Pushing the Envelope: The USPS Long Life Vehicle - Great Business Schools (2023)

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Thatboxy little mail truck in your neighborhoodactually hasa name. It’scalled the LLV, which stands for “Long Life Vehicle” and it, along with 142,000 other LLVs,are responsible for moving most ofthe 523 million pieces of mail every day. But their long life is coming to an end asthe USPS is going deeper into debt. With over $40 billion dollars in unsecured liabilities, the USPS is struggling to prioritize the replacement of its aging fleet. We unpacked everything you need to know about the LLV and its potential replacement.

BUILT TO DELIVER

In 1985, the USPS challenged Grumman and General Motors, Poveco, and American Motorsto build amail truck that would become the perfect mail carrier. The USPS comparedeach company’s prototype against a set of grueling tests.

  • Drive 5,760 miles on a closed loop 5-mile-long paved road at 50 to 55 mph.
  • Drive 11,520 miles over a gravel road at 30 to 45 mph.
  • Drive 2,880 miles over a road with a shoulder, stopping every 250 feet and accelerating to 15 mph in between.
  • Drive 960 miles over cobblestones that ranged from 3 to 4 inches high at 10 to 14 mph.
  • Drive 960 miles over potholes at 10 to 14 mph.
  • Haul a 1 -ton pound load during one half of the road test.
  • Haul a man and a 400 pound load during one half of the road test.
  • Drive over potholes ensuring that each wheel hits a pothole 35,000 times.
  • Make one hundred consecutive stops from 15 mph.

Grumman and General Motors won the challenge with the “Long Life Vehicle“.

The USPS first purchased99,150 LLVs for $11,651 each (that’s$25,126 in 2013 dollars).

  • Manufacturedby Grumman from 1987-1994 in Montgomery, PA
  • Vehicle Weight: 3000 lb
  • Cargo capacity Weight: 1000 lb
  • Cargo capacity Volume: 121 cubic feet
  • MPG: 9
  • Body: Corrosionesistant aluminum
    • Length 14 ft 7.5 in
    • Width 6 ft 3 in
    • Height 7 ft 1 in
  • Chassis: GM S-10
    • Frame: AM General
    • Engine: 98 hp 4-cylinder GM Pontiac2.5L Fuel Injection “Iron Duke”
    • Transmission: 3speed GMTurbo-Hydramatic 180 automatic transmission
    • Rear Wheel Drive

LLVs make up 74% of the entire USPS vehicle fleet

  • 212,000 vehicles total
    • 192,000 vehicles for delivering mail – 3% are held in a maintenance reserve
      • 142,000 are LLVs (74%)
      • 22,000 are FFVs(11%):Flex-Fuel Vehicle – similar to the LLV but with the ability to use E85
      • 21,000 are minivans (11%)
      • 7,000 are other (4%)

LLVs travel60% of the entire fleet’s miles

  • Distance traveled yearly by the entire USPS fleet: 1.28 billion miles
  • Distance traveledyearly by all LLVs: 765 million mi
  • per LLV yearly:5,388 mi
  • Distancetraveled dailyby all LLVs:2.6millionmi
  • per LLV daily: 18 mi

LLVs use57% of the entire fleet’s gas

  • Gas used yearly by the entire USPS fleet: 149 million gallons
  • Gas usedyearly by all LLVs:85 milliongallons
    • per LLV yearly:599 gallons
  • Gas used dailyby all LLVs: 284,000gallons
    • per LLV daily: 2 gallons

Most LLVs hang outin the city

  • Percent of the USPS fleetused for each type of route:
    • Rural: 17%
    • City: 83%
      • Park & walk: 42% (or 50% of city)
      • Curbside: 26% (or 32% of city)
      • Dismount: 7% (or 9% of city)
      • Express: 8% (or 9% of city)

LLVsstop and go… a lot

  • Average Curbside Delivery Route:
    • Number of stops: 500
    • Distance:20.8 miles
    • Speed:13.6 mph
    • Route time: 6 hrs
      • Time spent driving:1 hr 30 min (25% of the time)
        • Average drive between stops:11 sec
      • Time spent stopped: 3 hrs 50 min (64% of the time)
        • Average stop between drives:27 sec
      • Time on break:40 min (11% of the time)
    • Pre/Post route drive time: 30 min

Considering the amount of wear and tear these trucks endure, the LLV really is anamazing testament to the durability of American engineering. However, unlike Forever Stamps…

THEY’RE NOT BUILT TO DELIVER FOREVER.

