Dear Fellow Shareholder,
2021 was a year of historic change for GE. We focused and de-risked the company through strategic portfolio actions, significantly accelerated our debt reduction, and improved our operating performance through lean and decentralization. Despite the global pandemic and supply chain challenges, we persevered and effectively served our customers while continuing to invest in profitable growth with leading technology and innovation. Add to this the resilience of our employees and we exited the year with big opportunities ahead.
We continued to make progress on our transformation and successfully built a new GE; one that is a simpler, stronger, high-tech industrial company. In 2021, we significantly reduced our debt, bringing our total gross debt1 reduction over three years to $87 billion. Given this ongoing hard work and the dedication of our employees, we are operating from a position of strength, focused on important growth sectors in aviation, healthcare, and energy.
It is with this confidence that we were able to announce in November our plans to transform the company by forming three independent, investment-grade industry leaders with sustainability at their core. We will spin off Healthcare first in early 2023, combine Renewable Energy, Power, and Digital into one business to launch as an independent public company a year later, thus creating our third company focused on Aviation. This is a defining moment for GE, one which will best position each of our businesses to deliver long-term growth and create value for all our stakeholders.
We plan to establish each standalone company with greater focus and flexibility to better serve their customers, respond to distinct industry dynamics, and build deep domain expertise in their respective industries, including a dedicated board of directors. From an employee perspective, we expect each prospective company to provide more business- and industry-oriented career opportunities and incentives, helping us to compete more effectively for talent. And each will have the opportunity to attract a broader and deeper investor base that increasingly wants to be part of more specific industries and missions that have their own appeal. All three companies will have well-capitalized balance sheets and investment-grade ratings that provide a foundation for targeted investments in growth and innovation.
GE has a storied and proud history. For 130 years, people have counted on GE to “find out what the world needs… and try to invent it,” as our founder Thomas Edison famously said. This still rings true at GE today and will continue in each of our three future companies. Passionate teams working to find a better way for our customers and the world. I am convinced that the efforts of our employees, collectively and individually, will enable us to successfully execute our strategy. For us at GE, this is more than just a job; it is a purposeful mission—we are building a world that works.
Position of Strength
I am proud of what our company and employees achieved in 2021.
We delivered solid margin* and EPS* performance and $5.8 billion of Industrial free cash flow*2 for the year. Orders were strong, especially in services, setting us up for faster and more profitable growth going forward. Our top-line results were pressured—partly by our decisions to be more selective in the projects and markets we pursue, partly by market factors like supply chain challenges and uncertainty surrounding the U.S. wind production tax credit, and partly due to our own execution.
We’re seeing momentum in GE today including near-term improvement in our businesses, especially as Aviation recovers and our end markets strengthen. We expect to deliver between $5.5 billion* and $6.5 billion* free cash flow in 2022 and more than $7 billion* in 2023. Our deleveraging efforts will continue, further solidifying our financial position and allowing GE to play more offense through organic and inorganic growth opportunities.
During the GE Kaizen Week, Aviation’s Chris Smith "trystormed" possible solutions to improve missed delivery targets including visual management.
Strong Financial Position
We took a huge step in 2021 with the close of the GE Capital Aviation Services (GECAS) and AerCap Holdings N.V. (AerCap) transaction, creating an industry leader and strategic partner to airline customers. GE now owns approximately 46 percent of the combined company. This combination was an important catalyst to solidify our financial position. We significantly accelerated our total gross debt3 reduction by more than $50 billion over the year. Following this, we also report the now much smaller remaining GE Capital business as part of Corporate, enabling us to simplify our financial reporting structure and further enhance transparency for our shareholders.
We are taking action to de-risk our business and drive sustainable, predictable performance. By making the strategic decision to discontinue the majority of our factoring programs, we enable our businesses to get back to basics on billings and collections, and over time, we expect this will facilitate higher and more linear cash flow.
Improved Business and Operating Performance
We have continued to strengthen our business, transforming GE into a simpler, leaner, and more effective organization.
We enter 2022 with lean taking root across the company. In the simplest of terms, lean is about focusing on the customer and eliminating waste to deliver more value to our customers. Our efforts this past year drove sustainable, impactful improvements in safety, quality, delivery, cost, and cash management. Lean is helping GE rebuild our operational core and transform our culture. Combining this with our historical strength in technology and innovation, each of our businesses has a very strong foundation for continued and faster profitable growth.
