2009 Annual Report
ecomagination is GE
2009 GE ECOMAGINATION REPORT
FINANCIAL HIGHLIGHTS
• Earnings were $18.1 billion, the third highest in Company history • Revenues grew 6% to a Company record of $183 billion • Global revenues grew 13% • Infrastructure and Media segments grew operating profi t 10% • Total equipment and services backlog grew to $172 billion, an increase of 9% • Services grew 10% with a backlog of $121 billion • Invested $15 billion in the intellectual foundation of the Company, including products, training, marketing, and programming • Filed 2,537 patent applications in 2008, an increase of 8% • Named 4th most valuable brand in the world by BusinessWeek
Earnings From Yearly operations (In $ Billions)
25
22.5 19.3
20
17.3 15.6
15
2009
18.1
2008 2007 2006
10
5
0
2005
TABLE OF CONTENTS
2
Letter to Investors
3
GE at Glance
4
Year in Review
8
Statement of Income
2009 2009GE GEECOMAGINATION ECOMAGINATIONREPORT REPORT 1
LETTER TO THE SHAREHOLDERS
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e have prepared for a difficult economy in 2009. To that end, we have lowered costs, increased loss reserves, improved our cash position, and intensified our management processes.We made some tough calls as we navigated this environment. We raised $15 billion of equity at a time when liquidity was virtually frozen. We have gained access to government funding programs that put us on equal footing with banks. We have improved our funding. We have already raised about two-thirds of the debt required to grow our businesses in 2009. We have increased our alternative fundingto $54 billion, mainly through our banks.
senior and secured. We are prepared to hold and operate our assets through the cycle to maximize value. We have taken aggressive action to reduce costs by $5 billion.
Our base cost will be down 7% next year, driven by headcount reduction and spending cuts. We have simplified organizations and reduced layers. We’ll reduce variable costs, including $2 billion of sourcing on direct material purchases. We expect our indirect costs to be down close to 10%. Our industrial businesses generate about $16 billion of cash annually, even in an economic downturn. We are aiming to reduce working capital by about $5 billion over the next two years. This gives us plenty We have improved our liquidity. We of cash to reinvest in growth, support a strong dividend, or strengthen our balreduced commercial paper from $100 billion last year to $60 billion today. ance sheet. Our top priority for capital We ended 2008 with $48 billion of cash allocation at the present time must be safety. on our balance sheet.We are targeting our leverage in GE Capital to be 6:1 in 2009. We are prepared for a very rough To that end, we will continue to run economy and have been realistic about the Company with the disciplines of a “Triple A,” includingadequate capital, our loss estimates. We benefit from low leverage, solid earnings, and conhaving less consumer exposure than servative funding.We have built a founbanks and our commercialloans are
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2009 GE ECOMAGINATION REPORT
dation that can weather this economic storm. But to emerge from this cycle as a more valuable company requires an unflinching commitment to execute our long-term strategy: building strong businesses and sustaining competitive advantage. Sincerely,
Jeffrey R. Immelt Chairman of the Board and Chief Executive Officer
GE AT GLANCE Technology Infrastructure
GE is one of the leading providers of essential technologiesto developed and emerging countries in healthcare, aviation,transportation, and enterprise solutions.
Energy Infrastructure
GE Capital
NBC Universal
GE provides a broad range of products and services throughout theworld in energy, oil and gas, and water and process technologies.
GE offers an array of fi nancial services and products worldwideaimed at enabling businesses to grow and at providing creditand banking services to consumers, retailers, and auto dealers.
