In the late 1920s the U.S. Army funded the development of a series of high-power engines, as part of its hyper engine series, which it intended to produce on Continental Motors' production lines. Allison's manager, N.H. Gilman, decided to experiment with its own high-power cylinder design. The result was presented to the Army in 1928, which turned down the development proposal.
In 1929, shortly after the death of James Allison, the company was purchased by the Fisher brothers, who instructed it to use the cylinder design for a six cylinder engine for a "family aircraft". Before work on this design had progressed very far, Fisher sold the company to General Motors, which ended development due to financial pressures of the Great Depression. Nevertheless Gilman pressed ahead with the cylinder design, building a "paper project" V-12 engine. The Army was once again uninterested, but instead suggested Allison try selling it to the U.S. Navy. The Navy agreed to fund development of A and B models to a very limited degree for its airships, until the crash of the USS Macon in 1935, when the Navy's need for a 1,000 hp engine disappeared.
The Army had been leaning heavily towards exhaust-driven turbochargers instead of the more common mechanically-driven superchargers, feeling that their added performance more than made up for the added complexity. Thus little effort was invested in equipping the V-1710 with a reasonable supercharger, and when placed in aircraft designs like the P-39 or P-40 which lacked the room for a turbo the engine suffered tremendously at higher altitudes. It was this reason in particular that the V-1710 was later removed from the P-51 Mustang and replaced with the Rolls-Royce Merlin instead.
Allison also took over GE's axial flow engine design, becoming the Allison J35. The J35 was the primary powerplant for the F-84 Thunderjet and F-89 Scorpion, as well as appearing on numerous prototype designs. The J35 also finished production in 1955, by which point over 14,000 had been delivered.
Allison also started the development of a series of turboprop engines for the U.S. Navy, starting with the T38 and a "twinned" version as the T40. The Navy was interested only in the T40, but the complexities of the driveshaft arrangement doomed the engine and the project was eventually cancelled. Allison tried again with the T56, basically an enlarged T38 with the power of the T40, and was eventually rewarded when this engine was selected to power the C-130 Hercules.
Over the years a family of engines, based on the T56 basic configuration has been developed, culminating in the T406/Allison AE1107 turboshaft for the V-22 Osprey, the Allison AE2100 turboprop, used on newer models of the C-130 and the Allison/Rolls-Royce AE 3007 turbofan which propels many commuter aircraft, such as the Embraer ERJ 135 family.
One of Allison's most successful projects is the Model 250 turboshaft/turboprop engine family, which was started by the Company in the early 60s, when helicopters started to be powered by turbine, rather than reciprocating, engines.
In the 1980s Allison collaborated with Pratt & Whitney on demonstrating the 578-DX propfan. Unlike the competing General Electric GE-36 UDF, the 578-DX was fairly conventional, having a reduction gearbox between the LP turbine and the propfan blades. Noise considerations, plus a significant reduction in the real cost of aviation fuel, brought the NASA funded programme to a halt.