Foxconn factory fiasco could leave Wisconsinites on the hook for $300m

For five years, Foxconn promised and spectacularly failed to build a much-hyped sprawling factory near Mount Pleasant, Wisconsin. Now, the area's leaders may be saddled with $300 million in bond repayments that the Taiwanese iPhone maker had promised to repay.  According to the Wall Street Journal, Foxconn agreed to pay $36 …

[Yet Another Anonymous coward]

A lesson learned...

In other news, a small rust belt city announced they were "investing" $Bn in attracting a Taiwanese semiconductor company to build a $Bn plant there - it will bring 100,1000s of jobs and make $small rust belt city$ the centre of a global high tech enterprise zone said $local politician$

[VoiceOfTruth]

Re: A lesson learned...

One does have to wonder how many backhanders and brown envelopes were involved.

Is Wisconsin known as a high tech state? I don't think so.

[Someone Else]

Re: A lesson learned...

Is Wisconsin known as a high tech state? I don't think so.

No, but it is known to be home to some of the most (quietly) corrupt Republicons the country has ever seen.

[chivo243]

Re: A lesson learned...

That's because they Rs were chased out of Chicago by the Democratic Machine.

[MachDiamond]

Re: A lesson learned...

"Is Wisconsin known as a high tech state? I don't think so."

What does that have to do with anything? Do states need to have a large presence of technology companies before they are allowed to have any technology companies build facilities there?

[Yet Another Anonymous coward]

Re: A lesson learned...

Because the deal was that this plant was going to create squillions of highly paid semiconductor engineering jobs.

If you don't have a local semiconductor industry you need to lure those semiconductor engineers from California or Austin, or somewhere habitable, to Wisconsin.

It's the usual problem when a local council decide to create Silicon-GeologicalFeature, and assume that all the best people will all move from San Francisco because you have GeologicalFeature

[disgruntled yank]

Re: A lesson learned...

The University of Wisconsin is quite good, and at least at one time had a strong CS program.

[080]

Re: A lesson learned...

Sounds a bit like the SNP and Gupta.

[EarthDog]

Re: A lesson learned...

so that's what, 72 jobs?

[Strahd Ivarius]

Re: A lesson learned...

forty two

[Antron Argaiv]

If something sounds too good to be true

...it probably is.

I find it hard to believe that Foxconn would ever employ 100k people in middle of nowhere Wisconsin, when labor is so much less expensive (and regulations are so much looser) in Shenzhen.

[Yet Another Anonymous coward]

Re: If something sounds too good to be true

Nobody had to believe that. One person just had to believe that the halo effect of being photographed with the shovel would last long enough for the next election news, and the fallout would come after they were elected

[Jim Mitchell]

I'm confused. If Foxconn agreed to pay these costs, why is the town on the hook for the $300 million?

[Spasticus Autisticus]

. . . and who's getting the money - if it's paid out?

[Steve Hersey]

From my cursory reading (not an expert here!):

It looks as though the town took out $300 million in bonds to build stuff to support the project, Foxconn promised annual payments to cover the debt, and - big surprise there - didn't hold up their end of the deal. And have now effectively abandoned it. (The hire-and-fire trick to fudge compliance with the agreement is a typically soulless big-corporation touch.)

Who is ultimately on the hook for this will doubtless depend on the contract language, and exactly how binding that promise was. I suppose the town could seize and resell the property if the promise is enforceable but Foxconn won't pony up, but that would involve massive legal expenses. In the end, I think they're well and truly screwed.

[DougMac]

What's worse, is that the town used the threat of emmenient domain to kick off all the land owners for this super factory that was total grift from the start. They bought out many families for much less than their houses and farms were worth.

Look, your brand new house is "blighted" so we need to tear it down, you got pennies on the dollar, and look at this awesome empty dirt field that we have to show for it!

The politician scum waived all environmental rules including virtually unlimited water usage rights (in a state that is largely tourism and forest), the TIF figures were given in the article, but with the spare population, it could have been up to the equivilent of the state paying up to $346k per job obtained.

All of that down the drain. So the town/Wisconson is out real money, not just the pie in the sky money that they were supposed to be rolling in it. And they now own a pile of dirt and a small building they supposedly build Google servers in.

I'm sure Walker and his cronies are rolling in it, but certainly nobody else is.

[Anonymous Coward]

But look at the bright side, now that it became a single patch of land you can sell it for $500M.... /s

[VirtualizationGuy]

In many cases, the property that they will be seizing and trying to sell was seized by the local government from (frequently unwilling) citizens at below market value. No one had a say into whether their land was sold for this project.

