ALSN

MKT CAP $9.2BP/E 17.7DIV YIELD 1.01%FCF YIELD 8.04%REV TTM $4.4B +37.6%NET INCOME $529M −30.6%NET DEBT $2.5B52W 79.27 – 136.00SEC XBRL · TTM TO Invalid Date

How ALSN rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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Risk Factors Summary The following is a summary of the principal risks that could adversely affect our business, results of operations and financial condition.
Risks Related to Our Business and Operations • We participate in markets that are competitive, and our competitors’ actions could have a material adverse effect on our business, results of operations and financial condition. • Volatility in and disruption to the global economic environment may have a material adverse effect on our business, results of operations and financial condition. • Increases in cost, disruption of supply or shortage of raw materials or components used in our products could harm our business and profitability. • Prolonged inflation could result in higher costs and decreased margins and earnings. • Labor cost inflation and employee attraction and retention could have an adverse effect on our business, results of operations and financial condition. • Certain of our end users operate in highly cyclical industries, which can result in uncertainty and significantly impact the demand for our products, which could have a material adverse effect on our business, results of operations and financial condition. • In 2025, our sales were concentrated among our top five OEM customers.
The loss or consolidation of any one of these customers or the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our results of operations and financial condition. • Labor unrest could have an adverse effect on our business, results of operations and financial condition. • We are subject to cybersecurity risks to operational systems, security systems, and infrastructure owned by Allison or third-party vendors or suppliers. • Geopolitical risks may have an adverse effect on our results of operations and financial condition. • Our brand and reputation are dependent on the continued participation and level of service of our numerous independent distributors and dealers. • In the event of a catastrophic loss of one of our key manufacturing facilities, our business would be adversely affected.
Strategic Risks • Our success depends on research and development efforts, and we may not be successful in developing or introducing new products and technologies and responding to customer needs. • Our long-term growth prospects and results of operations may be impaired if the rate of adoption of fully automatic transmissions in commercial vehicles outside North America does not increase. • Our international operations, in particular our emerging markets, are subject to various risks which could have a material adverse effect on our business, results of operations and financial condition. • Fluctuations in foreign currency exchange rates could adversely affect our results. • We may not be able to identify or consummate acquisitions or partnerships or achieve expected benefits from or effectively integrate acquisitions or partnerships, which could harm our growth.
Risks Related to our Acquisition of the Acquired Off-Highway Business • We expect to incur significant costs in connection with the integration of the Acquired Off-Highway Business. • Any failure to integrate the Acquired Off-Highway Business and its operations with ours successfully in the expected time frame may adversely affect our results of operations and financial condition. • We may fail to realize all of the anticipated benefits from the integration of the Acquired Off-Highway Business and its operations after the acquisition or fail to effectively manage our expanded operations. • Our future results may suffer if we do not effectively manage our expanded operations.
Legal and Regulatory Risks • Any events that impact our brand name could have an adverse effect on our reputation, cause us to incur significant costs and negatively impact our business, results of operations and financial condition. • Many of the key patents and unpatented technology we use in our business are licensed to us, not owned by us, and our ability to use and enforce such patents and technology is restricted by the terms of the license. • We rely on unpatented technology, which exposes us to certain risks. • Environmental, health and safety laws and regulations may impose significant compliance costs and liabilities on us. • Our business and financial results may be adversely affected by government contracting risks. • Provisions of our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law might discourage, delay or prevent a change of control of our company or changes in our management and, as a result, depress the trading price of our common stock.
Risks Related to Our Indebtedness and Financial Risks • Our indebtedness could adversely affect our financial health, restrict our activities and affect our ability to meet our obligations. • To service our indebtedness, we will require a significant amount of cash, and our ability to generate cash depends on many factors beyond our control. • Despite current indebtedness levels, we and our subsidiaries may still be able to incur additional indebtedness, which could further exacerbate the risks associated with our substantial financial leverage. • Our pension and other post-retirement benefits funding obligations could increase as a result of a variety of factors. • An impairment in the carrying value of goodwill, other intangible assets or long-lived assets could negatively affect our consolidated results of operations and net worth.
For a more complete discussion of the material risks facing our business, see below.
Any inability of customers to pay us for our products and services, or any demands by suppliers for different payment terms, may materially and adversely affect our business, results of operations and financial condition.
The prices for and availability of these raw materials fluctuate depending on market conditions, including government trade policies and tariffs.
