Allison Transmission IPO

SUSIE GHARIB: Now another economic bellwether got a fresh start today as an IPO.
We’re talking here about Allison Transmission, ticker symbol A-L-S-N, began
trading here at the Big Board.

It’s a new chapter for the company that was once a division of General
Motors (NYSE:GM). It was bought five years ago by two private equity
firms. The 100-year-old company makes automatic transmissions for heavy-
duty trucks and buses. Allison shares rose more than 1 percent today from
their opening price of $23 a share. It’s the largest IPO so far this year.
When I met with CEO Lawrence Dewey, he talked about what will drive
Allison’s growth.

improving economy here in North America is going to give us a lift. And
then also we’re working to gain new customers outside of North America.
We’re only 5 percent of the commercial vehicles, of the types we sell into,
have automatic. So very low penetration. We think that represents a great
opportunity for Allison to increase our share in those markets.

GHARIB: Larry, I know you are moving into markets like India and
China. What kind of growth you can expect from those countries?

DEWEY: It’s going to be, we think, a solid growth story over a period
of time. We have got feet on the street and we’ve got people calling on
customers. So we would say certainly double-digit growth. Mid-teens is
what we target, and we would like to even do better than that in terms of
some those developing countries.

GHARIB: Now you make transmissions for things like school buses and
sanitation trucks. How are those businesses doing given that you are
working with states and municipalities that are drastically cutting their

DEWEY: We’re starting to see municipalities, those that have seen
their tax receipts come up, those that have maybe a little stronger
financial house in order, if you will, are starting to come back into the
market. One the other late cycle plays will be construction which, as you
know, is certainly still depressed and we see that as runway ahead of us as

GHARIB: Well, you know Wall Street is looking at the Allison IPO as a
sign of the U.S. recovery, a resurgence of American industry. From your
perspective, is the economy really getting better? Is it getting stronger?

DEWEY: It is improving. However it is uneven. And so for us we
focus on the various sectors. And some are coming along now. And others
we expect in the next six to 12 months to see some level of improvement.

GHARIB: Are you going to be doing more hiring, are you going to be
adding jobs?

DEWEY: We’ve been adding jobs for about the past year in our
factories as well as our offices. So as we have grown the business, we’ve
been able to add people and offer them well-paying jobs.

GHARIB: What about oil and fuel prices? How big a factor is this in
your business?

DEWEY: Well, it doesn’t affect Allison so much as it does some of our
customers because that’s a significant part of their ongoing expenses. So
it might cause them to think about the timing of their vehicle purchases.
At Allison, we’re developing new technologies, whether it’s controls,
electronic controls for the existing products, or new hybrid products, to
go with the hybrid transit propulsion systems that we currently market, to
give our customers the option of significant fuel savings, 25 to 35

GHARIB: Looking at your stock, tell us why investors should consider
investing into Allison, an old economy company, as opposed to another IPO
that came here today, Demandware, which is technology and innovation?

DEWEY: Well, actually there is a lot of technology at Allison. We do
a lot of electronic controls that go along with the hardware of our
products. You know, Allison is a solid financial company. We’re
profitable. We generate good cash flow, continue to pay down debt, which
is accretive to the shareholders. And then a focus with our announced
dividend on return of capital to our shareholders.

GHARIB: When are you going to have a dividend?

DEWEY: Well, actually, we start second quarter of this year.

GHARIB: All right.

DEWEY: So it was announced.

GHARIB: Thank you so much. Good luck to you, congratulations.

DEWEY: Thank you. Thanks a lot. Appreciate it. Thanks, Susie.

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