What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-02-17 compared with 2021-02-18 · 114 added, 106 removed, 209 unchanged (51% of the section changed)

Allison Transmission Holdings, Inc.

and its subsidiaries (“Allison,” the “Company,” “we,” “us” or “our”) design and manufacture vehicle propulsion solutions, including commercial-duty on-highway, off-highway and defense fully automatic transmissions and electric hybrid and fully electric systems.

and its subsidiaries (“Allison,”

the “Company,”

“we,”

“us”

or “our”) design and manufacture vehicle propulsion solutions, including commercial-duty on-highway, off-highway and defense fully automatic transmissions and electric hybrid and fully electric systems.

The business was founded in 1915 and has been headquartered in Indianapolis, Indiana since inception.

Allison was an operating unit of General Motors Corporation from 1929 until 2007, when Allison once again became a stand-alone company.

In March 2012, Allison began trading on the New York Stock Exchange under the symbol “ALSN”.

Allison is traded on the New York Stock Exchange under the symbol “ALSN”.

We have approximately 3,400 employees.

Although approximately 79% of revenues were generated in North America in 2020, we have a global presence by serving customers in Europe, Asia, South America and Africa.

Although approximately 76% of revenues were generated in North America in 2021, we have a global presence by serving customers in Asia, Europe, South America and Africa.

We serve customers through an independent network of approximately 1,400 independent distributor and dealer locations worldwide.

In March 2020, the World Health Organization categorized the novel coronavirus ("COVID-19") as a pandemic, and it continues to impact the United States and other major markets in which we operate across the world, resulting in severe disruptions to global markets and supply chains, significant uncertainty and a weaker global outlook.

The effects of the pandemic on the global economy began having a material impact on demand for our products and on our results of operations during the second quarter of 2020 as our suppliers and customers reduced or halted production.

Our suppliers and customers resumed production during the third quarter of 2020, resulting in increased demand for our products during the third and fourth quarters of 2020.

To limit the spread of COVID-19, governments continue to take various actions including travel bans and restrictions, quarantines, curfews, stay-at-home orders, social distancing guidelines and business shutdowns and closures.

Despite these disruptions, we continued manufacturing operations throughout 2020 allowing us to deliver our products to customers without interruption.

However, our global manufacturing facilities cut back on operating levels and shifts during 2020 as a result of government orders, our inability to obtain component parts from suppliers and decreased customer demand and, in certain locations, temporarily suspended operations in the second quarter of 2020.

We continue to take a variety of measures to promote the safety and security of our employees and to maintain operations with as minimal impact as possible to our stakeholders, including increased frequency of cleaning and disinfecting of facilities, social distancing, occupancy limits, mask wearing requirements, remote working when possible, travel restrictions, limitations on visitor access to facilities and on-site COVID-19 testing in our Indianapolis, Indiana headquarters.

During the second and third quarter of 2020, we also aligned operations, programs and spending across our entire business with current conditions, including reduced compensation expense through restructuring initiatives of both hourly and salary employees related to voluntary and involuntary separation programs implemented during the second quarter of 2020, furloughed a portion of our workforce, reduced overtime, and assessed the timing and cadence of various capital investments.

We are the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles and medium- and heavy-tactical U.S.

defense vehicles and a supplier of commercial vehicle electric hybrid and fully electric propulsion systems.

Allison solutions are used in a wide variety of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (primarily school and transit), motorhomes, off-highway vehicles and equipment (primarily energy, mining and construction) and defense vehicles (wheeled and tracked).

We believe the Allison brand is one of the most recognized in our industry as a result of the performance, reliability and fuel efficiency of our transmissions and propulsion solutions and is associated with high quality, durability, vocational value, technological leadership and superior customer service.

We int roduced the world’s first fully automatic transmission for commercial vehicles over 7 0 years ago.

Since that time, we have driven the trend in North America and Western Europe towards increasing automaticity by targeting a diverse range of commercial vehicle vocations.

Throughout 2021, the COVID-19 pandemic continued to cause supply chain, labor and raw material constraints that created volatility in our business performance and impacted global markets and supply chains.

