GM May Sell Allison Transmission

[Variance]

GM May Sell Allison Transmission

General Motors Corp. said Thursday that it may sell its Allison Transmission division as part of its effort to raise money and focus on its core business.

GM said in a news release that "it is looking at strategic options" for the Indianapolis-based transmission unit "including a potential sale of the business."

The world's leading automaker lost $3.05 billion in the first three quarters of 2006.

Allison Transmission has 3,400 employees and seven plants in Indianapolis. It makes and sells automatic transmissions for commercial and military vehicles.

"This process is another potential step in GM's plan to improve liquidity through the assessment of strategic options for a business that is not central to GM's mission of designing, manufacturing and selling cars and light trucks globally," the company said.

The Detroit News

[Drew Dowdell]

As long as GM continues to source their higher end truck transmissions from Allison, I don't see it as a bad thing. These transmissions are selling points in the HDs.

[Intrepidation]

Yeah, isn't the GM HD's the only ones with 6-speeds?

Didn't Allison make engines for aircraft back in the WWII era?

[Z-06]

Yeah, isn't the GM HD's the only ones with 6-speeds?

Didn't Allison make engines for aircraft back in the WWII era?

Yup and Yup

[Flybrian]

Uh, how is this not "focusing on its core business?" Some people buy GM HDs solely because of the Allison/Duramax combo.

[FAPTurbo]

It seems kind of dumb, just because the Duramax/Allison combo is such a powerpack.

[Northstar]

It's not core to the company because it's simply a transmission. It probably makes more sense to sell Allison and then buy transmissions from them than to hold on to them.

Situation 1: Say GM keeps Allison, and each transmission costs GM $800 to produce. GM makes said transmission a $1k option, a profit of $200. GM makes $200 x #of trucks sold per year.

Situation 2: GM sells Allison for $200 million (just a guess). GM buys the same transmissions from Allison for $900, and GM still makes said transmission a $1k option (no extra cost for consumer). This means that GM would lose $100/truck by selling Allison; however, GM would be better off selling Allison and then buying transmissions from them until GM has to buy transmission #1 million. It's going to take a LONG time for GM to sell 1 million trucks with the Duramax. and Allison.

[CSpec]

Why would the transmissions cost more if a different company produced them? If that were the case, why would GM sell it?

[Northstar]

Why would the transmissions cost more if a different company produced them? If that were the case, why would GM sell it?

If GM owns the company then they get them at the company's cost. If GM doesn't own the company then the company isn't going to give GM the transmissions without making some money themselves, which would make it cost more for GM to buy/use the transmission. It wouldn't cost more to produce them, it would just cost GM more to use them.

[FUTURE_OF_GM]

Dumb move...

I hate to see GM sell everything...

[balthazar]

If GM sells off Allison, the division/company would be free (I assume) to sell to other manufacturers, which reduces GM's marketing advantage notably. No other HD trans has close to the reputation. Not good.

[Sixty8panther]

Uh, how is this not "focusing on its core business?" Some people buy GM HDs solely because of the Allison/Duramax combo.

THANK YOU!!!

[Camino LS6]

This idea is beyond stupid!

Have we forgotten Delphi?

NO!

[thegriffon]

Umm, the GM statement says specifically Allison Transmissions commercial vehicle transmission business, for which they unveiled a new lineup a few years ago, unrelated to the HD light truck transmission. It's probable that only this new series of transmissions and the related hybrid system would be sold, and the 1000 series would be folded into GM Powertrain's standard transmission lineup.

Allison's aircraft engine and transmission business evolved into Allison Gas Turbine, which was sold to Rolls-Royce some years ago.

[AxelTheRed]

I'm not 100% sure what they mean by "core business" here when they're talking about selling off a transmission divison. As far as I'm concerned Allison is as much a part of their core business as Delphi and Fisher Body were. They sell off Allison, they lose advantage in the marketplace.

[Camino LS6]

Umm, the GM statement says specifically Allison Transmissions commercial vehicle transmission business, for which they unveiled a new lineup a few years ago, unrelated to the HD light truck transmission. It's probable that only this new series of transmissions and the related hybrid system would be sold, and the 1000 series would be folded into GM Powertrain's standard transmission lineup.

