GE 2002 Annual Report Download - page 8
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Please find page 8 of the 2002 GE annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.GE 2002 ANNUAL REPORT 7
hangover from excess capacity or risky financing, so we
can give our investors a soft landing. With an installed
base of turbines and a multi-year services backlog
that both have grown tenfold, and investment in new
platforms including Oil &Gas and Wind Energy, Power
is positioned for long-term growth and high returns.
Our performance in a difficult commercial aviation
market has been excellent. Our earnings in Aircraft
Engines and GECAS (our leasing unit) were down only
5% in 2002, despite a near 20% decline in commercial
engine shipments and the bankruptcies of two major
U.S. airlines. Our businesses are extremely well man-
aged, and their leaders have been through these
cycles before. We took cost out of the Engines busi-
ness while investing $700 million in R&D to develop
eight new engines. We have a successful family of
engines for regional jets, the only growth segment in
commercial aviation. Our service and military busi-
nesses should grow more than 15%, providing earnings
momentum. Meanwhile, GECAS has kept a 1,100-plus
fleet productive, with only 12 planes on the ground at
the end of the year. Our in-depth knowledge of these
assets and our global marketing skills have allowed
GECAS to grow through the turmoil. We are managing
through bankruptcies at major customers and have
remarketed more than 140 aircraft. We will emerge
from this cycle with strengthened customer relation-
ships, ahead of our competition. These businesses
should have double-digit earnings growth in 2003.
Medical Systems should also have an excellent
2003. Medical introduced 30 new products in 2002, the
most in its history. The backlog of orders for these
high-margin products is at an all-time high, and service
growth continues at 11% annually. Medical’s healthcare
information technology business grew orders 30%
in 2002 and is well positioned for 2003. Our Medical
business is the global leader in diagnostic imaging
and clinical information technology, two of the fastest-
growing segments in healthcare. Medical has a vibrant
leadership team with deep healthcare expertise, and the
business is positioned for sustained double-digit growth.
NBC continues to outpace its competition in
financial performance and ratings. Earnings grew 18%
in 2002, a terrific performance that we expect will
continue through 2003. Our prime-time ratings in key
viewing demographics (adults ages 18-49) were 29%
higher than the next network’s, allowing GE to com-
mand a 50% share of the growth in the “upfront” (pre-
season) advertising market. In 2002, we added the
Telemundo and Bravo networks to NBC. Telemundo is
well positioned to capture the growth in Hispanic
advertising. Bravo’s upscale audience parallels NBC’s
and creates new opportunities for content. Because of
NBC’s great performance, I was delighted to present
Bob Wright and his team with our annual Chairman’s
Leadership Award for “best overall performance.”
Our other short cycle industrial businesses —Plastics,
Consumer Products, Industrial Systems and Specialty
Materials — are well positioned for the future. They
have been affected by the global economy and earned
less in 2002 than they did in 1999. To combat this they
have lowered costs, invested in new products, built
global distribution and added new growth segments.
These businesses have transformed themselves during
a tough cycle, and they can achieve double-digit earnings
growth with only moderate economic expansion in 2003.
Commercial Finance and Consumer Finance grew
earnings by more than 15% last year, with attractive
returns on equity. These businesses represent more
than 80% of the earnings of the old GE Capital. We
grew their assets by 16% in 2002, while losses and
delinquencies remained stable. We acquired new plat-
forms that are producing exceptional returns: Deutsche
Bank’s inventory financing business, ABB’s structured
finance business and Security Capital’s real estate
operations. Commercial and Consumer Finance have
broad and deep leadership teams
—
people who know
how to get the most from each cycle. These businesses
have solid competitive advantages in low funding
costs, strong risk management and global origination,
and should deliver double-digit earnings growth
in 2003 and beyond.
LEARNING THE HARD WAY
ERC stands in sharp contrast to GE’s expectations for
business performance. We pride ourselves on having
sound strategy with strong operating accountability. A
GE business can briefly get out of balance strategically
or operationally, but rarely do we get both wrong at
the same time. We did with ERC.
A DIVERSE SET OF
LEADING BUSINESSES
DRIVING PERFORMANCE
Great businesses we have
been in for decades
OPERATING RIGOR
WITH A FOCUS ON
CASH GENERATION
Triple A-worthy discipline for
investment in growth
GREAT PEOPLE IN A
CULTURE OF LEARNING
AND ACCOUNTABILITY
Individuals who imagine, lead and
perform for the team and the company