Push to electrify mail trucks gains wide support, an unlikely win for both DeJoy and Biden

Source: By Jacob Bogage, Washington Post • Posted: Thursday, May 13, 2021

USPS had long spurned EVs over cost, but sustainability goals from the White House and top House Democrats could transform the agency’s fleet

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House Democratic leaders are lining up behind a White House push to allocate $8 billion in taxpayer funding for the latest iteration of mail truck, paving the way for a fully electric fleet instead of the piecemeal strategy U.S. Postal Service leaders have been pursuing.

The agency, which is generally self-sustaining and does not draw public money, has drawn up a bootstrap plan for new vehicles — the vast majority of which would run on gas — as it wrestles with $188.4 billion in liabilities and faces years of projected losses. The lawmakers’ plan would relieve the agency of the truck expense while significantly advancing one of President Biden’s key sustainability objectives.

Last week, the chairs of the House committees on Oversight and Reform and on Transportation urged members of the Democratic caucus to support the Next Generation Delivery Vehicle program, which would allow the agency to purchase as many as 165,000 trucks in the next decade. But the support would come with certain clean energy stipulations.

Party leaders had shown little enthusiasm for the program as outlined by the agency, which in February tapped Oshkosh Defense to build the trucks. But the postal plan, worth as much as $6 billion, called for only 10 percent of the vehicles to be electric — exasperating Democrats given the administration’s aims. The remaining trucks would have internal-combustion engines that could be retrofitted with electric drivetrains later in their life spans.

But Postmaster General Louis DeJoy had told lawmakers the agency couldn’t afford to make a bigger EV commitment — charging stations and other infrastructure would tack another $2 billion to the cost — or wait until it could. The agency’s aging fleet of Long Life Vehicles are barely getting by, and some have infamously burst into flames.

Committee Chairs Carolyn B. Maloney (D-N.Y.) of Oversight and Reform and Peter A. DeFazio (D-Ore.) of Transportation now want to provide the full $8 billion for electric trucks and EV infrastructure. Though the amount could get whittled down in negotiations with the Senate, momentum is building for the plan, according to a draft letter House Democrats plan to send Biden and Speaker Nancy Pelosi (D-Calif.), a copy of which was obtained by The Washington Post. More than 50 Democrats have signed on.

“To ensure that any federal funding appropriated to the Postal Service for fleet acquisition is used appropriately, we would also include a requirement in legislation that at least 75% of the Postal Service’s new fleet must be electric or zero-emission,” the letter says. “Further, we would require the Postal Service to acquire only electric or zero-emission vehicles after 2040.”

Such an agreement would set up a once-improbable scenario: Democrats and DeJoy in alliance on postal strategy, one that would play well with environmental activists, commercial mailers and package shippers.

“The Postal Service has one of the largest vehicle fleets in the world, but far too many postal vehicles are outdated, guzzle gas, and pose a risk to the dedicated Postal Service employees who use them to serve the public every day,” Maloney said in a statement. “As the Postal Service replaces its aging fleet, it is critical that it purchases electric vehicles to protect our planet. The Postal Service can be at the forefront of electric vehicle technology and set an example for the country and the world, but it needs funding to purchase the necessary vehicles and infrastructure. The Postal Service needs our help to electrify its fleet, and it needs it soon.”

Such a turnabout would mark a major shift in the party’s approach to DeJoy: Scores of House Democrats — including Maloney and DeFazio — have called for the postal chief’s removal over historically poor mail service since he took office in June 2020, and agency missteps before the 2020 election.

The USPS is facing financial, service and public relations crises, but the president’s new appointees could have an impact beyond restoring timely service. (Joshua Carroll, Brian Monroe/The Washington Post)

That imbroglio made party leaders slow to trust DeJoy and reticent to offer support to the agency while he remains in charge. After DeJoy told Maloney’s committee in February that only a sliver of the new fleet would be electric, Democrats were enraged and confused, according to aides involved with postal policy, who spoke on the condition of anonymity to talk candidly. Was DeJoy asking for congressional funding? Was he negotiating? Was he openly flouting Biden, who by executive order had directed agencies to transition the entire federal fleet to green power? Members were uncertain.

