Summary
With the temporary closure of its Roanoke VA plant, FreightCar America (RAIL) will be down to just one plant in Danville IL where union workers were notified in February that four of five jobs would soon be cut. In 2007, with production falling to 10,282 from 18,548 railcars in 2006, the company closed its largest and oldest facility in Johnstown PA and transferred all production work to its two other plants in Roanoke and Danville. Deliveries held constant in 2008, at 10,239 railcars, but output was expected to a fraction of that total this year. The closure of the Roanoke VA facility indicates that this forecast was on target.
Analysis
Production was expected to fall to only 7,500 cars in 2008, but a provision in the Economic Stimulus Package of 2008 gave buyers an incentive to advance their 2009 purchases into 2008. As a result, FreightCar’s production lines were running at full capacity right up to the end of December in order to fulfill delivery commitments and allow the new railcars to qualify for accelerated depreciation under the terms of the stimulus bill. Had not the bottom dropped out of the economy, production this year would have been less than half of last year due to effects of this governmental action.
The recession has also depressed the export market for Appalachian coal which has been booming for the last two years and driving up demand for the aluminum-steel hybrid coal cars the company has been building. Although orders for this car type were affected more than other types of coal cars by the Economic Stimulus Package of 2008, some new demand might have been anticipated this year had export shipments remained constant. With exports down, demand evaporated and work for Roanoke collapsed.
The market for new all aluminum coal cars was expected to be weak this year and Trinity Industries was projected to capture a major share of the orders. Although FreightCar America was not expected to deliver the normal output of even one of their plants, the closure of Roanoke
