Howes: Michigan's miss on landing Foxconn may be a blessing
Foxconn Technology Group’s massive $10 billion investment got away from Michigan, and that's turning out to be a good thing.
The Taiwan-based contract manufacturer is reversing its promise to employ thousands of blue-collar workers making liquid-crystal displays at a sprawling plant in Wisconsin’s Racine County — a deal touted by President Donald Trump nearly two years ago at the White House and, of course, on Twitter.
“In terms of TV, we have no place in the U.S.,” Louis Woo, a special assistant to Foxconn CEO Terry Gou, told Reuters on Wednesday. “We can’t compete. In Wisconsin, we’re not building a factory. You can’t use a factory to view our Wisconsin investment.”
Turns out delivering the big-ticket manufacturing renaissance promised by President Trump on his path to the Oval Office — and since — is proving more problematic than governing by tweet. It's complicated in the industrial Midwest by evidence of Foxconn's latest false promise, the negative impact of Trump's own tariffs, trade tension with China and the European Union, and competitive pressures forcing the likes of General Motors Co. to move toward closing four U.S. plants.
The result: despite the nation creating 284,000 manufacturing jobs last year, according to the Bureau of Labor Statistics, sales are dropping for Milwaukee-based Harley-Davidson Inc., forcing the maker of true-blue American motorcycles to now assemble rides overseas for sale in foreign markets. GM this year will idle, and likely close, one plant in northeast Ohio and two in southeast Michigan, each population strongholds in states that delivered Trump to the White House.
U.S. tariffs on foreign steel and aluminum last year cost Ford Motor Co. roughly $750 million in lost profit, the automaker said last week, a financial headwind continuing into this year. And Foxconn, already notorious for failing to deliver on plans to build a plant in central Pennsylvania, is using the tense trade environment — precipitated in large part by Trump administration policy — to meaningfully alter its overall commitment to Wisconsin.
If this is what winning looks like, expect folks in some key Midwest battlegrounds to look elsewhere come election time. The bellwether auto industry, and a prospective foreign investor in industrial states, are signaling that prospects for future jobs and investment are not immune to policies that raise costs and influence business decision-making.
In a statement clearly alluding to U.S.-China trade tensions, Foxconn blamed changes in "the global market environment" since the project was announced in the summer of 2017. The iPhone assembler reiterated its long-term commitment to the Wisconsin project, albeit one focused less on blue-collar jobs and more on "knowledge workers" conducting research and development. That's not likely to reassure the big deal's supporters or quiet its critics.
A would-be bait-and-switch wasn’t the deal that wowed President Trump, then-House Speaker Paul Ryan, R-Wis., and persuaded then-Gov. Scott Walker to assemble a roughly $4 billion incentive package — $2.85 billion of it in cash — to lure the world’s largest contract manufacturer to a site in the southeast corner of Wisconsin represented by Ryan in Congress.
Eighteen months ago, a Foxconn consultant using company data estimated that 75 percent of 13,000 jobs to be created in the state would be “hourly operators” and 18 percent would be engineers, the Milwaukee Journal Sentinel reported. Nine months later, Woo revised the hourlies down to roughly 33 percent. And that percentage has been dropped since to 10 percent blue-collar workers.
Reality intrudes. Liquid-crystal displays generally aren't manufactured in the United States for a reason: American labor costs are too high, as Foxconn now is confirming. And Detroit's automakers are signaling that heaping tariffs on foreign steel, aluminum and maybe even finished vehicles built outside the States will have undeniable impacts on jobs, investment and the bottom line.
Numbers matter in business, until the laws of competition are outlawed. The Foxconn deal may turn out to be what skeptics feared: too good to be true. It was such a head-slapper precisely because it promised comparatively high-wage jobs to manufacture a commodity typically sourced from Asia and other lower-cost countries.
Michigan lost that round to a Great Lakes rival. If this keeps up, folks around here will barely remember Foxconn — emphasis on the "con" part.
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.