The Haliade-X, the only 12+ MW offshore wind turbine that has been operating for over two years, at its Rotterdam (the Netherlands) prototype site.
This customer-centric mindset is building across the company. Our Renewable Energy site in Pensacola, Florida used lean to improve wind turbine yaw-drive assembly, which reduced production time by 20 minutes and contributed to increased shift capacity from four to five units. We expect this capacity increase to enable us to maintain on-time delivery for the 2022 schedule. Aviation’s overhaul shops have used lean to decrease turnaround time since 2020, allowing us to return engines to customers faster, and at lower cost. Gas Power Services’ business used lean to develop a new playbook for planned maintenance outage events, which has achieved 30 percent cycle time improvement. Healthcare’s Ultrasound team implemented lean principles of pull and daily management to better meet customer needs, resulting in a 13-percentage-point improvement in on-time delivery. These efficiencies are setting a new industry bar for execution and, most importantly, are delivering value and speed to our customers. Taken together with numerous other measures across the company, including 100,000 employees developing new skills through lean learning courses this year, these actions will meaningfully contribute to the success of our operations.
We are driving lasting cultural change. Our operating system is standardized—with a monthly focus on key performance indicators and a quarterly look at key priorities of talent, strategy, and budgeting. Our new performance management system is driving greater responsibility at an individual level. In addition, with new reporting of our priorities and progress in sustainability and diversity, we are holding ourselves accountable to make improvements within GE and for the world.
Decentralization goes hand in hand with lean and getting closer to our customers. This means managing the nearly 30 business units within our four segments. We have, therefore, moved the decision-making center of gravity closer to the customer. This will continue to result in greater accountability, more transparency, and better results.
Let’s take a closer look at how these efforts reflect how our teams are running our businesses better.
Thanks to operational improvements and increasing shop visits, Aviation expanded margins in 2021 to 13.5 percent reported, while revenue was slightly down, in line with departure activity. Orders were up across equipment and services, driven by commercial wins. We remain confident in the recovery while actively managing the impact of industry-wide material and labor availability challenges due to COVID-19. Our business is positioned to lead as the commercial aftermarket recovers and military grows.
Healthcare felt the impact of supply chain disruptions faster than our other businesses in 2021, but the team proactively managed costs, sourcing, and logistics to deliver solid performance. Orders and organic revenue* were up, and margins expanded 70 basis points organically*, giving the team both the capital and the flexibility to play some offense. In 2021, we acquired BK Medical and Zionexa, two exciting companies helping to realize the potential of precision health.
Renewable Energy delivered double-digit orders growth in 2021, but revenue and margin both declined organically*. Onshore Wind is a mature business that faces near-term challenges both structural and of our own making. Offshore Wind demand continues to significantly increase globally, while Grid Solutions is on its way to profitability. Scott Strazik is now leading our energy businesses running a similar play as he ran in Gas Power—being more selective up front about the new business we take on and being more disciplined on cost—and the onus is on us to continue to improve the performance of this business. Long-term, our energy businesses are firmly positioned to lead the energy transition.
In 2021, Power’s services growth offset decreases in revenue, driven primarily by our selectivity strategy, which includes lower turnkey scope and exercising more discipline in the projects we choose to underwrite. Margins improved more than 300 basis points organically*. Orders were up slightly, driven by services growth offsetting equipment. Gas Power has stabilized, Steam Power continues to exit the new-build coal power market, Power Conversion grew by double digits, and GE Hitachi Nuclear Energy is partnering with customers on the next generation of nuclear technologies. Looking forward, we’ll continue to improve performance by embedding lean principles deeper in the organization, leading to high single-digit margins for the total Power segment in 2023.
The Shape of Things to Come
future of flight
Helping customers achieve greater efficiency and sustainability and invent the future of flight.
Driving innovation in precision health to address critical patient and clinical challenges.
Supporting customers and communities seeking to provide affordable, reliable, and sustainable power.
Rising to the Challenge of Building a World That Works
GE is positioned to continue to lead in three important growth sectors—creating a smarter and more efficient future of flight, enabling precision health, and driving decarbonization through the energy transition—critical to our customers and the various end-markets that we serve.
