Foxconn Wisconsin Plant On Hold
October 23, 2017
What was once viewed as the reawakening of a display industry in the U.S. is beginning to fade in the light of day. The Wisconsin Economic Development Corporation was expected to approve the $3b incentive package for Foxconn’s proposed plant, has delayed approval until November 8 at the earliest, as opposing forces are pushing for additional due diligence related to the impact to taxpayers if Foxconn fails to fulfill its commitments. The Wisconsin Legislative Fiscal Office has reported that the state cannot recover the fiscal stimulus costs for at least 25 years using ‘best case’ numbers, and that any using cash flow analysis close to 30 years is ‘highly suspicious’, and board members are expected to vote on the deal without having seen the final contract, which the opposition calls ‘crazy’. Opposition camps cite that the deal keeps changing and summaries and memos were the only details. One change, the requirement that Foxconn hire an independent accounting firm to submit capital expenditures and hiring plans was just approved by the board. Senate Democratic leader Jennifer Shilling stated, “The public deserves to know the details and WEDC officials should be expected to have the knowledge and confidence to discuss the proposal in the light of day. This level of secrecy is extremely troubling when a $3b taxpayer subsidy to a foreign corporation is on the line.”
Figure 1: Land being sold for Foxconn facility
Almost concurrent with the Foxconn announcement, Samsung Electronics said they are putting its own plans to build an appliance factory in South Carolina on hold. The $380m project, which was to start appliance production in mid-2018 (they would be taking over an existing plant), is now said to be on hold after the US International Trade Commission ruled that Samsung and LG were hurting American companies, after a petition by Whirlpool to place a 50% tariff on washers and dryers imported from the Korean firms. Samsung’s claim is that additional restrictions could force Samsung to change its US expansion strategy, and lessen the need for the new factory, and its proposed 1,000 jobs, and while the President must make a determination as to what remedy to take after reviewing the ITC proposal, much of the original excitement about the plans would now seem to be mired in politics. It will be interesting to see how both the Samsung plant and a similar situation in Wisconsin with LG will play out after the adverse ITC ruling, as the administration will have to balance the optics of new job creation with the negatives cited by Whirlpool and the ITC decision, and the pushback from both South Korean appliance giants. While Whirlpool was the volume leader in 1Q ’17, both Samsung and LG were #1 and #2 in dollar volume.