GM Sells Allison Transmission

The Carlyle Group picked up this nifty little business for a cool $5.6 billion dollars.  Nearly all analysts are heralding this as a fantastic move, and one that’s good for GM.  I, however, am not the average auto industry analyst.  I actually think before I follow the crowd blindly.

Yes, its’ true that Allison Transmission is not a “core part” of GM’s business.  However, this business provided a key element to one of GM’s most profitable areas – trucks.  Chevy and GMC diesel pickup trucks use an Allison transmission, and it’s one of the main reasons that they sell so well.  Allison transmissions are known for their ridiculous longevity, and they add a very credible name to Chevy’s big trucks.  Dodge has Cummins, Ford has Duramax, and Chevy has Allison.  (  No, Duramax does not have the same ring as the other brands. )

Losing the Allison business does not automatically mean that GM will lose access to the transmissions.  In fact, it’s likely that they won’t.  However, this simply puts them in a very bad situation.  If Allison’s new owners decide that they want to raise prices on their fine transmissions by 20%, GM will have little choice other than to pay the price.  Whether that means profits get cut or the prices on their trucks rise, there’s no positive note.

GM, and Ford and Chrysler while I’m at it, have a bad problem of living in the here and now, rather than thinking forward.  GM got a nice windfall today for the sale of Allison Transmission – $5.6 billion isn’t exactly chump change.  The problem is that they’re setting themselves up for huge problems down the road – something they should be smart enough to avoid by now.  It’s a sad day for GM indeed.

Published on June 28, 2007 in GM

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