What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2023-02-16 compared with 2022-02-17 · 64 added, 59 removed, 264 unchanged (32% of the section changed)

10 unchanged sentences

We serve customers through an independent network of approximately 1,600 independent distributor and dealer locations worldwide.

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.

Global markets continue to experience supply chain, labor, energy and raw material constraints as a result of global economic volatility, the war in Ukraine and the COVID-19 pandemic, that impacted our business in 2022 and continue to impact our business performance.

As a result, during 2022 we experienced raw material and component part price inflation, increased freight and logistics costs, increased labor costs, production constraints due to labor shortages and increased foreign exchange volatility.

In addition, our net sales for 2022 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 and the inability of the commercial vehicle market to produce sufficient quantities to meet demand.

We expect that commercial vehicle build schedules will continue to be negatively impacted by the availability of components in 2023.

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.

6 unchanged sentences

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).

We have more than 200 different models that 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.

17 unchanged sentences

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 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.

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

Our Served Markets

14 unchanged sentences

Distribution

Transit, shuttle and coach buses

transit, shuttle

and coach buses

Construction

Specialty vehicle

Medium- and heavy-tactical wheeled platforms

Tracked combat platforms

North America medium- and heavy-tactical wheeled platforms

Global tracked combat platforms

Aluminum die cast components

13 unchanged sentences

Class 8 trucks are subdivided into two markets:

straight and tractor.

straight and tractor (which includes both line-haul and regional haul day cab tractors).

Class 8 straight trucks are those with a unified body (e.g., refuse, construction, and dump trucks), while tractors have a vehicle chassis that is separable from the trailer they pull.

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

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

1 unchanged sentence

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.

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

as well as certain vertically integrated OEMs.

9 unchanged sentences

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

Off-highway energy applications include hydraulic fracturing equipment, well-stimulation equipment, pumping equipment, and well-servicing rigs, which often use a fully automatic transmission to propel the vehicle and drive auxiliary equipment.

We supply our heavy duty off-highway transmissions to producers of well-stimulation and well-servicing equipment.

Competition includes Caterpillar Inc.

Competition in this end market includes Caterpillar Inc.

(“Caterpillar”) and Twin Disc, Inc.

1 unchanged sentence

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

Mining applications include trucks used to haul various commodities and other products, including rigid dump trucks, underground trucks and long-haul tractor trailer trucks with load capacities between 40 to 110 tons.

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.

Off-highway mining and construction applications include trucks used to haul various commodities and other products around construction sites and mines, including underground mines.

These trucks include rigid dump trucks, wide-body dump trucks, underground trucks, and long-haul tractor trailer trucks with load capacities between 40 to 110 tons.

Our major competitors in this end market include vertically integrated companies that manufacture fully automatic transmissions for their vehicles.

These vertically integrated competitors include Caterpillar, Komatsu Ltd.

(“Komatsu”), and Volvo Group (“Volvo”).

We also compete with independent manufacturers ZF and Dana.

Specialty vehicles using our heavy-duty off-highway transmissions include airport rescue and firefighting vehicles.

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

9 unchanged sentences

Asia-Pacific.

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.

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

however, we actively participate in several other important Asia-Pacific countries including Indonesia, Malaysia, Singapore, Taiwan and Thailand.

In addition, OEMs in the Asia-Pacific market are increasingly exporting their products to other regions.

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

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

2 unchanged sentences

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, and increasingly electric hybrid and fully electric propulsion solutions.

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

1 unchanged sentence

South America .

The South American region is characterized by a high level of OEM integration, with captive manual transmission and AMT manufacturing.

The South American region is characterized by a high level of OEM vertical integration, with captive manual transmission and AMT manufacturing.

Currently, manual transmissions are the predominant transmissions used in commercial vehicles in South America.

We serve the South American region primarily in the bus, refuse, vocational truck and agricultural markets.

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

1 unchanged sentence

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.

in energy applications;

Caterpillar, Danyang Winstar Auto Parts Co., Ltd.

Our primary competitors are Caterpillar, Danyang Winstar Auto Parts Co., Ltd., Twin Disc and manufacturers of electrified solutions in energy applications;

Caterpillar, Xi’an FC Intelligence Transmission Co.

and Komatsu in mining applications;

3 unchanged sentences

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 Incorporated, Volvo and ZF transmissions.

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

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

Department of Defense (the “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, Palletized Loading System for Heavy Dump Truck and Heavy Equipment Transporters.

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

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.

