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“At GE, we look forward with confidence. That is because we can shape some of the big growth drivers in any era.” Jeff Immelt, Chairman and CEO

The GE Works

Equation

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PICTURED: Leonardo Nogueira de Oliveira (left) and Wellington Pereira dos Santos (right), GE Oil & Gas

At GE, we look forward with confidence. That is because we can shape some of the big growth drivers in any era.

Last fall, we hosted a conference in Silicon Valley to launch what we call the Industrial Internet, an open, global network that connects people, data and machines. It’s about making infrastructure more intelligent and advancing the industries critical to the world we live in. We believe it’s about the future of industry—energy, healthcare, transportation, manufacturing. It’s about making the world work better.

At the conference, we put a GEnx engine on the stage. People posed for pictures with the engine; they marveled at the technology and its sheer size. It was a reminder of two things. First, few companies can do what GE does; the scale we operate on and our decades of investment are a competitive advantage. Second, in an uncertain economy, long-term growth and competitiveness require the endless pursuit of innovative productivity.

Similarly, I recently returned from Sub-Saharan Africa, a region that was “off the radar” when I became CEO. Today, we are at a $3 billion annual run rate, and that could double in the next few years. GE could have “$1 billion Franchises” in Nigeria, South Africa, Mozambique and Angola. We are investing in capability and people. There are very few American companies in the region. But we could sell more gas turbines in Africa than in the U.S. in the next few years.

“We want investors to see GE as a safe, long-term investment. One with a great dividend that is delivering long-term growth.”

A GE annual report has never fully featured software and Africa. Today, we feel they are essential and we can lead. Our ability to create our own future is why GE can win in any environment.

It starts with a culture—the foundation for any successful enterprise—a culture that inspires our people to improve every day. Our team is mission-based: We build, move, power and cure the world. We believe in a better way: We constantly learn from our customers, our competition and each other. We seek solutions for our customers and society. And we are a “We Company.” We know that strong teams with great people outperform individuals. That is why GE Works.

The global economy for 2012 was within our planning scenario, but short of our hopes. Maybe the best news—believe it or not—was Europe. It didn’t implode! The U.S. is improving, driven mainly by housing and the consumer, but capital investment remains sluggish. As a result, the U.S. continued its weakest recovery since the 1930s. China slowed as it went through a political transition. Because of a weak macro environment, we were able to lower input costs, and that had a positive impact on our margins.

We expect 2013 to be another “typical year” in the Reset Era. We remain confident in the economic strength of the emerging markets. We are encouraged by renewed growth and reform in China, which has a positive impact on other big resource-rich regions like Africa, Latin America and the Middle East. At the same time, we are in unprecedented fiscal territory in the U.S. and Europe, which will keep a limit on growth in the short term.

The major source of volatility in corporate planning is the U.S., something I never thought I would see. We would all like to believe that the U.S. will continue at a steady rate of 3%–4% GDP growth, as we saw in the 30 years before the global financial crisis. However, the U.S. faces more major “political storms” this year: the fiscal situation, repeated debt-limit controversy and tax reform.

We fear that this uncertainty will impact capital investment. And the amount of regulation tends to grow during periods of fiscal strain, and we are certainly seeing that in the U.S. The number of “major regulations”—regulations with more than $100 million of impact—has exploded in the last few years. The result has been an additional burden on business. Until we solve for these constraints, it is hard to see that the U.S. will return to its full growth potential.

We have demonstrated that GE can perform in this environment. In 2012, we grew our segment profits by 11% to $22.9 billion. We generated $17.8 billion of cash from operating activities (CFOA), up 48%, and returned $12.4 billion of cash to investors through dividends and stock buybacks. Our total shareholder return grew by 21%, well ahead of the 16% growth in the S&P 500. Our market cap grew by about $30 billion, and we remain the seventh most valuable company in the world.