[MachDiamond]

"Foxconn promised annual payments to cover the debt, and - big surprise there - didn't hold up their end of the deal."

Did they breech the contract or does the contract say one thing while the politicians that signed off on it thought it said something else? This happens a bunch in the US where there are way too many lawyers. Even the US Congress pulls this stunt by calling for a vote on a complex chunk of legislation that runs over 1,000 pages and isn't delivered to Congresscritters until the day before the vote is scheduled.

[Anonymous Coward]

Why did Britain fail to pay Iran £400 million since the 1970's for a bunch of tanks...? Because they could. Not like Iran was in much of a position to do anything about it.

It took Iran kidnapping innocent Brits, and their families making a huge amount of very public noise, for Boris to finally cave this year and cough up the dough.

How exactly is Wisconsin gonna force Foxconn to pay up if they say "Fuck you and the horse you rode in on."?

This might have been a vehicle for backhanders to the previous state governor, but I'm not sure what Foxconn got out of it. $3Bn tax break is surely only useful if you finish the work and stick around.

[VoiceOfTruth]

-> Because they could

Because of court orders to do so.

-> kidnapping innocent Brits

If you are referring to Nazanin Ratcliffe, that is half the story. She was a dual national. And like a lot of dual nationals, when it suits them they are one nationality and it when it doesn't they are the other.

[Jon 37]

Bollocks.

British "court orders" can't bind the UK government for years. They can always change the law, if they want to. It's pretty much a one-line law: "As an exception to the sanctions against Iran, the UK government can pay Iran the refund it owes for the cancelled tanks order".

And in those court cases, it was the UK trying to get out of paying. And then trying to get out of paying interest.

Regarding her being a dual national ... so what? She wasn't kidnapped because she had an Iranian citizenship. She was kidnapped because she had a British citizenship and lived in Britain and had a spouse in Britain and photogenic children in Britain. And she was female and photogenic. All of which made her an ideal pawn for negotiations. Her spouse could talk to the UK press to apply pressure to the UK government. The photogenic female victim, and caring spouse, makes it a good sob story for the UK press. The photogenic young children makes it an even better sob story for the UK press.

And a British government minister then made up a false story about her just being in Iran to ... do something that would have broken Iranian law. And announced it on TV as a fact. Like, how big of an idiot do you have to be to run your mouth on something like that, and give Iran a perfect excuse to keep her in jail.

[Anonymous Coward]

There more of us now. Thanks to Brexit. Winning.

[rcxb1]

> How exactly is Wisconsin gonna force Foxconn to pay up if they say "Fuck you and the horse you rode in on."?

File a lawsuit.

Win.

Seize all the Foxconn products coming into the state and sell them at auction to (partially) pay the fine.

When Foxconn customers aren't getting their product shipments, you'll immediately have Foxconn's full attention and they'll quickly work out an agreement to pay-up.

[Justthefacts]

What would Chavez do?

When considering whether to confiscate foreign-owned assets, to cover the consequences of my own ill-judged internal policy, I always think to myself:

What would Chavez do?

[Yet Another Anonymous coward]

How exactly is Wisconsin gonna force Foxconn to pay up

Send a gunboat

[vtcodger]

"File a lawsuit ..."

Yeah. Except Foxconn has lawyers too. And they'll probably argue that the folks in Wisconsin failed to live up to their side of the agreement in numerous ways. And the Wisconsinites probably did fail in some ways because it was a complicated deal. And the case will drag on for years. And so will the appeals. And the appeals of the appealate decisions. And the appeals of the appeals. And eventually everyone will get tired of the case and will settle for some deal that will cost Foxconn a lot less than what they originally promised to pay but will allow everyone to claim victory.

[Yet Another Anonymous coward]

Foxconn will claim they met their part of the deal.

They said they planned to open a factory and would receive $M in tax breaks if they employed a certain number of people. They didn't open the plant and didn't receive the tax breaks.

The city decided to spend $300M trying to cash in on the plant by building other infrastructure to attract other companies, they didn't come because Foxconn didn't.

Here Seattle spent $MM on infrastructure to persuade Boeing to keep manufacturing in the state. Boeing then shipped a lot of the assembly, for models which coincidentally have a high rate of falling out the sky, to another state that has lower wages, no unions and lower taxes.

[MachDiamond]

"Here Seattle spent $MM on infrastructure to persuade Boeing to keep manufacturing in the state. Boeing then shipped a lot of the assembly, for models which coincidentally have a high rate of falling out the sky, to another state that has lower wages, no unions and lower taxes."

