Sunday, January 28, 2007

Eating the Seed Corn

Fleet Owner:GM Considers selling Allison

General Motors (GM) yesterday announced it is considering selling its lucrative Allison Transmission business. The divesture would dispose of an operation “not central to GM’s mission of designing, manufacturing and selling cars and light trucks globally,” said the OEM.

Allison is considered a dominant player in the transmissions market for heavy- and medium-duty trucks, according to investment banking firm Bear Stearns. Allison should be an attractive asset for bidders, Bear Stearns said.

Headquartered in Indianapolis, Allison employs 3,400 persons and has seven plants. It sells automatic and powershift transmissions and provides product parts and support through a worldwide distribution network and offices in North America, South America, Europe, Africa and Asia.

An Allison acquisition would have some strategic potential for ZF, Eaton or Volvo, Bear Stearns said. But it considers International the “best likely fit” considering that OEM’s core offerings and competencies.

GM keeps selling its profitable assets to prop up its unprofitable car business. That seems short sighted to me. The car business, even if they do everything right (which is a Texas sized "if") is going to shrink as more competitors enter the market and GM abandons segments they are losing money in. The car business is always going to cyclical as well. Having a solid revenue and profit flow over the long haul seems like a good thing to me, probably a better thing than a few hundred million more to throw at the car business today.

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