GE 2008 Annual Report Download - page 4

The macro-environment has been brutal. The losses in the whole financial services
industry are projected to be at least $2 trillion. The lending capacity that has come out
of the system is somewhere between $5 trillion and $10 trillion. We have now entered
an economic recession across most of the world.
Government actions have helped to stabilize the environment. Capital markets have
improved, largely due to aggressive actions by the U.S. Federal Reserve, U.S. Federal
Deposit Insurance Corporation, U.S. Department of the Treasury, and global governments.
In addition, stimulus programs being implemented around the world will provide trillions
in new investments.
In this very tough environment, GE earned $18 billion, our third highest year in history.
Thanks to the extensive repositioning of our portfolio over the past eight years, we
redeployed our capital to enable growth. Our operating cash flow for the year remained
strong at over $19 billion. We have a $172 billion backlog in infrastructure products
and services. We have geographic diversity, with 53% of our revenues outside the U.S.
We also have a great pipeline of new products.
The credit for this performance in the toughest times I’ve ever seen goes to the people
of GE. The efforts of more than 300,000 skilled GE workers, technicians, credit analysts,
technologists, engineers, service providers, our experienced management team, and
all employees helped us end 2008 with solid profitability and prepare our Company
for future growth.
Despite our efforts, the GE stock got hammered. Companies with a presence in financial
services, like GE, are simply out of favor. I can tell you that no one is more disappointed
than I am with the performance of our stock in this tough environment. I assure you that
we will work hard to restore your trust, and we will continue to work hard to build GE
for the long term.
We are in a recession and, at times like these, it is difficult to predict how bad and for
how long. We are running GE to “weather the cycle.” However, I believe we are going
through more than a cycle. The global economy, and capitalism, will be “reset” in several
important ways.
The interaction between government and business will change forever. In a reset
economy, the government will be a regulator; and also an industry policy champion,
a financier, and a key partner.
The financial industry will radically restructure. There will be less leverage, fewer
competitors, and a fundamental repricing of risk. It will remain an important industry,
just different.
There are other resets as well: the diminished role of the automotive industry;
a prolonged downturn in housing; a decline in the prominence of alternative investments;
and the nature of executive responsibility and compensation. You get the point. Successful
companies won’t just “hunker down”; they will seek out the new opportunities in
a reset world.
In that context, we have taken strong actions to protect the Company during this
recessionary cycle. At the same time, we will continue to execute our long-term strategy.
We will continue to build strong businesses that will perform over the long term. And
we will drive the common initiatives that build competitive advantage.
“In this very tough environment, GE earned $18 billion, our third
highest year in history … We have a $172 billion backlog in
infrastructure products and services … We also have a great
pipeline of new products.”
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