General Motors Corp. has announced reaching a definitive agreement to sell its Allison Transmission unit the Carlyle Group Carlyle and Onex Corp. for approximately $5.6 billion. While the sale divests GM of a profitable operation, it raises cash the automaker will need when it heads into contract talks with the United Auto Workers later this year.
According to GM, the sale agreement covers substantially all of Allison Transmission, including seven manufacturing plants in Indianapolis, Ind. and its worldwide distribution network and sales offices. However, a facility in Baltimore dedicated to the production of conventional and hybrid 2Mode transmissions used in GM pickups and SUVs will remain with the General.
GM declared the transaction is “structured to preserve GM's and Allison's competitive strengths in their respective product lines.” The sale is expected to close as early as the third quarter of this year pending union and regulatory approval.
Onex Corp. (www.onex.com) is one of Canada's largest corporations. It makes private equity investments through its Onex Partners and ONCAP family of Funds. "This is another important step to strengthen our liquidity and provide resources to support our heavy investments in new products and technology," said Rick Wagoner, GM chairman & CEO. "At the same time, this sale will position Allison for growth with strong partners in Carlyle and Onex, which have well-established track records of working effectively with their management teams, unions and employees.”
The Carlyle Group (www.carlyle.com) is a global private equity firm with $58.5 billion under management. Carlyle invests in buyouts, venture & growth capital, real estate and leveraged finance in Asia, Europe and North America. "We are excited to partner with Onex, the Allison management team and employees as we grow this iconic brand and support its transition to a stand-alone business," said Carlyle managing director Greg Ledford.
James A. Allison founded the forerunner of Allison Transmission—the Indianapolis Speedway Team Co.-- on September 14, 1915. GM purchased the company in 1929. According to GM, today Allison (www.allisontransmission) is the leading designer and manufacturer of automatic transmissions for medium and heavy-duty commercial vehicles. Its products are used in on-highway and off-highway vehicles.
Headquartered in Indianapolis, Allison employs some 3,400 persons and sells its transmissions through a worldwide distribution network with sales offices in North America, South America, Europe, Africa and Asia. The operation generates annual revenues in excess of $2 billion.
As covered earlier by FleetOwner, see GM is in talks to sell its medium-duty truck line to International Truck and Engine.
"Medium-duty is a small part of their overall business and competition is increasing in the medium-duty segment," analyst Chris Brady, president of Commercial Motor Vehicle Consulting, told FleetOwner. "The investment needed to make the [medium-duty] product line competitive will probably increase and they will need all the resources they can get to turn around their automotive business. GM is looking at the competition increasing and [are] asking where do they want to spend their resources— in commercial vehicle or their automotive business. The choice is obvious."