As a result, we experienced, and expect to continue to experience, raw material and component part price inflation, increased freight and logistics costs and increased overtime expense as a result of labor shortages.

In addition, despite increased customer demand our net sales for 2021 were negatively impacted as a result of our customers’

inability to secure components from the broader commercial vehicle supply base which resulted in reduced commercial vehicle build schedules.

We expect that commercial vehicle build schedules will continue to be negatively impacted by the availability of components in 2022.

To limit the spread of COVID-19, governments continue to take various actions including the administration or mandate of vaccinations, travel bans and restrictions, quarantines, curfews, stay-at-home orders, social distancing guidelines and business shutdowns and closures.

We are also continuing to take a variety of measures to promote the safety and security of our employees and to maintain operations with as minimal impact as possible to our stakeholders, and as a result, we have been able to continue our manufacturing operations and deliver our products to customers.

We are the world’s largest manufacturer of fully automatic transmissions for medium- and heavy-duty commercial vehicles and medium- and heavy-tactical U.S.

defense vehicles and a leader in electrified propulsion systems.

Allison products are used in a wide variety of applications, including on-highway trucks (distribution, refuse, construction, fire and emergency), buses (primarily school and transit), motorhomes, off-highway vehicles and equipment (primarily energy, mining and construction applications) and defense vehicles (tactical wheeled and tracked).

We believe the Allison brand is one of the most recognized in our industry as a result of the performance, reliability and fuel efficiency of our propulsion solutions and is associated with high quality, durability, vocational value, technological leadership and superior customer service.

We introduced the world’s first fully automatic transmission for commercial vehicles over 70 years ago.

Since that time, we have driven the trend in North America and other parts of the world towards increasing automaticity by targeting a diverse range of commercial vehicle vocations.

Allison products are optimized for the unique performance requirements of end users, which typically vary by vocation.

Our products are highly engineered, requiring advanced manufacturing processes, and employ complex software algorithms for our transmission controls to maximize end user performance.

We have developed over 100 different models that are used in more than 2,500 different vehicle configurations and are compatible with more than 500 combinations of engine brands, models and ratings (including diesel, gasoline, natural gas and other alternative fuels).

Additionally, we have created thousands of unique Allison-developed calibrations available to be used with our transmission control modules.

Our products are highly engineered, requiring advanced manufacturing processes, and employ complex software algorithms for our propulsion system controls to maximize end user performance.

We have developed over 100 different models that are used in more than 2,500 different vehicle configurations and are compatible with more than 500 combinations of engine brands,

models and ratings (including diesel, gasoline, natural gas and other alternative fuels).

Additionally, we have created thousands of unique Allison-developed calibrations available to be used with our control modules.

Commercial vehicles typically employ one of three transmission types:

5 unchanged sentences

However, steady-state cruising is only one part of the duty cycle.

When the duty cycle requires a high degree of “start and stop” activity or speed transients, as is common in many vocations as well as in urban environments, we believe manual transmissions result in reduced performance, lower fuel efficiency, lower average speed for a given amount of fuel consumed and inferior ride quality.

When the duty cycle requires a high degree of “start and stop”

activity or speed transients, as is common in many vocations as well as in urban environments, we believe manual transmissions result in reduced performance, lower fuel efficiency, lower average speed for a given amount of fuel consumed and inferior ride quality.

Moreover, the clutches must be replaced regularly, resulting in increased maintenance expense and vehicle downtime.

2 unchanged sentences

Fully automatic transmissions utilize technology that smoothly shifts gears instead of a disconnect clutch, thereby delivering uninterrupted power to the wheels during gear shifts and requiring minimal driver input.

These transmissions deliver superior acceleration, higher productivity, increased fuel efficiency, reduced operating costs, less driveline shock and smoother shifting relative to both manual transmissions and AMTs in vocations with a high degree of “start and stop” activity, as well as in urban environments.

Emerging technologies in commercial-duty propulsion solutions include electric hybrid and fully electric propulsion solutions in certain end markets, such as transit buses, and are in part driven by efforts to reduce fuel consumption and greenhouse gas emissions.

activity, as well as in urban environments.

