Thursday, January 31, 2019

Foxconn cons the con man

At a dinner attended by tech executives and then President Obama, Apple’s CEO Steve Jobs made a disturbing pronouncement - Apple’s Jobs to Obama: “jobs aren’t coming back” to U.S. That’s the 2012 report from the Sarasota Herald-Tribune.

When President Barack Obama joined Silicon Valley’s top luminaries for dinner in California last February, each guest was asked to come with a question for the president.

But as Steve Jobs of Apple spoke, Obama interrupted with an inquiry of his own: What would it take to make iPhones in the United States? Not long ago, Apple boasted that its products were made in America. Today, few are. Almost all of the 70 million iPhones, 30 million iPads and 59 million other products Apple sold last year were manufactured overseas.

Why can’t that work come home? Obama asked.

Jobs’ reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.

The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their U.S. counterparts that “Made in the USA” is no longer a viable option for most Apple products.

Apple has become one of the best-known, most admired and most imitated companies on Earth, in part through an unrelenting mastery of global operations. Last year, it earned over $400,000 in profit per employee, more than Goldman Sachs, Exxon Mobil or Google.

However, what has vexed Obama as well as economists and policy makers is that Apple – and many of its high-technology peers – are not nearly as avid in creating U.S. jobs as other famous companies were in their heydays.

But while Apple is far from alone, it offers a window into why the success of some prominent companies has not translated into large numbers of domestic jobs. …

The Herald-Tribune report describes the development of the glass screen now in use on iPhones, an interesting case study on why those screens are manufactured in China.

The Foxconn con

Fast forward: Foxconn, the giant electronics manufacturer headquartered in Taiwan, was shopping for a new site. Under Gov. Scott Walker’s leadership, Wisconsin coughed up lots of cash and other goodies to entice Foxconn to build in Wisconsin. Judd Legum at has the story.

It was proof, we were told, that Trump could make good on his promises. Foxconn, the Taiwanese electronics giant, was building a new factory in Wisconsin – and manufacturing jobs were coming back to the United States.

Yes, it took $4 billion in subsidies and incentives from former Wisconsin Governor Scott Walker (R) and the state’s Republican legislature. But it was happening.

Trump traveled to Wisconsin for the groundbreaking on June 28, 2018. “Moments ago, we broke ground on a plant that will provide jobs for much more than 13,000 Wisconsin workers,” Trump said. “And I will tell you they wouldn’t have done it here, except that I became President, so that’s good.”

He claimed the “plant will manufacture state-of-the-art LCDs, adding an average of $3.4 billion to the state’s economy every single year.”

Trump said the new facility was proof he was “reclaiming our country’s proud manufacturing legacy” and “restoring America’s industrial might.”

“This is the Eighth Wonder of the World,” Trump proclaimed.

Except it was all a mirage. Foxconn announced Wednesday that it would not be building a manufacturing plant in Wisconsin.

Foxconn has changed its plans in Wisconsin dramatically. Louis Woo, a Foxconn spokesperson, told Reuters that it would not manufacture much of anything in Wisconsin.

On Wednesday, the company reiterated its pledge to bring 13,000 jobs to Wisconsin but did not provide a timeline. Conspicuously, Foxconn did not repeat its pledge to make $10 billion in capital investments.

In 2018, the company hired just 178 workers. The company reportedly considered “bringing in personnel from China…as it struggles to find engineers and other workers” in Wisconsin.

If this sounds to you like a bait-and-switch con, you are not alone.

As part of the deal, Republicans in Wisconsin essentially eliminated all corporate tax liability for Foxconn. So whatever “credits” Foxconn does qualify for will essentially be cash payments to the company.

“Not only do we not obtain the revenue, we pay the company,” State Representative Gordon Hintz (D), a critic of the deal, said.

Property owners have already had their land seized by the state, and paid for by taxpayers, to make way for Foxconn’s facility. “We wiped out entire neighborhoods,” Sandy Weidner, a Racine city alderman, told the Wall Street Journal.

Trump and Walker could have seen this coming. Foxconn has a history of making grandiose announcements but not delivering.

In 2013, Foxconn promised to spend $30 million and create 300 jobs in Harrisburg, Pennsylvania “to establish a high-end technology management facility.” It was never built. In recent years, Foxconn has pledged investments of $100 million to $1 billion in Brazil, Vietnam, and Indonesia, as well as Colorado, Louisiana, and four other states but never followed through.

Foxconn’s decision underscores the impossibility of Trump’s fundamental promise – to Make American Great Again by restoring the manufacturing economy. States are throwing billions at multi-national corporations to turn back the clock.

But while manufacturing jobs have ticked upwards since 2009, “they are still only back to where they were in 1941, when the population was less than half of today’s,” and well below the manufacturing peak of 1979.

One reason the old economy will not return: automation. Even when factories do return to the United States, they employ a small fraction of the people factories did 40 years ago.

The appeal of manufacturing is obvious. Those jobs supported a robust middle class and economic mobility. But, for the most part, those jobs are not coming back. …

It looks to Scriber that Foxconn pulled a fast one, again, and conned Walker and Trump. But the biggest con is what Trump promises the American worker - a return to a 40-year old economy. Steve Jobs might well have said “that economy isn’t coming back.”

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