Transmission deal

has signed a deal with a global supplier of automatic gearboxes,

, to sell a 10 per cent equity stake in its company for an initial cash injection of £7.1m.

The Lancashire-based supplier of full-toroidal traction-drive transmissions said the agreement would give Allison licence rights to Variable Transmissions (IVTs) and Continuously Variable Transmissions (CVTs) in addition to options over global manufacturing and sales exclusivity in the small to medium truck and bus market.

The total value of the licence fee to be paid to Torotrak is thought to be between £18m and £28m. Additionally, royalty payments will be paid to Torotrak for every Allison transmission sold under the new arrangement.

The deal has been described by Torotrak’s chief executive, Dick Elsy, as a ‘landmark’ for the British engineering and technology industries amid current financial difficulties.

The agreement is the largest ever secured by Torotrak and will allow the company to extend its technology to the truck and bus sectors, which have reported an upturn in demand.

Elsy said: ‘This is a very significant endorsement of our technology. Allison is the world leader in commercial-duty automatic transmissions and this agreement provides us with access to large production volumes in this high-value sector. To be announcing news like this in the teeth of an economic crisis speaks volumes for Torotrak and the value that is now being placed on our technology.’

Development work on a new medium-duty truck transmission will begin immediately, with Torotrak supporting Allison in the project as part of a separate engineering agreement.