GE 2007 Annual Report Download - page 4

Invest and Deliver
In 2008, we should hit all of our fi nancial goals and outperform
the S&P 500. Our revenues should grow by at least 10% to
$195 billion, with organic revenue growth at 2 to 3 times GDP
growth. Our earnings per share should grow by at least 10%. Our
return on average total capital (ROTC) should near our target
of 20%. We expect to return $18 billion to our investors through
the dividend and stock buyback.
We have the discipline and the processes to win in this tough
environment. We are in the fi fth year of a successful organic
growth initiative that is delivering results. More than half of our
revenues are outside the U.S., and our global revenue growth
was 22% in 2007. We have $150 billion of Infrastructure products
and services in backlog. We have strict risk discipline, and as a
result, have no exposure to losses from Collateralized Debt
Obligations (CDOs) and Structured Investment Vehicles (SIVs).
We have retained a “Triple-A”-rated balance sheet and generate
substantial cash fl ow, so we can invest while others pull back.
GE is different because we invest in the future and deliver
today. We are uniquely positioned to win in the essential themes
of this era. We help to create the future and, by doing so,
drive our own growth. We are a leadership company. We have
built strong businesses that win in their markets. Together,
our businesses deliver consistent earnings growth through the
cycles. We are a high-performance company. We can harness
ideas from across the Company to drive superior organic growth,
margins, and returns. We are a company that develops leaders.
Our team is experienced, and still they learn every day. Our
bench is deep.
In the rest of this letter, I will share with you the value
embedded in the totality of GE. In a tough 2008, this value will
be unlocked for you.
Winning in the essential themes
Last year I described our investments in six strategic themes
that could propel our growth for decades. These included
infrastructure technology, emerging markets, environmental
solutions, demographics, digital connections, and creating
value from origination. Our thesis was that each of these themes
was essential in the development of the world, and that GE
could create a profi table future for our investors, our customers,
and society. I would like to give you an update on our progress
in two of these themes.
In 2004, we launched our program in environmental solutions,
called ecomagination.
SM We believed that energy shortages and
environmental concerns would challenge our customers and,
more broadly, society. We had explored other corporate “social”
programs on the environment and decided they were not for
us. Our program needed to be an “edgy” initiative grounded in
business principles with hard metrics, customer commitments,
and technology investments. We wanted to use our brand
and technology to become a catalyst for broader change, while
making money for our investors.
This approach is working. Our original goal was to grow
revenues from ecomagination products from $6 billion in 2004
to $20 billion in 2010. We were at $14 billion in 2007 and will
cross $20 billion by 2009. Every GE business is participating. We
have created more than 60 ecomagination products that produce
cleaner energy and water or improve effi ciency. In the near future,
GE will launch technologies ranging from advanced coal gasifi ca-
tion to thin-fi lm solar panels to a hybrid locomotive. We will
invest $6 billion to fi nance renewable energy projects around
the world. We have multiple projects underway with our global rail,
airline, and utility customers who will be impacted by changes in
energy cost and regulations. Our goal is to support our customers’
aspirations for cost reduction, compliance, and reputation.
Customer partnerships are at the center of ecomagination.
A good example is Waste Management, whose Think Green®
business strategy aligns with a number of GE businesses. Our
companies share a commitment to sustainable, organic growth
built upon industry expertise and strong technology. Our
collaboration will grow to include GE Jenbacher gas engines that
burn landfi ll gas, land use for wind- and solar-power generation,
hybrid commercial vehicles, and emerging waste-conversion
technologies that produce electricity or synthetic fuels.
Ecomagination has become a global brand, symbolic of inno-
vation at GE. We are viewed as a technical partner by customers
around the world. We have engaged with governments to
drive public policies that create a framework to address global
warming and energy security. Due to our early success, we
have raised our ecomagination revenue target from a $20 billion
goal to $25 billion by 2010.
Similarly, we have been building leadership in emerging
markets for the last decade. It was our belief that the combination
of population growth, raw material infl ation, and improved
governance could lead to rapid expansion in these markets. Today,
the growth rate of emerging economies is four times that of the
U.S. Their governments are investing in massive infrastructure
projects that will drive local consumption. GE is well-positioned
to meet this demand. Our growth rate has averaged 20%, and
we should have $40 billion of emerging market revenue in 2008.
You have heard me talk in the past about our unique “company-
to-country” approach to emerging markets. This allows us to
use the breadth of a multi-business company to increase sales.
Perhaps the preeminent “company-to-country” relationship is
the Beijing Olympic Games. The Games will be a showcase for GE
to combine the presence of our global entertainment franchise
with the value of our infrastructure technology. GE’s leadership
position in the Olympics will create $2 billion of revenues in 2008
and decades of goodwill in China.
We are building great customer relationships with some of the
largest companies in the emerging markets. Mining customers
plan to invest $200 billion in capital equipment in the next fi ve
years. We see an opportunity and believe that mining could
be a $1 billion business for GE by 2010. It is dominated by seven
big players, none of whom have U.S. headquarters. Vale is a
great Brazilian mining company with whom we recently com-
mitted to a multi-year technical development agreement in
Transportation, Energy, and Water. BHP Billiton, a global mining
leader headquartered in Australia, is working with GE on a
comprehensive environmental solutions initiative.
2 ge 2007 annual report
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