Foxconn Deal in Wisconsin Hits Snag Over Guarantees

By Shayndi Raice Features Dow Jones Newswires

Wisconsin's efforts to bring a $10 billion Foxconn Technology Group plant to the state has hit a snag, though supporters of the deal said they believe it will still come together.

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The Wisconsin Economic Development Corp. delayed a vote Tuesday to give final approval to a contract that would provide the Taiwanese firm with $3 billion in economic incentives.

On Wednesday, a Democratic state representative who opposed the deal told a local Wisconsin news organization the delay was over a "nuclear bomb" in the contract that wouldn't sufficiently protect taxpayers in the case that Foxconn didn't fulfill its promises, sparking concerns the deal could be in trouble.

WEDC CEO Mark Hogan said the delay was to ensure the deal was done right. "WEDC continues to do due diligence on a complex deal," said WEDC CEO Mark Hogan in a statement. "We will take the time necessary to ensure taxpayers are protected and Foxconn is able to create tens of thousands of family-supporting jobs in Wisconsin."

But the latest hiccup underscores the political pitfalls of offering such a large tax-incentive package. The deal had been criticized by some Democrats in the state legislature because of a state fiscal analysis that found taxpayers wouldn't recoup their investment until the 2042-43 fiscal year.

Wisconsin Gov. Scott Walker announced a tentative deal with Foxconn in a White House ceremony in July, that was positioned as a victory in President Donald Trump's efforts to revive American manufacturing. In September, the governor signed legislation that approved giving the Taiwanese firm -- formally known as Hon Hai Precision Industry Co. -- the hefty $3 billion incentive package.

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Mr. Walker said in a statement he was "confident" the state will reach an agreement with Foxconn.

After the legislation was approved, the economic development group was tasked with negotiating the details of a contract with Foxconn. Its board was supposed to approve the contract Tuesday, but was told the day before that negotiations were still ongoing. On Wednesday, State Sen. Tim Carpenter described to the holdup as a "nuclear bomb" in an interview with the Wisconsin State Journal. He didn't respond to a request for comment.

The board next meets Nov. 8. A spokesman for the WEDC wouldn't say if the final contract would be approved at that time.

Board members were tight-lipped about the details around what was holding up the deal but it was broadly characterized as a problem around assurances in the contract that Foxconn would fulfill its promises.

The company has said it would invest $10 billion to build a 20-million square-foot campus in Racine County that could employ up to 13,000 workers over a period of six years. The facility would build liquid-crystal display technology, or LCD screens.

Republican State Rep. Rob Hutton, a member of the WEDC board, said the issue was over how Foxconn would guarantee the state that it was reaching its employment and financial investments in exchange for tax credits.

Mr. Hutton said he was still optimistic that the deal would be completed. "My sense continues to be that both parties are equally committed," he said.

Write to Shayndi Raice at shayndi.raice@wsj.com

(END) Dow Jones Newswires

October 18, 2017 15:17 ET (19:17 GMT)