Foxconn's Wisconsin factory isn't what it initially promised. Can it still create a high-tech hub?

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Stacey Wescott/Chicago Tribune/TNS

By the end of the year, Taiwanese electronics giant Foxconn expects to start production at a brand-new liquid crystal display manufacturing plant in southeast Wisconsin.

The million-square-foot building’s outline is visible from what used to be quiet two-lane roads, widened to accommodate the surge of activity Foxconn is expected to bring to an area that was once largely farmland. A handful of additional buildings and a power substation are taking shape nearby.

Foxconn’s plans have changed dramatically since its initial announcement, feeding skepticism over whether it can deliver on a pledge to create 13,000 jobs and turn southeast Wisconsin into a hub of high-tech electronics manufacturing. Some question whether the project will pay off for Mount Pleasant and Racine County, which are investing hundreds of millions of dollars and have seen several residents displaced from their homes.

“It’s like a bait-and-switch,” said Kim Mahoney, who lives in the only house still standing in what used to be a small subdivision on the Foxconn site.

But backers say Foxconn’s arrival has been a much-needed shot in the arm for workforce development efforts in an area lacking in skilled manufacturing workers and they remain confident even a scaled-down project will boost the local economy.

“You would love the movie if you hadn’t seen the trailer,” said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce.

It was “the trailer” that convinced the state to offer an incentive package worth up to $3 billion if the company hit benchmarks tied to jobs, wages and investment and to fast-track preparations for Foxconn’s arrival. Local government agencies agreed to front investments in infrastructure improvements and buy property promised to Foxconn, at a total cost currently estimated at $808 million.

The company’s agreement with Mount Pleasant and Racine County calls for those expenditures to be repaid over time through property taxes and special assessments. Foxconn is obligated to make up any shortfall if it doesn’t raise the value of the main site to $1.4 billion by 2023.

Foxconn continues to fulfill its financial obligations under the local contract, which “ensures strong taxpayer protections and minimum valuation guarantees,” Racine County Executive Jonathan Delgrave said in a statement. The company paid $8.4 million in property taxes and special assessment payments, in addition to a one-time $60 million payment, as of Dec. 30.

Meanwhile, Wisconsin officials have said the company’s shifting plans call into question its eligibility for up to $3 billion in incentives negotiated at the start of the project. Foxconn missed job creation and investment targets required to earn tax incentives in 2018, and won’t report on last year’s progress until April.

It’s not that nothing is happening in Mount Pleasant. Foxconn said earlier this year it has invested nearly $372 million at the site, where it has started building a 260,000-square-foot plant that will manufacture and assemble components for computer servers and a data center with offices, in addition to the million-square-foot liquid crystal display factory.

But it’s also building a different kind of factory than the one agreed to in its contract with Wisconsin. The company originally was to build a Generation 10.5 factory that would produce large LCD panels often used to make large flat-screen TVs. Instead, it will build a Generation 6 facility producing smaller panels with potential applications in education, medicine, entertainment and the military.

A smaller Generation 6 factory would be less likely to attract additional suppliers to hoping to do business with Foxconn to Mount Pleasant, said Bob O’Brien, co-founder and president of Display Supply Chain Consultants, who was recently hired by the state as an expert on the flat-panel display industry.

Those other businesses would have brought more jobs and helped build out a “Wisconn Valley” beyond just Foxconn.

“The notion that it will deliver on all of its initial promise is not conceivable,” O’Brien said. “But the notion it will deliver on some and you could have an LCD manufacturing site in Wisconsin is still in the realm of possibility.”

Analysts said it wasn’t surprising Foxconn abandoned plans for the cutting-edge Generation 10.5 plant, as prices for the large TV panels made at those factories plunged.

“In 2017, you could see an oversupply coming unless you had just crazy expectations about how big the TV market could get,” said Charles Annis, with technology research firm Omdia.

Sheehy, of the Milwaukee commerce association, said officials in Wisconsin underestimated how rapidly the industry was evolving. Usually, incentives are offered to companies with more defined plans, he said.

Both Foxconn and Wisconsin have gone through leadership changes as well. Foxconn founder Terry Gou stepped down to consider a run for the presidency of Taiwan last year before withdrawing from the race. Wisconsin’s governor when the deal was signed, Republican Scott Walker, was replaced by Tony Evers, a Democrat, in 2018.

The changes in Foxconn’s plans have raised concerns about whether the work underway in Mount Pleasant is still eligible for the incentives outlined in its contract with the state, said Missy Hughes, who took the reins of the state’s economic development agency, the Wisconsin Economic Development Corp., last fall. Taxpayers agreed “to invest in a certain kind of project, and that’s changed, taxpayers deserve to know what’s the new vision,” she said.

“We want to continue to have a partnership, and coming to the table doesn’t eliminate that partnership," she said. "It hopefully strengthens it.”

Foxconn Technology Group said it made changes to the plan in response to market demand, and the company has remained in discussions with the state “regarding our commitment to bring substantial impact to Wisconsin’s economy, workforce and educational institutions.” It will continue to report on hiring and capital expenditures.

