GE 2014 Annual Report Download - page 15

below GE’s cost of capital. Improving our
capital effi ciency depends on returning
substantial dividends to GE, which is our
goal over the next few years.
We will continue to allocate capital in a
disciplined and balanced way. We will
grow the dividend in line with earnings and
consider this our highest investor priority.
We will execute the Synchrony split, which
is a capital effi cient way to reduce our fl oat,
and should reduce our shares by 8%. We will
invest $10–$15 billion each year in R&D, cap-
ital equipment and IT to grow the Company
globally and reduce our cost. And, we will do
limited M&A, as Alstom is our top priority.
We are on track for our fi nancial pivot, but
despite our work, total shareholder return
declined 7%, trailing the S&P 500. We have
made short-term tradeoffs to achieve long-
term gains. For instance, we gave up 15%
of Synchrony’s earnings through the IPO,
but investors have yet to feel the benefi t of
the stock split. And, we invested $0.12 EPS
to restructure the Company, which was a
5% drag on earnings and lowered returns in
2014. These moves will accelerate growth
in 2015 and 2016.
Our aim is to grow this by 100–200 basis
points over the next few years.
Our big focus is reducing product cost, built
around the principles of “should cost”;
in other words, what is the ideal cost with
perfect execution. For the H Turbine, our
goal is a 25% reduction from present levels.
This requires automation, accelerating
learning curves from our suppliers and new
manufacturing tools. It will also result in
the insourcing of critical components like
precision castings.
We are still defi ning the competitive posi-
tion for GE in the fi nancial services industry,
driven by our domain. We are a great
competitor in the American heartland,
where our customers value the access to
GE industrial capability. But, we must
stay focused on improving returns at GE
Capital. GE Capital earned $7 billion in
2014, down about 12%. It returned a $3 bil-
lion dividend to the parent, a substantial
decline from 2013. GE Capital is fi nancially
secure, and we continue to make GE
Capital smaller and more connected to
GE’s strengths. We have about $83 billion
invested in Capital, but our returns are
LETTER TO SHAREOWNERS
GE CAPITAL REGULATORY TEAM
GE Capital Chairman & CEO Keith S. Sherin and his regulatory
team are building and optimizing GE Capital’s capabilities to
ensure a strong future.
Photo (left to right): Robert Green, Tom Gentile, Sharon Garavel, Michael
Silva, Joe Pizzuto, Keith S. Sherin, Jennifer VanBelle, Rob Casper and
Anne Kennelly Kratky.
GE 2014 ANNUAL REPORT 13