We like the way GE is positioned in this environment: a great portfolio of world-class, technology-leading businesses; a strong position in fast-growth global markets; leading-edge service technologies that achieve customer productivity; high visibility with a backlog of $210 billion; and a strong financial position. We want investors to see GE as a safe, long-term investment. One with a great dividend that is delivering long-term growth.

A portfolio that plays to strength

premier
infrastructure
company

Strength Cash

valuable
specialty
finance

Strategic imperatives

  • Superior technology

  • Enhancing customer services and analytics

  • Leading in growth markets

  • Simple and competitive cost structure

Shale

Gas Revolution

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PICTURED: Ujjwal Kumar (left), GE Oil & Gas;
Kent Wilkinson (right), Chesapeake Energy Corporation

Shale Gas Revolution

Access to shale gas is opening new possibilities for energy use, and GE is involved in almost every aspect of this “Shale Revolution.” To make compressed natural gas (CNG) more accessible as a transportation fuel, GE Oil & Gas and Chesapeake Energy created a compact refueling solution, the CNG In A Box™ system. The benefits are impressive: For every fleet vehicle filled with CNG instead of gasoline, carbon dioxide emissions equivalents are reduced about 24%, or 2.2 metric tons per vehicle annually. We’re also creating new ways to help manage impact on the environment during extraction. GE Power & Water is partnering with memsys, a water technology company, to develop membrane distillation technology, which promises to be an effective, energy-efficient solution for treating wastewater generated during the gas extraction process.

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Five choices that drive the FUTURE

Strategy is about making choices, building competitive advantage and planning for the future. Strategy is not set through one act or one deal. Rather, we build it sequentially through making decisions and enhancing capability. As we look forward, it is important that investors see the Company through a set of choices we make for the purpose of creating value over time.

First, we have remade GE as an “Infrastructure Leader” with a smaller financial services division. We like infrastructure markets because they are growing and because they utilize GE capabilities in technology, globalization, financing and customer relationships. About $60 trillion of infrastructure investment is needed by 2030 to support billions of new consumers joining the middle class in the emerging world, and to support developed-market productivity.

“At $100 billion of revenue with 15% margins, we are the largest and most profitable infrastructure company in the world.”

Over the last decade, we have grown our infrastructure platforms by investing in adjacencies, pursuing opportunities that are closely related to our core. About one-third of our infrastructure revenues comes from businesses we weren’t in a decade ago. These include fast-growth businesses like Oil & Gas, Life Sciences, and Distributed Power. This growth has come through organic investment and focused acquisitions.

At the same time, we are creating a smaller, more focused financial services company—one that has a lower risk profile and adds value to our industrial businesses. We will continue to reduce the size of GE Capital from the $600 billion of assets it was in 2008 to a goal of $300–$400 billion in the future. GE Capital has a sound fiscal position, with Tier 1 capital above 10% and strong liquidity. We can generate returns above our cost of capital. Over the next few years, we plan for GE Capital to return about $20 billion of dividends back to the parent. We will purposefully reallocate capital from financial services to infrastructure and grow it faster. Our goal is to have infrastructure earnings reach 70% of our total over time.

We have dramatically simplified GE over the past decade. The last major portfolio move we made was exiting NBC Universal (NBCU). In the first phase, we sold 51%, and reallocated $11 billion from the proceeds to purchase new platforms in Energy and Oil & Gas. These businesses already have generated $1 billion of earnings and are growing 20% annually.

Recently, we announced an agreement for the disposition of the remainder of NBCU, and its real estate, for $18.1 billion. This creates additional cash for value creation in the short term, through increased share repurchase and investment in growth.

Second, we are committed to allocating capital in a balanced and disciplined way, but with a clear priority for dividend growth. GE will generate $100 billion for allocation over the next few years, including cash from existing operations, dividends from GE Capital and dispositions.

