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Source: GreatBusinessSchools.org

Pushing the Envelope: The USPS Long Life Vehicle

That boxy little mail truck in your neighborhood actually has a name. It’s called the LLV, which stands for “Long Life Vehicle” and it, along with 142,000 other LLVs, are responsible for moving most of the 523 million pieces of mail every day. But their long life is coming to an end as the 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 Motors to build a mail truck that would become the perfect mail carrier. The USPS compared each 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 purchased 99,150 LLVs for $11,651 each (that’s $25,126 in 2013 dollars).

Manufactured by 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 Pontiac 2.5L Fuel Injection “Iron Duke” Transmission: 3 speed GM Turbo-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 travel 60% of the entire fleet’s miles

Distance traveled yearly by the entire USPS fleet: 1.28 billion miles

Distance traveled yearly by all LLVs: 765 million mi

per LLV yearly: 5,388 mi



Distance traveled daily by all LLVs: 2.6 million mi

per LLV daily: 18 mi



LLVs use 57% of the entire fleet’s gas

Gas used yearly by the entire USPS fleet: 149 million gallons

Gas used yearly by all LLVs: 85 million gallons per LLV yearly: 599 gallons

Gas used daily by all LLVs: 284,000 gallons per LLV daily: 2 gallons



Most LLVs hang out in the city

Percent of the USPS fleet used 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)



LLVs stop 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



THE PROBLEM

Considering the amount of wear and tear these trucks endure, the LLV really is an amazing 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 to 2017 Age in 2015: 28 years old

1988: 17,060 purchased Lifespan extended from 2012 to 2018 Age in 2015: 27 years old

1989: 17,232 purchased Lifespan extended from 2013 to 2019 Age in 2015: 26 years old

1990: 17,222 purchased Lifespan extended from 2014 to 2020 Age in 2015: 25 years old

1991: 17,716 purchased Lifespan extended from 2015 to 2021 Age in 2015: 24 years old

1992: 17,785 purchased Lifespan extended from 2016 to 2022 Age in 2015: 23 years old

1993: 18,121 purchased Lifespan extended from 2017 to 2023 Age in 2015: 22 years old

1994: 16,889 purchased Lifespan extended from 2018 to 2024 Age in 2015: 21 years old

2000: 8,170 purchased Lifespan extended from 2024 to 2030 Age in 2015: 15 years old

2001: 9,553 purchased Lifespan extended from 2025 to 2031 Age in 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 vehicle to repair.

In 2010, it cost $2,600 per vehicle to 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 cost was for 9% of the fleet that required more than $6,000 in repairs.



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

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 must comply with the alternate fuel requirements of the Energy Policy Act of 1992.

75% of lightweight federal vehicles must be able to use alternate fuel sources. EPACT92 started going into 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%



ENVELOPE BUDGETING 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 billion borrowing limit from the US Treasury.

According to their 2014 financial 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 in Compensation and Benefits $6.7 billion in Transportation $1.9 billion in Depreciation $1.1 billion in Supplies & Services $1.6 billion in Rent & Utilities $3.5 billion in Vehicle/Maintenance, Interest & Other $0.3 billion in Separation Costs $5.6 billion in RHB Pre-funding



WHEN THEY CAN’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 (or 20,000/LLV). This would delay purchasing new vehicles until 2020. They decided to continue with the fix-as-fail plan.

In 2009, they bought more time. It would cost $4.3 billion to replace the LLVs (or $30,000/LLV). They decided to spend $524 million to repair the LLVs to last until 2017.

In 2011, they started filling gaps in the fleet. It would cost $4.4 billion to replace the LLVs (or $31,000/LLV). They decided to spend $500 million for 25,000 minivans (or $20,000/minivan) to replace the dying LLVs.

In 2011, they explored re-powering.

They replaced the engine, transmission, rear axle, and exhaust system on several LLVs.



In 2012, they tested re-powering.

The repowered gasoline and diesel LLVs were deployed for testing in VA.



In January 2014, they began filling more gaps in the fleet. They bought another 3,509 minivans to replace more dying LLVs.

In September 2014, they began preparations for supplementing the next generation LLV. They will use existing LLV bodies on new 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 will scrap 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-up will help supplement the 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 start dying in 2017.

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

THE SOLUTION

IT COULD BE SHOCKING!

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

1899: EV used as 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 in Long Island City, NY

1959: EV used in Miami, FL

1960-63: 77 EVs tested

1970-80: 620 EVs tested

1995: The USPS tested 6 EVs for 8 months and found them to 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 EV prototypes by stripping the LLVs engine and transmission to retrofit it with an electric drive system. The EVs began testing in the Washington DC area in 2011.

2011: 10 Navistar eStar two-ton EV step 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, most EVs can drive anywhere from 40-100 miles per charge.

96% of all LLVs drive under 40 miles/day making it the perfect candidate for going electric.

1% drive <5 mi/day

15% drive 5-9 mi/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 40-44 mi/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 years compared 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, one EV 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. One EV could generate $2,308 every year just by being plugged into the grid overnight – that’s $328 million per year.



THE COST OF GOING ELECTRIC

Initial cost of an EV would be around $40,000.

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

10 years without Vehicle-to-Grid revenue or government purchasing funds – 1% return rate.

5.6 years with Vehicle-to-Grid revenue but without government purchasing funds – 15.3% return rate.

5.5 years without Vehicle-to-Grid revenue but with government purchasing funds – 19.9% return rate.

<2 years with Vehicle-to-Grid revenue 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

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://about.usps.com/what-we-are-doing/green/report/2012/14.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