for no understandable reason.

I still like to believe that most of the people around there are good and mean well, but it gets harder and harder every day to believe the willful ignorance they possess of economic, societal, and cultural issues at hand, here and now, will fade. But there's hope. Younger leaders are working their way into local government (hi Greta!), especially over in the formal City of Racine. There's hope that Racine and Racine County might be a leader of progressive values in the area.

As an aside, I think there's oodles of opportunity in the SE WI area for younger folks. It really is a beautiful place, is near to Chicago and Milwaukee, and is inexpensive. You get all four seasons, for better or worse. I think it's better than SF's summer and grey-chillier-summer. Some joke that the four seasons are winter, construction, construction, and construction, but that's an exaggeration. Anyway, I think an influx of more diverse people in background and ideology could really stimulate an area like SE WI. Add to that making it worth young people staying around instead of fleeing to the coasts, and suddenly Racine can be a really cool place.

This whole Foxconn thing just makes me so sad, and angry.

justaman• 5 years ago

You claim to not understand how that group of people can swing right and then proceed to attribute ignorance to that group of people. This doesn't compute. Very partisan and ignorant of you.

munificent3• 5 years ago

for no understandable reason.

Americans classically derive much of their sense of value from:

1. Work

2. Race (for many white people, especially historically)

...and that's about it. Unlike other cultures our "rugged individualism" means that we don't tend to derive as much sense of worth from family, traditions, organizations we belong to, etc. This is especially true for men who are raised to believe that who they are is what they do.

The economic shift to a service- and knowledge-based economy with many manufacturing and ag jobs being automated or outsourced away has devastated 1. in many communities. The march towards better civil rights and equality is chipping away at 2.

This has left a huge number of Americans feeling that they are worth less than they used to be. People like that are ripe for being exploited. People will buy anything if you tell them you're selling dignity. Trump's "Make America Great Again" slogan was really "Make You Feel Like You're Great Again".

fatbird• 5 years ago

I lived and worked in the area for four years, working in Pleasant Prairie, living in Kenosha and then Oak Creak. Parent is right, it's a strange place because of the mixture of so many influences: the proximity of Chicago and Milwaukee, a former industrial powerhouse region, access to great education but full of people who've never been to Chicago or Milwaukee (let alone further than them).

My sysadmin had a hobby of creating frankenstein cars. He put the powertrain of a Camaro into the body of Gremlin, for which he needed a second Gremlin to lengthen the chassis by a foot. It was so overpowered he needed a couple hundred pounds of sandbags in the back to give it any traction at all. This sort of thing wasn't that weird either.

anitil• 5 years ago

A great episode!

(RIP Reply All, you'll be missed)

waterheater3• 5 years ago

Do not trust Foxconn. I strongly believe they're playing a long-term game here.

For example, the Foxconn plant is on a particular tract of land only partially within the Lake Michigan watershed. Anyone living within the watershed must return their water, and it must be cleaned up first. My understanding of the Great Lakes Compact is that Foxconn's land is one of legal ambiguity, that they may draw from Lake Michigan but not return it. I sure hope it doesn't mean they can bottle up Lake Michigan water and ship it elsewhere, but water is set to be more valuable than oil, so I bet they're playing it strategically.

ThaDood• 5 years ago

Not to be a naysayer, but do you have any sort of evidence to substantiate this claim? Any evidence of exceptions to laws regarding the usage of the watershed and lake with specific regards to Foxconn? Or any kind of indication that a bottling facility will be built up?

jerry19792• 5 years ago

Not the parent, but there does seem to be a fair amount of legal shenanigans related to the Foxconn and the Great Lakes Compact.

https://www.wiscontext.org/what-foxconn-means-great-lakes-co...

waterheater3• 5 years ago

Hard evidence? No. The exact plot of land they chose is not particularly remarkable, so I must wonder why they chose a piece of land straddling the watershed, given that the Compact [1] indirectly applies to corporations.

There's a deeper political aspect to Foxconn's presence that I can't trust. I'm from Wisconsin, and the whole Foxconn deal leaves me feeling extremely uneasy. Leaving aside the Wisconsin and USA politicians associated with the deal, Terry Guo briefly ran for president of the Republic of China. Guo and Foxconn made significant donations to UW-Madison. It smells wrong, and all the Wisconsinites I've talked to agree.