Today, we sell substantially all of the propulsion solutions for medium- and heavy-tactical wheeled vehicles used by the U.S.

military, including the Joint Light Tactical Vehicle, Light Armored Vehicle, Stryker Armored Vehicle, the Family of Medium Tactical Vehicles, Heavy Expanded Mobility Tactical Trucks, Palletized Loading Systems, Heavy Dump Trucks and Heavy Equipment Transporters.

Propulsion solutions for tactical wheeled vehicles are typically sold to OEMs.

We supply tracked vehicle propulsion solutions to the U.S.

Army, including the Abrams M1A2 Main Battle Tank, Joint Assault Bridge, Assault Breacher Vehicles, Mobile Protected Firepower Assault Vehicles and the M113A3 Armored Personnel Carrier family of vehicles.

We also sell parts kits to the U.S.

Army for Abrams Tank sustainment.

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.

We have defense products in 110 countries around the world.

Increasingly, we are supplying vehicle propulsion solutions for international tracked vehicles, such as light tracked personnel carriers, armored fighting vehicles, heavy tracked artillery systems, and Main Battle Tanks.

Our defense products are manufactured at our headquarters in Indianapolis and by our licensees internationally for export world-wide.

Globally, we face competition primarily from Renk AG/Renk America, SAPA S.p.A, ST Kinetics and QinetiQ Group plc for supply of tracked vehicle propulsion solutions.

Additionally, we face competition from ZF in certain defense wheeled vehicles using automatic transmissions and from several AMT suppliers.

Service Parts, Support Equipment and Other

5 unchanged sentences

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.

15 unchanged sentences

Wheeled Defense

Day Cab Tractors

Coach and Transit Bus

Day Cab Tractors

Fire and Emergency

Wheeled Defense

Articulated Dump Truck

Day Cab Tractors

Articulated and Wide Body

Mining Dump Trucks

Coach and Transit Bus

Day Cab Tractors

Fire and Emergency

4 unchanged sentences

Coach and Transit Bus

Day Cab Tractors

Fire and Emergency

Line-Haul Tractors

School and Shuttle Bus

10 unchanged sentences

Rigid Dump Trucks

Hydraulic Fracturing Equipment

Defense Products

6 unchanged sentences

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 day cab tractor 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 family of products.

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.

Further, we are developing new products and technology to improve the fuel efficiency and fuel economy of our conventional products, including by allowing engines to operate more efficiently and at lower speeds to avoid consuming fuel without compromising performance, and to expand our portfolio of electric hybrid and fully electric propulsion solutions.

Some examples of these development efforts in 2022 include the expansion of our eGen portfolio of electric propulsion solutions through the addition of the 130S fully electric axle and the eGen Flex, our next generation electric hybrid system capable of full electric vehicle operation for up to 50% of a bus’s route depending on duty-cycle.

Our product development and engineering efforts in 2022 also extended into our off-highway and Defense end-markets through the launch of FracTran, a more efficient and higher-horsepower hydraulic fracturing transmission, and the development of eGen Force, a new cross-drive transmission for tracked applications that enables electric hybrid propulsion and electric only silent maneuverability.

In 2022, we also began production of our next generation of electronic controls that are capable of delivering advanced communications, functional safety, cybersecurity and over-the-air programming.

Sales and Marketing Organization

3 unchanged sentences

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

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

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

12 unchanged sentences

Our primary manufacturing facilities, located in Indianapolis, Indiana, consist of approximately 2.3 million square feet of usable manufacturing space in six plants.

We also have established customization and parts distribution in the United States, The Netherlands, Brazil, China, Hungary, India and Japan.

Our high volume on-highway products are produced in multiple global locations (United States, Chennai, India and Szentgotthard, Hungary), while off-highway, electric hybrid propulsion and defense tracked products are produced in Indianapolis and fully electric propulsion solutions are produced in Auburn Hills, Michigan.

In addition, our aluminum die cast components are produced in Lewisburg, Tennessee.

We also have established customization and parts distribution in the United States, the Netherlands, Brazil, China, Hungary, India and Japan.

Suppliers and Raw Materials

14 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.

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.

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

Human Capital

15 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 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.

Our inclusion and diversity efforts in 2022 included the participation by 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 continuing our 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 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.

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.

For 2022, we achieved an overall recordable rate of 2.26, meaning that for every 100 employees, 2.26 employees incurred an injury that resulted in recordable medical treatment and the number of lost work days was 0.87, meaning that for every 100 employees, 0.87 individuals experienced an incident that resulted in days away from work.

7 unchanged sentences

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.

Environmental Protection Agency 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.

16 unchanged sentences

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 (the “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.

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 https://ir.allisontransmission.com as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC.

We have included our website address throughout this filing as textual references only.

2 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