Dividend History

total dollar amount of dividends paid to shareholders

TOTAL DIVIDENDS 2000–2012: $106 BILLION

TOTAL DIVIDENDS 1892–1999: $45 BILLION

The top priority remains growing the dividend. Since 2000, we have paid out $106 billion in dividends, more than any company except Shell, and more than we paid out in the first 125 years of the Company combined. We like GE to have a high dividend yield, which is appealing to the majority of our investors.

We plan to buy back shares to get below 10 billion, where we were before the crisis. We will make significant progress toward that goal in 2013 by allocating a significant portion of the NBCU cash to repurchase our shares. In total, we plan to return $18 billion to investors this year through dividend and buyback.

We will continue to execute on focused acquisitions, a capital-efficient way to grow the Company. We will keep our focus on acquiring specific capabilities where GE can add substantial value. We can execute on a few of these each year.

Third, we have significantly increased investment in organic growth, focusing on R&D and global expansion. In doing so, we have invested ahead of our competition. We believe that investing in technology and globalization is key to gaining market share. Annually, we invest more than $10 billion to launch new products and build global capability. We make these investments with the full benefit of GE’s scale.

Over the past decade, we have doubled our annual R&D investment, increasing $2–$3 billion to 5%–6% of revenue. Because of this investment, we have progressed from a company that can launch one new commercial engine each decade to a company that can launch one each year. We will launch 10 new gas turbines this decade, significantly more than in previous times. We are a broader and deeper technology leader than at any time in our history.

We have built a company that has high share in growth regions. In 2012, we had $40 billion of orders in growth regions, a 12% increase over the prior year and a threefold increase in the last decade.

NEXT-GENERATION

MATERIALS

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PICTURED: Troy Brenner, GE Aviation

Next-Generation Materials

Our newest jet engines use next-generation materials and manufacturing processes to reduce weight, improve fuel consumption and lower maintenance. We’re pioneering the use of parts made from non-metallic, composite materials. On the CFM LEAP engine, GE will provide the first ceramic matrix composites in a commercial jet engine’s “hot section.” The resulting increase in heat tolerance will help lead to a projected 15% reduction in fuel consumption compared to prior-generation engines, saving billions of dollars for our customers. Also, scientists and engineers at GE’s Global Research Center are developing techniques to fabricate lightweight structures using metal additive manufacturing processes that were previously not feasible. We anticipate this will result in millions of dollars in fuel savings for GE’s aircraft engine customers every year.

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Find out how GE is extending its lead in advanced manufacturing.

Achieving these results has required substantial investment in capability and people. Between 2010 and 2014, we are making 30 investments in manufacturing, research, services, customer innovation and training in growth markets. We have developed and repositioned our leaders to capitalize on growth-market opportunities. We have 10,000 commercial resources focused on the needs of our customers in growth markets. We have achieved local relevance with global scale.

We use the entire GE enterprise to improve the value of our investments in technology and globalization. For technology, we have a “Global Research Center Network” that builds strategic capability, spreads technology around the world and innovates for local markets. We have a “Global Growth Organization,” led by a GE Vice Chairman, that allows GE to better compete by using our talent.

Fourth, we have built deep customer relationships based on an outcomes-oriented model. Our growth is aligned with customer outcomes, and our products improve their productivity.

We have grown our service revenue from $21 billion to $43 billion over the past decade. Services represent about 75% of our industrial earnings. With $157 billion of service backlog, we have the momentum to grow in the future.

Industrial Internet = Customer Outcomes

The Power of 1%

Through efficiencies enabled by the Industrial Internet,
a 1% change can deliver tremendous value to customers.

15-Year Savings
Aviation 1% Fuel Savings $30B
Power 1% Fuel Savings $66B
Rail 1% Reduction in
System Inefficiency
$27B
Healthcare 1% Reduction in
System Inefficiency
$63B
Oil & Gas 1% Reduction in
Capital Expenditures
$90B

We believe in a solutions-oriented selling model, one that can deliver outcomes for customers. In Healthcare, we are aligned around the major accounts so that we can help them transform ahead of U.S. healthcare reform. In Oil & Gas, we deliver comprehensive technical solutions for our customers. In Aviation, we create value through the performance of our new technologies. We only win when our customers win.