Within weeks, top House Democrats began discussing funding the entirety of the truck program themselves, with stipulations, putting the mail service in line with its shipping industry competitors and even major automakers. Amazon and FedEx both promise to be carbon-neutral by 2040. General Motors has pledged to stop producing gas-powered passenger vehicles by 2035, and Ford has set aside $22 billion for EV development over the next four years.

That the Postal Service has made no such commitment — the agency said in a statement that its “objectives align” with Biden’s Jan. 27 executive order — has angered appropriators, according to six congressional officials, who spoke on the condition of anonymity to discuss ongoing negotiations. Lawmakers viewed that as emblematic of the agency’s go-it-alone style since DeJoy, a former logistics executive and GOP fundraiser, took office last summer.

“The Postal Service fully supports the deployment of electric technology in our delivery fleet,” agency spokesman David Partenheimer said in a statement. “The ultimate extent of our ability to purchase electric vehicles is dependent on congressional financial support. With that support, we have confirmed that we can deploy a majority of our delivery fleet as [battery electric vehicles] by 2030.”

But Postal Service leaders have long been wary of EV technology, according to current and former agency officials and industry executives involved in the fleet program, because of skepticism over its reliability. That’s partially a byproduct of the lengthy procurement process: When agency leaders took the first steps toward updating its fleet seven years ago, the concept of buying 100,000-plus electric vehicles was unrealistic.

This account of the Postal Service’s struggle to replace its trucks is based on interviews with 25 congressional aides, current and former postal officials, and mailing and auto industry insiders, many of whom spoke on the condition of anonymity to discuss ongoing negotiations, confidential procurement provisions or private conversations.

“The Postal Service doesn’t have the cash to do this right now at all,” said a Senate aide involved in postal policy. “If Congress has specific ideas about what these vehicles should be, they should step up to the plate and fund it. They have to operate right now like Congress will do nothing. They have to start replacing the fleet.”

The Postal Service and the problem with EVs

The Postal Service has not made a profit since 2006, losing $9.2 billion in 2020 alone, leading to deep cutbacks in infrastructure spending. That’s partially why postal leaders prioritized the lower upfront costs of its chosen vehicle over the larger savings that electric vehicles will take years to realize. The agency also needs to act soon, experts say, given the rapid pace of deterioration of the current fleet.

The vehicle procurement, six former agency officials and industry insiders said, picked up momentum during the latter half of Donald Trump’s presidency. The Postal Service’s bipartisan but Trump-appointed governing board was aware, the people said, of constant overtures from the White House to award the contract so Trump could announce it while he campaigned for reelection.

But funding remained a sticking point. The board’s then-chairman, Robert M. Duncan, floated making a direct appeal to Trump to secure funding, said one person with knowledge of the conversation. Duncan half-jokingly suggested allowing Trump to design the exterior of the new vehicles — much like his design push for Air Force One — if he pressed Congress to help pay for them. But it’s unclear whether officials ever seriously entertained the idea.

Duncan did not respond to a request for comment. Partenheimer said the agency would not “acknowledge speculation or hearsay about internal conversations that may or may not have happened.”

Postal officials told lawmakers in recent weeks that a $400 million grant would allow for 10 percent electrification, and $5.4 billion would provide for half the fleet. Full electrification would cost $8 billion.

Comparable dollar signs have staggered postal leaders previously, according to five people involved in fleet program discussions. Early in the procurement process, the people said, agency officials internally expressed a preference for hybrid vehicles, but then were put off by cost.

“The conversation was, ‘We want to put a stake in the ground for some technology, but we don’t want to make a bad decision and get stuck with all of these,’” one of the people said.

The USPS is facing financial, service and public relations crises, but the president’s new appointees could have an impact beyond restoring timely service. (Joshua Carroll, Brian Monroe/The Washington Post)

Bigger cargoes, lower maintenance costs

That thinking led the Postal Service to select a truck design that mailing and automotive experts say fulfills agency requirements but isn’t revolutionary.

They say Oshkosh’s NGDV would be safer than the trucks now in use. At minimum, they come with air bags, which the LLVs do not. They also have side-entry doors to cargo bays and standing access from the driver’s seat to the cargo area, reducing the need for carriers to unload packages from the back of their trucks. Mail carriers have been injured and even killed after other vehicles hit their trucks.

