During this period (1962) EMD did not have a high horsepower locomotive to match Alco or GE. However, EMD did have its turbocharged 2000 hp GP20, which was selling about as well as possible under the (then) current business conditions. With the RS27 not selling, Alco considered its position with regard to a lower cost 12-cylinder Model 251 locomotive, where the RS11 had lost its horsepower edge to EMD. In response, Alco introduced the 2000 hp DL-721 (RS32) in 1960, superseding RS11 production. Powered by a Model 251C engine, at 57 feet, 2 inches in length over couplers, the RS32, in common with the RS27, was slightly longer than the RS11. The 2000 hp was developed by a change in the engine valve timing, a higher engine governor setting to 1025 rpm, a turbocharger of higher output, and a higher capacity generator. This generator required increased air flow cooling, which is indicated by air filters positioned low on the hood sides immediately behind the cab. The RS32 was also equipped with the Type E transistorized control system. The Model 251C (prime mover) was originally equipped with the new Alco Model 600 turbocharger. While the Model 600 produced the higher output pressure required, it did not experience the expected reliability, and it was replaced by an upgrade of the Model 510, designated the 520. The first RS32's, 15 units for the NYC, were built in June-July 1961, immediately after the last RS11's were completed.

The NYC's RS32's were initially placed in service on the hotshot Flexi-Van trains that Alco had so coveted for the RS27. Alco's trade-in policy for early First Generation units continued in effect, and the NYC traded in FA1/FB1's on this group of RS-32's. Not until Spring of 1962 did RS32 production resume, when Alco turned out 10 units for the Southern Pacific. They were followed shortly by an additional 10 units for the NYC. The NYC traded in its PA/PB units on this group of RS32's. The SP units had the larger fuel tank option, as did the NYC's second order. Thus the RS32 production ceased after just one year and 35 units built, yet another disappointing result. Both the NYC and SP units had productive careers until they were retired in the late-1970's. The SP units operated in Coast Line freight service, principally in the Bay Area. The NYC units were eventually downgraded from hotshot service, bumped by newer power. They operated in general freight service for the Penn-Central. Sizable numbers of both fleets survived retirement by their original owners. The SP units worked on lease, at least one unit is (maybe) still in operation. The C&NW acquired 10 former NYC units in 1979. They were put into service on the C&NW's Central Division "Alco Line", where they replaced RS3's. A total of three former SP and NYC RS32's continued to operate for shortline owners through the 1990's, incredible for such a rare model.