I'm glad their subsidies were slashed.

[1] https://www.gsgp.org/media/1330/great_lakes-st_lawrence_rive...

bryanlarsen2• 5 years ago

but water is set to be more valuable than oil

Desalination costs less than 0.1 cents per liter, so that sets a pretty firm price cap on the cost of water.

kickout• 5 years ago

Not arguing at all--- you got a link for those costs? I always thought desalination was cost prohibitive. I'd be thrilled to know it was 0.1 cents per liter (seriously)!

mbesto2• 5 years ago

No one saw this coming.

altendo• 5 years ago

I am always struck at the amount that states and municipalities are willing to write off in order to attract companies. On one hand, I understand that companies want to take the best deal, but on the other hand, at times local governments are willing to give up so much money in tax revenue. I remember reading about the competitions for Google Fiber and Amazon's second HQ - it felt absurd the amount cities and states were willing to drop, financially speaking.

I'm glad this one has been renegotiated (especially seeing that the proposed plant never happened), but I'd like to see these deals be more level-headed before they get to this point.

luckylion3• 5 years ago

They don't have a choice between Amazon HQ or 50 medium sized new businesses, they often have Amazon HQ or nothing new. In that case, whatever they get is more than they have now, isn't it? New jobs that will bring other new businesses and local taxes etc are a bonus.

wavefunction2• 5 years ago

Places that were serious contenders for Amazon HQ definitely have other employers and options. There is no way that Amazon HQ is ending up in Sioux Falls or Laramie or something.

insert_coin• 5 years ago

It looks that way in the end, with no other alternative but to yield, but at some point there were many options, that is how the town, city, county or state came to be in the first place. The problem is that they gave so many concessions just to get a short term political advantage, that real productive and sustainable jobs couldn't compete with corruption.

Now because of the giant snowball made from all the little policy mistakes that sounded insignificant at first, or ever worse, sounded sound! I mean who wouldn't want high paying jobs that barely require any training? the only option in many places is to keep the charade, but at some point politics need to give way to real production, and that only means real competition.

danhak• 5 years ago

They’re not really “giving up” anything if they attract a business that otherwise wouldn’t be there at all.

It’s still a net gain to have a major employer in your locale, along with all the other economic benefits and tax revenue that entails.

AlwaysRock2• 5 years ago

It could be a net gain. Dropping a few thousand jobs and a factory into an area changes said area. Sometimes for the better. Sometimes not.

346792• 5 years ago

They're giving up fairness and equality- equal treatment under the law. If the entire state wasn't completely devoid of any entities looking to compete in that space, it probably is now. Anyone making LCD panels in Wisconsin suddenly has a $80,000,000 greater financial gap from their largest competitor. If the lower taxes are good for creating jobs at a net gain to the local economy, then the lower rate should be applied equally among all similarly taxed entities.

avs7332• 5 years ago

There should be research to support this argument. Has anyone found evidence for or against? Otherwise the claim here seems aspirational rather than useful.

I know that the history of stadium deals, for example, this claim is nearly universally made to support incentivizing sports teams - and the evidence nearly universally shows it to be false.

"In every case, the conclusions are the same. A new sports facility has an extremely small (perhaps even negative) effect on overall economic activity and employment. No recent facility appears to have earned anything approaching a reasonable return on investment. No recent facility has been self-financing in terms of its impact on net tax revenues. Regardless of whether the unit of analysis is a local neighborhood, a city, or an entire metropolitan area, the economic benefits of sports facilities are de minimus." [0]

[0] https://www.brookings.edu/articles/sports-jobs-taxes-are-new...

emodendroket• 5 years ago

The New York Times investigated this notion and found most deals were so lopsided that the municipalities and states never came anywhere near recouping their investments. https://www.nytimes.com/2012/12/02/us/how-local-taxpayers-ba...

refurb3• 5 years ago

Exactly.

People this it’s a choice between: A) company moves here pays $0 in tax or B) company moves here and pays $5M in tax.

