Game of Drones? Postal Service to Follow Amazon in Drone Push
Package for You, Miss!
USPS reported its second-quarter financial results earlier this month. And as you may expect, the news was pretty poor -- $1.5 billion in losses for the quarter, continuing struggles to pay "retiree health benefit prefunding" and an antiquated infrastructure that's in sore need of upgrades.
One bright note in an otherwise bleak report: "Package Volume increased 14.4 percent over same quarter last year." Turns out, this single segment of USPS's business, package delivery, is now "a key business driver" in the Post Office's efforts to raise revenue to offset continuing declines in the amount of plain-vanilla (manila?) letter volume.
And that could be a problem.
Trouble in Paradise
According to USPS CFO Joseph Corbett, the Post Office's shifting role away from carrying letters, and toward carrying packages, is rapidly wearing out its truck fleet. Not long ago, Corbett admitted that USPS needs to spend about $10 billion over the next few years to "replace our aging vehicle fleet, purchase additional package sorting equipment and make necessary upgrades to our infrastructure."
What he didn't say is that he wants to replace the vehicles with drones.
Duck and Cover!
Not replace them entirely with drones, of course. But according to multiple media reports, drones may form a part of Corbett's plan to remake USPS's vehicle fleet for the 21st century.
Most of the 15 manufacturers bidding to rebuild the USPS truck fleet fall under the "usual suspects" label: AM General, Fiat Chrysler (FCAU), Ford (F), and Nissan among them. These trucks are expected to cost anywhere from $25,000 to $35,000 apiece, and should be drivable for 20 years -- with the ability to incorporate upgrades over that lifespan. USPS plans to buy 180,000 of them, so the trucks alone could cost USPS as much as $6.3 billion.
Adding to that cost, though, USPS has admitted one quirky company to its competition, which features the addition of "drone" technology to its truck. The company in question: tiny startup Workhorse Group, whose electric "Workhorse" truck carries a "HorseFly" drone on its roof to aid in package delivery.
HorseFly is said to weigh 15 pounds, and to be able to dart out and deliver 10-pound packages at speeds of up to 50 mph before returning to base. The idea is that upon entering a neighborhood, a mail carrier would deliver most packages by the usual procedure, tooling around the neighborhood at 15 mph, making dropoffs in each mailbox.
But for outlying locations -- say, a lone farmhouse off the beaten track, but just a few miles from a well-populated neighborhood -- the mail carrier would save himself a trip. He'd load a package onto HorseFly and send it off on its own while he finished the neighborhood route. Package delivered, HorseFly would fly back, intercept the mail truck, land on the truck roof, recharge, and get ready to be reloaded for another dropoff.
The Future of Package Delivery
As you can see, this isn't a revolutionary solution to USPS's difficulties. One drone per truck, and that drone only carrying one package at a time on miles-long round trips, won't make a huge dent in the average postal carrier's workload. But it could save driving time, save on fuel costs, and save on wear-and-tear on the truck -- all big contributors to USPS's ongoing fiscal deficit.
These benefits might intrigue USPS enough to at least give Workhorse a trial run, even if the big contract goes to one of Detroit's more established automakers. Crazy as drone delivery might sound for USPS, they've come up with crazier ideas before.
Maybe this one will even work.
Motley Fool contributor Rich Smith wonders: If the package requires a signature, does the drone hover while it waits for you to sign, or does it perch? He has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com and Ford. Try any of our Foolish newsletter services free for 30 days. And click here to check out our free report for one great stock to buy for 2015 and beyond.