That should scream that Boeing was moving due to reasons that WA wasn't addressing. The first and almost only play in a politician's book is to throw money at something. The problem is that many times money isn't the issue or just adds to the problem. The US doesn't need to pay for EV chargers, they need to streamline the permit/approval process so private companies can install and turn them on. The State and Federal politicians make statements about going "green" or "sustainable" or whatever the current buzzword is and at the local level they add roadblocks.

[Paul Hovnanian]

"File a lawsuit."

And then sit back and wait. Once the CCP takes back Taiwan and nationalizes Foxcon, we'll settle with them.

Shame about that defense pact. It sure is difficult to get US pols motivated when there are still outstanding legal issues.

[MachDiamond]

"$3Bn tax break is surely only useful if you finish the work and stick around."

Unless something changes and that tax break can't be used. They might have found out that the operation was going to be subject to the usual US collection of regulatory agency approvals and inspections that could make the entire business plan untenable. I'm not saying that clean air/water/land acts aren't a good idea, but if 4 different agencies are tasked with enforcing 4 different sets of contradictory rules for the same thing it can be a huge problem.

[VirtualizationGuy]

RE: Foxconn factroy fiasco

I am from Wisconsin. Foxconn has a history (both within Wisconsin and other places) of making promises and signing contracts and then just not completing them. Since they are a foreign company with no signifcant resources in the USA, they can ignore contractual payments with little chance of penalties.

The main purpose of the deal was initially to keep Scott Walker in office as the governor and give Foxconn a "major investment in making America Great" project to use for preferred status at the Federal level.

[MachDiamond]

Farm club

"I'm confused. If Foxconn agreed to pay these costs, why is the town on the hook for the $300 million?"

Many political bodies are strictly amateur operations. The people on the council or in the legislature are the ones with the best hair and had the most money to run their campaign. They aren't judged on their business or technology knowledge. When they go up against a very large and savvy corporation with lots of lawyers and tricky contracts, those corporations win no matter what happens. Where will always be an escape hatch for them to climb out of if the winds of business change.

I think it's long overdue that prohibitions are put in place to prevent government bodies giving away incentives to convince companies to locate a facility in their area. Big corporations know that they can get all sorts of free money if they play the game.

Say a company is looking to add a distribution warehouse to serve a particular region. They put out the word that they will be selecting a location and get cities to bid. They work to get 10 or a dozen to bid against each other while none of them know what the complete criteria is for selecting the location. 3 cities will be a good fit, two will be a marginal fit and the remaining are used as shills. The goal is to get one of the three good locations to drop their shorts and agree to be abused for the next 10 years until the company shuts that warehouse and starts the whole process over someplace else where they will pay no taxes and get a brand new building to boot. In the wake, the city is left with a big building that is only useful to a limited number of companies in the country, can't be easily subdivided and hasn't been well maintained. The city also has a big unemployment issue all of a sudden and all of the city services that were expanded to handle the increase in population to staff the facility aren't able to pay for themselves leaving bonds unpayable that were issued to build out the services in the first place. The king of this sort of tactic is usually a retail reseller of Chinese tatt that starts with a W.

[Jimmy2Cows]

Stunned

Foxconn went back on an agreement and treated hired workers like shit, huh? Well who'da thunk it.

[Anonymous Coward]

Re: Stunned

They almost acted like they were an American company

[Kevin McMurtrie]

Other options besides LCD?

Maybe build luxury SUVs with 6.5L V8 gasoline engines that redline at 3000 RPM, standard cassette deck stereo system, and a VHS entertainment system that displays on in-seat CRTs. No, wait. EVs are the future. Swap that V8 for NiCd battery packs and go full Laserdisc.

[Will Godfrey]

Re: Other options besides LCD?

You spelled NiFe wrong

[KarMann]

Re: Other options besides LCD?

That's not a NiFe. This is a NiFe!

[eldakka]

Re: Other options besides LCD?

> Maybe build luxury SUVs with 6.5L V8 gasoline engines that redline at 3000 RPM, standard cassette deck stereo system, and a VHS entertainment system that displays on in-seat CRTs.

That's a good start. But replace the cassette deck with 8-track and the VHS with Beta, then it's a winning product.

[Anonymous Coward]

People voted for these morons, suck it up

[ecofeco]

And they keep voting for the likes of them.

[Bill Gray]

Obligatory Douglas Adams quote

"...the lizards oppress the people horribly, of course, and nobody likes them," Ford said. "But people vote for them again and again."

"But why?", Arthur asked patiently.

"Because," Ford explained, "if they didn't vote for a lizard, the wrong lizard would get elected. Got any gin?"

(Or something like that. Working from memory here.)

