The U.S. Postal Service delayed awarding a multi-billion dollar contract to replace its fleet of aging mail trucks until next year.
The Postal Service also now says it may split assembly of 186,000 next-generation daily mail trucks between several of the four company teams competing for the $6 billion-plus contract.
“We expect to award the contract(s) for the production phase in 2020,” Kim Frum, USPS spokesperson, said in a statement to Trucks.com.
The new mail trucks would take over delivery duties from the boxy white trucks familiar to most Americans.
Those 140,000 trucks — formally known as Grumman Long Life Vehicles — need replacement. They lack essential functions such as air conditioning, airbags or anti-lock brakes. They are too small to accommodate the e-commerce packages that make up the bulk of the mail today. With an average age of about 28 years, they are past their expected life span.
The mail trucks are so old the Postal Service has trouble recruiting automotive techs who know how to fix them. Grumman built them from 1987 through 1994,
Four teams split between seven vehicle makers are competing to replace the vehicles with modern, custom-made delivery trucks. Testing on two dozen prototypes wrapped up in March. The trials took about three times longer than the USPS expected.
Winning some or all of the high-stakes competition could validate years of work and pay off in a multi-year contract for a manufacturer. It also could determine the survival of Workhorse Group, a small, unprofitable electric truck company that’s on one team.
Companies without U.S. automotive manufacturing facilities are now moving to secure possible sites.
LOOKING FOR FACTORY SPACE
Mahindra Automotive North America said it is on the hunt.
“Were we to win the contract we would build the vehicles in the U.S. and, in fact, signed a (letter of intent) to evaluate the former Buick City site in Flint, Mich., for that purpose,” said Rich Ansell, vice president of marketing at the U.S. unit of India’s automotive giant, Mahindra and Mahindra Ltd.
The company also is evaluating sites in several other states, he said. Mahindra is offering a gasoline or mild-hybrid powertrain option, according to government filings.
Turkey-based Karsan, which makes commercial electric vehicles, is teamed with long-time USPS supplier Morgan Olson of Sturgis, Mich. It has announced a series of strategic and manufacturing agreements with that company. The team has offered a plug-in hybrid engine option for the new mail truck.
Workhorse, with truck body maker VT Hackney, also is considering where to build if the team wins a contract for their battery-electric truck.
In May, Workhorse announced that a group led by company founder Steve Burns was the preferred buyer for General Motor’s 6.4-million-square-foot Lordstown assembly complex. The purchase and makeover of the plant could cost $300 million.
“If they were to win even a piece of Postal Service business, that could absolutely make the difference between them raising the money and not,” said Mike Ramsey, an analyst with Gartner Inc., when the news broke.
The fourth team, specialty truck- and military vehicle maker, Oshkosh Corp., of Oshkosh, Wisc., and Ford Motor Co. of Dearborn, Mich., already have U.S. manufacturing facilities. They based their internal combustion engine entry on the Ford Transit cargo van.
PRODUCTION PROPOSAL REQUESTS
The Postal Service is expected to give the participating companies requests for production proposals by the end of this year.
The production proposal phase will start a new round of competition that also could drag on longer than was initially expected.
“The evaluation process, from RFP release to contract award for the production program, requires thorough evaluation as well as negotiations,” Frum said.
There are other hurdles before the new mail trucks hit the streets.
Money is one. The Postal Service loses money. Much of losses come from Congressional mandates forcing the agency to fund employee retirement costs at higher rates than needed, the Postal Service said.
But in a warning sign for the agency, the USPS’s 2019 fiscal third-quarter financial report showed a drop in its package and shipping volumes. That was the first year-over-year decline in nine years. Package and shipping revenue rose slightly. That could change if giant customers such as FedEx, UPS and Amazon move more packages to their own networks.
Fast-moving automotive technology is another concern. Critics and the USPS worry that the new truck design could trap the agency into a static transportation platform. Separately, the agency is researching autonomous vehicle technology for its mail trucks, indicating that it might be a future option required of the mail truck manufacturers.
And the pressure to “Buy American” could also affect the outcome. While any new mail truck is likely to be made in America, foreign companies are members of several teams.
Meanwhile, the agency has said that the new truck’s sticker price won’t be the sole measure it will use to award a contract.
That will make it easier for more expensive choices such as the hybrid- or electric-engine trucks to compete. They may cost more upfront. But they should have a lower lifetime cost than a gas engine because of lower fuel bills and maintenance needs.
“Following the RFP issuance and final proposal receipt from the participating NGDV suppliers, the Postal Service will make a choice based on an evaluation of best value,” said Frum.