Rolls-Royce Allison - Company Profile, Information, Business Description, History, Background Information on Rolls-Royce Allison

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P.O. Box 420
Indianapolis, Indiana 46241

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History of Rolls-Royce Allison

Rolls-Royce Allison, owned by the London-headquartered Rolls-Royce plc, designs, manufactures, and services gas turbine engines for both military and commercial aerospace applications. Rolls-Royce Allison serves as the lead organization for three of Rolls-Royce's 13 business units: Corporate and Regional Airlines; Helicopters; and Defense North America. The company has four facilities in Indianapolis, comprising more than 3.5 million square feet, and one facility in Evansville, Indiana. A subsidiary of Rolls-Royce Allison, the Allison Advanced Development Company, is co-located with Allison's Indianapolis facilities and focuses on research and development of defense-related products for the U.S. government.

The Early Days: Race Cars and Army Business

Rolls-Royce Allison has its roots in one of Indiana's most beloved institutions: auto racing. The company's founder, James A. Allison, was one of the three original developers of the Indianapolis Motor Speedway, home of the famed Indy 500. Allison and his cohorts set out to build the world's finest racetrack--one that would be used for testing by automobile manufacturers, thus turning Indianapolis into a major auto manufacturing hub. When the track was completed in 1909 and the auto racing began, Allison developed his own race team, featuring a young driver named Eddie Rickenbacker.

It is perhaps not surprising, given his evident love of all things car-related, that Allison's next venture would be an auto machine shop. This shop, the forerunner to Rolls-Royce Allison, opened in 1915 to redesign and refit domestic and foreign cars for racing. Named the Allison Speedway Team Co., it employed 20 of the most skilled mechanics and engineers that Allison could locate. It was not long before the shop's pioneering inventiveness in piston engine design and manufacturing garnered a reputation.

When the United States entered World War I in 1917 its reputation for innovation landed the company, by then called Allison Engineering Company, a subcontract to do engineering work for the military. As the United States prepared to enter the battle, the Army had encountered difficulties with its newly designed "Liberty" aircraft engine, an engine that incorporated design elements from several automotive engines. Tapping Allison's prowess with high-performance automotive engines, the Army commissioned the company to revamp the prototype Liberty engines. Allison came through, improving the engine design with new crankshaft bearings, better propeller reduction gearing, and a new type of supercharger.

Late 1920s Through the Early 1950s: New Owners and Wartime Contracts

James Allison died in 1928, and his company was purchased by his former racecar driver, Eddie Rickenbacker. Rickenbacker had left racing in 1917 to join the Army and had distinguished himself as a fighter pilot during World War I, earning the prestigious title "Ace of Aces." Upon his return from the war, he had established a short-lived car manufacturing company, the Rickenbacker Motor Company, which closed after only six years of operation. In 1927, the year before he acquired Allison, Rickenbacker had made a substantially higher-profile acquisition: he had purchased the Indianapolis Motor Speedway. Although he would remain in control of the Speedway until after World War II, his tenure as Allison Engineering's leader was brief; in 1929 he sold the company to Fisher Brothers Investment Trust of Detroit.

Fisher Brothers did not hang on to the engine maker long, either. In just a few months, the Detroit firm turned the company over to the automotive giant, General Motors Corp. Under General Motors' ownership, Allison Engineering became the Allison Division.

In the years between GM's purchase of Allison and America's entry into World War II, the Allison Division grew steadily. By 1941, the company had three Indianapolis plants, which employed more than 12,000 workers. When the United States joined the war, the size and the nature of Allison's business made it a prime candidate to help meet burgeoning defense needs. The Allison Division contributed to the war effort by designing and manufacturing the V-1710 aircraft engine--a 12-cylinder, 1200 shp liquid-cooled, V-1710 engine that powered such famous wartime fighters as the Flying Tigers P-40, the Lockheed P-38, and the P-51 Mustang.

Postwar, Allison continued to break new ground in engine design. During the late 1940s and early 1950s, the company designed and produced some of the earliest "turbojet" engines&mdash-gines in which air from the atmosphere was compressed for combustion by a turbine-driven compressor. One of the turbojets Allison produced during this period was the T56. This 2500 shp turboprop was later to become a 5000 shp engine that would remain in production for 40 years.