“While Foxconn continues to respond to an ever-changing technology and supply chain landscape, our commitment to creating a global technology hub and manufacturing ecosystem in Wisconsin remains unchanged,” Foxconn said in the statement.

Asked how much the company expected to invest, how many people it expected to employ in Mount Pleasant, and how those jobs would be divided between research and manufacturing roles, Foxconn said it “will make business and hiring decisions based on timing that positions the company, its employees, and its local partners for long-term success while continuing to comply with the WEDC pay-for-performance agreement.”

Despite the uncertainty, the community is preparing for Foxconn’s production to ramp up. The anticipated need for thousands more skilled manufacturing workers helped secure $5 million in state funding for investments in advanced manufacturing programs at Kenosha’s Gateway Technical College, including a 35,800-square-foot expansion to a facility for manufacturing and engineering programs.

Even if Foxconn falls short of its plans to create 13,000 jobs, Gateway President Bryan Albrecht said he isn’t worried about keeping those courses full. Wisconsin companies like Rockwell Automation, InSinkErator and S.C. Johnson — even gummy candy maker Haribo, which plans to open a factory in Pleasant Prairie this year — have been calling for more workers with the skills to work with automated systems, he said.

In Illinois, the College of Lake County is making similar investments in programs that could prepare students for careers in advanced manufacturing, which will help accommodate more students.

Those investments were driven by demand from local employers, but Foxconn “has been a good thing for manufacturing because it created a dialogue among a lot of people considering their needs and how we can support manufacturers here,” said Richard Ammon, dean of engineering, mathematics and physical science.

Older workers are retiring and there isn’t a big enough pipeline of young workers to replace them. Companies also are adding new technology, creating more demand for workers who know how to analyze data from sensors, program robots or keep automated systems running smoothly.

“It got to the point where we enrolled an employee in a nine-month (automation technician) certification program because we figured he’d graduate before we’d find someone,” said Robyn Safron, senior human resources manager at Hydraforce, a Lincolnshire-based hydraulic valve maker that brought in its first robot two years ago.

Companies competing for talent say they’ve raised wages in certain roles and are investing in in-house training, as well as apprenticeship programs that let employees work while studying in the classroom and getting on-the-job training.

The prospect of a scaled-down Foxconn is something of a relief to Mundelein-based MacLean-Fogg, which manufactures components for the auto industry.

“We were nervous about it as to how it was going to impact our ability to be able to fill positions, because it was hard enough as it was,” said Kristin Malbasa, executive vice president of human resources. “At the same time, because it’s hard, we didn’t know where they were going to find 13,000 people.”

In addition to workforce development, efforts are underway in Wisconsin to build the infrastructure needed to accommodate Foxconn’s growth.

About $250 million is being spent on state, village and county roads around Foxconn’s Mount Pleasant site, widening some and building new ones. The Foxconn development also helped secure funding that sped up planned improvements to nearby Interstate 94, said Wisconsin Transportation Department spokesperson Michael Pyritz.

But in Milwaukee, officials rejected plans to provide additional public transit options for people commuting to Mount Pleasant, said Milwaukee Alderman Robert Bauman, who pointed to uncertainty about the project’s eventual scale and lack of dedicated funding.

In Mount Pleasant, some homeowners said they were shocked to learn their property had been promised to Foxconn while watching the project’s announcement on the news. Others said it was difficult to start looking for new homes while waiting to hear what the village would offer for their land. Mount Pleasant said it paid 140% of fair market value for homes, plus relocation benefits.

Mahoney, who has refused to move from her home on the Foxconn site, said she and her husband don’t want the project to fail but don’t believe the village’s offer would “make us whole." Her husband, Jim, occasionally checks out the construction site through a spotting scope. Mahoney said she tries not to look past the trees at the edge of their yard.

She’s running for a seat on Racine County’s Board of Supervisors and said she wants to know what the county is doing to protect itself in case Foxconn’s plan falls short.

But other residents, including some who hadn’t been eager to move, said they remain optimistic the deal will be good for the community despite the changes.

“What business doesn’t change as the economy and other things happen out there? It doesn’t bother me … things are still progressing forward,” said Randy Burrow, 61, who retired after working in UPS’ automotive department and moved to Spring Prairie after the village bought his home in Mount Pleasant.

Tom Fleiss, who used to farm land that is now part of the Foxconn site, was skeptical the company would create the 13,000 jobs initially promised but still thinks it will benefit an area that’s already seeing development.

“Everything around it is going to have a lot of jobs, we’ve just got to get the next generation to fill them,” he said.

That’s why Hughes is confident investments in workforce and infrastructure will be needed — whether or not Foxconn drives that need.

“The energy is there. We’ll see whether or not the return comes from Foxconn or others, but I have a lot of confidence that investment is strong there,” she said.

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©2020 Chicago Tribune

Stacey Wescott/Chicago Tribune/TNS
Stacey Wescott/Chicago Tribune/TNS
Mark Hertzberg/Chicago Tribune/TNS