It was originally designed to last 24 years, but in 2009, the USPS implemented a preventative repair program to extend their life from 24 years to 30 years.

  • 1987: 6,818 purchased
    • Lifespan extended from 2011 to2017
    • Agein 2015: 28 years old
  • 1988: 17,060 purchased
    • Lifespanextended from 2012 to 2018
    • Agein 2015: 27 years old
  • 1989: 17,232 purchased
    • Lifespanextended from2013 to 2019
    • Agein 2015: 26 years old
  • 1990: 17,222 purchased
    • Lifespanextended from2014 to 2020
    • Agein 2015: 25 years old
  • 1991: 17,716 purchased
    • Lifespanextended from2015 to 2021
    • Agein 2015: 24 years old
  • 1992: 17,785 purchased
    • Lifespanextended from2016 to 2022
    • Agein 2015: 23 years old
  • 1993: 18,121 purchased
    • Lifespanextended from2017 to 2023
    • Agein 2015: 22 years old
  • 1994: 16,889 purchased
    • Lifespanextended from2018 to 2024
    • Agein 2015: 21 years old
  • 2000: 8,170 purchased
    • Lifespanextended from2024 to 2030
    • Agein 2015: 15 years old
  • 2001: 9,553 purchased
    • Lifespanextended from2025 to 2031
    • Agein 2015: 14 years old

FIX-AS-FAIL IS FAILING

The current USPS repair strategy is to “Fix-as-Fail” – but with an aging fleet, repair cost are on the rise.

  • In 2008, it cost $1,886 per vehicle to repair.
  • In 2009, it cost$2,471 per vehicleto repair.
  • In 2010, it cost$2,600 per vehicleto repair.
    • 37% of maintenance cost was unscheduled – the USPS only accounts for 20% to be unscheduled.
  • In 2013, it cost $3,188 per vehicle to repair.
    • 24% of maintenance costwas for 9% of the fleet that required more than $6,000 in repairs.

Auditors have advised the USPS toreplace LLVs that cost more than $3,500 to repair.

(Video) Why 407 Mail Trucks Have Caught Fire Since 2014

SAFETY ISN’T FIRST ANYMORE

Old LLVs lack safety technology that is now standard.

  • Front airbags
  • Back-up cameras
  • Intermittent wipers
  • Blind-spot warning systems
  • Daytime running lights
  • Seatbelt reminders
  • Anti-lock brake systems (ABS)

THE ENVIRONMENT ISN’T TOP PRIORITY

The USPS mustcomply with the alternate fuel requirements of the Energy Policy Act of 1992.

  • 75% of lightweight federal vehicles must beable to use alternate fuel sources.
    • EPACT92 started goinginto effect in 1996, 2 years after Grumman stopped producing the LLV.
    • EPACT92 gave until 2006 to comply.
  • Only 22% of the USPS fleet has the ability to use alternative fuel.
    • E85 21.2%
      • Only 9.7% of the entire fleet actually use E85 fuel because it costs 23% more to operate a vehicle on E85 – That’s$1.23 of E85 to travel the same distance that $1.00 of gas will.
      • Only 2% of the fleet’s gas is alternative fuel (2.3 million out of 149 million gallons of gas equivalent).
    • Other (CNG, Propane, Hydrogen, EV, Hybrid): 0.8%

ENVELOPEBUDGETING GONE BROKE

The USPS is an independent establishment of the federal government and is expected to pay for its operation from the revenue it generates, but things aren’t going so well.