Even in the event that increased costs can be passed through to customers, our gross margin percentages would decline as the recovery of these costs from customers generally lags six to 12 months.
In 2025, approximately 75% of our total spending on components was sourced from approximately 40 suppliers, many of which are the single source for such components.
As of December 31, 2025, all of the suppliers from which we purchase materials and components used in our business were fully validated suppliers, meaning the suppliers’ manufacturing processes and inputs have been validated under a production part approval process (“PPAP”).
An increase in the cost or a sustained interruption in the supply or shortage of some of these raw materials or components that may be caused by a deterioration of our relationships with suppliers, adverse geopolitical events such as the crisis in the Red Sea, events such as natural disasters and extreme weather events, which may increase in frequency and intensity as a result of climate change, power outages, labor strikes and public health crises, such as pandemics and epidemics, could negatively impact our business, results of operations and financial condition.
While we may experience the supply chain constraints mentioned above across all our product lines, the impacts to our customers are likely to be more pronounced in our lower volume product lines, including those supplied to the Allison Transmission Defense and Allison Transmission Off-Highway end markets.
Our inability to do so could harm our business and results of operations.
In addition, government trade policies and tariffs have increased, and could continue to increase our manufacturing costs, and we may not be able to fully offset such higher costs through price increases.
In addition, we continue to experience increased labor costs, including significant labor cost increases under our collective bargaining agreement with the UAW, which will continue to impact our results of operations.
Some of the markets in which we operate, including agriculture, energy, mining, construction, material handling, distribution and motorhomes, exhibit a high degree of cyclicality.
In 2025, our sales were concentrated among our top five OEM customers.
The loss or consolidation of any one of these customers or the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our results of operations and financial condition.
For the years ended December 31, 2025, 2024 and 2023, our top five OEM customers accounted for approximately 52%, 55% and 52% of our net sales, respectively.
Our top three customers, Daimler AG, PACCAR Inc. and Traton SE, accounted for approximately 18%, 11% and 10%, respectively, of our net sales during 2025.
The loss of, or consolidation of, any one of these customers or a significant decrease in business from one or more of these customers, could harm our business, results of operations and financial condition.
In addition, the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our business, results of operations and financial condition.
As of December 31, 2025, approximately 49% of our U.S. employees, representing approximately 43% of our total employees, were represented by the UAW and are subject to a collective bargaining agreement.
In addition, approximately 68% of the U.S. employees that were acquired with the Acquired Off-Highway Business are represented by the UAW or the USW and are subject to collective bargaining agreements.
Any new collective bargaining agreements we negotiate with the UAW or the USW to replace the existing collective bargaining agreements upon their expiration may result in increased costs to us, in particular labor costs, which could have an adverse effect on our results of operations.
We are subject to cybersecurity risks to operational systems, security systems, and infrastructure owned by Allison or third-party vendors or suppliers.
The techniques used by threat actors change frequently and are often difficult to detect.
We also deploy scanning tools in our systems that allow us to identify and track known security vulnerabilities, but we cannot guarantee that patches or mitigation measures will be applied in all instances before such vulnerabilities can be exploited by a threat actor.
As a provider of defense products and services to the U.S. government and foreign governments, we are subject to a heightened risk of cyberattacks, including by foreign governments, violent extremist organizations, and transnational criminal organizations.
In addition, because certain of our systems are integrated with third-party (e.g., dealers) systems and technology, the circumvention or failure of our cybersecurity measures could compromise the confidentiality, integrity, and availability of those third-party systems, and vice versa.
We work with a network of approximately 1,500 independent distributors and dealers (as of December 31, 2025) that provide post-sale service, service parts and support equipment.
While we manufacture our products in many facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our manufacturing facilities due to accident, labor issues, weather conditions, acts of war, political unrest, terrorist activity, natural disaster or extreme weather events, which may increase in frequency and intensity as a result of climate change, public health crises, such as pandemics and epidemics, or otherwise, whether short- or long-term, would have a material adverse effect on our business, results of operations and financial condition.
Our most significant concentration of manufacturing is around our corporate headquarters in Indianapolis, Indiana, where we produced approximately 85% of our transmissions in 2025.
We also acquired approximately 46 manufacturing and assembly facilities as part of the acquisition of the Acquired Off-Highway Business, located in approximately 22 countries.