The NGDVs are built to accommodate more packages, with larger cargo areas than LLVs. DeJoy’s strategic plan is built around parcel growth, and the agency estimates its package business will grow 6 to 11 percent year-over-year through 2025.

The NGDVs are projected to cut millions of dollars in maintenance and fuel expenses — LLVs average only 10 miles per gallon while the new design would be compliant with California’s stringent mileage and emissions standards, Oshkosh officials said — and raise revenue by making the agency more competitive with private-sector shippers on package delivery.

Automotive experts say it’s a prudent choice, but expressed concerns that the internal-combustion platform would quickly grow obsolete. They also questioned why the Postal Service would commit to a long-term fleet rather than — as many international postal services do — purchasing vehicles in five- to six-year cycles to stay ahead of evolving technology and avoid years of maintenance costs.

“There might have been a certain element of American exceptionalism: We have needs different from everyone else,” said one person involved in the procurement. “There might have been a sort of marketing need. FedEx and Amazon are all developing their own vehicles, and USPS said, ‘Well, we want one of our own.’ It is important, that relatability, that idea of the friendly local postal worker. That is a major part of what they do to set them apart from nameless Amazon. The USPS knew that. They were looking for that.”

But in selecting Oshkosh, the Postal Service must confront several unknowns. Neither the Postal Service nor Oshkosh representatives would say whether the company submitted an EV model for durability testing. Nor would they say whether Oshkosh has preformed a powertrain transition, swapping out an internal-combustion engine and transmission for electric parts, or how much that would cost.

As recently as November, Oshkosh wrote in a securities filing that it lacked the “expertise or resources” to develop electric vehicles.

“If you have a process and you trial a vehicle and then you win that process, and then what you’re awarded is not actually the vehicle that went through the process, that has people raising concerns,” said Greg Lewis, managing director at brokerage firm BTIG. “When we think about this going forward, to deliver a vehicle and then electrify it, one would argue that is not the most cost-efficient way to electrify a fleet.”

‘A statement of objectives’

Postal Service officials said the agency conducted durability tests on more than 40 NGDV prototypes with various drivetrains from multiple bidders. Mark Guilfoil, the agency’s vice president of supply management, said officials expected suppliers to modify their designs after durability tests, and the Postal Service also evaluated how suppliers resolved technical issues.

“The prototype stage was a statement of objectives,” Guilfoil said. “It was always built into the process where there would be changes and updates.”

Oshkosh’s president and chief executive, John Pfeifer, said in an interview with The Post that drivetrain flexibility was a key advantage of his company’s bid.

“We can take an internal-combustion vehicle and convert it in the future to battery-electric without having to replace the whole vehicle,” he said. “Now, that’s really important because there’s a lot of use cases for the Postal Service where either they don’t have the infrastructure for recharging yet — there will be in the future, but they don’t have it yet — or maybe it’s not conducive yet to battery-electric because it’s long rural routes where you don’t come back to base for a long time for recharging.”

But over time, he said, “the technology will improve.”

“Our ambition is for the most robust electric vehicle mix of fleet as possible,” said Scott Bombaugh, the Postal Service’s chief technology officer. “The challenge for us is the average route is 17 miles in driving distance. And we’re guided by a total cost of ownership model that, absent funding to support infrastructure cost, would point to a significant portion of the fleet being internal-combustion engine.”

That familiar crunch for the Postal Service — price — is where the agency finds difficulty communicating with lawmakers. Postal leaders for generations have highlighted that the agency does not draw taxpayer funding, yet still serves every American address six days a week. But at times in the recent past when the mail service has needed government support, mailing industry insiders say it has been slow to ask, and appropriators say the agency’s requests have been either political nonstarters, such as eliminating Saturday delivery, or far too narrow.

“Since the mid-80s, the Postal Service has tried to avoid being government, except when it is, and they didn’t see the value of [being a federal agency],” said a former postal leader. “They were never clued into the federal government world. And so with the appropriations process, if they had to get involved, it was a very specific involvement. So when a train went through, they never thought, ‘Can we get something off of it?’”