GM Sells Allison Transmission

Carlyle Group and Onex Corp. will pay $5.6 billion.
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The private-equity gauntlet swallowed another slice of the U.S. auto industry Thursday, with

General Motors

(GM) - Get Report

agreeing to sell Allison Transmission to The Carlyle Group and

Onex Corp.

for $5.6 billion.

The deal marks another step in GM's restructuring plan to shed some assets and build up cash reserves that it can use to revamp its product line and better compete with foreign-based competitors.

It's also another foray for private-equity groups into the depressed domestic auto industry, where many investment firms flush with capital and easy access to cheap credit have found buyout targets.

The Allison sale, expected to close in the third quarter pending regulatory approval, includes seven manufacturing facilities in Indianapolis and a group of distribution centers and sales offices. A Baltimore plant used for the production of conventional and hybrid transmissions used in GM's pick-up trucks and SUVs and will remain with the automaker.

"This is another important step to strengthen our liquidity and provide resources to support our heavy investments in new products and technology," said GM in a press release. "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."

GM had said in January that it was looking to sell Allison, which makes transmissions for commercial trucks, buses and military vehicles.

Shares of GM recently were up 62 cents, or 1.7%, to $38.03.