UPDATE (Feb. 1, 2019): Foxconn abruptly said it will build flat screens in Wisconsin after a call with President Donald Trump. We’ll see how it shakes out.
The point of the original post remains: Incentive packages don’t determine whether a manufacturing project is successful. But that won’t stop government bodies from making the offers. As noted below, Indiana’s incentive package to United Airlines for a maintenance base didn’t make that project succeed.
ORIGINAL POST (Jan. 30): States, cities and other government bodies just can’t help themselves.
When there’s a big manufacturing project promising hundreds or thousands of jobs, they get out their checkbooks. They offer up millions of dollars, or in the case of the proposed Foxconn facility in Wisconsin, billions of dollars in incentives.
Now Foxconn says it may drop plans to build flat-screen panels in Wisconsin after being promised $4 billion in government incentives. Oops.
The more things change, the more they stay the same.
In the early 1990s, United Airlines was promised more than $300 million in incentives from Indiana and local governments to build a new aircraft maintenance base that was being relocated from California. The Hoosier state was the winning bidder (other contenders included Oklahoma). It was supposed to be a new boom for Indiana.
In the long run, however, it didn’t work out. The boom never happened. United shut the facility in the early 2000s as part of cutbacks. In 2010, United merged with another airline, Continental. The merged carrier kept the more famous United name. Nevertheless, United cashed its big check before all that happened. First things first.
Manufacturing success results more from hard work and keeping abreast of technology. Manufacturing requires attention to detail. Blink and you’ve been surpassed for supremacy.
Regardless, the aforementioned states, cities and other government bodies often resemble the rubes that attended the carnivals of the 20th century.
During my career, I’ve seen this pattern over and over.
Indiana (where I worked at the time) won a General Motors Co. pickup plant that went to Fort Wayne in the 1980s. A few years later, Illinois bested Indiana for a automotive plant planned by Mitsubishi. Except that plant, years later flopped. Then Indiana came back and secured a Subaru plant (at the time a Subaru-Isuzu factor before Isuzu got out of North America).
Kentucky’s Winning Bet
In the middle of this time frame, Kentucky beat other contenders for a major Toyota Motor Corp.manufacturing center. That was more than 30 years ago. Even today, it remains Toyota’s primary manufacturing center in North America. The company added additional investments in Indiana and West Virginia.
Nevertheless, government officials often lack a long-term perspective. Corporate executives are accused of not looking out to the future. Yet, executives usually have a longer-term outlook than government officials (the next election).
Will officials learn from Foxconn and Wisconsin?
Not likely. The rubes who attended the 20th century carnivals always came back
The only difference between Indiana-United Airlines and Wisconsin-Foxconn is inflation — the inflation of corporate incentive demands.
And that’s not isolated to manufacturing. Amazon, a technology company, got plenty of government units to make incentive proposals when it dangled the prospect of a second headquarter. Amazon eventually announced two new second headquarters (New York City and Northern Virginia) after the bids came in.