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Ontario could seek to get back $226,000 grant to Air Brake for Kingston plant

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The Ontario provincial government may seek to get back from New York Air Brake a $226,000 grant it awarded last May for an expansion at the company’s Knorr Brake Ltd. facility in Kingston, Ontario, that will be shut down in 2014.

But because Air Brake might decide to use the Knorr Brake plant to repair locomotive rail parts, it still could keep the Canadian money if that operation stays in Kingston. The grant was 10 percent of a $2.2 million project to expand the plant, which produces locomotive braking systems; the project would have created 18 jobs.

The production of brake systems, which accounts for most of the work at the plant, will be moved to Watertown and create up to 50 jobs here. To determine what to do with the repair operations, the company is completing a market analysis, President Michael J. Hawthorne said.

About $130,000 of the $226,000 grant already has been received. It has been used to build an 8,000-square-foot addition at the back of the 22,000-square-foot plant to house its repair system, which needs replacing. But the company has yet to decide whether it will continue to use that facility or relocate the operation.

“It may stay in Kingston, or go somewhere else,” Mr. Hawthorne said. “If we decide we’re going to move, we’ll return any funds we’ve received. The market analysis will tell us how much we think we can win by moving, or if having the facility repaired is justified. If we’re in violation of the contract, we’ll pay the money back.”

Meanwhile, it remains to be seen whether Canadian officials will seek immediate action to get back the funding, which was acquired by Air Brake from the Eastern Ontario Economic Development Fund. A statement emailed Thursday from the Ministry of Economic Development, Trade and Employment said the organization “will seek to claw back as much of the grant money as it is owed.” Minister Eric Hoskins was not available for comment.

Another member of Parliament said at the press event Tuesday in Kingston that the government likely will take action. John M. Gerretsen, who represents Kingston in Parliament and also is the attorney general for Ontario, told the Kingston Whig-Standard on Tuesday that he intends to “take whatever measures we can to get the money back.”

Mr. Hawthorne said the decision to shut down manufacturing at Knorr Brake, which will mean the loss of 86 jobs, was made after an analysis last summer of the overall cost structure of the plant. The company determined that, because the Canadian dollar is now almost equal to the U.S., doing business in Canada was no longer giving it a competitive advantage.

“We used to enjoy a 30-cent difference that’s now evaporated,” he said. “With an overhead cost structure that’s similar at each facility, it made sense for us to consolidate. It was a difficult business decision because the people at KBL do an outstanding job.”

He said consolidation at Air Brake’s Watertown headquarters will mean all heavy freight products now will be produced under the same roof. To make room for new operations there, a cell used for manufacturing hoses for trains will be moved to its facility in North Carolina, and some of its locomotive production will be moved to Kansas City.

Jeff Garrah, chief executive officer for the Kingston Economic Development Corp., said he was surprised by Air Brake’s announcement of the plant closing. But he said he understands the company’s rationale for needing to become more efficient to compete in the global marketplace. The move is expected to create 50 jobs at Air Brake’s Watertown headquarters at 748 Starbuck Ave. The phased closure will start in the fall, and operations are expected to stop at the Kingston plant by early next year.

“It’s always disappointing to lose a company, but we understand global decisions are made and it’s going to be good for our neighbors south of the border,” Mr. Garrah said. “Our economies have a lot in common, and while it’s sad to see these jobs go, I feel good that an area in Northern New York will benefit. I think in the last 10 years it’s been much more difficult for manufacturers in Northern New York than Canada.”

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