Allison takes off.

• Author: Johnson, J. Douglas
• Position: General Motors Corp. Allison Gas Turbine Div. - Includes related article

The rechristened Allison Engine Co.--formerly Allison Gas Turbine Division of General Motors--is on its own.

Allison roars! Allison makes engines, and engines roar! Allison sits on 400 valuable acres on the Indianapolis west side and roars to the tune of $740 million in annual sales. All this makes a joyful sound unto about 4,200 employees, plus city, county and state tax collectors. Allison's roar sounds just dandy to Indiana.

You probably noticed there was a major management buyout last December, when Allison changed hands. A prominent player was an exceptional company called Clayton, Dubilier & Rice. This investment firm spent two years dickering with General Motors to purchase the Allison Gas Turbine Division for $310 million just so it could be renamed Allison Engine Co. What CD&R does is locate divisions of large corporations that are no longer part of the parent company's core business and help them achieve their full potential by establishing them as stand-alone enterprises.

Walking into the office of CEO F. Blake Wallace, you're met with the sight of a squadron of model airplanes. All these craft run on Allison power. In the last 75 years, Allison has made more than 150,000 engines for military and commercial use. The first one the company turned out cost a few hundred bucks. Today a bargain model goes for more than $100,000 and the deluxe models are more than a million.

Other major players in the new company have had their names on doors at Allison headquarters for years. As Joseph L. Rice III, president of CD&R says, "In all our transactions, managers of the business invest their capital to own a significant share of the new company's common stock." The theory is that participation gets their attention and brings out their best efforts.

"We will offer 120 employees an opportunity to buy shares," says Wallace. "The remainder of our salaried people will be owners by way of a 401(k) program. In the future we'll consider a plan to give some form of ownership to the hourly people. Frankly, we want everybody to feel like they have a stake in the business, not just job security and pride...but ownership."

Three long-tenured managers are now executive vice presidents: Wilson Burns, Frank Verkamp and Mike Hudson, with a combined experience of 88 years with the company. Wallace has been at Allison for 11 years. He was general manager of Allison and a GM vice president. In the permutation he lost his VP designation but gained "chairman and...