ROCHELLE – Nippon Sharyo is cutting its workforce by about 110 employees because of continued complications with a prototype rail car, the company announced Monday.
The rail-car manufacturer has laid off nearly two-thirds of its workforce in the past 5 months: It dropped 100 of its 350 employees in January.
Nippon Sharyo has a contract to build 130 bi-level passenger cars for the Midwest and California, paid for with $551 million in federal funds from the American Recovery and Reinvestment Act, but that project has hit delays since September 2015, when a prototype bi-level car failed a safety test.
If the company cannot deliver on the contract, the funding will expire and revert to the U.S. Treasury on Sept. 30.
“We continue to confront technical complications and delays with the bi-level rail car project that have forced us to evaluate the volume of work and the needs at our Rochelle facility,” the company said in a statement. “As a result, we have made the difficult decision to reduce our workforce.”
The layoffs will come from all areas of the plant, which opened in 2012 and cost $35 million.
“We are grateful for the hard work and dedication of our employees, and will be providing severance packages to those affected by this announcement,” the statement said.
To build the facility, the state offered Nippon Sharyo an incentives package in 2010 worth more than $5.1 million in training funds, grants, corporate income tax credits and other incentives.
The company’s tax breaks are worth more than $3.2 million across 10 years, based on 2010 tax rates.
In April 2016, the Wall Street Journal reported that it was years behind schedule.
Not only has it been difficult for Nippon Sharyo to meet stringent Federal Railroad Administration safety standards, but it also has had difficulty meeting the strict contractual “Buy America” requirement, which mandates that it build its trains entirely in the U.S. with U.S.-made components and materials, when there is only a very small domestic rail-car industry.