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100 ge 2008 annual report
notes to consolidated financial statements
Þ INDEMNIFICATION AGREEMENTS. These are agreements that require
us to fund up to $693 million under residual value guarantees
on a variety of leased equipment. Under most of our residual
value guarantees, our commitment is secured by the leased
asset at termination of the lease. The liability for these indem-
nification agreements was $332 million at December 31, 2008.
We had $1,742 million of other indemnification commitments
arising primarily from sales of businesses or assets.
Þ CONTINGENT CONSIDERATION. These are agreements to provide
additional consideration in a business combination to the
seller if contractually specified conditions related to the
acquired entity are achieved. At December 31, 2008, we had
total maximum exposure for future estimated payments of
$118 million, of which none was earned and payable.
Our guarantees are provided in the ordinary course of business.
We underwrite these guarantees considering economic, liquidity
and credit risk of the counterparty. We believe that the likelihood
is remote that any such arrangements could have a significant
adverse effect on our financial position, results of operations or
liquidity. We record liabilities for guarantees at estimated fair
value, generally the amount of the premium received, or if we do
not receive a premium, the amount based on appraisal, observed
market values or discounted cash flows. Any associated expected
recoveries from third parties are recorded as other receivables,
not netted against the liabilities.
At December 31, 2008 and 2007, the likelihood that we will be
called upon to perform on these guarantees is remote.
Product Warranties
We provide for estimated product warranty expenses when we sell
the related products. Because warranty estimates are forecasts
that are based on the best available information—mostly historical
claims experience —claims costs may differ from amounts pro-
vided. An analysis of changes in the liability for product warranties
follows.
(In millions) 2008 2007 2006
Balance at January 1 $1,541 $1,339 $1,240
Current-year provisions 1,038 827 829
Expenditures (a) (917) (763) (729)
Other changes 13 138 (1)
Balance at December 31 $1,675 $1,541 $1,339
(a) Primarily related to Technology Infrastructure and Energy Infrastructure.
Note 31.
Commitments and Guarantees
Commitments, Including Guarantees
In our Aviation business of Technology Infrastructure, we had
committed to provide financial assistance on $1,291 million of
future customer acquisitions of aircraft equipped with our
engines, including commitments made to airlines in 2008 for
future sales under our GE90 and GEnx engine campaigns. The
GECAS business of Capital Finance had placed multiple-year
orders for various Boeing, Airbus and other aircraft with list
prices approximating $17,248 million and secondary orders with
airlines for used aircraft of approximately $1,653 million at
December 31, 2008.
At December 31, 2008, NBC Universal had $8,102 million of
commitments to acquire film and television programming,
including U.S. television rights to future Olympic Games and
National Football League games, contractual commitments
under various creative talent arrangements and various other
arrangements requiring payments through 2014.
At December 31, 2008, we were committed under the follow-
ing guarantee arrangements beyond those provided on behalf of
securitization entities. See Note 30.
Þ CREDIT SUPPORT. We have provided $9,151 million of credit sup-
port on behalf of certain customers or associated companies,
predominantly joint ventures and partnerships, using arrange-
ments such as standby letters of credit and performance
guarantees. These arrangements enable these customers and
associated companies to execute transactions or obtain
desired financing arrangements with third parties. Should the
customer or associated company fail to perform under the
terms of the transaction or financing arrangement, we would
be required to perform on their behalf. Under most such
arrangements, our guarantee is secured, usually by the asset
being purchased or financed, but possibly by certain other
assets of the customer or associated company. The length of
these credit support arrangements parallels the length of the
related financing arrangements or transactions. The liability for
such credit support was $72 million for December 31, 2008.