  • They can’t raise rates because the Postal Accountability and Enhancement Act of 2006 caps their rates based on inflation.
  • Mail volume has declined 20% from 2007-2011.
  • They’ve already maxed out their $15 billionborrowing limit from the US Treasury.
  • According to their 2014financial report, the USPS is in a “Deep Financial Hole” with 35 cents of assets to cover every dollar of liabilities.
    • $21.6 billion in assets
      • $2.3 billion in unrestricted cash
      • $1.8 billion in other assets
      • $17.5 billion in buildings and equipment
    • $61 billion in liabilities
      • $16.8 billion in retiree health benefits
      • $17.2 billion in workers’ compensation
      • $15 billion in debt – the statutory limit
      • $3.5 billion in compensation, benefits, and leave
      • $3.6 billion in deferred revenue (Forever Stamp usage)
      • $5.4 billion in other liabilities
  • In 2013, they had a net income loss of $5 billion dollars.
    • $66 billion in revenue
      • $28.1 billion in First-Class Mail
      • $16.9 billion in Standard Mail
      • $12.5 billion in Shipping and Packages
      • $3 billion in International
      • $1.7 billion in Periodicals
      • $3.8 billion in other revenues
    • $71 billion in expenses
      • $50.3 billion inCompensation and Benefits
      • $6.7billion inTransportation
      • $1.9billion inDepreciation
      • $1.1 billion inSupplies & Services
      • $1.6billion inRent & Utilities
      • $3.5billion inVehicle/Maintenance, Interest & Other
      • $0.3billion inSeparation Costs
      • $5.6billion inRHB Pre-funding

WHEN THEYCAN’T AFFORD IT… DELAY IT

  • In 2005, they began to weigh the options.
    • It would cost$4 billion to replace the LLVs(or 28,571/LLV).
    • Refurbishing the LLVs would cost $2.8 billion (or20,000/LLV).
      • This would delay purchasing new vehicles until 2020.
    • They decided to continue with the fix-as-fail plan.
  • In 2009, theybought more time.
    • It would cost $4.3 billion to replace theLLVs(or $30,000/LLV).
    • They decided to spend $524 million to repair the LLVs to last until 2017.
  • In 2011, they started filling gapsin the fleet.
    • It would cost $4.4 billionto replace theLLVs(or $31,000/LLV).
    • They decided to spend $500 million for25,000 minivans (or $20,000/minivan) to replace the dying LLVs.
  • In 2011, they explored re-powering.
  • They replacedtheengine, transmission, rear axle, andexhaust system on several LLVs.
  • In 2012, they tested re-powering.
  • The repowered gasoline and diesel LLVswere deployed for testing in VA.
  • In January 2014, they began filling more gapsin the fleet.
    • They bought another3,509 minivans to replace moredying LLVs.
  • In September 2014, they began preparations forsupplementing the next generation LLV.
    • They will useexistingLLV bodies onnew rolling chassis (everything but the body).
    • They will keep the body for its…
      • roll up rear door
      • sliding side doors
      • correct ride height for curbside deliveries
    • They willscrap the old chassis because of its…
      • low miles per gallon
      • poor resistance to corrosion
      • outdated engine diagnostics
      • high maintenance
    • The new rolling chassis solution will need to have a 20+ year life.
    • This LLV mash-upwill help supplementthe next generation of delivery vehicles.

BUT THEY CAN’T AFFORD TO DELAY IT

Replacing all LLVs could take up to 10 years, and the oldest LLVs will startdying in 2017.

By choosing to repair the LLVs instead of replacing them, USPS will have $342 million inextra cost by 2017.

IT COULD BE SHOCKING!

USPS has been toying with Electric Vehicles (EV)for a long time:

  • 1899: EV usedas alternative to horse – cut route time in half (from 3 hrs for 40 pickups to 1 1/2 hours)
  • 1903: EV used in St. Louis, MO
  • 1914:EV used inLong Island City, NY
  • 1959:EV used in Miami, FL
  • 1960-63: 77 EVs tested
  • 1970-80: 620 EVs tested
  • 1995: The USPS tested 6 EVsfor 8 months and found themto cost just $.03 more per mile than gas LLVs.
    • The EVs cost just 38 cents/mi compared to 35 cents/mi for gas in 1995.
  • 1996: The USPS teamed with GM to convert several LLVs to electric, but GM ceased all electric vehicle endeavors in 1998.
  • 2001: 500 Ford EVs were tested. They passed all USPS requirements except for the 50 mile range (it only went 42). – Ford recalled the EVs and replaced them with gas powered minivans.
  • 2010: The USPS offered $50,000 to five firms to develop EVprototypes bystripping the LLVs engine and transmission to retrofit it with an electric drive system. TheEVs began testing in the Washington DC area in 2011.
  • 2011: 10 Navistar eStar two-ton EVstep vans were deployed for testing in CA, NY, and VA: they can go 100 miles on a charge and recharge in 6-8 hours.