In addition, an increased adoption of electric propulsion solutions could result in lower demand for our fully automatic transmissions and, over time, the demand for related service parts and support equipment, which would impact our margins.
If we experience significant delays or increased costs in the production, launch or acceptance of our products and technologies, our business, results of operations and financial condition may be materially adversely affected.
Outside-North America net sales represented approximately 24% of our net sales for 2025.

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The prices for and availability of these raw materials fluctuate depending on market conditions.
Even in the event that increased costs can be passed through to customers, our gross margin percentages would decline as the recovery of these costs from customers generally lags six to twelve months.
In 2024, approximately 75% of our total spending on components was sourced from approximately 40 suppliers, many of which are the single source for such components.
All of the suppliers from which we purchase materials and components used in our business are fully validated suppliers, meaning the suppliers’ manufacturing processes and inputs have been validated under a production part approval process (“PPAP”).
An increase in the cost or a sustained interruption in the supply or shortage of some of these raw materials or components that may be caused by a deterioration of our relationships with suppliers, adverse geopolitical events such as the crisis in the Red Sea, events such as natural disasters and extreme weather events which may increase in frequency and intensity as a result of climate change, power outages, labor strikes and public health crisis such as pandemics and epidemics or the like could negatively impact our business, results of operations and financial condition.
While we may experience the supply chain constraints mentioned above across all our products lines, the impacts to our customers are likely to be more pronounced in our lower volume product lines, including those supplied to the Defense and Off-Highway end markets.
In addition, we continue to experience increased labor costs, including significant labor cost increases under our new collective bargaining agreement with the UAW, which will continue to impact our results of operations.
Our inability to do so could harm our results of operations.
Any inability of customers to pay us for our products and services, or any demands by suppliers for different payment terms, may materially and adversely affect our results of operations and financial condition.
Some of the markets in which we operate, including energy, mining, construction, distribution and motorhomes, exhibit a high degree of cyclicality.
Our sales are concentrated among our top five OEM customers and the loss or consolidation of any one of these customers or the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our results of operations and financial condition.
For the years ended December 31, 2024, 2023 and 2022, our top five OEM customers accounted for approximately 55%, 52% and 51% of our net sales, respectively.
Our top three customers, Daimler AG, PACCAR Inc. and Traton SE, accounted for approximately 20%, 13% and 11%, respectively, of our net sales during 2024.
The loss of, or consolidation of, any one of these customers, or a significant decrease in business from, one or more of these customers could harm our business.
In addition, the discontinuation of particular vehicle models for which we are a significant supplier could reduce our net sales and have a material adverse effect on our results of operations.
As of December 31, 2024, approximately 50% of our U.S. employees, representing approximately 44% of our total employees, were represented by the UAW and are subject to a collective bargaining agreement.
Any new collective bargaining agreement we negotiate with the UAW to replace the existing collective bargaining agreement upon its expiration may result in increased costs to us, in particular labor costs, which could have an adverse effect on our results of operations.
We are subject to cybersecurity risks to operational systems, security systems, or infrastructure owned by Allison or third-party vendors or suppliers.
The techniques used by threat actors change frequently and may be difficult to detect for long periods of time.
In addition, as a provider of defense products and services to the U.S. government and foreign governments, we are subject to a heightened risk of cyberattacks, including by foreign governments, violent extremist organizations, and transnational criminal organizations.
We work with a network of approximately 1,600 independent distributors and dealers that provide post-sale service, service parts and support equipment.
While we manufacture our products in several facilities and maintain insurance covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a portion of one of our manufacturing facilities due to accident, labor issues, weather conditions, acts of war, political unrest, terrorist activity, natural disaster or extreme weather events, which may increase in frequency and intensity as a result of climate change, public health crises, such as pandemics and epidemics or otherwise, whether short- or long-term, would have a material adverse effect on our business, results of operations and financial condition.
Our most significant concentration of manufacturing is around our corporate headquarters in Indianapolis, Indiana, where we produce approximately 90% of our transmissions.
In addition, the increased adoption of electric propulsion solutions could result in lower demand for our fully automatic transmissions and, over time, the demand for related service parts and support equipment, which would impact our margins.
If we experience significant delays or increased costs in the production, launch or acceptance of our products and technologies, our net sales and results of operations may be materially adversely affected.
Outside-North America net sales represented approximately 23% of our net sales for 2024.
