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Workhorse (WKHS) Drops Lawsuit Against USPS Over Mail Truck Contract

·3-min read

Workhorse Group Inc. WKHS recently announced that it is voluntarily withdrawing its lawsuit protesting the United States Postal Service’s (USPS) decision to let Oshkosh’s OSK Defense arm build the next-generation mail truck. The court accepted Workhorse’s dismissal late Tuesday — just a day before the first oral arguments on the USPS’s motion to dismiss the suit were scheduled to commence.

The USPS set out to replace its current mail trucks in 2015, in an effort to make the fleet more fuel efficient and give mail carriers state-of-the-art facilities, like advanced safety features and air conditioning. Workhorse was one of the few companies that went into the final stage of the bidding process.

However, this February, Workhorse lost the long-awaited USPS’ multibillion-dollar contract for the next mail truck to rival Oshkosh, ending a contest that started in 2015.

This was followed by Workhorse filing a suit in the U.S. Court of Federal Claims in mid-June, against the USPS’ decision to award the contract to Oshkosh. Workhorse called the USPS' decision "arbitrary, capricious, and without rational basis". Also, Workhorse claimed that the Postal Service unfairly blamed its truck for a mishap that injured a worker evaluating the prototype.

Nonetheless, the picture seems to have suddenly changed with Workhorse deciding to abruptly drop the suit. Workhorse’s decision to withdraw the suit comes just two weeks after a short-selling research firm published a report on the start-up, alleging fraud and accusing the company of hiding a Securities and Exchange Commission (SEC) investigation from investors.

The dismissal of the lawsuit comes from Workhorse’s newly-appointed CEO, Rick Dauch, who took over just six weeks ago, following several quarters of the company not achieving production targets. Reportedly, Dauch sees multiple business opportunities for Workhorse’s last-mile delivery trucks and drone system, and wants to kindle the company’s focus on taking advantage of those. Dauch has further stated his intention to cooperate with the government on future electric vehicles (EV), rather than challenge it through litigation. Additionally, Dauch aspires to drive the company ahead and wants to keep avenues open for future contracts with the U.S. government as the company accelerates its vehicle electrification efforts.

Workhorse Group is an EV manufacturer, specializing in delivery vans and the development of a stepvan chassis. Workhorse is famous for its flagship C-Series electric van, which is a short-range electric van designed for the so-called last-mile service, such as deliveries to homes and businesses. The company received the U.S. government thumbs-up to begin production of the van last year, thus garnering a slew of orders in early 2021. However, the company has since struggled to meet production targets.

Also, the biggest headwind for Workhorse is its lack of manufacturing capabilities and constant supply-chain constraints. Moreover, with auto bigwigs like General Motors GM, Honda HMC, Volkswagen and others gearing up efforts to capitalize on the trending EV race, prospects are dim for Workhorse.

Workhorse currently carries a Zacks Rank of 4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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