Today,mostEVs can drive anywhere from40-100 miles per charge.

(Video) Pushing The Envelope: Evolution of the USPS in a Modern World | Luca Serio | TEDxSyracuseUniversity

96% of all LLVs drive under 40 miles/daymaking it the perfect candidatefor goingelectric.

  • 1% drive <5mi/day
  • 15%drive 5-9mi/day
  • 28%drive 10-14 mi/day
  • 25%drive 15-19 mi/day
  • 15%drive 20-24 mi/day
  • 7%drive 25-29 mi/day
  • 3%drive 30-34 mi/day
  • 2%drive 35-39 mi/day
  • <—————————-minimum EV range
  • 1%drive 40-44mi/day
  • 1%drive 45-50 mi/day
  • 2%drive >50 mi/day

THE BENEFITS OF GOING ELECTRIC

  • Energy recapturing: With an average of 500 stops every day, regenerative breaking could be used to recapture energy.
  • Cheap to charge: LLVs drive during on-peak hours and park during off-peak hours.
  • Lower maintenance cost: EV battery replacement would cost just $6,367 every 5 yearscompared to $15,940 for 5 years of LLV maintenance.
  • Lower operating cost: It cost $.05/mi to operate an EV compared to $.33/mile to operate an LLV.
  • If gasoline prices are in the $3-$4 a gallon range, oneEV could save the USPS $1,500 per year – that’s $213 million per year.
  • Generate Revenue:
    • By reducing emission with EVs, the USPS could sell its excess allowances.
    • When plugged into the“Vehicle-to-Grid” system, the USPS could buy and sell its energy for a profit – the EV battery would become grid regulators/stabilizers.
    • OneEV could generate $2,308every year just by being plugged into the grid overnight – that’s $328 million per year.

THE COSTOF GOING ELECTRIC

Initial cost of an EV would bearound $40,000.

Studies show that an electric LLV could pay for itself in…

  • 10 years without Vehicle-to-Gridrevenue or government purchasing funds – 1% return rate.
  • 5.6 years with Vehicle-to-Gridrevenue but without government purchasing funds– 15.3% return rate.
  • 5.5 years without Vehicle-to-Gridrevenue but with government purchasing funds– 19.9% return rate.
  • <2 years with Vehicle-to-Gridrevenue and government purchasing funds– 63.2% return rate.

“Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.” – Inscription on the James Farley Post Office, New York City, NY

SOURCES:

http://www.washingtonpost.com/wp-dyn/content/article/2010/06/17/AR2010061705539.html?nav=E8

http://postalmuseum.si.edu/research/pdfs/DA-WP-09-001.pdf

https://www.uspsoig.gov/sites/default/files/document-library-files/2014/dr-ma-14-005.pdf

https://about.usps.com/who-we-are/financials/integrated-financial-plans/fy2014.pdf

(Video) Pushing the Envelope: A History of the Post Office Through Stamps

http://www.greencarcongress.com/2010/01/acpropulsion-20100120.html

https://www.fbo.gov/index?s=opportunity&mode=form&tab=core&id=bc0d17b1516849779b3f0350e0f88203&_cview=0

http://www.postalreporternews.net/2011/02/02/usps-seeks-supplier-foreplacement-of-delivery-vehicles-llv/

http://www.gao.gov/assets/320/318032.pdf

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/03/AR2010030304085.html

http://www.afdc.energy.gov/pdfs/usps_cs.pdf

http://postalmuseumblog.si.edu/2010/07/long-life-vehicle-llv.html

http://www.ebay.com/gds/How-Far-Can-an-Electric-Car-Travel-on-a-Single-Charge-/10000000177634903/g.html

http://about.usps.com/who-we-are/postal-facts/one-day-by-the-numbers.htm

(Video) RECCS additional questions and answers

Carrie Morris
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Warren Dahl
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