Future of Flight
Starting with Aviation, innovations that improve fuel efficiency are defining the future of flight, and our engines can operate on approved sustainable aviation fuel (SAF) today. Transitioning from petroleum-based fuels to SAF can reduce carbon emissions up to 80 percent, factoring in the entire life cycle of the fuel, significantly contributing to the commercial aviation industry’s long-term goal of net-zero carbon emissions from flight by 2050. In December 2021, a United Airlines Boeing 737 MAX 8 powered by CFM LEAP-1B engines became the first passenger flight to use 100 percent “drop-in” SAF for one of the aircraft’s two engines. Drop-in SAF can be used interchangeably with conventional jet fuel and requires no modifications to engines and airframes. Customers Etihad Airways, British Airways and many more have also flown commercial flights powered by a SAF fuel blend.
Looking further out, we are innovating for the next generation of aircraft engines. With CFM International, our 50-50 joint company with Safran Aircraft Engines, GE Aviation launched the Revolutionary Innovation for Sustainable Engines (RISE) program to demonstrate advanced technologies, with ground and flight tests expected in the middle of this decade. This program could ultimately lead to engines that would use 20 percent less fuel and produce more than 20 percent fewer CO2 emissions than the most efficient jet engines built today. And GE Aviation together with GE Research is advancing commercial hybrid electric propulsion systems through key partnerships with ARPA-E and NASA. We are prioritizing the future of aviation now for a more sustainable future.
This year, GE Aviation together with GE Research announced a new research partnership with NASA to accelerate the introduction of hybrid electric flight technologies for commercial aviation.
Enabling precision health—integrated, efficient, and highly personalized care—is vital to addressing critical challenges that affect patients and healthcare providers.
At a patient level, Healthcare’s acquisition of BK Medical, an advanced surgical visualization company whose technology helps clinicians see inside the patient’s body in real time during surgery, will enable better care, faster surgeries, and reduced complications. Healthcare is focused on supporting the entire continuum of care for patients from diagnosis through therapy and beyond. To do this well, we work every day on improving our own operations. For example, Healthcare’s Pharmaceutical Diagnostics team in Ireland applied lean thinking to create, test, and implement new workflow and preparation sequences that reduced production turnaround times. These changes resulted in extra production capacity of more than two million bottles of contrast media, which is used during medical imaging exams to enable better visualization and diagnosis. In 2021, Healthcare introduced its latest pocket-size color ultrasound scanner, Vscan Air, a handheld, wireless device that beams images from the ultrasound probe to an app on a smartphone—bringing an essential tool to the point of care. With 30,000 units in more than 100 countries, our Vscan Family technologies help doctors deliver expanded care to more people, including in rural regions.
As the healthcare system continued to contend with COVID-19 in 2021, GE Healthcare implemented a statewide system in Oregon powered by artificial intelligence to give clinicians near real-time information about intensive care unit (ICU) capacity, acute hospital beds and emergency department wait times. In one instance, the Oregon Care System was able to identify the nearest ICU to airlift a critically ill patient to and alert the ambulance crew to pack several liters of the patient’s blood type in the helicopter’s coolers. To date, 65 of the hospitals in Oregon—approximately 95 percent of the state’s beds—are live in the system.
As a company whose equipment helps generate one-third of the world’s electricity, we have a responsibility to lead the industry’s decarbonization efforts and meet the rising global demand for affordable, reliable, and sustainable energy. Our energy businesses provide powerful, integrated solutions with some of the most innovative onshore and offshore wind turbines, most efficient gas turbines, as well as advanced technology to modernize and digitize electrical grids.
James Thomas from our Gas Power manufacturing plant in Greenville, S.C., installs a stator blade assembly for the 7HA turbine. Two 7HA turbines along with other GE technology will help deliver up to 1,050 MW for Seminole Electric in Putnam County, Florida.
We believe in the important role of building the breakthrough technologies the world will need in the future, including carbon capture, utilization, and sequestration (CCUS), low- and zero-carbon fuels like hydrogen for new and existing gas plants, and small modular nuclear reactors. Our gas turbines have already accumulated more than eight million hours running on blends of hydrogen and similar fuels. Fuels such as clean hydrogen could help avoid millions of tons of CO2 emissions to the atmosphere by the end of the decade, and we are building or modifying power plants in the U.S., Australia, and China designed to utilize blends of hydrogen and natural gas as fuel. The Brentwood Power Station in New York is beginning a demonstration project to run on a blend of natural gas and carbon-free “green hydrogen.”
