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Foxconn shrinks plans for Wisconsin plant

Yahoo Finance’s Myles Udland, Brian Sozzi, and Julie Hyman discuss Foxconn’s plans to scale back its liquid-crystal-display plant in Wisconsin.

Video transcript

JULIE HYMAN: Remember back in, what was it, 2017 or so, Foxconn, the big contract electronics maker agreed to build a plant in Wisconsin. The plan at that time was to invest as much as $10 billion to hire 13,000 people by the year 2032. And as part of that, they got a big old package of incentives, including tax breaks, about $2.85 billion worth. Well, fast forward to today. Now they're going to invest as much as $672 million, the number of jobs under 1,500, and it's by the year 2025. They're still going to get, though, $80 million in incentives.

Now, this plan previously agreed to by the company's former chairman, Terry Gu, the former Republican governor, Scott Walker. President Trump touted this as part of his administration's push to bring manufacturing back to the United States. So, much of that, obviously, melting away here. And as Myles alluded to, going into the break, one of my favorite bugaboos, if you will, corporate tax breaks, but specifically having to do with these kinds of local initiatives to try to move companies to various places because the sort of lack of success of these is pretty infamous. I'm sure there are some examples of where it has worked out well.

But we tend to hear about the ones where it doesn't. And certainly, the poster child for all of this was Amazon's really unseemly, or should I say, municipalities really unseemly vying for Amazon to locate there a couple of years ago. I don't know. Brian, I'm going to go to you on this one because I know you tend to come out on the other side of me from this. But I mean, come on.

BRIAN SOZZI: Yeah, I'm really--

JULIE HYMAN: Look at this Foxconn situation.

BRIAN SOZZI: I'm really on the other side. And you mentioned the incentives, Julie. So part of the original plan, Foxconn was getting about $2.85 billion in incentives. We'll call it $3 billion. Under this new plan, those incentives go down to $80 million. So that is a big cleanup by the new governor Evers, Tony Evers, in Wisconsin. But I'm coming back to the point where why was it bad to give these incentives to open a giant plant to make LCD screens in the United States for once? A giant LCD plant in the United States that was supposed to create 13,000 jobs, why is that a bad thing to give incentives away to create that plan--

JULIE HYMAN: Well, for starters, they raised the land-- for starters, they bulldozed farms and raised the land to build the factory that's not now being built, at least not to the capacity.

BRIAN SOZZI: Fair, point taken. But there go 13,000 jobs at a time when we need jobs, and then secondarily, we're using more tech gear than ever before. Why not have that tech gear made in the US for a change?

JULIE HYMAN: The goal of the thing is not the problem. The problem is that they don't deliver on the promise. And very frequently, that's what happens in these situations. Look at all the casinos that receive incentives to get built around the country. How often do those casinos actually, in a sustainable way, deliver on the economic promises that they made in terms of job creation over the long-term? Very frequently, they do not.

BRIAN SOZZI: But it still-- I think it would still be good. Even if they created 5,000 jobs, that's great. You know what? I can use for once a tech device that is made in the USA. And I'm on board with that, people.

JULIE HYMAN: I mean, would Foxconn have come there without the incentives?

BRIAN SOZZI: Unclear. Myles?

JULIE HYMAN: Don't know.

MYLES UDLAND: As HQ2 showed, I mean, Amazon is still putting tens of thousands of jobs in New York City. People with all these-- like, the biggest companies that we know are all based in Northern-- or most of them, with the exception of Amazon, basically. They're based in Northern California, which I don't think the popular narrative would be California's the most business friendly state. And so I think around the edges, these sorts of incentive packages are always going to exist. And they will work to varying degrees.

But ultimately, if you have a good and growing business, you will be where you want to have your talent located. I mean, I think we're going to see that with some of the investment that's happening from Intel, for example, in US manufacturing. They may get some breaks from Arizona or somewhere else to start building up their capacity. But if they think it's better for them from a business standpoint to build chips in the US, they're going to do that with or without the kinds of incentives that maybe were discussed in this one situation.

BRIAN SOZZI: Yeah, I'll just quickly-- I'll add this, too. Even if they were to under promise, and let's say they hire 2,000 workers to work to operate this big giant LCD plant, those are 2,000 workers likely to be reskilled. And I see nothing wrong in that. Give them new skills, put them to work.

JULIE HYMAN: The hiring ain't the problem. The problem is how much you're paying to get those jobs and whether the economic calculation actually makes sense.