GE 2009 Annual Report Download - page 9

We’ve built strong bonds with hundreds of community hospital systems like Ochsner,
in New Orleans, and Virtua Health, in New Jersey. Over the last decade, we’ve gone
beyond supplying them diagnostic imaging equipment. We work just as hard on quality,
leadership and productivity solutions. We’ve helped make Ochsner and Virtua two of
the highest-quality and most cost-efficient health systems in the country.
Providing solutions requires technical breadth, customer value and societal trust. GE
brings this to clean energy and affordable healthcare, places where governments must
invest. This will provide sustainable and profitable growth to investors.
An energized and accountable team.
One of the challenges of leadership in tough times is keeping your team
realistic in the present and optimistic about the future. The pre-crisis
business rules are gone forever. In their place are different challenges
like resourcing for growth in emerging markets, working with global
governments and adapting to economic volatility.
Evolving leadership is a strength for GE. We learn constantly from
success and failure, and we use what we learn to educate our leaders.
For example, we learned important lessons about risk and liquidity
management over the past 18 months. In the next few years, we will intensify development
of leaders who will thrive in the future.
One way to rejuvenate leadership is to learn from others. We sent 30 of our best leaders
to more than 100 major institutions to learn how they are training for the future. We visited
Google, West Point, MIT and other institutions around the world.
This is what we have learned, and what we will teach: Leaders must be better listeners;
we must be comfortable with ambiguity; we must inspire by example and vision; we
must move with competence and speed; and we must respect people and connect with
society. The bottom line is that people have different expectations for leaders.
At the same time, when leaders come together in their business teams, they must
execute better than ever. We plan to send our top business units through a team-based
course called “Leadership Innovation and Growth.” They will focus on operational execution,
organic investment and anticipating change. We aim to develop a new generation of
leaders who will power the most competitive company in the world.
Our leaders’ measurements and compensation will be further aligned with investors. In
2010, we will have a long-term incentive plan using four key metrics: 2010 – 12 cumulative
earnings-per-share, where targets will reflect the attractive financial profile I described
earlier; cumulative industrial cash generation, which provides the capability to grow our
dividend in line with earnings; industrial return on total capital goals, which would keep
GE on a level with other highly valued companies and reflect effective capital allocation;
and GE Capital ending net investment consistent with our vision of a smaller, more focused
financial services business. Achieving these goals will create a more valuable company.
Intensifying efforts to grow leaders, incorporating external perspectives, operationalizing
learning and further aligning incentives with investor interests — that’s how GE is
energizing leadership for the 21st century.
Attractive growth in earnings, cash and returns.
We expect 2010 earnings to be flat with 2009. In 2011 and beyond, we expect GE to
generate solid earnings growth, even if the economic recovery is uneven. We will
achieve this growth while generating substantial “free cash” that could further enhance
investor returns.
Infrastructure earnings should continue to be strong. We won many big global orders
in 2008 – 09 and face the future with $175 billion in backlog, a record high. We have a full
pipeline of new products. And product services, which account for more than 70% of our
infrastructure profitability, will continue to grow. By 2011, we should see earnings growth
from both equipment and services.
We expect 2010 earnings to be flat with
2009. In 2011 and beyond, we expect GE
to generate solid earnings growth, even
if the economic recovery is uneven. We
will achieve this growth while generating
substantial “free cash” that could further
enhance investor returns.
Historical Performance
70
30
175
1970s* 1980s 1990s 2000s
CUMULATIVE
CASH FLOW
(In $ billions)
*CFOA was not a metric the Company reported in 1970s
65
24
10
165
1970s 1980s 1990s 2000s
CUMULATIVE
EARNINGS
(In $ billions)
39
14
99
1979 1989 1999 2009
AVERAGE
P/E RATIO
GE 2009 ANNUAL REPORT 7