Emerging technologies in commercial-duty propulsion solutions include electric hybrid and fully electric propulsion solutions in certain end markets and are in part driven by efforts to reduce fuel consumption, noise and greenhouse gas emissions.

Fully electric powertrains differ from electric hybrid powertrains because they only propel the vehicle with an electric motor;

while electric hybrids generally utilize both a conventional internal combustion power source and powertrain as well as the means to propel the vehicle electrically.

While both emerging technologies are gaining use in niche automotive markets, they are just beginning to evolve and become proven in commercial vehicle markets.

Fuel efficiency, reduction in fuel consumption and reduced emissions are important considerations for commercial vehicles everywhere and they tend to go together.

We believe fuel efficiency, the measure of work performed for a given amount of fuel consumed, is the best method to assess fuel consumption of commercial vehicles as compared to the more commonly-used fuel economy metric of miles-per-gallon (“MPG”).

MPG is inadequate for commercial vehicles because it does not encompass two key elements of efficiency that we believe are important to vehicle owners and operators:

payload and transport time.

For example, if more work can be completed or more payload hauled using the same amount of fuel and/or over a shorter period of time, then we believe the vehicle is more fuel efficient.

Since fuel economy only accounts for distance traveled and fuel consumed, ignoring time and work performed, we believe it is therefore an inferior metric to fuel efficiency when it comes to assessing commercial vehicles.

Markets, regulations, policies and technology continue to evolve with respect to these topics.

While both emerging technologies are gaining use in automotive markets and electric hybrids and fully electric propulsion solutions have gained use in the transit bus market, fully electric propulsion solutions remain in a developmental phase in the medium- and heavy-duty commercial vehicle market.

Our Served Markets

6 unchanged sentences

(IN MILLIONS)

VOCATIONS OR END USE

Construction

Day Cab Tractors

Distribution

• Metro Tractors

School, transit, shuttle and coach buses

15 unchanged sentences

Transmission fluids

Refer to NOTE 19, “Concentration of Risk” in Part II, Item 8, of this Annual Report on Form 10-K for additional information on our significant original equipment manufacturer (“OEM”) customers.

Refer to "NOTE 19.

Concentration of Risk”

in Part II, Item 8., of this Annual Report on Form 10-K for additional information on our significant original equipment manufacturer (“OEM”) customers.

North America

6 unchanged sentences

We have been supplying transmissions for Class 8 straight trucks for decades, and it is a core end market for us.

Today, we have very limited exposure to the Class 8 line-haul tractor market because lower priced manual transmissions and AMTs generally meet the needs of these vehicles which are primarily used in long distance hauling.

We have limited exposure to the Class 8 tractor market because lower priced manual transmissions and AMTs generally meet the needs of these vehicles which are primarily used in long distance hauling.

We also provide electric hybrid and fully electric propulsion solutions within the North American on-highway market.

The interest in conserving fuel and reducing greenhouse gas emissions is driving demand for more fuel-efficient commercial vehicles.

Our customers for transit bus applications are typically city, state and federal governmental entities.

We compete primarily with BAE Systems plc and manufacturers of fully electric propulsion solutions in this market.

We sell substantially all of our transmissions and propulsion solutions in the North American on-highway market to OEMs.

These OEMs, in turn, install our transmissions and propulsion solutions in vehicles in which our product is either the exclusive transmission or propulsion solution available or is specifically requested by end users.

In 2020, OEM customers representing over 95% of our North American on-highway unit volume participated in long-term agreements (“LTA”) with us.

Generally, these LTAs offer the OEM customer defined levels of mutual commitment with respect to growing Allison’s presence in the OEMs’ products and promotional efforts, pricing and sharing of commodity cost risk.

Our electric hybrid and fully electric propulsion customers include bus and truck applications.

We compete primarily with BAE Systems plc and manufacturers of fully electric propulsion solutions such as Dana Incorporated and Meritor, Inc.

as well as certain vertically integrated OEMs.

We sell substantially all of our propulsion solutions in the North American on-highway market to OEMs.

