Landmark Deal a Major Coup for British Automotive Engineering Industry

LEYLAND, UNITED KINGDOM - March 16, 2009: In a deal described as a major coup for the British automotive engineering industry, Torotrak plc has secured a landmark global licensing agreement with the world’s leading designer, manufacturer and supplier of medium- and heavy-duty automatic gearboxes for the commercial vehicle sector, Allison Transmission, Inc.

Under the agreement, announced today (Tuesday, March 17th, 2009), the American giant will take an approximate 10% equity stake in Lancashire-based Torotrak, the world leader in full-toroidal traction-drive transmission technology for the automotive, commercial vehicle, off-highway and outdoor power equipment markets. Torotrak’s Chief Executive, Dick Elsy, described it as a landmark deal for the company and said the news would help to lift some of the gloom surrounding the British automotive industry, currently deep in recession.

Allison’s equity stake, coupled with initial licence payments, involves an immediate cash injection of £7.1m into the British firm, which is fully listed on the London Stock Exchange. In return Allison has gained licence rights to Torotrak’s innovative transmission technology as well as options over global manufacturing and sales exclusivity in the small to medium truck and bus market, with similar options relating to large trucks and buses at a later date. The total value of the licence fees to be paid to Torotrak under the agreement, should Allison take up all of the licensing and exclusivity options on offer, will be in the region of £18m to £28m; additionally, royalty payments will be made to Torotrak for every Allison transmission sold under the new arrangement.

Development work on a new medium-duty truck transmission will commence immediately with Torotrak supporting Allison in the programme under a separate engineering agreement.

The total deal, the largest ever secured by Torotrak, opens up major new markets for the company’s technology in the truck and bus sectors – currently experiencing a clear upturn in demand for gear shift automation – and builds on agreements already concluded with Tata Motors Ltd and a major unnamed European truck manufacturer.

Allison, formerly a division of General Motors Corporation, was acquired by affiliates of The Carlyle Group and Onex Corporation in August, 2007. Founded in 1915, the Allison business is headquartered in Indianapolis, Indiana, U.S.A., and employs approximately 2,700 people. It is the world leader in the design, manufacture and sale of commercial-duty automatic transmissions, hybrid propulsion systems, and related parts and services for on-highway trucks and buses, off-highway equipment and military vehicles. Allison products are specified by over 250 of the world’s leading vehicle manufacturers and are used in many market sectors including bus, refuse, fire, construction, distribution, mining, energy, military and specialist applications. Regional headquarters with dedicated support staff are located in Brazil, The Netherlands, India, China, and Japan. With a global presence in 80 countries, Allison has over 1,500 distributor and dealer locations worldwide.

The new partnership gives Allison access to Torotrak’s specialist design and development skills covering Infinitely Variable Transmissions (IVTs) and Continuously Variable Transmissions (CVTs). The UK company’s technology offers significant opportunities for efficiency gains, fuel savings and emission reductions, together with a seamless, highly refined drive experience.

Torotrak Chief Executive, Dick Elsy, described the agreement as a major coup for the British automotive engineering industry at a difficult time for both manufacturers and component suppliers.

He said: “This is a very significant endorsement of our technology. Allison is the world leader in commercial-duty automatic transmissions and this agreement provides us with access to large production volumes in this high value sector. To be announcing news like this in the teeth of an economic crisis speaks volumes for Torotrak and the value that is now being placed on our technology.”

Mr Elsy, who took the helm at Torotrak in 2003 after holding senior positions with Jaguar, Land Rover and BMW, said the deal marked a major investment in ‘green technology’. “It underlines Britain’s ability to deliver innovative and affordable engineering solutions at a time when all vehicle manufacturers are seeking to cut emissions, boost fuel economy and further refine transmission technology,” he explained.

Allison Transmission Chairman and CEO, Lawrence E Dewey, added: “We are excited about working with Torotrak to incorporate their unique technology into a new family of products that will offer our customers around the world new features and benefits.”