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Freight company cashed in on $10 million PPP loan — then shut down and moved to Mexico

Cooper Neill/Bloomberg via Getty Images

An American freight company reportedly cashed in on an emergency federal loan last year, only to shut down its stateside manufacturing operations and move to Mexico a few months later.

FreightCar America, a major producer of freight cars for the railway industry, shuttered its last remaining U.S. production site in Muscle Shoals, Alabama, late last summer and shifted production to its facility in Castaños, Mexico. The move reportedly cost 550 American workers their jobs.

Yet only a few months earlier, the company had received a $10 million Paycheck Protection Program loan — the maximum amount available to businesses as part of a program to help American workers retain their jobs during the coronavirus pandemic, ProPublica reported.

The news outlet acknowledged that to some employees, the news didn't come as a shock, since they had for years heard rumors that management would relocate. But for others, the timing seemed odd.

At least one employee, Robert Bulman, believed the maneuver was a "setup" from the beginning.

"When the Mexican plant opened, we were told at the beginning they would just be helping Shoals and making parts for the trains," said Bulman, who reportedly worked at the Alabama plant for seven years before getting laid off. "But the whole time, it was a setup, we were gone."

Another employee, who wished to remain anonymous, told ProPublica, "I went to FreightCar to retire. I wasn't planning on leaving when I got there."

FreightCar America CEO Jim Meyer reportedly insisted in an email to ProPublica that at the time he received the PPP money, the company had no intention of shutting down the Alabama plant. He added that the money was put to good use in that it helped the company retain employees for most of the year even as production dropped off.

In its report, ProPublica did not accuse FreightCar America of any obvious wrongdoing but insinuated that the company may have "exploited loopholes and rule changes" in the pandemic relief program established last year under the CARES Act.

Initially, in order for the PPP loans to be forgiven, the Small Business Administration required borrowing businesses to spend 75% of the loan money on payroll for eight weeks. Later, as businesses complained that they couldn't spend PPP money quickly enough due to the stalled economy, the legislation was amended to require businesses to spend only 60% of the loan money on payroll.

In FreightCar America's case, the eight-week threshold was passed before layoffs kicked in, and according to ProPublica, the company likely abided by the payroll expenditure rules. Rules aside, whether the company did right by its employees may be up for debate.

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