NBC Universal is one of the world’s leading media and entertainmentcompanies in the development, production, and marketingof entertainment, news, and information for a global audience. 2009GE GEECOMAGINATION ECOMAGINATIONREPORT REPORT 2009
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YEAR IN REVIEW
Reduce water use and improve water reuse 4
Reduce greenhouse gas (GHG) emissions
2009 GEGE ECOMAGINATION REPORT 2009 ECOMAGINATION REPORT
Keep the public informed
Reduce greenhouse gas (GHG) emissions
T
he plan to achieve this is called 1-30-30. The “1” reflects the percentage (versus 2004 levels) by which GE will reduce its absolute greenhouse gas (GHG) emissions worldwide by 2012. This is a major goal, given that GHG emissions would otherwise have grown substantially by approximately 30% based upon current business growth projections. GE also committedto reducing the intensity of its GHG emissions 30% by 2008 andimproving energy effi ciency 30% by the end of 2012 (also versus2004 levels). Improving energy efficiency translates into significant energy cost savings for GE — another way ecomagination is rewarding investors. By making a public commitment and then tracking the results, GE is leading by example and demonstrating how one company can make a difference. In 2008, GE’s GHG emissions were 6.49 million metric tons, a reduction of 13% from our 2004 baseline. In addition to the continued implementation of many GHG and energy reduction projects in 2008, some of the emission reductionsare in part attributable to the slowing of the economy. Our performance against GE’s GHG Intensity and Energy Efficiency goals, which use revenue as a denominator thus reflecting economic conditions, showed continued progress, improving by 41% and 37%, respectively, compared to 2004. GE has now achieved
the first of its three GHG and energy goals to reduce GHG Intensity by 30% by the end of 2008. Each year, GE adjusts its 2004 baseline to account for divestments and acquisitions in accordance with the WRI/ WBCSD greenhouse gas accounting protocol. Although the numberof large sites in the GE GHG inventory is approximately the sameas in 2004, our adjusted baseline inventory is now approximately 46% lower than the initial 2004 inventory. We continue to recognize the hard work of our employees through the eCO2 awards and certification program, recognizing those sites that achieve at least a 5% absolute GHG reduction independent of changes in production levels.
To make ecomagination truly “sustainable” from a business perspective at its inception, GE set very real, aggressive targets, one of which is to improve the energy efficiency of Company operations and reduce the Company’s greenhouse gas emissions.
During 2008,we certified 41 sites which collectively achieved an aggregate reduction of 180,000 metric tons of CO2. We also gave special recognition ecomagination awards to ten sites for extraordinary results. Five of these sites, located in Hungary, implemented programs using GE’s Jenbacher engines in combined heat andpower projects at their manufacturing sites. Our outreach efforts continue as well, as we share our approach with suppliers,customers, and partners.
2009 2009 GE GE ECOMAGINATION ECOMAGINATION REPORT REPORT
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Reduce water use and improvewater reuse
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n May 2008, we announced our goal to reduce our fresh waterconsumption by 20% from a baseline of 2006 to 2012. Duringthe year, we have developed tools for our sites to assess, identify, and quantify costs and benefits of implementing water reduction projects. Our first water reduction Kaizen blitz event was conductedat our Global Research Facility in Niskayuna, New York, withvery favorable water reduction and cost benefits identified.
“GE technology works to reduce GE’s water footprint”
In 2008, water use from these sources was 0.2% higher than our 2006 baseline. An increase in non-contact cooling water offset a 10.8% reduction in water use for potable, process, and sanitary purposes. This increase was due to a project at one of our largest water using sites to better quantify water use.
energy efficient wastewater system at the Wilmington, North Carolina site has reduced water usage by 25 million gallons annually, avoiding nearly 80 tons per year of CO2 emissions and realizing annual savings of $160,000 in water and energy costs.
The project, utilizing GE Sensing Ultrasonic Flow Meters, identified that water use at the site was substantially higher We plan on using this approach at than originally estimated and had other targeted locations during the increased 11% since 2006.As a result, remainder of 2009 to identify more we are evaluating significant reduction Using GE’s ecomagination ZeeWeed® opportunities. Since 2006, we have opportunities at this site and across all membrane bioreactor(MBR) technology, GEH is transforming up to 65,000 collected water consumption data for of our businesses. gallonsper day of plant waste water those sites across our businesses meetinto a sustainable, drought proof suping a criterion of more than15 million GE technology works to reduce GE’s ply of high quality, non-potable water. gallons annually of water consumed. water footprint. GE Hitachi Nuclear This treated wastewater effluent is Water consumption data includes water Energy (GEH) and Global Nuclear reused in the facility’s cooling towers, used for potable, process, and sanitary- Fuel(GNF), a joint venture of GE, an integral component of the campurposes as well as non-contact coolToshiba, and Hitachi,have been working waters (NCCWs) from fresh water ing toward achieving GE’s ecomagina- pus heating,ventilating, and cooling (HVAC) system. It also eliminatesthe sources. We adjust the data each year to tion commitment to reduce our water use of ground water for this purpose. reflect acquisitions and divestments. footprint 20% by2012. Already, a new
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Keep the public informed
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he Company is continuing ongoing discussions, dialogues, and communications to engage with the public on our ecomagination efforts. This year the Company is launching an updated Web site at www.ecomagination.com where the public can learn more about GE ecomagination, our customers, and our diverse stakeholders. As part of GE’s overall corporate effort to improve transparency, the Company issues this annual ecomagination report to track environmental goals as well as a separate citizenship report to highlight social responsibility initiatives. Throughout the year,the Company also provides updates on ecomagination through shareholder and analyst meetings. To inform the public, GE launched a series of new advertisements with a common refrain, “Now.” Includeding the multi-faceted campaign was a focus on Smart Grid, GE’s vision for a more efficient and sustainable electrical energy grid. The campaign featured GE’s first Super Bowl ad, called “Scarecrow,” that focused on Smart Grid technology.
