Allison CFO Built Finance Engine from Scratch

Allison Transmission Finance Chief David Graziosi assembled the company’s finance function after it separated from parent GM.

When David Graziosi joined Allison Transmission as CFO, treasurer and executive vice president in 2007, the company’s finance operations were “essentially appendages” to those of its parent, General Motors. Allison’s separation from GM later that year, when it was purchased by Carlyle Group and Onex, gave him the opportunity to build Allison’s treasury, controller and tax functions from the ground up.

Graziosi, who had been through carve-outs before, says it’s important to start the process of constructing a finance operation by identifying an overall vision for what it will do. At Allison, he first looked at individual finance functions, such as financial planning and analysis, treasury, and regional finance, then considered what specialty skills he needed, while keeping in mind his plans for long term staff development.

“Leadership’s key there—getting the right people in charge of the sub-functions, then just building upon that team,” he says.

If there’s one thing Graziosi emphasizes, it’s the strength of his team. One of the most important things he has learned at Allison, he says, is “frankly, how valuable the people are.”

Allison, an Indianapolis-based maker of automatic transmissions with $2.2 billion in revenue last year, finally went public in March. But Allison’s finance group was preparing to take the company public starting in 2008. Among other things, that meant preparing financial filings, since the company would need to report its finances publically from the get-go.

“We were in a constant state of readiness” for the IPO, Graziosi says, waiting for suitable market conditions. That readiness included hiring underwriters, preparing financial forecasts, getting the company’s auditors ready and having external advisers on hand.

“The point was to be ready, but do it in a rational way that would minimize the disruption or the distraction to the company,” he says.

In the wake of Allison’s IPO, the company announced in May that it was initiating its first dividend of 6 cents per share, which Graziosi calls a “strong signal of what we want to do with free cash flow.”

Allison is currently looking to expand into non-NAFTA countries, where there is low penetration of automatic transmissions and plenty of room for growth. The company recently started production into Hungary and India, and currently has more technologies under development than ever before. But Graziosi says expansion isn’t his biggest concern.

“We do not pride ourselves on being empire builders,” he says. “We have the global footprint that we need driving the strategic plan.”

Instead, Allison is focused on reducing its debt. Graziosi says the company’s long-term target is to achieve investment-grade leverage of 2 to 2.5 times earnings before interest, tax, depreciation and amortization. (At the end of the first quarter, Allison’s leverage stood at 3.89.) But the current capital structure also seeks to keep the cost of debt low and maximize shareholder value.

Over his years as a financial executive, Graziosi says, he has learned that finance is not just scorekeeping, it’s about making decisions to support the business.

“When you look at it, it’s really ‘How are you working with other functions to drive performance at the end of the day?’” he says. “It’s really coming down to people working with other people to make things happen.”

 

See Treasury & Risk’s 2012 100 Most Influential People in Finance list here.

See a slideshow of the CFOs on this year’s list here, and complete coverage of the list here.

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