In factory automation, heterogeneous manufacturing processes need to be coordinated over wireless networks to achieve safety and efficiency. Wireless networks, however, are inherently unreliable due to shadow fading induced by the physical motion of the machinery. To assure both safety and efficiency, this paper proposes a state-dependent channel model that captures the interaction between the physical and communication systems. By adopting this channel model, sufficient conditions on the maximum allowable transmission interval are derived to ensure stochastic safety for a nonlinear physical system controlled over a state-dependent wireless fading channel. Under these sufficient conditions, the safety and efficiency co-design problem is formulated as a constrained cooperative game, whose equilibria represent optimal control and transmission power policies that minimize a discounted joint-cost in an infinite horizon. It is shown that the equilibria of the constrained game are solutions to a non-convex generalized geometric program, which are approximated by solving two convex programs. The optimality gap is quantified as a function of the size of the approximation region in convex programs, and asymptotically converges to zero by adopting a branch-bound algorithm. Simulation results of a networked robotic arm and a forklift truck are presented to verify the proposed co-design method. (C) 2019 Elsevier B.V. All rights reserved.