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

Letter to Shareowners

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.

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.