GE 2014 Annual Report Download - page 104

84 GE 2014 FORM 10-K
MD&A EXPOSURES
We manage counterparty exposure, including credit risk, on an individual counterparty basis. We place defined risk limits
around each obligor and review our risk exposure on the basis of both the primary and parent obligor, as well as the issuer of
securities held as collateral. These limits are adjusted on an ongoing basis based on our continuing assessment of the credit
risk of the obligor or issuer. In setting our counterparty risk limits, we focus on high-quality credits and diversification through
spread of risk in an effort to actively manage our overall exposure. We actively monitor each exposure against these limits and
take appropriate action when we believe that risk limits have been exceeded or there are excess risk concentrations. Our
collateral position and ability to work out problem accounts have historically mitigated our actual loss experience. Delinquency
experience has been relatively stable in our European commercial and consumer platforms in the aggregate, and we actively
monitor and take action to reduce exposures where appropriate. Uncertainties surrounding European markets could have an
impact on the judgments and estimates used in determining the carrying value of these assets.
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VENEZUELA
Our activities related to Venezuela generated revenues of approximately $0.6 billion in 2014, consisting of both exports to and
operations within the country. Substantially all of these revenues are denominated in U.S. dollars and euro but we also
transact in bolivars for certain businesses.
Determining the appropriate exchange rate for remeasurement of bolivar-denominated monetary assets and liabilities into U.S.
dollars continues to be subject to uncertainty. During 2014, Venezuela operated three different exchange mechanisms:
CENCOEX (the official exchange mechanism), SICAD1 and SICAD2. In 2014, we became eligible to access the SICAD1
exchange mechanism to settle certain future transactions, including the payment of dividends. In light of this development, we
concluded the SICAD1 rate is the most appropriate for measuring a majority of our monetary assets and recorded pre-tax
charges of $66 million during 2014. We continued to access CENCOEX for certain of our qualifying imports and measure the
associated bolivar-denominated net monetary assets at that rate. In February 2015, the Venezuelan government eliminated
SICAD2 and introduced a new open market exchange mechanism (SIMADI). We will reevaluate the determination of the
appropriate exchange rates for remeasurement in light of current developments, including the potential for a devaluation of the
bolivar. Net monetary assets subject to remeasurement were approximately $78 million at December 31, 2014, including
approximately $19 million in bolivar-denominated cash and cash equivalents and approximately $41 million related to a non-
consolidated investment.
We also continue to monitor other effects of the economic and operating environment in Venezuela on our activities, including
the impact on non-bolivar credit exposures and recoverable amounts of bolivar denominated non-monetary assets.
OIL & GAS INDUSTRY
The recent sharp decline in oil prices and the prospect of lower oil prices has mixed implications for the industries and
countries in which we compete. In general, lower oil prices are expected to stimulate growth in oil importing countries while
causing negative economic effects in many energy-exporting countries. Certain parts of our Oil & Gas business will experience
declines in orders and pricing pressures, while we expect that other parts will be largely unaffected. In response to this
uncertain industry outlook, we have implemented cost actions and increased our focus on productivity. We expect that low oil
prices will benefit our other businesses through lower direct material and other variable costs as well as through the expected
stimulus-effect on growth in the U.S. and in other economies that rely on energy imports, including Europe, Japan, and India.
EMPLOYEE MATTERS
Approximately 16,400 GE manufacturing and service employees in the United States are represented for collective bargaining
purposes by one of 11 unions (approximately 82 different locals within such unions). A majority of such employees are
represented by union locals that are affiliated with the IUE-CWA, The Industrial Division of the Communication Workers of
America, AFL-CIO, CLC. During 2011, we negotiated four-year agreements with most of our U.S. unions. Most of these
contracts will terminate in June 2015, and we will be engaged in negotiations to attain new agreements. While results of 2015
union negotiations cannot be predicted, our recent past negotiations have resulted in agreements that increased costs.