GM may put Allison on the block; Analyst predicts trucks could be next

NEW YORK — General Motors says it’s looking to sell off its Indianapolis-based Allison Transmission commercial and military operations as part of a strategy to move away from “business that is not central to GM’s mission of designing, manufacturing and selling cars and light trucks globally,” the company said in a statement.

Allison Transmission employs 3,400 people, has 7 plants in Indianapolis and sells automatic and powershift transmissions, product parts and support through a worldwide distribution network. It is a dominant brand for automatic transmissions in medium and heavy-duty trucks — especially on vocational and military applications, where the division’s marketshare is in the 90 percentile.

GM is talking about dumping its Allison division, but one market
analyst thinks MD trucks aren’t part of its core strategy either

The transportation division at leading market analysts firm Bear Stearns suggests the Allison asset should attract strong bidder interest. Logical strategic buyers, the firm says, could likely include ZF and possibly Eaton, depending on antitrust authorities’ market definition. Volvo would be a logical buyer, adds New York-based Bear Stearns, “if it wanted to become vertically integrated and sell the transmission into its Mack Trucks (vocational) and bus divisions.”

However, Bear Stearns suggests that GM’s announcement sends a bigger message about the vehicle giant’s commercial market strategy. “The combination of today’s announcement on Allison, plus GM’s wording of its core mission (which appears to exclude medium- and heavy-truck from its central mission), gives us increased conviction that a sale of GM’s medium-duty truck business is not only logical, but also increasingly likely,” Bear Stearns wrote in a message to investors.

As for who would step up to the trucking purchase plate, Bear Stearns has a number of guesses.

The product offerings aren’t broad enough for a new North American entrant or foreign truck maker without its own dealer network. Therefore, Volvo — which recently has been making noise about reentering the medium-duty market, via Mack; Hino, which has high growth aims in the medium-duty truck market; and Isuzu, which has a corporate history with GM, are all logical candidates.

However, it is Navistar, which Bear Stearns believes would make the best fit for GM’s Kodiak and TopKick’s vocational and bus applications line up. Navistar is also experienced with such joint ventures, given its Blue Diamond partnership with Ford.