Workhorse Group Forms Joint Venture To Advance Truck-Based Drone Business

Electric truck maker Workhorse Inc. WKHS is selling its Surefly flying car project to aerospace and defense contractor Moog Inc. MOOG for $4 million and forming a joint venture with Moog to boost its truck-based drone delivery efforts.

Workhorse had been trying to sell the Surefly vertical-lift copter assets to raise money to build its lightweight NGEN electric-powered step vans. Workhorse has about 1,100 pending orders for the step vans, the largest from United Parcel Service Inc.(UPS), according to CEO Duane Hughes.

Both transactions were part of an October 7 filing by Workhorse with the U.S. Securities and Exchange Commission (SEC). 

Personal Passion

The personal copter project was a passion of former Workhorse CEO Steve Burns, who left that position in February. Burns displayed the Surefly at the North American International Auto Show in January. One Workhorse investor previously said he thought Surefly could bring as much as $50 million.

Some of the Surefly technology is part of Workhorse's truck-based drone called Horsefly, which it has demonstrated with a UPS Inc. UPS truck and driver and delivering high-end sneakers for StockX, a market that buys and sells high-end athletic footwear.

Drone Deliveries

The specifics of the Workhorse-Moog 50/50 joint venture are described in the SEC filing. On October 8, Workhorse said in a press release it is working with Unmanned Systems Operations Group, Inc. (USOG) to launch an initial pilot drone delivery program in the San Diego area.

Unmanned Systems was described in the Workhorse press release as a provider of end-to-end, unmanned mobile medical delivery logistics.

"USOG's vision is to enable nationwide medical deliveries by UAV [unmanned aerial vehicles], and we couldn't think of a better application for our HorseFly system," Hughes said. "As the only U.S. patented truck drone-launched system, we believe we are in an excellent position to take share in a number of nascent delivery markets." 

The use of drones for medical deliveries is gaining popularity. UPS is expanding a trial program to deliver medical supplies and working with CVS and others to make medical deliveries nationwide. It received Federal Aviation Administration (FAA) approval in early October to operate a commercial drone fleet.

Workhorse said the HorseFly, a custom-built UAV integrated with the NGEN electric delivery vehicles, is FAA-compliant. It said its cloud-based software system would enable USOG personnel to monitor multiple autonomous UAV flights. 

Customers will be able to track their deliveries through an app that allows for real-time data transmission for information such as package location and vehicle status as well as onboard video, Workhorse said. 

Lordstown Motors

Separately, Burns formed a business (Lordstown Motors) to buy a General Motors' plant in Lordstown, Ohio, that will close if a tentative agreement is ratified by striking members of the United Auto Workers (UAW) union. He wants to build a full-size electric pickup truck for commercial customers called the Endurance. It would be based in part on Workhorse technology. Workhorse owns about 10% of Lordstown Motors.

GM wants to sell the plant to Burns, but it is sensitive to the UAW, which opposes the sale. The union demanded that GM assemble a new vehicle at Lordstown, which stopped production of the Chevrolet Cruze compact sedan in March. If the UAW ratifies the national contract, GM can sell the plant. But a new owner would need to negotiate a contract with the UAW.

In September, Lordstown Motors hired Rich Schmidt, who was Tesla Inc. director of manufacturing operations, from 2012 to 2016, as chief production officer for Lordstown Motors.

Burns told The Detroit News earlier in October that he hopes to begin building electric pickups at the plant as soon as next year.  

"To have a ready-made workforce close by that's skilled at that sort of labor, that's hard to get," he told the newspaper.

Workhorse and its partner, V.T. Hackney, are finalists for a $6 billion U.S. Postal Service contract to build the next-generation postal service vehicle. The Workhorse design for the postal vehicle is based on its W-15 electric pickup, so it would fit into production at Lordstown if the plant is sold to Burns.

Workhorse owns a plant in Union City, Indiana, where the NGEN vans will be assembled.

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