A modern take on the classic song, “If I Only Had a Brain,”from the film The Wizard of Oz, the ad imagines what can happen when old technologies become smarter. The digital component of the campaign included a new microsite, www.PlugIntoTheSmartGrid.com, that featuresa break through technology known as augmented reality. The United States Climate Action Partnership (USCAP), of which GE is a founding member, is a group of businesses and leading environmental organizations that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions. In 2009, the groupcreated a proposal called a “Blueprint for Legislative Action” which calls for reductions between 14% and 20% of 2005 greenhouse gas levels by 2020 and an 80% reduction by 2050 through an economy-wide cap and trade program.
“Engaging the public through advertising” 2009 GE ECOMAGINATION REPORT
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STATEMENT OF INCOME
T
o ensure that product introduction is met with the highest degree of integrity, GE employs a rigorous qualification process to effectively certify new ecomagination products. GE’s process began with establishing a clear standard for ecomagination products based on two criteria. Ecomagination offerings are products that significantly and measurably improve customers’ operating performance or value proposition and Environmental performance or services that substantially enable such improvements. These criteria work in tandem. At the heart of this standardis GE’s belief that “green is green”— that by investing in and developing environmentally
advanced products and services, GE will deliver solutions that increase customers’ ability to competeand win. GE also created the Ecomagination Product Reviewscorecard that quantifi es a product’s environmental impacts and benefits relative to other products. To ensure the accuracy of thescorecard, GE receives third-party quantitative environmental analysis and verification for GE’s product claims. GE’s portfolio of ecomagination products and services includes more than 80 at the time of the publishing of this year’s report (see list) and spans the entire range of GE businesses. GE’secomagination products and services are highlighted here.
2009 Summary Consolidated Revenues (In $ billions)
172 124
136
152
810 20092009 GE ECOMAGINATION REPORT GE ECOMAGINATION REPORT
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BOARD OF DIRECTORS
“The GE Board held 22 meetings in 2009, and each outside Board member visited at least two GE businesses without the involvement of corporate management, in order to develop his or her own feel for the Company�
Robert J. Swieringa Professor of Accounting and former Anne and Elmer Lindseth Dean, S.C. Graduate School of Management, Cornell University, Ithaca, New York. Director since 2002. Ralph S. Larsen Former Chairman of the Board and Chief Executive Officer, Johnson & Johnson, pharmaceutical, medical and consumer products, New Brunswick, New Jersey. Director since 2002. Sam Nunn Co-Chairman and Chief Executive Officer, Nuclear Threat Initiative, Washington, D.C. Director since 1997.
W. Geoffrey Beattie President and Chief Executive Officer, The Woodbridge Company Limited, Toronto, Canada. Director since 2009. Rochelle B. Lazarus Chairman of the Board and former Chief Executive Officer, Ogilvy & Mather Worldwide, global marketing communications company, New York, New York. Director since 2000. Andrea Jung Chairman of the Board and Chief Executive Officer, Avon Products, Inc., beauty products, New York, New York. Director since 1998.
Robert W. Lane Chairman of the Board and former Chief Executive Officer, Deere & Company, agricultural, construction and forestry equipment, Moline, Illinois. Director since 2005. Sir William M. Castell Former Vice Chairman, General Electric Company. Director since 2004. Susan Hockfield President of the Massachusetts Institute of Technology, Cambridge, Massachusetts.Director since 2006.
2009 GE ECOMAGINATION REPORT
General Electric Company Fairfi eld, Connecticut 06828 www.ge.com To learn more about GE’s ecomagination strategy and get updates on progress as it relates to products, services, and our overall commitment, please visit www.ecomagination.com Visit our interactive online annual report at www.ge.com/annualreport
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2009 GE ECOMAGINATION REPORT