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Manufacturer Took Federal COVID Relief, Moved to Mexico

The company slashed more than 500 jobs after receiving a $10 million government loan.

A freight car maker slashed more than 500 jobs after receiving a $10 million government loan.

As the COVID-19 pandemic ravaged the global economy in early 2020, Congress approved a massive relief bill that, in part, provided funds to businesses in an effort to prevent widespread closures and mass layoffs.

In many respects, that provision — known as the Paycheck Protection Program — was successful. But it also emphasized getting money in the hands of embattled small businesses quickly in the midst of a national emergency, which was bound to invite problems.

Prosecutors have charged numerous people with defrauding the program in the past year-plus, but a new report also shows that a handful of companies took PPP money and laid off their employees anyway — and likely did it completely legally.

ProPublica detailed the story of one such company, railroad car manufacturer FreightCar America, which received a $10 million PPP loan only to shut down its last remaining U.S. factory a few months later, slashing more than 500 jobs in the process.

Company executives said they didn’t intend to close the Northwest Alabama factory at the time they applied for the loan, and argued that the money kept workers on the job amid a drop in orders.

Some workers, however, suggested that the loan merely kept the lights on while the company prepared to shift all production to a facility in Mexico. The Alabama plant was the company's fourth U.S. facility to be closed in the past 15 years.

The report noted that the company also met the qualifications for its $10 million loan to be completely forgiven. The layoffs were announced long after the PPP’s eight-week spending requirement, and experts noted that the program was later tweaked to ease those restrictions — meaning that it “wouldn’t be difficult” to lay off half of a company’s workforce and still have its loan forgiven.

In total, ProPublica found that at least six companies received more than $1 million in PPP loans and later cut more than 50 jobs, including an Oregon steel plant, a Nebraska aerospace manufacturer and a Washington state paper mill.

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