Most of our operations are in the U.S., but we also have manufacturing and customization facilities in India and Hungary with a services agreement with Stellantis NV and customization capability in Brazil, the Netherlands, China and Japan.
Department of the Treasury, and other trade protection regulations and measures; • political risks, including increased trade protectionism and risks of loss due to civil disturbances, acts of terrorism, acts of war, guerilla activities and insurrection; • unstable economic, financial and market conditions and increased expenses as a result of inflation, higher energy costs or higher interest rates; • difficulties in enforcement of third-party contractual obligations and intellectual property rights and collecting receivables through foreign legal systems; • difficulty in staffing and managing international operations and the application of foreign labor regulations; • differing local product preferences and product requirements; • fluctuations in currency exchange rates to the extent that our assets or liabilities are denominated in a currency other than the functional currency of the country where we operate; • potentially adverse tax consequences from changes in tax laws, requirements relating to withholding taxes on remittances and other payments by subsidiaries and restrictions on our ability to repatriate dividends from our subsidiaries; and • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Potential and completed acquisitions and partnerships involve many risks that could have an adverse effect on our business, financial condition or results of operations, including: • our ability to identify suitable acquisition or partnership candidates, prevail against competing potential acquirers or partners and negotiate and consummate acquisitions or partnerships on terms attractive to us; • difficulties in integrating personnel and sales forces, operations, manufacturing, logistics, research and development, information technology, communications, purchasing, accounting, marketing, administration and other systems and processes and otherwise assimilating the operations of the acquired company; • the diversion of resources, including diverting management’s attention from our current operations; • risks of entering new geographic or product markets in which we have limited or no direct prior experience; • the potential loss of key customers, employees or suppliers of the acquired company or adverse effects on our existing business relationships with our suppliers and customers; • the potential incurrence of indebtedness to fund the acquisition or partnerships; • the acquired business or partnership not achieving anticipated revenues, earnings, cash flow or market share; • excess capacity; • failure to achieve the expected synergies or cost savings; • the need for additional investments post-investment or post-acquisition that could be greater than anticipated; • the impact of U.S. and foreign competition laws and regulations on our ability to make certain acquisitions, to enter into certain partnerships or to make certain strategic investments; • inaccurate assessment of undisclosed, contingent or other liabilities or problems and unanticipated costs associated with the acquisition or partnership; • incorrect estimates made in accounting for acquisitions, incurrence of non-recurring charges and write-off of significant amounts of goodwill that could adversely affect our financial results; and • dilution of earnings.
We currently do, and may continue in the future to, rely on unpatented proprietary technology.
Although we believe the loss or expiration of any single patent would not have a material effect on our business, results of operations or financial position, there can be no assurance that any one, or more, of the patents or any other intellectual property owned by or licensed to us will not be challenged, invalidated or circumvented by third parties.
Environmental Protection Agency and several states to address greenhouse gas emissions, the European Union’s CSRD, California’s Climate Corporate Data Accountability Act and Climate-Related Financial Risk Act, and the SEC's final climate disclosure rules, which are currently stayed.
There can be no assurances that future environmental remediation obligations will not have a material adverse effect on our results of operations and financial condition.
Our business and financial results may be adversely affected by U.S. government contracting risks.
We are subject to various laws and regulations applicable to parties doing business with the U.S. government, including laws and regulations governing performance of U.S. government contracts, the use and treatment of U.S. government furnished property and the nature of materials used in our products.
We may be unilaterally suspended or barred from conducting business with the U.S. government, or become subject to fines or other sanctions if we are found to have violated such laws or regulations.
The laws and regulations to which we are subject include, but are not limited to, Export Administration Regulations, the Federal Acquisition Regulation, International Traffic in Arms Regulations and regulations from the Bureau of Alcohol, Tobacco, Firearms and Explosives and the FCPA.
Our amended and restated certificate of incorporation and amended and restated bylaws and certain provisions of the Delaware General Corporation Law contain provisions that could discourage, delay or prevent a change in control of our company or changes in our management that the stockholders of our company may deem advantageous.
As of December 31, 2024, we had total indebtedness of $2,414 million, and we would have been able to borrow an additional $744 million, net of $6 million of outstanding letters of credit, under Allison Transmission Inc.’s (“ATI”), our wholly-owned subsidiary, revolving credit facility with commitments in the amount of $750 million due March 2029 (“Revolving Credit Facility”).
As of December 31, 2024, we had no outstanding borrowings against the Revolving Credit Facility.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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