We know it will take several years for some of these advances to become technologically and commercially viable and widely adopted in many parts of the world. Thus, while GE works on breakthrough technologies for tomorrow, we continue to build and deliver state-of-the-art equipment the world needs today to decarbonize the energy sector while building resilience in more than 175 countries around the world.
Gas turbines are crucial for providing reliable baseload electricity to complement large wind projects like the 1.05-gigawatt Western Spirit project just commissioned in New Mexico and the 1.485-gigawatt North Central wind farm under construction in Oklahoma. Both wind farms are using wind turbines from our 2-megawatt (MW) family, which has become a stalwart of the industry, with more than 20 gigawatts (GW) of installed capacity. Also, our powerful Haliade-X offshore wind turbine prototype in Rotterdam began operating at 14 MW. One Haliade-X turbine can save up to 52,000 metric tons of CO2, the equivalent of the emissions generated by 11,000 vehicles, in one year4. We have over 7 GW of Haliade-X commitments worldwide.
Our software is helping digitize the grid to add more renewable energy and make it more resilient. Leveraging our software, utilities can integrate a high penetration of renewables while sustaining grid reliability and resiliency. In addition, data on past outages and weather patterns, for instance, can help pinpoint future spots of vulnerability during a storm—so utilities can speed up repairs and minimize downtime. In 2021, GE Digital acquired grid management software company Opus One to help utilities bring more distributed energy resources online. Our software is paving the way to an autonomous grid that can detect problems and come up with the most efficient solutions, a critical step in accelerating the energy transition.
This is the impact of GE—every day our people rise to the challenge of building a world that works, in service of a more connected, healthier, and more sustainable future.
Delivering Value Now and in the Future
Today, GE is a stronger, more customer-centric company. We are building a culture that puts safety at the forefront and lean at the center. This clarity of mission provides compelling opportunities for our businesses to define the trajectory of their industries—we shape the future of flight, advance precision health and lead the energy transition—and we do it by getting better every day.
Take for instance, our work in Lynn, Massachusetts, where I spent a week serving those closest to the work, our operators, as part of a global lean event in early October. Our mission was to improve first-time yield on midframes, a key subassembly of the military engines we produce in Lynn, whose stubborn variability has been negatively impacting our on-time delivery to customers. By the end of the week, we had improved processes for welding and quality checks on midframe parts, improvements that are now delivering 99 percent first-time yield, as compared with 59 percent before the lean event. We are convinced these improvements, when applied with scale, will help us reach our goals for military on-time delivery. And we can improve our performance on the back of these changes for years to come. These constant, incremental changes make us a more efficient, profitable business.
As a company with momentum, we are positioned to succeed in the biggest transformation in our history—creating three companies focused on the critical global needs in aviation, healthcare, and energy. Our employees are essential to the success of these businesses, and we will offer them industry-leading opportunities and incentives to advance their careers. We are fortunate to have experienced leaders in place, already at work to execute this planned transformation and stand up each of these businesses for success on day one.
These independent businesses will take forward the “core of GE” while better leveraging our innovation muscles, technology expertise, leadership, and global reach to build a world that works for everyone.
2021 was a meaningful year for GE. The future starts now, and we are embracing it.
Some of the information we provide in this document is forward-looking and therefore could change over time to reflect changes in the environment in which GE competes. For details on the uncertainties that may cause our actual results to be materially different than those expressed in our forward-looking statements, see https://www.ge.com/investor-relations/important-forward-looking-statement-information. We do not undertake to update our forward-looking statements.
 Includes borrowings, after tax pension & principal retiree benefit plan liabilities, operating leases, 50% preferred stock, and factoring
 Based on prior three-column reporting format and excluding the impact from factoring programs discontinued in current and prior periods. For GE’s full set of reported metrics against its 2021 Outlook and more information on its transition from three- to one-column financial statement reporting, please see GE’s fourth-quarter 2021 earnings materials at ge.com/investor.
 Includes borrowings, after tax pension & principal retiree benefit plan liabilities, operating leases, 50% preferred stock, and factoring
 According to wind conditions on a typical German North Sea site
* Non-GAAP financial measure