Workhorse is attempting to turn around its operations by hiring Ryan Gaul as the new “President of Commercial Vehicles”. Workhorse shares skid as electric truck maker cuts production target Possible turnaround
īottlenecks within the global supply chain and offshore shipping delays of commodity raw materials and components as well as our initial stages of production limited our capacity to produce during the first quarter," Workhorse Chief Executive Officer Duane Hughes said. However, at least some of these delays should be attributed to management shortcomings. The company issued a statement blaming the coronavirus pandemic for its production delays. Considering it manufactured less than 50 units during its best production quarter, these revised forecasts may still actually be overly optimistic. Workhorse recently lowered its 2021 production forecast from 1,800 units to 1,000. It’s clear that the company has had serious issues with properly executing its strategy. The fact that we are halfway to 2021 and less than 100 trucks have been shipped is cause for serious concern. If they had focused on executing this agreement they may have bagged the 10,000 truck order that went to Arrival ( ARVL). In fact, Workhorse management actually dropped the ball on UPS as it had an agreement with them for the 950 trucks as early as June 2018. If Workhorse is able to properly execute its current contracts with UPS and the Pride Group Enterprise, I am confident that it can get more orders from these firms. The company needs to be able to execute on this backlog gain a deep foothold on these customers. This backlog is made up of a recent order by Pride Group Enterprises, a privately held logistics company, for 6,320 vans to be delivered between now and 2026 along with a pending order with long-time partner UPS ( UPS) for 950 vans and a 500 truck order from commercial vehicle distributor Pritchard Cos. This is quite surprising as the company actually has a pretty impressive backlog, all from top-quality customers. It built a measly seven trucks in Q4 2020. However, this boast is laughable given that it only manufactured a grand total of 38 vehicles. The company boasts in its Q1 2021 press release that it has doubled the number of electric vehicles produced in this quarter compared to the previous three quarters combined. The company needs to focus on actually executing its existing orders and proving itself to be a reliable partner/ supplier. I believe that Workhorse management “lawyering it up” to pursue a formal complaint to USPS is a waste of time. In other words, there seem to be serious concerns with Workhorse’s management that may keep it landing these types of “large-contracts”. The company has a somewhat sketchy history having been in distress numerous times and licensing out its patents. However, I believe the main reason that the company did not win the contract was that it had serious concerns about reliability. Or at the very least being part of the USPS contract. To most observers, Workhorse seemed to have a solid shot of winning. This is because the vehicles offered by Oshkosh are majority gas-powered with USPS management giving an estimate that roughly only 10% of the fleet would be EVs under this agreement. After all the environmental lobby in DC, including Joe Biden himself, has not been happy with the decision. There exists a very slim chance that the contract to Oshkosh will be canceled or at least not extended further in the future.
So much so, that management is aware of the situation and has launched a formal complaint with the United States Federal Court of Claims. I believe that the loss of this contract was a huge blow for the company’s long-term viability. The company lost the contract to its rival Oshkosh Defense ( OSK).
The company came to investor’s general attention when it was one of the finalists for the highly lucrative USPS contract. Given my continued bullishness on electric vehicles in general, the contrarian in me wanted to see if there is a possible investment opportunity in the company. For those unfamiliar, Workhorse is an electric vehicle company focused on last-mile delivery. Workhorse ( NASDAQ: WKHS) has seen its share price decline by more than 70% from its all-time highs. Digital Vision./DigitalVision via Getty Images
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