Fifth and finally, we have positioned GE to lead in the big productivity drivers of this era. This is important for growing our margins while keeping our customers competitive. The levers of productivity are constantly changing. For more than a century, GE has been a leader in productivity and innovation.

We will lead in the shale gas revolution. The volume of and access to shale gas and other unconventional resources in the U.S. (and other regions) will change the competitive balance in energy for a generation. This gives the U.S. one of the lowest costs of electricity in the world and the chance to be an energy exporter. Big industries—like rail—could convert from diesel to gas. The option of becoming energy-independent is now possible for North America. Through our Oil & Gas business we can provide important content in extraction, development, and environmental protection of shale gas. We are the world leader in gas-powered generation and transportation.

We are extending GE’s lead in advanced manufacturing. Manufacturing is a major source of competitive advantage. After decades of outsourcing capability, we now see companies rebuilding their manufacturing strength. Companies used to make investment decisions purely on labor cost. However, there are new materials that can revolutionize performance, and precision technologies and high-power computing are transforming how we manufacture. GE will “insource” more manufacturing content. We are investing in processing technologies such as additive manufacturing. In the future, we aspire to reduce the cycle times for complex systems and lower cost.

the industrial internet
in customers' hands

GE gives customers access to
the Industrial Internet wherever they are.

RailConnect Transportation Management, GE Transportation

Intelligent Operations, GE Aviation

AgileTrac™, GE Healthcare

We are making a major investment in software and analytics. We know that industrial companies need to be in the software business. We want to make the analytics around our products, real-time data, and operating solutions a GE core competency. We have built a Software and Analytical Center of Excellence in California, where we are adding a vast array of human talent to achieve our goals. We know that our services in the coming year depend on building smarter machines with the ability to extract and analyze data. We will be a leader in analytics. And that will make GE more valuable to our customers. This is the power of the Industrial Internet.

The reason why analytics are important in the infrastructure industry relates to what we call “The Power of 1%.” Across our customer base, improving asset performance by 1% can add $20 billion of customer profit annually. In our world, small changes mean big outcomes.

For investors, we have defined where we play, how we win, our capital allocation priorities and investments for the future. These “five choices” will set up our performance and drive our success over the long term.

DRIVING THE

INDUSTRIAL

INTERNET

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PICTURED: Rachna Pitts, Norfolk Southern

Driving The Industrial Internet

Our Rail Optimization Solutions help railroads move freight faster and more cost-effectively. The RailConnect Transportation Management System and Movement Planner System help railroads analyze critical information in real time to plan and optimize business outcomes, operations and asset utilization. These intelligent solutions deliver real efficiencies: Norfolk Southern, a major Movement Planner customer, estimates that every 1 mph increase in network speed saves an estimated $200 million in annual capital and operating expenses. In 2012, we expanded our Optimization Solutions portfolio by acquiring RMI, a leading supplier of transportation management systems used by railroads across North America to manage operations, improve information flow, increase productivity and reduce cost.

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We Are Executing on Our Commitments

Last year, we set focused execution goals for GE: double-digit industrial earnings growth; margin expansion; restarting the GE Capital dividend to the parent; reducing the size of GE Capital; and balanced capital allocation. We achieved all of our goals for the year.

Our businesses are performing

In 2012, our industrial segment earnings grew by 10% to $15.5 billion. Our industrial segment organic revenue growth was 8% and margins grew by 30 basis points, both metrics comparing favorably to peers. Growth was broad-based; all of our reported segments grew earnings for the first time since 2006. We finished the year with $210 billion of backlog, a record for the Company.

We grow our industrial businesses by pulling the same “levers.”

“We lead with technology, invest in fast-growth markets, drive value in the installed base, invest in adjacencies and grow margins.”

