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Prospects for $10B WI Plant Could be 'Dead'

Wednesday, November 4, 2020

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An analyst hired by the state of Wisconsin has called the $10 billion Foxconn project “dead” as tax breaks and government aid become more and more crucial to keeping the agreement afloat.

Last month, Foxconn founder Terry Gou said that the company’s commitment to the project depends on government aid. Shortly after, Foxconn Technology Group decided to challenge a decision by the Wisconsin Economic Development Corp. not to issue the company tax credits.

Some Contract & Project History

In April 2018, Foxconn named Providence, Rhode Island-based Gilbane (which has a Milwaukee office) and global firm M+W Group (Stuttgart, Germany) as its lead contractors on the 20 million square feet of building space that will eventually employ 13,000 people.

Officials announced the first round of contracts that July, worth $14 million, that went toward a multi-purpose building on the site, which is now complete.

Foxconn

An analyst hired by the state of Wisconsin has called the $10 billion Foxconn project “dead” as tax breaks and government aid become more and more crucial to keeping the agreement afloat.

However, 2019 opened with a Jan. 17 letter in which the company disclosed that it would not make the threshold of job creation needed in order to receive about $9.5 million in tax credits.

(Foxconn is under an agreement with jobs agency Wisconsin Economic Development Corp. to create up to 13,000 jobs over the course of construction, which would then qualify the company to be awarded up to $3 billion in tax credits.)

The contract with WEDC extends well beyond the completion of construction, however, over the first 15 years of the contract, which ends in 2027, the minimum hiring number dips to 10,400 and the company must continue employing that many people through 2032.

Shortly after, the company noted that it was no longer sure that the facility would be solely focused on making flat screens as originally pitched. According to a report by Reuters, which spoke to Louis Woo, special assistant to Foxconn Chief Executive Terry Gou, the company would now focus on creating a “technology hub” rather than LCD manufacturing.

While it promises to maintain the numbers in terms of job creation, the type of jobs that will now be up for grabs will reportedly be totally different, and will include more research and development and design positions rather than manufacturing jobs.

Woo cited the cost of labor in the United States for the shift.

Bid packages for the construction of the massive manufacturing facility began issuing in May and later that month Foxconn awarded $13 million in contracts for foundation-related work to C.D. Smith Construction Inc. Crews began pouring concrete in late June.

Also in early summer, officials awarded nearly 40 other contracts—the financial terms of which were not disclosed—and renderings for the property were released as well.

The area is designed by three Taiwanese companies that include JJP Taipei, Team Engineering Consulting and United Integrated Services, while the building shell is designed by Eppstein Uhen Architects in Milwaukee. Graef is the engineer of record and The Sigma Group is civil engineer. New York-based Exyte, which has specialization in clean rooms, is leading the design team.

In August, it was reported that walls were going up at the 1 million-square-foot plant. About 200 workers installed 400 precast concrete panels and structural steel work, led by general contractor Gilbane Building Co.

Echoing the shift in focus, in September, Foxconn announced that it had chosen Mortenson Construction (Minneapolis) to serve as construction manager for two facilities that were recently approved as part of the plan to support “smart manufacturing,” which include a Smart Manufacturing Center and the High-Performance Computing Data Center.

At the time, Mortenson announced an invitation to bid on the core and shell of the SMC, seeking contracts for: earthwork, site utilities, asphalt, site concrete, landscaping, concrete reinforcing materials, concrete reinforcing install, SOG concrete, precast, steel, metal panels, roofing, overhead doors, glazing, skylights, exterior sheathing and air barriers, loading dock equipment, elevators, temporary fencing, masonry, testing services and concrete Redi-Mix materials.

In October, the Milwaukee Journal Sentinel reported that Foxconn awarded another $83 million in contracts. In addition to that, Patch also reported that installation had begun on the 1 million-square-foot factory’s roof. For the installation, 16,000 yards of concrete will be poured onto the metal deck and will reportedly be completed by three roofing crews.

Last month, Foxconn founder Terry Gou said that the company’s commitment to the project depends on government aid. Shortly after, Foxconn Technology Group decided to challenge a decision by the Wisconsin Economic Development Corp. not to issue the company tax credits.

Designs for the data center were also released, which include not only the 34,250-square-foot building but a 100-foot-tall “networks operations center globe,” which is set to include a 240-seat auditorium, board rooms and more office space. Both are also designed by Eppstein.

At the end of the year, letters between State Department of Administration Secretary Joel Brennan and Foxconn Industrial Internet Chief Business Officer Richard Vincent were released by Wisconsin Gov. Tony Evers’ administration that discussed whether the project will even qualify for the agreed-upon $3 billion incentive package.

This year started off with a $2.3 million contract award for subcontracts under the project’s High-Performance Computing Data Center Bid Package No. 1.

That brought the total value for contracts awarded to the $10 billion project to $372 million. Most of those subcontracts focuses on concrete work.

What Now

“Right now it looks dead,” Display Supply Chain Consultants CEO Ross Young told EE Times in an interview. “They only built a storage facility and are not getting the subsidies they need. We don’t anticipate any more G10.5 LCD fabs being built. The industry has sufficient capacity. In fact, the Korean suppliers Samsung and LGD are shutting down a significant amount of capacity and looking to exit the LCD TV panel market as Chinese government subsidized capacity drove prices down.”

According to the Times, the Taiwan-based company failed to meet the targets that would have qualified it to receive up to $19.1 million in job-creation tax credits and another $192.9 million in capital-investment tax credits for jobs and investments in 2019.

On Oct. 12 WEDC decided not to issue tax credits to Foxconn for capital investment and hiring in 2019. The state agency determined that Foxconn only hired 281 full-time employees and only made $300 million in capital expenditures.

Foxconn has maintained, however, that it hired more than 520 eligible full-time worked and that it invested $750 million.

Robert Berry, attorney with Foxconn, sent a letter to Jennifer Campbell, chief legal officer for WEDC, at the end of last month saying the company objects to the decision specifically “regarding terms and timelines.” 

“Despite frustrations and disappointment with WEDC’s decision and the method chosen by the WEDC to inform the (company) of its determination, it is the (company’s) intention to continue to work with the WEDC in good faith to resolve this disagreement within the next 30 days in a manner that benefits interested parties, including Racine County and the village of Mount Pleasant,” the letter reads. 

   

Tagged categories: Business matters; Finance; Good Technical Practice; Government; NA; North America; Ongoing projects; Taxes

Comment from Tom Schwerdt, (11/4/2020, 11:23 AM)

This project has looked questionable for quite awhile.


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