These OEMs, in turn, install our propulsion solutions in vehicles in which our product is either the exclusive propulsion solution available or is specifically requested by end users.

In 2021, OEM customers representing over 95% of our North American on-highway unit volume participated in long-term agreements (“LTAs”) with us.

Generally, these LTAs offer the OEM customer defined levels of mutual commitment with respect to growing Allison’s presence in the OEMs’

products and promotional efforts, pricing and sharing of commodity cost risk.

The length of our LTAs is typically between three and five years.

We often compete in this market against independent manufacturers of manual transmissions, AMTs, electric hybrid and fully electric propulsion solutions, fully automatic transmissions manufactured by Ford Motor Company (“Ford”), ZF Friedrichshafen AG (“ZF”) and Voith GmbH (“Voith”), and against vertically integrated OEMs in certain weight classes that use their own internally manufactured transmissions in certain vehicles.

The following table presents a summary of our competitive position by vehicle class in the North America On-Highway end market.

We often compete in this market against independent manufacturers of manual transmissions, AMTs, electric hybrid and fully electric propulsion solutions, fully automatic transmissions manufactured by Ford Motor Company (“Ford”), ZF Friedrichshafen AG (“ZF”) and Voith GmbH (“Voith”) and against vertically integrated OEMs in certain weight classes that use their own internally manufactured transmissions in certain vehicles.

The following table presents a summary of our market share by vehicle class in the North America On-Highway end market.

CLASS 8 STRAIGHT

PRIMARY COMPETITION

Transmissions

We have provided products used in vehicles and equipment that serve energy, mining and construction applications in North America for over 70 years.

2 unchanged sentences

Competition includes Caterpillar Inc.

(“Caterpillar”) and Twin Disc, Inc.

(“Twin Disc”).

(“Caterpillar”) and Twin Disc, Inc.

(“Twin Disc”).

We also provide heavy-duty transmissions used in mining trucks, specialty vehicles and construction vehicles.

1 unchanged sentence

Our major competitors in this end market are Caterpillar and Komatsu Ltd.

(“Komatsu”), both of which are vertically integrated and manufacture fully automatic transmissions for their own vehicles.

Specialty vehicles using our heavy-duty transmissions include airport rescue and firefighting vehicles and heavy-equipment transporters.

Our major competitor in this end market is Twin Disc.

Construction applications include articulated dump trucks, with Caterpillar, Volvo Group (“Volvo”) and ZF as competitors.

Outside North America

Outside North America we serve several different markets, including:

Europe, Middle East, Africa (collectively, “EMEA”), Asia-Pacific and South America.

Asia-Pacific, Europe, Middle East, Africa (collectively, “EMEA”), and South America.

We are the largest manufacturer of fully automatic transmissions for the commercial vehicle market outside of North America.

We also provide electric hybrid and fully electric propulsion solutions within the outside North America on-highway market.

While the use of fully automatic transmissions in the medium- and heavy-duty commercial vehicle market has been widely accepted in North America, markets outside North America continue to be dominated by manual transmissions.

3 unchanged sentences

The following is a summary of our on-highway net sales by region outside of North America.

Europe, Middle East, Africa .

EMEA is composed of several different markets, each of which differs from our core North American market by the degree of market maturity, sophistication and acceptance of fully automatic transmission and electric propulsion solution technology.

Within Europe, we serve Western European developed markets, as well as Russian and Eastern European emerging markets, principally in the refuse, emergency, bus, coach, distribution and utility markets.

Competition in Western Europe is most notably characterized by a high level of vertical powertrain integration with OEMs often utilizing their own manual transmissions and AMTs in their vehicles.

The Middle East and Africa regions are generally characterized by very limited local vehicle production, with imports from the U.S., South America, Turkey, China, India and Europe accounting for the majority of vehicles.

Asia-Pacific.

Our key Asia-Pacific markets include China, Japan, India, and South Korea;

however, we actively participate in several other important Asia-Pacific countries including Australia, Taiwan, Indonesia, Malaysia and Thailand, which are primarily importers of commercial vehicles.