Oil & Gas is our fastest-growing business, with revenue of $15 billion and earnings growing 16%. We compete in high-growth markets. We are investing to launch new products fully utilizing our broad technical capability. For instance, we launched the first subsea compressor at Statoil, creating an industry-leading position. Our orders grew by 16% in the year, and we are winning new business around the world.

Our Power & Water business grew earnings by 8% in 2012, and we expect to be about flat in 2013. We are well-positioned for long-term growth in natural gas power generation, distributed power, and services. However, Wind power generation—where GE leads—is more volatile. We had a very strong year in 2012 but, due to U.S. regulatory uncertainty, this year will be difficult. Based on strong global demand with expanding service, we expect Power & Water growth to resume in 2014.

Over the next few years, we see earnings upside by improving our performance in markets like Energy Management. This business is complementary to our core infrastructure franchise, yet our share is less than 10% and our margins are lower than those of our competitors. We are seeing outstanding opportunities for growth in power conversion and digital energy.

We expect another year of strong industrial performance in 2013. Oil & Gas, Aviation, Healthcare and Transportation should hit “all-time-high earnings” in 2013. Our plan targets 10% industrial earnings growth.

GE Capital had earnings of $7.4 billion, up 12%. Our Tier 1 common ratio is 10.2%, well above the regulatory goals. GE received a $6.4 billion dividend from Capital. Our team has done a great job of reducing commercial real estate exposure, which was $46 billion at year-end, down 50% from its peak. GE Capital continues to outperform regional and money center banks in important areas like net interest margins and losses.

The “core” of GE Capital is being a leading lender to middle market customers, building on our deep experience in, and understanding of, these markets and assets. In businesses like sponsor finance, aircraft leasing and retail services, and middle market lending and leasing, GE Capital has deep domain experience and will continue to grow.

FUELING

AIRLINE

PRODUCTIVITY

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PICTURED: Daniel Davim Rebello, GE Aviation

Fueling Airline Productivity

GE’s Fuel & Carbon Solutions (FCS) helps airlines reduce fuel consumption by combining advanced data analytics and industry expertise. FCS can integrate and analyze vast amounts of data—about 1.5 terabytes per customer per year—from flight operations, airline systems and flight data recorders. It then uses the resulting operational intelligence to identify, implement and monitor changes in the way flights are planned and flown, saving fuel and improving efficiency. FCS has already helped customers like Brazil’s GOL Airlines cut fuel consumption significantly. We estimate that it could save the entire global airline industry more than 1.3 billion gallons of fuel per year, valued at more than $4 billion, and eliminate more than 12.4 million metric tons of carbon dioxide emissions.

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Our initiatives are delivering results

We drive cross-company initiatives to generate organic growth and improve margins. We review our progress against our long-term goals and through relative performance of 20 industrial peers and large banks. Our performance is near the top in almost every category, but we still have room for improvement.

We have built broad technical capability that can deliver big systems and foster innovation. Each year we file about 2,000 patents in the U.S., putting GE in the top 10 for innovation. GE engineers and scientists from around the world collaborate and demonstrate a real culture of execution.

GE products deliver vast customer value. Over the next few years, we will transform our aviation engine product line with several new models, including the launches of GEnx, the CFM LEAP and the GE9X. Each engine will improve airline fuel efficiency by 15%, while reducing emissions. By 2020, we will have 46,000 GE engines in service, up from 4,100 in 1990. That is a product of our technical expertise.

In Healthcare, we are launching high-margin products at every price point and across all modalities. This is how we win around the world. In computed tomography (CT), we launched the Discovery CT750 HD FREEdom, a high-end scanner, which can greatly reduce radiation dose. At the same time, we launched the CT Brivo, sold at 20% of the price of a high-end scanner, which is growing share in global markets. In fact, in the first six months, we sold 100 Brivos to Chinese customers, many of whom had never owned a CT.