Allison's aircraft engine and transmission business evolved into Allison Gas Turbine, which was sold to Rolls-Royce some years ago.

As I understand it the HD light truck Allison trans is the same one used in the med. duty trucks.

[thegriffon]

There is a whole new family of commercial transmissions. Allison is no longer marketing the 1000 series 3000 series etc.

[Justin Bimmer]

This is OLD NEWS!!!! GM has had Allison Transmission "for sale" for twenty years. They would love to off load this company just like they did with Detroit Diesel. Only problem was that Roger Penske didn't want it.

[David]

This is WRONG!!!

I hate Toyota, but if they can make money at the same time that they own their own Tranny and Engine plants, GM can do the same thing.

This sounds like a plan by gm MANAGEMENT to allow them to bring money into the company and hit their own Executive goals that lines them with stock, cash bonus, etc. America's biggest problem is the current generation of instant gratification, me first and no real dedication to long term growth and security for all employees of a company. Executives goals should be based on what security and growth they bring over time to the company.

Selling Allison and increasing their cost is not going to help GM.

Sorry but the example above is bunk, GM pays 800 at cost and sells for 1000 but can buy for 900 and still sell for 1000. BS, GM mgmt will not want to cut their own profit margins. If they sell Allison, they will up what they charge us consumers to keep if not increase their profit margines. Then we will have crap on our hands as they still have not totally gotten out of the rebate cycle as slow times will cause them to cut profit to maintain selling trucks.

Better to keep allison, work on paying off the legacy debt of the pension funds and enhance the products as in the long run, they will continue to drive cost lower, increase the units they make and deliver. Far too many oportunities to drive a variety of products for 6 and 4 cyclinder engines with solid Allison tranny's backing up the new 4 and 6 cylinder diesels.

IMO Keep Allison and GO DIESEL!!!

[dwightlooi]

I think that overall its a good idea to spin off units that are not part of the company's core business. For one thing it will probably make Allison more competitive as they can no longer count on unconditional GM consumption of their products and they have to compete on equal footing with other suppliers in terms of product superiority and value. It is also good for GM because it is not tied down to using Allison transmissions. Instead she should use whatever is the best or which offers the best combination of product strengths and value. In other words, instead of the best from GM, the transmission can and should be the best in the world -- be it Borg Warner, ZF, Allison, Aisin, or whatever.

Generally speaking spinning off supporting subsidiaries makes both the parent company and the subsidiary more competitive. This is the strategy pursued by Boeing for instance. One example being the spin of Spirit Aeros ystems. Instead of being a boeing internal division supplying wings and fuselages to the parent company with little competitive incentive, Spirit now has to compete or perish. As a result they have really shaped up and are now the world's leading manufacturer of large Composite structures. Boeing uses them to supply the nose and forward fuselages for the carbon fiber Boeing 787 -- not because they have to, but because they are the best.

BTW, Toyota doesn't really do their own transmissions. Toyota by and large uses Aisin Transmissions. But they also occasionally use other suppliers like Getrag and others. Aisin has a close working relationship with Toyota, but it is not a subsidiary and Toyota is not obligated to buy their stuff instead of say ZF boxes or whatever. Hence, Aisin has to try doubly hard to keep Toyota's patronage. Its a good business model. BMW does the same thing too. They use ZFs most of the time, but they also use GM Hydramatics for instance (the X5, X3 and 330xi AWD 6-speeds are, believe it or not, GM 6L80Es). Again, ZF and GM have to compete hard for BMW's business. This puts better products into BMW's hands.

[76ChevyTrucker]

The only problem that I see with GM getting rid of Allison is that Allison might very well STOP selling the 1000 series transmission to GM, which would sound crazy, BUT more idiotic things could happen. I'd say that they keep the division. Allison is the best MD and HD transmission on the market as far as the automatic transmissions are concerned. I know that ZF and BW make some all right ones, but the 6-speed Allison 1000 takes the cake and wipes the floor with them. Most people who buy the 2500 and 3500 GM trucks are buying them with the Duramax and the Allison simpy because of the increadible towing capacity as compared to Ford and Dodge. Overall, I just see this as a bad idea.

