Wednesday, March 23, 2011

Carlyle's Allison Road

The Carlyle Group will take Allison Transmission public in a $750 million offering.  Directors signed the S-1 on March 18, 2011.  Reuters reported on Allison's IPO:

Owners Onex and The Carlyle Group said they would use proceeds from the offering to repay debts and for investments in technology, infrastructure and research.
Allison Transmission is adding jobs in Hungary and India:

The Company commenced construction of a new facility in Szentgotthard, Hungary in the fourth quarter of 2010 and expects to be completed with the facility by 2011. Production at the facility is expected to begin during 2011.

During the fourth quarter of 2010, the Company committed to expand its production in its Chennai, India facility by manufacturing components for our global manufacturing operations as well as assembling transmission products for emerging markets. Production is expected to commence during the second half of 2012.
As for government grants, the S-1 offered:

In 2009, the Company was notified by the U.S. Department of Energy that it was selected to receive matching funds from a grant program funded by the American Recovery and Reinvestment Act for the development of Hybrid manufacturing capacity in the U.S. (the “Grant Program”). For the years ended December 31, 2010 and 2009, the Company recorded $12.0 million and $1.8 million of reimbursement of allowable expense to Other income.
How much did Hungary and India give, since they're getting Allison's new manufacturing capacity?

The S-1 mentioned labor relations with U.A.W. Local 933. 

On May 1, 2008, the Company and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) Local 933 reached an agreement on a labor contract covering approximately 2,200 hourly employees that replaced the hourly defined benefit pension plan with a defined contribution pension plan effective for all new hires from May 19, 2008 through November 14, 2012. The agreement also eliminated retiree healthcare for those hired after May 18, 2008. The charge to expense for the hourly defined contribution pension plan was $0.5 million, $0.2 million and $0.2 million for the years ended December 31, 2010, 2009 and 2008, respectively.
There was no mention of participation in the Early Retiree Reinsurance Program, although the U.A.W. liked that component of health reform.  That's because GM retained responsibility for retiree medical, dental, vision and life insurance for salaried employees eligible to retire when Carlyle & Onex acquired the firm.

GM is responsible for medical, dental, vision and life insurance liabilities for hourly employees who retire prior to the expiration of the current collective bargaining agreement between the UAW and GM that expires in September 2011.
Federal ERRP funds for GM/UAW Retiree Medical Benefits Trust could pay for retiree benefits at Allison Transmissions.  The S-1 ensures it isn't Allison for two segments of employees.

Carlyle knows how to find the government teat.  Elected officials pave the way.