When in reality it’s a choice between: A) company comes here and pays $0 in tax or B) company doesn’t come here and net taxes are still $0

wavefunction2• 5 years ago

Roads and infrastructure don't pay for themselves and considering the scale of some incentive packages offered and the paltry outcomes like the one we're discussing in Wisconsin and elsewhere the assertion that there's a "net gain" deserves serious scrutiny and supporting evidence.

stevehawk• 5 years ago

I don't understand why people keep downvoting this sentiment. Cities have two options:

(1) Attract a business that wouldn't otherwise come, which when it exists will attract more people that pay state/local sales taxes and increase demand for property, which in turn increases property price, which increases property taxes.

(2) Don't attract the business. . . .. nothing comes after that.

greedo• 5 years ago

They usually don't gain many jobs, and the tax benefits are usually given away as part of the package to attract the business.

tppiotrowski• 5 years ago

I think it’s a zero-sum game. Only one of your competitors has to offer a concession to win the business so you have to compete.

rchaud• 5 years ago

but I'd like to see these deals be more level-headed before they get to this point.

I don't think that's possible considering the incentives at play. Politicians always have the next election in mind, and what better way to try to win it then sign a deal that promises jobs? Doesn't matter if the numbers bandied about are too good to be true --- just get pen to paper and point the finger at your opponent and decry him as anti-business.

fnord772• 5 years ago

it's a pretty low risk gamble for the politicians and there's almost always a reward for them even if the deal falls through.

vmchale• 5 years ago

In this case because Scott Walker lost re-election.

grecy• 5 years ago

local governments are willing to give up so much money in tax revenue

It's literally a race to the bottom, and for some reason people are eager to win!

AzzieElbab3• 5 years ago

you cant "give up" tax revenue you haven't collected

nindalf• 5 years ago

You're right, but you can contribute to a race-to-the-bottom where no one collects any tax.

mannerheim• 5 years ago

You certainly can if it's property taxes. Someone's going to own the land either way, so offering property tax incentives is giving up tax revenue.

r00fus3• 5 years ago

Let's just call it what is is: corruption. Corruption isn't just something that happens in 3rd world countries. Alive and well in the US of A.

data_spy• 5 years ago

In this case, it was actually a Governor who didn't know math more so than corruption. At least for the original terms in 2017.

imtringued2• 5 years ago

It's corporate welfare.

specialist• 5 years ago

Close the deal, claim credit, move on before the inevitable consequences.

Just like a sales driven tech company. Heroes for booking sales. Score fat commission. Loser developers and clients are left holding the bag.

whoomp12342• 5 years ago

GOod. kick em out. WI doesnt want foxconn anyways

notional• 5 years ago

The absolute hilarity of HN obsession with 'both siding' every story and going back to see how it unraveled over the years.

on Jan 22, 2017 - https://news.ycombinator.com/item?id=13457176

on Jan 16, 2018 - https://news.ycombinator.com/item?id=16163558

on April 14, 2018 - https://news.ycombinator.com/item?id=16839542

on Oct 29, 2018 - https://news.ycombinator.com/item?id=18328772

on April 12, 2020 - https://news.ycombinator.com/item?id=22850723

seattle_spring• 5 years ago

HN is a large collection of people with diverse opinions, not just one person who decides to swing their opinion one way or the other on a given day.

bongoman37• 5 years ago

They should make a law that if a deal is offered to one company, it should be offered to all. That keep the playing field fair and level.

tfehring• 5 years ago

For comparison:

- The deal negotiated by former governor Scott Walker was expected to cost taxpayers between $172k and $290k in government funding per job created. [0]

- $80 million for 1,454 employees, the provisions of the updated deal per TFA, is $55k each.

- The US average cost of similar programs is $24k. [0]

It's not obvious whether this is a good deal, but unlike the original it's not obviously a bad deal.

[0] https://research.upjohn.org/cgi/viewcontent.cgi?article=1244...

8note2• 5 years ago

Hopefully those jobs pay more than 55k to the employed, and the government is doing better than just paying people to set up their own factory

Wisconsin has negotiated a dramatically scaled-back deal with Foxconn

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