GE 2015
Annual Report

HowWeAttackIndustrialMargins

Our Cost Breakdown

  • 15%
  • 70%
  • 15%

Our Historical Margin Trends

SG&A
OPERATING PROFIT MARGIN1,2

Product & Service
SEGMENT GROSS MARGIN1

Alstom

We are segregating Alstom’s costs from our SG&A and Products & Services costs as we focus on integrating Alstom and achieving our targeted cost synergies.

How We Drive Margins

Historical & Ongoing Focus

Leaner structure

  • 460bps reduction in Industrial SG&A expenses as a % of sales from 18.5% to 13.9%1 (2011-2015)
  • 65% of processes moving to shared services
  • 77% reduction in enterprise resource planning systems (2010-2015)
  • $1B+ reduction in Corporate operating costs (2013-2015)3
What We Are Driving Towards
~12.8%
<2%

Recent Focus

Lower Product Costs

  • Investing in advanced manufacturing & digitized factories
  • Capturing supply chain value through deflation, sourcing & backward integration
  • Designing for value through FastWorks
What We Are Driving Towards
+50bps

Integration Focus

Cost Synergies

  • Manufacturing & services
  • Sourcing
  • SG&A expenses
  • Engineering & technology
What We Are Driving Towards
~$3B

2016 INITIATIVES TO DRIVE PRODUCT MARGIN EXPANSION

Integrating GE-wide councils
Product Management, Supply Chain & Engineering Leaders councils integrated to prioritize shared margin goals across functions

Launching new product cost labs
Launching Product Management & Variable Cost Productivity labs within Global Research solely focused on product management & costs


HOW WE ARE DEFINING OPERATING PROFIT MARGIN GOING FORWARD3

17%1,2

Without Corporate

In the past, our margin targets excluded corporate

1. Excluding Alstom.
2. Non-GAAP Financial Measure. See Financial Measures That Supplement U.S. Generally Accepted Accounting Principles Measures (Non-GAAP Financial Measures) on page 95 in the form 10-K.
3. Excluding restructuring and other & gains.

Welcome to the 2015
GE Annual Report

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