We leverage technology to launch new businesses. Our Energy Storage business is a great example of how we innovate and bring to scale state-of-the-art technologies. Researchers in our GRC labs invented a new battery based on technology from more than 30 patents. GE teams also designed an advanced manufacturing process to build the battery efficiently. In essence, we created a start-up within the Company, and we expect the business will generate more than $1 billion in revenue annually in just a few years.

“Excellence in localization is a GE competitive advantage.”

Our growth-market revenue expanded by 11% to $37 billion. We have a segmented global strategy. We aspire to grow in China. We will lead the industrialization of resource rich regions. And we will retain our operating presence in Europe as it restructures.

GE has a strong franchise in China that grew by 19% in 2012. Our advantage is in localization and partnerships. Last year, we opened two customer innovation centers, in Chengdu and Xi’an. At the same time, we are partnering with Chinese state-owned enterprises, achieving global scale. In 2012, we announced a joint venture with XD, a Chinese leader in transmission and distribution equipment, and digital energy. This allows us to capture global growth, in an industry where we have low share, with a Chinese cost base.

Our other fast-growth global opportunity is in resource-rich countries, where we have built a competitive advantage. From Latin America to the Middle East to Africa to Russia to Australia to Canada, their goals are the same: converting resource wealth into industrial expertise and jobs. In these regions, we remain committed to a “Company-Country” approach. Last year we announced a $1 billion investment in Saudi Arabia across four GE platforms.

The payback from global investments is huge. Our recent acquisition in Power Conversion received $600 million of orders in Brazil alone by leveraging GE’s presence and relationships in the country. Similarly, GE Transportation is building a $1 billion business in Russia and Kazakhstan, based on local capabilities.

GE has a productive manufacturing and engineering base in Europe. We recently entered into an agreement to acquire Avio, an Italian high-tech aviation supplier that would add to this base. While Europe may remain sluggish for a while, we have an important installed base and smart and dedicated teams helping our customers. We will continue to be a good partner for Europe, sustaining a robust manufacturing and engineering base.

See how the Industrial Internet can impact the world

Services growth was 4%, fueled by a growing installed base and expanding content. The Industrial Internet is revolutionizing the services we provide our customers, helping them to become more productive operations. GE will leverage our vast service backlog to develop technologies that enhance the performance of our products—and the enterprises in which they operate—while growing our dollars per installed base. The Industrial Internet is built on intelligent machines, advanced analytics and people at work that can save airlines, railroads, hospitals and utilities billions of dollars each year.

The impact of these solutions is being felt by customers across various industries. Norfolk Southern is a large North American Class I railroad and our launch customer for GE Rail Network Optimization. This solution uses data and analytics to improve operating decisions across the entire transportation network, including railroads, shippers, intermodal terminals and repair shops. They estimate that every 1 mph increase in network speed saves them $200 million in annual capital and operating expense.

In Healthcare, we’ve deployed our Hospital Operation Management (HOM) solutions in more than 50 hospitals. HOM tracks hospital assets to ensure that quality care is delivered across a patient’s stay, from admission to discharge. The HOM launch customer was Mt. Sinai Hospital, where we help them track 15,000 assets and have shown a 10% improvement in patient throughput.

We are taking a few bigger swings where we are improving the enterprises in which our assets operate. In Aviation, to address the fleet performance of global airlines, we launched Taleris, a joint venture with Accenture. This analytical tool will allow airlines to predict maintenance events before they happen. The goal is “Zero unplanned downtime.” Taleris aids airlines such as Qantas and JetBlue with their fleet performance, maintenance and operations, allowing them to save millions of dollars annually through more efficient use of their airplanes.

Margins grew by 30 basis points to 15.1%. Our goal is to grow another 70 bps in 2013. We will achieve this by improving processes while reducing structural cost.

We are in our third year of GE Advantage, our process-improvement program. Our teams are improving on 40 big processes throughout the Company. I review each of these frequently, and we realized $800 million of margin improvement in 2012.

