GE 2008 Annual Report Download - page 39

management’s discussion and analsis
ge 2008 annual report 37
PROPERTY, PLANT AND EQUIPMENT totaled $78.5 billion at
December 31, 2008, up $0.6 billion from 2007, primarily reflecting
acquisitions and additions of commercial aircraft at the GECAS
business of Capital Finance. GE property, plant and equipment
consisted of investments for its own productive use, whereas
the largest element for GECS was equipment provided to third
parties on operating leases. Details by category of investment
are presented in Note 14.
GE additions to property, plant and equipment totaled
$3.0 billion in both 2008 and 2007. Total expenditures, excluding
equipment leased to others, for the past five years were
$14.5 billion, of which 33% was investment for growth through
new capacity and product development; 31% was investment in
productivity through new equipment and process improvements;
and 36% was investment for other purposes such as improvement
of research and development facilities and safety and environ-
mental protection.
GECS additions to property, plant and equipment were
$13.3 billion and $15.2 billion during 2008 and 2007, respectively,
primarily reflecting acquisitions and additions of commercial
aircraft at the GECAS business of Capital Finance.
GOODWILL AND OTHER INTANGIBLE ASSETS totaled $81.8 billion
and $15.0 billion, respectively, at December 31, 2008. Goodwill
increased $0.6 billion from 2007, primarily from acquisitions—
including Hydril Pressure Control by Energy Infrastructure,
Merrill Lynch Capital by Capital Finance and Vital Signs at
Technology Infrastructure, partially offset by the effects of the
stronger U.S. dollar and dispositions. Other intangible assets
decreased $1.2 billion from 2007, primarily from amortization
expense and the effects of the stronger U.S. dollar. See Note 15.
ALL OTHER ASSETS totaled $106.9 billion at year-end 2008, a
decrease of $15.9 billion, reflecting decreases in prepaid pension
assets, assets held for sale and real estate, partially offset by
increases in derivative instruments and associated companies.
We recognized other-than-temporary impairments of cost and
equity method investments of $0.5 billion and $0.1 billion in
2008 and 2007, respectively, including $0.2 billion relating to our
cost method investment in FGIC Corporation during 2008. See
Note 16.
Delinquency rates on managed equipment financing loans and
leases and managed consumer financing receivables follow.
December 31 2008 2007 2006
Equipment financing 2.17% 1.21% 1.22%
Consumer 7.47 5.38 5.22
U.S. 7.14 5.52 4.93
Non-U.S. 7.64 5.32 5.34
Delinquency rates on equipment financing loans and leases
increased from December 31, 2007, and December 31, 2006, to
December 31, 2008, primarily as a result of the inclusion of the
CitiCapital acquisition and Sanyo acquisition in Japan, which
contributed an additional 12 and 9 basis points, respectively, at
December 31, 2008, as well as deterioration in our U.S. commercial
middle market and certain European portfolios. The current finan-
cial market turmoil and tight credit conditions may continue to
lead to a higher level of commercial delinquencies and provisions
for financing receivables and could adversely affect results of
operations at CLL.
Delinquency rates on consumer financing receivables
increased from December 31, 2007, and December 31, 2006, to
December 31, 2008, primarily because of rising unemployment,
an increasingly challenging economic environment and lower
volume. This has resulted in continued deterioration in our U.S.
and U.K. portfolios. In response, GE Money has continued to
tighten underwriting standards globally, increased focus on
collection effectiveness and will continue its process of regularly
reviewing and adjusting reserve levels. We expect the global
environment, along with U.S. unemployment levels, to continue
to deteriorate in 2009, which may result in higher provisions for
loan losses and could adversely affect results of operations at
GE Money. At December 31, 2008, roughly 40% of our U.S.-
managed portfolio, which consisted of credit cards, installment
and revolving loans, was receivable from subprime borrowers.
We had no U.S. subprime residential mortgage loans at
December 31, 2008. See Notes 12 and 13.
OTHER GECS RECEIVABLES totaled $18.6 billion at December 31,
2008, and $22.1 billion at December 31, 2007, and consisted
primarily of amounts due from GE (generally related to certain
material procurement programs of $3.0 billion at December 31,
2008 and $2.9 billion at December 31, 2007), insurance receiv-
ables, amounts due from Qualified Special Purpose Entities (QSPEs),
nonfinancing customer receivables, amounts accrued from
investment income, amounts due under operating leases and
various sundry items.