1960s--80s: Division Switching

Between 1963 and 1983, the Allison Division felt the impact of a series of corporate reshufflings. In 1963 the company became a part of General Motors' Power Products and Defense Operations Group. In 1970 Allison again was repositioned, merging with Detroit Diesel to form the Detroit Diesel Allison Division. This newly formed division developed and manufactured turbine and diesel engines, generators, and transmissions. The division's aerospace segment made various types of engines for a number of applications--including small turboshaft engines for helicopters and other aircraft, large turboprop engines for military and civilian transports, jet engines for military attack planes, industrial turbine engines for power generation and oil pipeline uses, and turbines for the marine industry.

In 1983 General Motors separated Allison from Detroit Diesel, making it an independent division--the Allison Gas Turbine Division. Throughout the remainder of the decade and into the 1990s, the division made deeper inroads into the military engine market. One of the most significant of these inroads came in when the U.S. Navy chose Allison's 6000 shp class turboshaft T406 engine to power its innovative V-22 Osprey. The V-22 was a tiltrotor aircraft--a unique, flexible hybrid of helicopter and jet. The craft could take off and land like a helicopter, then convert in the air to a high-speed turboprop airplane, capable of high altitude flight. Each V-22, which received final Defense Department approval for production in April of 1997, carried two Allison T406 engines.

A second important military contract teamed Allison with a division of AlliedSignal Aerospace Company to design and produce an engine for the Army's RAH-66 Comanche reconnaissance and attack helicopter. The Comanche, which was still in the design and test stages, was scheduled to go into full-rate production in 2006. Allison and AlliedSignal designed the T800 turboshaft engine for the new aircraft. In addition to designing military engines, Allison was working on two new engines for civilian aircraft as well: the AE 2100 turboprop and the AE 3007 turbofan, based on the military version of the T406.

1993--95: Flying Solo

In the early 1990s General Motors decided to focus its attentions more completely on the automobile business and, therefore, to shed its non-auto divisions, including Allison. The company, which employed approximately 4,700 employees and had sales of $700 million, went up for bid in April of 1992. Through the spring and summer of 1992, GM received--and rejected--three offers for Allison, including one from General Electric Co. Subsequently, however, a bid for $310 million was accepted from a New York investment firm. The firm, Clayton Dubilier & Rice, specialized in buying detached divisions of large industrial companies and positioning them to stand alone. Under the terms of the buyout, Clayton Dubilier & Rice would hold between 80 and 90 percent of the company's ownership. Allison's senior management would have ten percent; the remainder of shares was to be offered later to other key employees.

The deal was finalized in December of 1993, ending Allison's 64-year affiliation with General Motors. Although the company had a new name--Allison Engine Company--the faces on its management team were familiar. The CEO, F. Blake Wallace, had been with the company for 11 years, serving as the general manager at the Allison division and as a GM vice-president. Three other long-term Allison managers--Wilson Burns, Frank Verkamp, and Mike Hudson--were made executive vice-presidents. Wallace was pleased with the outcome of the sale negotiations and the fact that the company was to retain much of its essence. "It is very satisfying after two years of difficult transition, to come out where the company is whole, has been kept from being dismembered or sold to a competitor who would take our work elsewhere," he was quoted as saying in a March 1994 Indiana Business Magazine article. "We pretty well kept the team together, kept the strategy together. I like that extremely well."

The transition was not without its casualties, however. Immediately after completing the purchase from General Motors, Allison terminated employment for almost 500 of its hourly workers, many of whom worked on a component line that had supplied other GM divisions.

1995--97: Joining Forces with Rolls-Royce

Allison Engine Company's tenure as an independent business was brief. In 1995, after holding it for little more than a year, Clayton Dubilier & Rice sold the company to Britain's Rolls-Royce plc for $525 million. Rolls-Royce--which, despite the shared name, was not affiliated with the luxury car-maker--was the third largest producer of aircraft engines in the world. It also manufactured power generation systems and marine propulsion and oil and gas engines in its smaller Industrial Power division.

Having already done business under at least six different monikers, Allison once again was renamed and was absorbed into Rolls-Royce's Aerospace division. At the time of the Allison purchase, the two companies established the Allison Advanced Development Company (AADC) as a wholly owned subsidiary of Rolls-Royce Allison. The AADC was formed to perform defense-related research, design, and development work for U.S. government agencies. It was structured specifically to adhere to Department of Defense security requirements and occupied secure facilities that were separate from its parent company's operations.