[DS999]

If Foxconn has promised to pay the bonds

And they don't, presumably they can repossess the land and sell it.

That is, assuming they got it in writing and didn't just get a verbal commitment...

[HereIAmJH]

Re: If Foxconn has promised to pay the bonds

Generally the local gov't entity (City/County) issues the bonds to pay for infrastructure because their credit gives them a better lending rate. The agreement with the companies include a revenue stream that pays back the bonds over a number of years. TIF (Tax Increment Financing) and CIDs (Community Improvement District) are what you will commonly hear about.

The problem comes in when the contract isn't fully executed. Economy turns and the company doesn't fully build out, etc. Or there are miscalculations on the revenue stream. One local one I can think of is a small town that financed infrastructure for a new Walmart that was going to anchor a shopping center. The sales tax revenue was going to pay off the bonds. The rest of center was never built out and WM alone didn't produce enough sales tax revenue to cover the bond payments. The town had to lay off police officers to pay the bond or risk their credit rating.

So since the city apparently guaranteed the bonds, they are responsible for the $300m. If Foxconn doesn't pay the annual $36m (for the next 20 years), they'll have to seize the property and sue. While making the bond payments in the meantime.

This is why you want to elect competent people, even at the local level. You have given them the authority to make contracts in your name that you will be financially responsible for.

[Richard 12]

Re: If Foxconn has promised to pay the bonds

And this is exactly why local councils are not allowed to borrow in the UK.

[Nifty]

Re: If Foxconn has promised to pay the bonds

Richard 12 "And this is exactly why local councils are not allowed to borrow in the UK."

Politicians are not talking about… local government debt

https://www.smf.co.uk/commentary_podcasts/politicians-are-not-talking-about-local-government-debt/

There's a table of UK local authority borrowing there that runs into billions.

There are a scattering of web articles 2020-2021 saying that LA borrowing should be/will be tightened, but nothing definitive.

Can you provide your source?

[Anonymous Coward]

Re: If Foxconn has promised to pay the bonds

They can still get into trouble loaning money to local companies though. Northampton Borough Council no longer exists (West Northants Unitary Authority replaced it) following a corruption probe into a £10M loan to Northampton Town Football Club. The money vanished, and has never been traced.

[notyetanotherid]

Re: If Foxconn has promised to pay the bonds

>And this is exactly why local councils are not allowed to borrow in the UK.

Err, then what exactly is the the Public Works Loan Board for?

[Yet Another Anonymous coward]

Re: If Foxconn has promised to pay the bonds

Not only are local councils in the USA expected to sell bonds to fund everything it's encouraged by making the interest on the bonds tax-free to anyone who buys them, so there is always a big demand

[Ace2]

Re: If Foxconn has promised to pay the bonds

I used to live near Coca-Cola Drive. Was there a Coke bottling plant there? Nope, but there were lots of nice roads and bridges around it.

[MachDiamond]

Re: If Foxconn has promised to pay the bonds

"The rest of center was never built out and WM alone didn't produce enough sales tax revenue to cover the bond payments."

I expect that the Walmart also crushed most of the small businesses for a radius of several miles so if they pull out, people will have a hard time buying necessities.

[Anonymous Coward]

Gee, you mean something else Trump bragged about is turning out to be nothing but a pipe dream? Do tell...

[MachDiamond]

"Gee, you mean something else Trump bragged about is turning out to be nothing but a pipe dream? Do tell..."

Oh pulllleeese.

Obama championed Solyndra. Enron was a big favorite for others. I think the lesson here is politicians aren't good business people on the whole. Choose a politician and you can locate an example.

[vincent himpe]

what's the function of that giant metal ball ? burning money ?

[Yet Another Anonymous coward]

Re: Giant Ball is Storage

Monorail terminal

[sebacoustic]

Re: Giant Ball is Storage

monorail mono-terminal inasmuch as it doesn't go anywhere.

[Anonymous Coward]

It's the first building of Spaceball City.

[My other car WAS an IAV Stryker]

Spaceball City

Miller Brewing HQ is nearby. Maybe they can switch from canned/keg beer to canned/keg air.

(As long as you don't mind the smell of brewer's yeast. As an undergraduate student near downtown Brew City/Cream City, I remember certain mornings after an overnight wind from the west/towards the lake. Good times.)

Icon, obviously -->

[Michael Wojcik]

Foxconn EPCOT. Temple to the spirit of Buckminster Fuller. Sunsphere Mount Pleasant.

[Jonjonz]

So, I get your typical crony local government back room deals where the officials at the top get paybacks, but really what has Foxconn gotten out of this even if they never deliver?