Labor Deal Signing Bonuses Dampen Record Allison Sales

US Class 8 Vocational Truck Demand Drives Transmission Sales Higher in Q1
Allison Transmissions
Demand is expected to remain strong in the second quarter of 2024. (Allison Transmission)

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Signing bonuses linked to a labor contract ratified by United Auto Workers members in January hurt profits at Allison Transmission Holdings in the first quarter of 2024, even as the company posted record sales on the back of U.S. Class 8 vocational truck demand.

Indianapolis-based Allison posted net income for the quarter of $169 million, down slightly from $170 million, it said late April 25, due to the $14 million one-time hit from the signing bonuses.

However, earnings per share increased to $1.90 per diluted share from $1.85 after the company bought back shares during the past year. At the end of Q1, Allison had 89 million shares outstanding, compared with 92 million shares a year earlier.

“In the first quarter, we generated record net sales, driven by strong global on-highway demand and strength in our outside North America off-highway and defense end markets,” CEO David Graziosi said in a statement accompanying the results.

Allison CEO David Graziosi


“Robust demand for Class 8 vocational and medium-duty trucks drove record revenue in our North America on-highway end market, while strength in Asia drove record first-quarter revenue in our outside North America on-highway end market,” he added.

The company’s sales in the most recent quarter rose 6.5% to $789 million from $741 million in the year-ago period.

Allison’s North America on-highway sales totaled $420 million, an increase of 11.7% compared with $376 million in the same period a year earlier, largely on the back of strong demand for Class 8 vocational and medium-duty trucks and price increases, it said.

Some of that was because pent-up demand seen in 2023 in the vocational sector carried over into the start of 2024, Graziosi said during the company’s earnings call. Allison Earnings Q1 2024

Demand is expected to remain strong in the second quarter of 2024, before weakening slightly as the second half of the year progresses due to seasonal reasons, he told analysts.

Allison continues to be extremely positive about the U.S. vocational and medium-duty markets at the moment.

“Our expectation, currently, based on what we’re hearing from [original equipment manufacturers] and end users, is we expect it to continue to be a very busy year on the vocational front,” Graziosi said during the call.

“Medium-duty had also a level of lack of supply post the pandemic,” he said, adding: “That market improved in terms of supply-demand balance. We’re seeing fleets do some level of resizing. That’s not surprising, frankly, when you start to look at the developments in certain segments of the medium-duty market.”

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“So that is firming up a bit in terms of supply/demand, but continues to be a relatively busy market for us,” he said.

“Our read — through our sales force — is that [dealerships’] inventory is still pretty tight,” added Chief Financial Officer Fred Bohley.

Allison’s defense sector sales also jumped in Q1, increasing $21 million or 77.8% to $48 million from $27 million in the year-ago quarter, which Allison said was the result of higher demand for tracked vehicle applications.

Sales at Allison’s outside North America on-highway operations — its second-largest end market — totaled $115 million, compared with $108 million a year earlier. The 6.5% increase was largely driven by higher demand in Asia and price increases on certain products, although this was partially offset by lower demand in Europe, it said.