Official Michigan for months has been in hot pursuit of the Foxconn Technology Group, the Taiwan-based contract manufacturer planning massive investments in the industrial Midwest.
Neighboring Wisconsin landed the first prize, an envisioned complex that ultimately could employ as many as 10,000 workers — provided taxpayers in America’s Dairyland pony up an estimated $3 billion in incentives to close the deal.
Michigan is still in the hunt for additional Foxconn investment, Gov. Rick Snyder and others say. That’s good, so far as it goes. Foxconn operations serving the hometown auto industry would be a natural fit here, as would a research and development site to leverage Michigan’s ample well of engineering talent.
But something far more strategic may be at play. Namely, establishing a beachhead in America’s industrial heartland that could be converted to production of electric and autonomous vehicles, competing directly with Detroit’s automakers and its global auto industry rivals.
That’d be a first, a kind of manufacturing Trojan horse within the shadows of General Motors Co.’s Renaissance Center and Ford Motor Co.’s Glass House. Oh, there’ve been joint ventures, like Mazda Motor Corp.’s now-defunct partnership with Ford in Flat Rock and Mitsubishi Motors Corp.’s dissolved tie-up with Chrysler Corp. in Normal, Ill.
But never in the history of the Detroit-based auto industry have foreign-owned rivals planted themselves in the heart of America’s auto industry. Why would they when they could establish their own spheres of influence in Tennessee and South Carolina, Alabama and Mississippi, Georgia and Ohio, most of it far from the reach of Detroit and its United Auto Workers?
Why lobby congressional delegations that have spent decades pushing Detroit’s interests in Washington to split loyalties they likely would not be politically predisposed to split? Not when the new players could win political support from pols in the growing New South states.
The auto industry as this town has known it for a century is facing dramatic change. The Auto 2.0 transformation likely will see Silicon Valley tech heavies join the ranks of automakers — potentially with the help of contract manufacturers like Foxconn and one of its biggest customers, Apple Inc.
Automakers “and suppliers face significant challenges in the transition to Auto 2.0,” Morgan Stanley, a leading Wall Street investment firm, warned in a recent note, “including attracting and retaining human talent, capital deployment, exposure to obsolete technology and poor transferability of skills to an EV ecosystem.
“Foxconn’s efforts could, over time, expand into a position of direct competition or even substitution from the currently installed capital base to manufacture complete vehicles.”
Sound far-fetched? It shouldn’t, considering the high-tech players — Apple, Google parent Alphabet Inc., Intel Corp. and countless startups — angling for a piece of the 21st-century automotive pie called mobility, autonomy and electrification. And Foxconn in recent years has been investing in electric-car and mobility ventures.
These are different times. The traditionally defined industry, a collection of familiar automotive names, is morphing into a broader, technology-driven sector shaping up to be far larger and better capitalized than the traditional auto industry.
“The way disruption goes these days, I just don’t think anything should be underestimated,” Glenn Stevens, executive director of the Detroit Regional Chamber’s MICHauto unit, said in an interview Monday. “You cannot be complacent and cannot let the inflection points hit you and not be ready for them.”
Then there are the politics. A revived sense of nationalism, especially in the heartland, helped propel Donald Trump to the White House. And business leaders from Detroit and San Francisco to Taipei and Tokyo are on notice: access to the rich United States market will come at a higher cost to be measured in creating American jobs.
Apple, smart enough to read political winds, understands this. So does Foxconn, which chose to first announce its plans for Wisconsin at a White House event emceed by America’s emcee-in-chief. Do you think that was an accident?
Investing in middle America produces a political by-product — investment in American jobs and a region that is vital to any winning presidential coalition. That could come in very handy should Foxconn turn from manufacturing liquid crystal displays to assembling electric cars for sale in the United States.
Look, Apple CEO Tim Cook isn’t pulling punches. He told Bloomberg News that self-driving car technology is “the mother of all” artificial intelligence challenges. And his is a company that doesn’t sell its software to third parties; it embeds it into products it designs, has them built to its specifications and markets them with a sharp eye to Apple’s brand positioning.
“So far, Apple has kept its car ambitions under wraps,” Recode, a website specializing in technology news, wrote last year. “But it stands to reason that if the company chooses not to work with an automaker, it could create a car the way it manufactures iPhones: conceive the parts and assemble it at Foxconn. ....”
Exactly right — right in the industrial heartland, subsidized by its taxpayers.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, listen to his Saturday podcasts, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.