One good example is our “Transportation: Requisition to Platform” process, which facilitates our new product launches. Results so far include: 80% system reuse; six-month reduction in cycle; and a 35% reduction in sole-source suppliers and overtime. GE Advantage helps us sustain a competitive advantage.

GE Advantage

40 projects
to improve
processes
across GE

1,000
dedicated GE
professionals

$800 million
incremental
industrial
margin benefit
annually

benefits

  • Increases our speed to market

  • Improves the quality of our products and services

  • Significantly reduces costs

  • Drives competitive advantage for our customers and company

We are also simplifying the way we run GE, with an eye to lowering our structural cost and improving our speed. In 2011, our selling, general and administrative expenses (SG&A) as a percentage of industrial sales were 18.5%. We are aiming to reduce this structure to below 16% by 2014. This is a total of $2.5 billion of cost out; by the end of 2012, we achieved 40% of our goal.

Another big contributor to better margins involves attacking product cost through better design. In our Aviation business, where we have a solid backlog for many years, we are reshaping our supply chain to increase GE content. We are investing in advanced materials, manufacturing technological global capacity. In Appliances, we launched four new products in 2012. In 2013, we will launch four more. All are increasing share and margins.

We are executing on our commitments. In 2013, we would like to: grow industrial earnings by 10%; achieve 2%–6% industrial organic revenue growth; return a significant amount of cash from GE Capital to the parent; and return $18+ billion of capital to investors in dividends and buyback.

LOCALIZING For

UNDERSERVED

MARKETS

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Localizing for Underserved Markets

GE’s innovation is extending healthcare resources to parts of the world where access to quality care has been far from certain. In China, we introduced the Brivo CT325, delivering the benefits of computed tomography in a compact, easy-to-use, affordable system that is ideal for clinics in remote areas: 88% of units sold are now in use in rural hospitals that previously could not afford a CT scanner, helping them better diagnose cancers and injuries for some 3.6 million people in China. With the opening of our new innovation center in Chengdu, which is focused on developing products and solutions specifically for the China market, we plan to drive further advances in local healthcare and other sectors.

Healthcare
revenue in
GE’s nine
growth regions

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We Continue to Improve our Culture

Over the holidays, I was reviewing the annual Gallup poll that rates institutions in the U.S. Once again, big business has a low overall rating, with 21% favorability, roughly a third of the approval for small business. The mood reflects the economic environment. We are lucky that government can set the “floor” with favorability at 13%.

So is size inherently bad? I don’t think so. But size can breed a perversion of bureaucracy, a sense of entitlement and a distance from reality. Size is bad when it crushes innovation. A good culture is the only filter that can make size a strength and not a weakness.

Over the past year or so, I have made it a priority to personally connect with entrepreneurs and venture capitalists. I wanted to understand more about the start-up culture and the ways that smart entrepreneurs run their companies.

2013: What is Important to Investors

  • 1
    Double-digit earnings growth for GE industrial
  • 2
    Significant cash returned to parent from GE Capital
  • 3
    Significant margin expansion
  • 4
    Solid industrial segment organic revenue growth
  • 5
    Return cash to shareholders

Now, I don’t want to make GE a startup. GE’s great strength is our scale. GE has more than 40,000 salespeople, supported by 50,000 engineers and scientists; we can sell in more than 160 countries with the world’s sixth most valuable brand.

The trick is to keep all of that, but without the bureaucracy and arrogance that can often accompany size.

The fact is that GE was becoming too complicated. We were simply working on too many things that aren’t important. We had too many “checkers” and not enough “doers.” Visiting with entrepreneurs has helped me focus on complexity, accountability and purpose. I have found two books—The Lean Startup and The Startup Playbook—to be particularly useful.

Entrepreneurs simplify everything. They are purpose-driven. They focus on customers, people and solving problems. They do fewer things, but with bigger impact. They don’t delegate important decisions; rather, they position decision-makers close to the action. There is no headquarters, no layer of “checkers.” They use judgment, they move fast, and they are accountable.

