Last summer, a few months after receiving a $10 million PPP Loan from the federal government during the COVID-19 pandemic, FreightCar America shut down its Muscle Shoals plant, laid off 550 Alabama workers and moved its entire operation to Mexico, according to a report published by ProPublica.
The company also used a loophole to qualify for the Paycheck Protection Program — which was supposed to be limited to “small businesses” with fewer than 500 employees — and it doled out a hefty salary and a seven-figure bonus to its CEO in 2020, the ProPublica report said.
FreightCar America, which is headquartered in Chicago, has been closing plants for the last decade, as it struggled financially, and there had long been rumors that the Muscle Shoals plant was teetering on the brink of closure. But it had touted the advanced technology of its Alabama plant in marketing materials, and insisted the Shoals plant was remaining open.
In press releases announcing the plant closure last September, FreightCar officials placed the blame on the pandemic and said the move to Mexico would save the company more than $20 million annually in production costs. On a call with investors — FreightCar is a publicly traded company — CEO Jim Meyer said much of the savings would come from reduced labor costs.
FreightCar also negotiated an early end to its lease of the Shoals factory, which was owned by the Retirement Systems of Alabama.
It spared no expense, however, in compensating Meyer, who has been FreightCar’s CEO since 2017 and oversaw the 120-year-old company’s shuttering of its last three American plants. Meyer received every penny of his $500,000 salary in 2020, plus stock options, and a $1 million bonus for landing a private loan, according to ProPublica.
Landing the $10 million PPP loan — which a company executive told investors would “partially offset” operating losses and inventory, according to ProPublica — required some creativity. Because PPP loans were supposed to be limited to small businesses, FreightCar, with well over that many employees at its Shoals plant alone — not to mention the employees remaining at its headquarters in Chicago — relied upon a loophole in the SBA’s formula for calculating which businesses do or don’t meet the definition of a “small business.”
Utilizing that formula allowed FreightCar to qualify with up to 1,500 employees, according to ProPublica.
