Letter to Shareowners
Opportunity to Reset
Let’s face it: our Company’s reputation was tarnished because we weren’t the “safe and reliable” growth company that is our aspiration. I accept responsibility for this. But, I think this environment presents an opportunity of a lifetime. We get a chance to reset the core of GE and focus on what we do best. We can reset expectations for our performance. And we can participate in the changes required in the broader economy.
GE has enormous and enduring strengths that are underestimated right now. We have leadership businesses and a dedicated team. We have outperformed the S&P 500 in earnings over the long term, including 2008.
One important reset is in financial services. Earlier this decade, our financial services earnings received a valuation similar to our industrial earnings; today, it is lower. In the end, having financial services as 50% of our earnings was too high. We intend to reset this business to be smaller, less volatile and more connected to the “GE core.”
In addition, we determined that this was a good time to rethink how we communicate about the Company and to provide only an annual framework on our operations, instead of detailed quarterly guidance. We’ve always tried to be transparent, to offer a lot of detail and data, and describe the Company externally the way we run the Company internally, and we will continue to do so. As a long-cycle business, we want our investors to focus on long-term results.
For 2009, we have sharpened our strategic processes and scenario planning. We have increased the frequency and changed the agendas of our operating meetings. Each of our businesses has set up a process to identify the “naysayers” in each of our industries to make sure their voices are heard inside GE. From top to bottom and across GE, we must and will listen more critically and respectfully to each other.
I have also learned something about my country. I run a global company, but I am a citizen of the U.S. I believe that a popular, thirty-year notion that the U.S. can evolve from being a technology and manufacturing leader to a service leader is just wrong. In the end, this philosophy transformed the financial services industry from one that supported commerce to a complex trading market that operated outside the economy. Real engineering was traded for financial engineering. In the end, our businesses, our government, and many local leaders lost sight of what makes a nation great: a passion for innovation.
To this end, we need an educational system that inspires hard work, discipline, and creative thinking. The ability to innovate must be valued again. We must discover new technologies and develop a productive manufacturing base. Our trade deficit is a sign of real weakness and we must reduce our debt to the world. GE will always invest to win globally, but this should include a preeminent position in a strong U.S.
GE plans to play an important role in this process. We are, first and foremost, a technology company. And we will continue to invest increasing amounts in R&D to develop innovative solutions for our customers. In addition, we will continue investing to improve the education system, around the world, to produce more competitive students.
People come to GE because they understand there is more to life than making a buck. People come here because they want to make a difference, and never has this been more important than it is right now.
The current crisis offers the challenge of our lifetime. I’ve told our leaders at GE that if they are frightened by this concept, they shouldn’t be here. But if they’re energized, and desire to play a part in transforming the Company for the future, then this is going to be a thrilling time to be a part of GE.
GE will be a better company winning through this crisis. Your GE teams have dug in and are dedicated to the tasks ahead. My thanks go out to all investors who continue to support our efforts. If you are a prospective investor, let me say, now is the time to invest in GE!
Jeffrey R. Immelt
Chairman of the Board and Chief Executive Officer
February 6, 2009
2008 Company Highlights
- Earnings were $18.1 billion, the third highest in Company history
- Revenues grew 6% to a Company record of $183 billion
- Global revenue grew 13%
- Infrastructure and Media segments grew operating profit 10%
- Total equipment and services backlog grew to $172 billion, an increase of 9%
- Services grew 10% with a backlog of $121 billion
- Industrial organic revenue grew 8%
- Invested $15 billion in the intellectual foundation of the Company including products, services, marketing, and programming
- Filed 2,537 patent applications in 2008, an increase of 8%
- Named 4th most valuable brand in the world by BusinessWeek
(In $ billions)
5-year average growth rate of 12%
Earnings From Continuing Operations
(In $ billions)
5-year average growth rate of 7%