Progress Rail Services, a subsidiary of Peoria, Ill.-based Caterpillar Inc., announced plans Friday morning to locate a locomotive manufacturing facility in Muncie, creating up to 650 jobs by 2012.

The Alabama-based company said it plans to invest about $50 million to open the first locomotive manufacturing and assembly plant in the United States in many years.

The plant will take over a 740,000-square-foot facility formerly occupied by ABB Power T&D Co., which closed in 1998.

In addition, the company plans to build a locomotive test track on the facility's 75-acre campus.    

The facility will serve the diesel-electric locomotive market and position the company to participate in future transit-rail projects.

Progress Rail will operate the facility through a new subsidiary.

Founded in 1983, Progress Rail makes, repairs and refurbishes freight cars, locomotives and rail track. In addition, the company oversees the reclamation of used rail, wrecked or retired railcars and locomotives and other scrap metal.

The company has more than 130 operating facilities throughout the U.S., Canada, Mexico, Brazil, Italy, Germany and the United Kingdom.

In August, Progress Rail acquired Electro-Motive Diesel, expanding its network of global locations, products and services.

The Indiana Economic Development Corp. offered Progress Rail Services up to $3.5 million in performance-based tax credits and up to $1 million in training grants based on the company’s job-creation plans.

In addition, the IEDC will provide the city of Muncie with up to $1 million in infrastructure assistance from the state's Industrial Development Grant Fund. The state will assist the company in applying for a $1 million federal Community Development Block Grant.

Delaware County will consider a tax abatement, community revitalization enhancement district and tax increment financing request valued at about $22.5 million at the request of the Muncie-Delaware County Economic Development Alliance.