The unique leadership movement inside GE today is Simplification. Part of it is structural.

“We want the Company
to be lower-cost, have shorter cycle times, and match authority to accountability.”

And we need to accomplish this across multiple platforms, in diverse markets, living in an era of hyper-regulation.

But the other part of Simplification is cultural. Big companies fail when they lose a culture of accountability— accountability for outcomes. We must compete with purpose. And we must deliver outcomes for customers, investors, society and each other. We are building processes that drive speed, accountability and compliance. We are committed to long-term thinking despite volatility in the current environment. The decisions we are making today will shape the Company for years to come. GE can execute on a scale few can match. I hope, as an investor, that makes you proud.

So, what is leadership? It is the harnessing of culture, the culture of GE Works. We are mission-based. We search for a better way. We drive solutions for our customers and society. We are a “We Company.” It is driving accountability for outcomes. It is fostering smart risk-taking and business judgment.

You have invested in GE. You know the choices we have made for the next decade. You have seen our execution and the key metrics we use to manage the Company. You have a sense for our culture and leadership team. You will see this reinforced in the rest of this report. Let me know what you think. You can e-mail me at ask.jeff@ge.com.

Jeffrey R. Immelt Jeffrey R. Immelt Chairman of the Board
and Chief Executive Officer
February 26, 2013

2012 performance

“Last year we set focused execution goals for GE: double-digit industrial earnings growth; margin expansion; restarting the GE Capital dividend to the parent; reducing the size of GE Capital; and balanced capital allocation. We achieved all of our goals for the year.”
JEFF IMMELT, CHAIRMAN AND CEO

Consolidated Revenues

(In $ billions)
  • 2008
  • 2009
  • 2010
  • 2011
  • 2012
180
154
150
147
147

OPERATING EARNINGS

(In $ billions)
  • 2008
  • 2009
  • 2010
  • 2011
  • 2012
16.9
9.9
12.4
14.9
16.1

CASH FLOW FROM OPERATING
ACTIVITIES (CFOA)

(In $ billions)
  • 2008
  • 2009
  • 2010
  • 2011
  • 2012
19.1
16.4
14.7
12.1
17.8

GE Scorecard

2012 Results
Industrial Segment Earnings Growth+10%
Industrial Operating Earnings % of Total55%
Cash from GE Capital$6.4 billion
Industrial Segment Organic Revenue Growth+8%
Margin Growth+30 bps, 15.1%
Cash Returned to Investors$12.4 billion
Returns on Total Capital11.7%

Relative Performance

industrial vs. 20 peersgepeersquartile
Organic Growth (%)831st
Margin (%)15.111.52nd
Returns (%)15.510.32nd
ge capital vs. banksgeregional
banks
money
center banks
Tier 1 Common Ratio—Basel 31 (%)8.88.18.7
Liquidity Coverage Ratio2 (%)29661116
Net Interest Margin3 (%)4.93.72.9

1 GECC is not currently subject to minimum regulatory capital requirements. This U.S. Basel 3 estimate is based on GECC’s current understanding of the Standardized Approach as issued in a Notice of Proposed rulemaking by U.S. federal banking agencies in 2012. This estimate may evolve over time as U.S. Basel 3 rules and their applicability to GECC are finalized. Peer data is based on publicly available information incorporating either U.S. Basel 3 standardized or U.S. advanced approaches.

2 Financial data as of 3Q 2012. GECC information; Peer comparisons using assumptions based on December 2010 guidance and publicly available company data. It does not reflect the revised guidance issued in January 2013. GECC elevated due to 4Q 2012 maturities; 4Q 2012 LCR estimate 211%.

3 GECC includes operating lease income (net of depreciation) and excludes retailer payments, cash and the legacy insurance business.

Note: Financial results from continuing operations unless otherwise noted.

PICTURED: Dr. Tianhong Zhang, GE Power & Water