Blackstone among suitors for GM's Allison: sources

In this file photo General Motors unveils the Buick Enclave to the media in Pasadena November 28, 2006. The Blackstone Group is among the private equity suitors in pursuit of Allison Transmissions, sources familiar with the matter said on Thursday, as interest heats up for the General Motors subsidiary.

NEW YORK (Reuters) - The Blackstone Group is among the private equity suitors in pursuit of Allison Transmissions, sources familiar with the matter said on Thursday, as interest heats up for the General Motors Corp. (GM.N) subsidiary.

Centerbridge Capital Partners and Carlyle Group are among the other buyout firms said to be interested in the division, one source said.

That source said Allison's cash flow was more than $500 million and that its price tag could be about $3 billion.

"We're working on it, working on the process," GM Chief Financial Officer Fritz Henderson said on Thursday, speaking to reporters about Allison Transmission.

"We're talking to a number of investors," he said. "I'm not going to get underneath the process but there are a number of parties that are interested and we're running a pretty disciplined process for looking at the business."

GM, the world's No. 1 automaker, said in January it was looking at strategic options for the Indianapolis-based division, which makes transmissions and hybrid propulsion systems for commercial trucks, buses and military vehicles.

Investment bank Merrill Lynch & Co. MER.N is advising the company on the process. The bank declined to comment.

Blackstone BG.UL and Carlyle CYL.UL declined to comment. Centerbridge, co-founded by a former Blackstone dealmaker, also declined to comment.

Blackstone and Centerbridge are teamed up to bid for Chrysler Group, the automaker put up for sale by DaimlerChrysler AG DCXGn.DE, people familiar with the talks have said. It was unclear whether the two were teamed up to bid for Allison.

GM is in the middle of a restructuring effort that focuses on cutting costs and improving cash flow.

Private equity firms buy companies or controlling stakes by borrowing most of the money. They aim to improve the business, cut costs, and sell it later for a premium. These cash-rich buyout firms have shown a voracious appetite for buying divested corporate units that they believe can be improved through attention, cash infusion, and restructuring.

(Additional reporting by Kevin Krolicki)