Our key Asia-Pacific markets include China, Japan, South Korea and India;

however, we actively participate in several other important Asia-Pacific countries including Australia, Thailand, Malaysia, Taiwan and Indonesia, which are primarily importers of commercial vehicles.

Within Asia-Pacific, our sales efforts are principally focused on the transit bus and vocational truck markets.

Currently, manual transmissions are the predominant transmissions used in commercial vehicles in the Asia-Pacific region.

In China, subsidies offered by governmental entities continue to drive the development and adoption of fully electric propulsion solutions for use in the transit bus market.

In China, government subsidies and regulations by governmental entities continue to drive the development and adoption of fully electric propulsion solutions for use in the bus and truck markets.

Europe, Middle East, Africa .

Competition in Western Europe is most notably characterized by a high level of vertical powertrain integration with OEMs often utilizing their own manual transmissions and AMTs in their vehicles, and increasingly electric hybrid and fully electric propulsion solutions.

The Middle East and Africa regions are generally characterized by very limited local vehicle production, with imports from China, Europe, India, South America, Turkey and the U.S.

accounting for the majority of vehicles.

South America .

2 unchanged sentences

The following is a summary of our off-highway net sales by region outside of North America.

Europe, Middle East, Africa.

Our off-highway markets in EMEA are mining and construction.

Our major off-highway competitors are Caterpillar and Komatsu, both of which are vertically integrated manufacturers of off-highway mining vehicles, including the specific fully automatic transmission used in their mining trucks.

A typical construction application is a rigid or articulated dump truck, with competition from Caterpillar, Dana Inc., Volvo and ZF transmissions.

Asia-Pacific .

Off-highway markets in Asia are shared by energy, mining and construction applications.

Our primary competitors are Caterpillar, Danyang Winstar Auto Parts Co., Ltd., Twin Disc and Xi’an FC Intelligence Transmission Co.

Ltd., in energy applications;

Our primary competitors are Caterpillar, Danyang Winstar Auto Parts Co., Ltd., Twin Disc and Xi’an FC Intelligence Transmission Co.

in energy applications;

Caterpillar, Danyang Winstar Auto Parts Co., Ltd.

1 unchanged sentence

and Caterpillar, Volvo and ZF in construction applications.

Europe, Middle East, Africa.

Our off-highway markets in EMEA are mining and construction.

A typical construction application is a rigid or articulated dump truck, with competition from Caterpillar, Dana Incorporated, Volvo and ZF transmissions.

We have a long-standing relationship with the U.S.

Department of Defense (“DOD”) dating back to 1946, when we began developing our first-generation tank transmission.

Today, we sell substantially all of the transmissions for medium- and heavy-tactical wheeled vehicle platforms including the Joint Light Tactical Vehicle, Light Armored Vehicle, Stryker Armored Vehicle, Mine Resistant Ambush Protected Vehicle, the Family of Medium Tactical Vehicles, Heavy Expanded Mobility Tactical Trucks, Heavy Dump Truck and Heavy Equipment Transporters.

Department of Defense (the “DOD”) dating back to 1946, when we began developing our first-generation tank transmission.

Transmissions for our wheeled vehicle platforms are typically sold to OEMs.

We are also the supplier on two of the three key tracked vehicle platforms, the Abrams tank and the M113 family of vehicles, which are sold directly to the DOD.

We also supply more than half of the tracked vehicle transmissions in U.S.

Army armored brigades directly to the DOD, including the Abrams M1A2 Main Battle Tank, Joint Assault Bridge, Assault Breacher Vehicles and the M113A3 Armored Personnel Carrier family of vehicles.

We also sell transmissions to the DOD for the U.S.

Army Abrams Tank sustainment, as well as for certain Abrams Tank customers outside North America.

Additionally, we sell parts kits to licensees for the production of transmissions for tracked vehicles manufactured outside North America, and our defense products are in approximately 110 countries around the world.

See Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for a discussion of risks associated with our contracts with the DOD.

Globally, we face competition primarily from L3 Technologies, Inc., Renk AG and SAPA S.p.A for supply of tracked vehicle transmissions.