The following year, Rolls-Royce put plans for its newly purchased subsidiary into action when it awarded Allison new production work. In September of 1996, Rolls-Royce Allison announced that it would begin producing Adour F405 engines, which were used in the U.S. Navy's T-45 Goshawk training planes. Rolls Royce's Bristol, England plant, which was producing all of its Adour engines at the time, would continue to produce the engines for British military applications. Allison also announced that it had been assigned the production of turbine blades, gears, and other parts for Rolls-Royce's RB211 engine--work that previously had been slated for outsourcing. According to a September 27, 1996 article in the Indianapolis Star/News, Allison management felt that being awarded the new work represented a "vote of confidence" by Rolls-Royce.

Production of the RB211 components was scheduled to begin in 1997, with work on the Adour engines to start the following year. Rolls-Royce Allison, which had a work force of approximately 4,300, anticipated that the new production work would result in the addition of between 700 and 850 new jobs over the course of four years.

Rolls-Royce Allison received another shot in the arm in 1997, when it received two major contracts from Lockheed Martin and AMR Eagle, a commuter service affiliate of American Airlines. The order from Lockheed Martin, valued at $500 million, was for Allison's AE 2100D2 turboprop engine, which would be used to power Lockheed's new C-27J Spartan aircraft. The AMR Eagle order, valued at more than $275 million, was for Allison AE 3007A1 engines to be used in 42 EMB-145 Embraer regional jets.

1998: Top-Down Changes

The year 1998 ushered in structural changes for Rolls-Royce--which ultimately meant shakeups in Rolls-Royce Allison as well. Rolls-Royce reorganized its entire business into 13 market-based units, with each unit having an increased autonomy to oversee everything from development to marketing. Rolls-Royce Allison became the home of three of these new units: Corporate and Regional Airlines, Helicopters, and Defense North America. The Helicopters division was charged with responsibility for all Rolls-Royce helicopter products, both civilian and military. Defense North America would work with all North American military and military-related customers, including the U.S. and Canadian military agencies. The Corporate and Regional Airlines unit would supply engines to be used in commuter airlines and company-owned aircraft.

Under the new arrangement, Allison's president and CEO, S. Michael Hudson, had the responsibility of running the Helicopter and Defense North America units, and John Ferrie, the company's executive vice-president of business operations, assumed control of the Corporate and Regional Airlines unit. Other changes were afoot as well. Since purchasing Allison in 1995, Rolls had been concerned with the subsidiary's level of efficiency--and management's efforts to improve productivity had failed to completely eradicate the problem. The parent company's new plan addressed the efficiency issue by calling for major changes in the way Rolls-Royce Allison operated. The parent company's goals included consolidating factory operations into a much smaller physical area, freeing up approximately half of the manufacturing facility's square footage. The vacated space would then be used to house operations that were performed offsite in rented facilities. Another major change struck at the very core of Allison's manufacturing methods. Rolls planned to implement a "cell" system of manufacturing, in which teams of employees performed multiple tasks.

Rolls-Royce Allison's reaction to the planned upheavals was generally positive. According to a July 2, 1998 article in the Indianapolis Star/News, employees felt that the restructuring proved Rolls was committed to retaining Allison. "Employees always wondered were we going to be integrated or set up for another sale," Lee Rhyant, Allison's vice-president of production operations, was quoted as saying. He called the restructuring a "comfort zone."

Looking Ahead

At the beginning of 1999, Rolls-Royce Allison had 5,100 employees and sales of $1.2 billion--with sales of $1.3 billion projected for the coming year. Company management anticipated that if the previous year's Rolls-mandated changes went well and operational efficiency was improved, there was potential for growth. One of the most significant growth possibilities in the company's near future was the building of a worldwide training center in Indianapolis. The training center would be used by Rolls-Royce employees, customers, and vendors who produced, operated, and serviced Rolls' aircraft engines. Talks between Rolls-Royce and its Allison subsidiary were still in the preliminary stages.

Principal Subsidiaries: Allison Advanced Development Company.

Additional Details

Further Reference

Johnson, J. Douglas, "Allison Takes Off," Indiana Business Magazine, March, 1994, pp. 8--13.Koenig, Bill, "Allison Engine To Add Up to 850 Jobs," Indianapolis Star/News, September 27, 1996.----, "Allison Gas Turbine Deal Unveiled," Indianapolis Star, September 16, 1993.----, "It's an Engine for Growth," Indianapolis Star/News, July 2, 1998.O'Malley, Chris, "Allison Engine Begins Life Anew," Indianapolis News, December 2, 1993.

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