General Motors on Thursday said it would sell its Allison Transmission commercial and military business to The Carlyle Group and Onex Corporation for approximately $US5.6bn.

The sale agreement covers substantially all of Allison Transmission, including seven manufacturing facilities in Indianapolis, Indiana and its worldwide distribution network and sales offices.

The production facility in Baltimore, Maryland, dedicated to the production of conventional and hybrid 2Mode transmissions used in GM’s retail pick-up trucks and SUVs and will remain with GM.

The transaction is structured to preserve GM’s and Allison’s competitive strengths in their respective product lines and is expected to close as early as the third quarter of this year pending union and regulatory approval.

“This is another important step to strengthen our liquidity and provide resources to support our heavy investments in new products and technology,” said Rick Wagoner, GM chairman and CEO.

“At the same time, this sale will position Allison for growth with strong partners in Carlyle and Onex, which have well-established track records of working effectively with their management teams, unions and employees,” Wagoner added.

Seth Mersky, managing director of Onex said, “We believe Allison is poised for excellent growth in its sector with the increasing rate of adoption of automatic transmissions in commercial vehicles both in North America and abroad.

“Allison’s exceptional reputation for product quality and reliability, its strong brand and talented management team provide it with a competitive advantage that will allow the company to capture that growth.”

Carlyle managing director Greg Ledford said, “We are excited to partner with Onex, the Allison management team and employees as we grow this iconic brand and support its transition to a stand-alone business.”

The Carlyle Group is a global private equity firm with $58.5bn under management. Carlyle invests in buyouts, venture & growth capital, real estate and leveraged finance.

Onex Corporation is one of Canada’s largest corporations and makes private equity investments through its Onex Partners and Oncap family of funds.