Additionally, we face limited competition from ZF in certain defense wheeled vehicles.

See Part I, Item 1A, “Risk Factors”

of this Annual Report on Form 10-K for a discussion of risks associated with our contracts with the DOD.

Globally, we face competition primarily from Renk AG/Renk America, SAPA S.p.A, S&T Dynamics and QinetiQ Group plc for supply of tracked vehicle transmissions.

Additionally, we face competition from ZF and AM General in certain defense wheeled vehicles using automatic transmissions and numerous manual transmission suppliers.

Service Parts, Support Equipment and Other

3 unchanged sentences

The need for replacement parts is driven by normal vehicle and equipment maintenance requirements.

Uninterrupted operation is generally critical for end users’ profitability.

In addition, beginning in 2019 we began selling aluminum die casting components following our acquisition of Walker Die Casting.

Uninterrupted operation is generally critical for end users’

profitability.

In addition, in 2019 we began selling aluminum die casting components following our acquisition of Walker Die Casting.

The sale of Allison-branded parts and fluids, remanufactured transmissions and support equipment is fundamental to our brand promise.

3 unchanged sentences

We also provide support equipment to our OEMs to assist in installing new Allison solutions into vehicles, and, therefore, sales of support equipment are dependent upon sales of new solutions.

The competition for service parts and ReTran transmissions comes from a variety of smaller-scale companies sourcing non-genuine “will-fit” parts from unauthorized manufacturers.

These “will-fit” parts often do not meet our product specifications, and therefore may be of lesser quality than genuine Allison parts.

The competition for service parts and ReTran transmissions comes from a variety of smaller-scale companies sourcing non-genuine “will-fit”

parts from unauthorized manufacturers.

These “will-fit”

parts often do not meet our product specifications, and therefore may be of lesser quality than genuine Allison parts.

Our Product Offerings

2 unchanged sentences

On-Highway Products

School/Shuttle Bus

School and Shuttle Bus

Wheeled Defense

School/Shuttle Bus

School and Shuttle Bus

Wheeled Defense

Day Cab Tractors

Coach and Transit Bus

Fire and Emergency

Metro Tractors

Wheeled Defense

Articulated Dump Truck

Day Cab Tractors

Coach and Transit Bus

Fire and Emergency

Metro Tractors

Wheeled Defense

Electric Hybrid Propulsion Solution

Transit and Shuttle Bus

Fully Electric Propulsion Solutions

eGen Flex Electric Hybrid Propulsion Solutions

Transit and Shuttle Bus

eGen Power Fully Electric Propulsion Solutions

Coach and Transit Bus

School and Shuttle Bus

Off-Highway Products

16 unchanged sentences

We believe our customers expect our products to provide unparalleled performance and value defined in various ways, including delivering maximum cargo in minimum time, using the least amount of fuel possible while employing the fewest vehicles possible and experiencing maximum vehicle uptime.

In response to those needs and the evolving customer focus on fuel efficiency, we provide vehicle specification guidelines, propulsion control software and mechanical components to optimize fuel economy while delivering desired vehicle performance.

In response to those needs and the evolving customer focus on fuel efficiency and reduced emissions, we provide vehicle specification guidelines, propulsion control software and mechanical components to optimize fuel economy while delivering desired vehicle performance.

Further, we are developing new technology to improve fuel efficiency and fuel economy by allowing engines to operate more efficiently and at lower speeds to avoid consuming fuel without compromising performance.

Some examples of these development efforts include the announcements of our first 9-speed transmission and the uprated variant of our existing 3000 Series transmission for the on-highway regional haul end-market.

We also pioneered electric hybrid-propulsion in commercial vehicles and beginning in 2019, we announced our fully electric propulsion solutions.

Building on our existing engineering capabilities and technology acquired in 2019 we continue to enhance our existing electric hybrid-propulsion system with additional electrification features, including our eGen Flex product which has the ability to operate in electric only mode for up to 10 miles.

We also continue to develop and enhance new alternative technologies for use in our global commercial vehicle markets, including fully electric centrally-located drive and electrified-axle solutions such as our eGen Power product.

