Alabama plant closed and moved to Mexico after receiving $ 10 million PPP loan: report

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Last summer, months after receiving a $ 10 million PPP loan from the federal government during the COVID-19 pandemic, FreightCar America closed its Muscle Shoals plant, laid off 550 workers from Alabama, and relocated all production to Mexico. according to a report published by ProPublica

The company also used a loophole to qualify for the Payroll Protection Program, which was supposed to be limited to “small businesses” with fewer than 500 employees, and gave its CEO a solid salary and a seven-figure CEO bonus in 2020. This is stated in the message ProPublica.

FreightCar America, headquartered in Chicago, has been shutting down plants over the past decade due to financial difficulties, and there have long been rumors that the Muscle Shoals plant is teetering on the brink of shutting down. But the company advertised the advanced technology of its Alabama plant in marketing materials and insisted that the Shoals plant remain open.

In press releases announcing the plant closure last September, FreightCar officials blamed the pandemic and said the move to Mexico would save the company more than $ 20 million in production costs annually. Speaking to investors – FreightCar is a public company – CEO Jim Meyer said most of the savings will come from lower labor costs.

FreightCar also agreed to early terminate the lease at the Shoals plant, which was owned by Retirement Systems in Alabama.

However, the company spared no expense to compensate Meyer, who has been the CEO of FreightCar since 2017 and oversaw the 120-year history of the company shutting down its last three American factories. According to ProPublica, Meyer received every penny of his $ 500,000 salary in 2020, plus stock options and a $ 1 million bonus on private loan.

Getting a $ 10 million PPP loan, which a ProPublica spokesperson said to investors would “partially offset” operating losses and inventories, took some creativity. Since PPP loans were to be limited to small businesses, FreightCar, with many more employees at its Shoals plant, not to mention staff remaining at its Chicago headquarters, relied on a loophole in the SBA formula to calculate which companies qualify or do not meet the definition of “small business”.

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Using this formula has allowed FreightCar to qualify up to 1,500 employees, according to ProPublica.

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