GE 2002 Annual Report Download - page 11
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Please find page 11 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.10 GE 2002 ANNUAL REPORT
services revenues of $23 billion, growing at double
digits, with margins of more than 25%.
Many people assume that high margins mean that
the customer is getting a bad deal. The opposite is
true. Services put GE on the same side as the customer
and bring us closer. We win together. Customers like
Southwest and KLM have found that we make them
more profitable by delivering more fuel efficiency, more
time on wing and better service.
In the railroad industry, the key customer metric is
asset utilization — the time a train is working. We have
a set of information technology services that can
increase asset utilization by two percentage points.
This represents a substantial potential savings for the
industry and approximately $350 million in revenues
for our Transportation business.
Services by definition keep you focused on your
customers. And when you are solving customers’
problems, your potential for growth is endless.
ENDURING RELATIONSHIPS
We want GE to have enduring relationships with
customers. This has been my passion for many years.
I admit that when I discuss it inside the company or
among investors, eyes can glaze over. Talking about
customers seems too soft.
Let me put it as simply as I can. Customers win
when we provide better products; they win when we
provide better service; they win when we can generate
productivity through information management; they
win when we can provide needed capital.
GE operates in huge, global, fundamental industries:
airlines, railroads, hospitals, utilities, retailers and mid-
market businesses. A company that provides products
and services and information and financing in markets
it’s been in for decades can have enduring relationships.
The challenge I have set out for GE is to be innovative,
productive and competitive so that we can do this
again and again and again.
Healthcare is a great example of what I mean. This
is a $4 trillion global industry, growing more than 10%
each year. It’s also filled with challenges. Healthcare
affordability is a social issue, with costs heading toward
20% of the U.S. GDP by the end of the decade. Only
50% of our customers are profitable. GE can help.
industry’s only digital flat-panel interventional cardiac
imaging system; it is expected to generate $150 million
of revenue in year one, and it has no competitors.
Other products create demand in old industries. In 2003,
our Consumer Products business will introduce high-
end cooktops and ovens, refrigerators, dishwashers,
washers and dryers that can lead their categories.
GE leverages technology in unique ways through
our Global Research organization. Our first Global
Research Center, opened more than 100 years ago in
Schenectady, N.Y., was the birthplace of corporate
research and development. Today we’re extending our
reach with centers in India, Germany and China. Global
Research has become a hub for change because it
allows us to invent new technologies and discover
new applications across our businesses.
Renewable energy is a great example. In March
2002, we acquired Enron’s wind power assets for $180
million. We knew their customers, but not their expert-
ise. But through Global Research, in nine months we
infused technology from around GE, from materials to
controls to generators. As a result, we have improved
the performance of the existing fleet, given the busi-
ness the means to produce more efficient and power-
ful new turbines, and added a business that should
generate revenues in excess of $1 billion in 2003 with
solid profitability. We have become a global leader in
wind energy in less than a year because of our
diverse businesses and Global Research. In two years,
GE Wind will pay for itself. Only GE can do this.
Technology leadership expands the capability of
every GE business. But its most important benefit is the
creation of a huge installed base of long-lived, propri-
etary technology, and opportunities to provide that base
with services for years to come.
SERVICES ACCELERATION
Services leadership accelerates high-margin growth
and creates competitive advantage. When you own
the technology, there is never excess capacity. Our
advantage lies in a high-tech installed base of jet
engines, power turbines, locomotives and medical
devices. This base has grown fourfold since the mid-
1990s, and it remains one of our most valuable assets.
Our multi-year services backlog is $75 billion today,
nearly as big as all of GE in 1996. In 2003, we expect
LETTER TO STAKEHOLDERS THE GE LEADERSHIP TEAM
Representatives of GE’s operating
and corporate management…united
by curiosity, drive and imagination