Finally, our product development and engineering efforts also extend into our Off-Highway and Defense end-markets through initiatives to develop more efficient and higher-horsepower hydraulic fracturing and mining transmissions such as FracTran and TerraTran, as well as new cross-drive transmissions for tracked applications, such as the Next Generation Electrified Transmission that enables electric hybrid propulsion and electric only silent maneuverability.

From time to time, we also acquire certain licenses to provide us with technology to complement our portfolio of products and product initiatives.

4 unchanged sentences

These regional management teams distribute OEM service and application engineering resources globally.

We manage our defense products sales, marketing, service and application engineering through professionals based in Indianapolis, Indiana and Detroit, Michigan.

We manage our defense products sales, marketing and service geographically with North America and Outside North America sales supported by and application engineering through professionals based in Indianapolis, Indiana.

We have developed a marketing strategy to reach OEM customers as well as end users.

We target our end users primarily through marketing activities by our sales staff, who directly call on end users and attend local trade shows, targeting specific vocations globally and through our plant tour programs, where end users may test our products on our Indianapolis test track and our enhanced customer experience demonstration track at our Hungary facility.

While our marketing management uses the term “customer” interchangeably for OEMs and end users, the primary objective of our marketing strategy is to create demand for fully automatic transmissions and electric propulsion solutions through:

OEM promotion of our prod ucts and incorporation of fully automatic transmissions and electric propulsion solutions in their commercial vehicle product offerings;

While our marketing management uses the term “customer”

interchangeably for OEMs and end users, the primary objective of our marketing strategy is to create demand for propulsion solutions through:

OEM promotion of our products and incorporation of our propulsion solutions in their commercial vehicle product offerings;

Allison representative and/or Allison distributor contact with identified, major end users;

3 unchanged sentences

Our field organization also works closely with distributors who, in turn, work with dealers to provide end users with education, parts, service and warranty support.

The defense marketing group follows a defined plan that identifies country, vehicle and specific OEMs and then approaches the ultimate end user through a variety of channels.

The defense group focuses on industry OEMs and collaborative dialogue with OEMs and government leaders to understand program requirements and determine our long-term product development strategy.

Manufacturing

5 unchanged sentences

Suppliers and Raw Materials

A significant amount of the part numbers that make up our transmissions and electric propulsion solutions are purchased from outside suppliers, and during 2020, we purchased approximately $687 million of direct materials and components from outside suppliers.

The largest elements of our direct spending are aluminum and steel castings and forgings that are formed by our suppliers into our larger components and assemblies for use in our transmissions and electric propulsion solutions.

A significant amount of the part numbers that make up our propulsion solutions are purchased from outside suppliers, and during 2021, we purchased approximately $851 million of direct materials and components from outside suppliers.

The largest elements of our direct spending are aluminum and steel castings and forgings that are formed by our suppliers into our larger components and assemblies for use in our propulsion solutions.

Our spending on aluminum and steel raw materials directly and indirectly through our purchase of these components constituted approximately 20% of our direct material and component costs in 2021.

11 unchanged sentences

However, in typical market conditions, the North American truck market experiences a higher level of production in the first half of the year due to fewer holidays and the practice of plant shutdowns in July and December.

As a result of the COVID-19 pandemic, demand for our products did not align with demand experienced during typical market conditions, as we experienced a severe decrease in demand in the second quarter of 2020 with demand recovering throughout the second half of 2020.

Due to the ongoing uncertainties related to the COVID-19 pandemic, we may experience non-typical market conditions and demand expectation in 2021.

Due to ongoing supply chain and labor constraints caused by the COVID-19 pandemic, demand for our products may not align with the demand we have experienced during typical market conditions.

Human Capital

10 unchanged sentences

Approximately 46% of our U.S.

employees are represented by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (“UAW”) and are subject to a collective bargaining agreement.

In December 2017, we entered into a six-year collective bargaining agreement with UAW Local 933 that expires in November 2023.

2 unchanged sentences

Allison recognizes the power of different thought, accepts and respects each individual and strives to create an inclusive workplace where everyone can reach their full potential, driving innovation and business results.