[rsking]

Allison Indianapolis plant sells to OEMs, makes 1000 series (same used by Chevy/GMC HD), 3000 series (MD), 4000 series (HD), military, off highway, and hybrid bus.

Allison Baltimore plant makes same 1000 series tranny exclusively for GM Truck plants and also future dual mode hybrid production.

GM could trade Allison for Chrysler. Daimler could use ZF for manuals and Allison for automatics.

[Tink]

My father works at Allison Indy.

From what I gather from him, this doesn't look like it's going to happen.

[CARBIZ]

I think that overall its a good idea to spin off units that are not part of the company's core business. For one thing it will probably make Allison more competitive as they can no longer count on unconditional GM consumption of their products and they have to compete on equal footing with other suppliers in terms of product superiority and value. It is also good for GM because it is not tied down to using Allison transmissions. Instead she should use whatever is the best or which offers the best combination of product strengths and value. In other words, instead of the best from GM, the transmission can and should be the best in the world -- be it Borg Warner, ZF, Allison, Aisin, or whatever.

Generally speaking spinning off supporting subsidiaries makes both the parent company and the subsidiary more competitive. This is the strategy pursued by Boeing for instance. One example being the spin of Spirit Aeros ystems. Instead of being a boeing internal division supplying wings and fuselages to the parent company with little competitive incentive, Spirit now has to compete or perish. As a result they have really shaped up and are now the world's leading manufacturer of large Composite structures. Boeing uses them to supply the nose and forward fuselages for the carbon fiber Boeing 787 -- not because they have to, but because they are the best.

BTW, Toyota doesn't really do their own transmissions. Toyota by and large uses Aisin Transmissions. But they also occasionally use other suppliers like Getrag and others. Aisin has a close working relationship with Toyota, but it is not a subsidiary and Toyota is not obligated to buy their stuff instead of say ZF boxes or whatever. Hence, Aisin has to try doubly hard to keep Toyota's patronage. Its a good business model. BMW does the same thing too. They use ZFs most of the time, but they also use GM Hydramatics for instance (the X5, X3 and 330xi AWD 6-speeds are, believe it or not, GM 6L80Es). Again, ZF and GM have to compete hard for BMW's business. This puts better products into BMW's hands.

I couldn't disagree more. The Aisin trannies are crap, pure crap. Drive an Optra, then a Cobalt and you'll se what I mean. The Optra gets horrible gas mileage and the shifts are noticeable. The Camry 4 spd transmission was the same. GM needs to keep its transmission and engine plants - why give everything to the competition? Look at what happened when GM sold off that plant last year - didn't Toyota turn around and buy it to make more capacity to compete with GM directly?

Why are Hondas engines so good? Answer: they build reliable, efficient small engines. Perhaps (and I am just saying perhaps) Chrysler wouldn't have undergone such a downward spiral in engineering during the '80s if they'd kept their marine division, instead of selling it to Brunswick. Chrysler engines and transmissions were the best (slant 6, their old 3 spd torqueflite), but then they sold off their non-core businesses (like Airtemp) and look at what happened to them!

[thegriffon]

The Optra has a 4-speed ZF auto built by Daewoo, not an Aisin. Toyota does have an equity tie-up with Aisin Seiki, parent company of Aisin AW (Aisin Warner) and Aisin AZ (manual transimssions), but sometimes uses it's own in-house transmissions. Aisin is the dominant supplier of fwd auto transmissions to European automakers, including Ford, Opel and Saab. 5-speed fwd autos used by GM and related 6-speed autos used by Opel and Saab are supplied by Aisin. GM is of course gradually dumping the Aisin transmissions and the old Hydra-matic 4-speeds for its own new-generation 6-speed autos, including a new model being built by GM Daewoo.

[Camino LS6]

The HDs need to keep the exclusivity they now have with the Allison trans. On that basis alone, this seems a bad idea to me.