Our inclusion and diversity efforts in 2020 include establishing an employee-led multicultural resource group, implementing continuous Unconscious Bias Corporate training, participating in career fairs at historically Black colleges and universities, and launching a speaker series to create an open forum on complex and difficult conversations about diversity and inclusion.

Our inclusion and diversity efforts in 2021 included the participation by approximately 1,000 employees in unconscious bias training, continuing our speaker series to facilitate dialogue about inclusion and diversity, continuing to increase our focus on the recruitment of underrepresented groups including by participating in career fairs with Historically Black Colleges and Universities, Hispanic institutions, veterans and people with disabilities and establishing a virtual mentoring program to connect team members from different offices, departments and backgrounds.

Employee Health & Safety .

Allison’s overriding priority is to protect the health and safety of each employee.

As part of our health and safety programs , employees participate in training focused on this topic and metrics are reviewed regularly , including the number of injury incidents that occur and those incidents that result in lost work days.

Allison’s overriding priority is to protect the health and safety of each employee.

As part of our h ealth and safety programs , employees participate in training focused on this topic and metrics are reviewed regularly, including the number of injury incidents that occur and those incidents that result in lost work days.

For 2021, we achieved an overall recordable rate of 1.94, meaning that for every 100 employees, 1.94 employees incurred an injury that resulted in recordable medical treatment and the number of lost work days was 0.53, meaning that for every 100 employees, 0.53 individuals experienced an incident that resulted in days away from work.

3 unchanged sentences

These permits are subject to modification, renewal and revocation by issuing authorities.

In addition, certain of our products and our customer’s products are subject to certification requirements by a variety of regulatory bodies.

We believe we are in substantial compliance with all material environmental laws and regulations applicable to our plants and operations.

1 unchanged sentence

Increasing global efforts to control emissions of carbon dioxide, methane, ozone, nitrogen oxide and other greenhouse gases and pollutants, as well as the shifting focus of regulatory efforts towards total emissions output, have the potential to impact our facilities, costs, products and customers.

Environmental Protection Agency (“EPA”) has taken action to control greenhouse gases from certain stationary and mobile sources.

In addition, several states have taken steps, such as adoption of cap and trade programs or other regulatory systems, to address greenhouse gases.

6 unchanged sentences

We do not anticipate our liabilities relating to contaminated sites will be material to our financial results.

We compete on the basis of product performance, quality, price, distribution capability and service in addition to other factors.

We face competition from numerous manufacturers of various types of transmissions and propulsion solutions for commercial vehicles.

Furthermore, we face an increasing amount of competition from vertical integration, as some of our customers are OEMs that manufacture transmissions and propulsion solutions for their own products.

Despite their transmission and propulsion solutions manufacturing capabilities, we believe that our existing OEM customers have chosen to purchase certain transmissions and propulsion solutions from us due to the quality, reliability and strong brand of our transmissions and propulsion solutions and in order to limit fixed costs, minimize production risks and maintain company focus on commercial vehicle design, production and marketing.

We compete on the basis of product performance, quality, price, distribution capability, service and fuel efficiency, in addition to other factors.

We face competition from numerous manufacturers of various types of propulsion solutions for commercial vehicles.

Furthermore, we face an increasing amount of competition from vertical integration, as some of our customers are OEMs that manufacture propulsion solutions for their own products.

Despite their propulsion solutions manufacturing capabilities, we believe that our existing OEM customers have chosen to purchase certain propulsion solutions from us due to the quality, reliability and strong brand of our propulsion solutions and in order to limit fixed costs, minimize production risks and maintain company focus on commercial vehicle design, production and marketing.

Corporate Information

3 unchanged sentences

Our internet address is www.allisontransmission.com.

We file annual, quarterly and current reports, proxy statements and other documents with the United States Securities and Exchange Commission (“SEC”), under the Securities Exchange Act of 1934, as amended (“Exchange Act”).

These periodic and current reports and all amendments to those reports are available free of charge on the investor relations page of our website at http://ir.allisontransmission.com as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business