GE 2015 Annual Report Download - page 44

Download and view the complete annual report

Please find page 44 of the 2015 GE annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 252

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178
  • 179
  • 180
  • 181
  • 182
  • 183
  • 184
  • 185
  • 186
  • 187
  • 188
  • 189
  • 190
  • 191
  • 192
  • 193
  • 194
  • 195
  • 196
  • 197
  • 198
  • 199
  • 200
  • 201
  • 202
  • 203
  • 204
  • 205
  • 206
  • 207
  • 208
  • 209
  • 210
  • 211
  • 212
  • 213
  • 214
  • 215
  • 216
  • 217
  • 218
  • 219
  • 220
  • 221
  • 222
  • 223
  • 224
  • 225
  • 226
  • 227
  • 228
  • 229
  • 230
  • 231
  • 232
  • 233
  • 234
  • 235
  • 236
  • 237
  • 238
  • 239
  • 240
  • 241
  • 242
  • 243
  • 244
  • 245
  • 246
  • 247
  • 248
  • 249
  • 250
  • 251
  • 252

How We Attack Industrial Margins
2016 INITIATIVES TO DRIVE PRODUCT MARGIN EXPANSION
• Investing in advanced
manufacturing & digitized factories
• Capturing supply chain value
through deflation, sourcing &
backward integration
• Designing for value through
FastWorks
•C
apt
uri
ng
sup
ply chain
va
lue
•I
• I
nve
nve
sti
sti
ng
ng
in
in
adv
adv
anc
anc
ed
ed
m
an
f
ufa
ctu
i
rin
&
g &
g
di
di
i
git
g
i
ize
df
d f
act
i
ori
e
s
RECENT
FOCUS
Lower Product Costs
15% Alstom
OPERATING PROFIT MARGIN1, 2 SEGMENT GROSS MARGIN1 We are segregating
Alstom’s costs
from our SG&A and
Products & Services
costs as we focus on
integrating Alstom
and achieving
our targeted cost
synergies
2011 2012 2013 2014 2015 2011 2012 2013 2014 2015
14.8% 28.0%
15.1% 27.7%
15.7% 27.4%
16.2% 26.6%
17.0%
27.4%
HISTORICAL &
ONGOING FOCUS
Leaner Structure
• 460bps reduction in Industrial SG&A
expenses as a % of sales from 18.5%
to 13.9%1 (2011-2015)
• 65% of processes moving to
shared services
• 77% reduction in enterprise resource
planning systems (2010-2015)
• $1B+ reduction in Corporate
operating costs (2013-2015)3
15% SG&A 70% Products & Services
WHAT IS
OUR COST
BREAKDOWN
OUR
HISTORICAL
MARGIN
TRENDS
HOW
WE DRIVE
MARGINS
WHAT WE
ARE DRIVING
TOWARDS
~12.8%
SG&A
expenses as
% of sales1
<2%
Corporate
operating costs
as % of Industrial
revenues3
+50 bps
gross margins
annually
~$3B
target cost
synergies by
2020
INTEGRATION
FOCUS
Cost Synergies
• Manufacturing
& services
• Sourcing
• SG&A expenses
• Engineering &
technology
WITHOUT
CORPORATE
12.0% 11.6% 12.6% 14.2% 15.3%
2015 2018 (TARGET)2016 (FORECAST)
16%+
INCLUDING
ALSTOM
14–14.5%
INCLUDING
ALSTOM
PRODUCTIVITY
IMPROVEMENTS &
LOWER CORPORATE
COSTS
ALSTOM IMPACT
(100–150) BPS
COST
SYNERGIES,
PRODUCTIVITY
IMPROVEMENTS
& LOWER
CORPORATE
COSTS
1. Excluding Alstom.
2. Non-GAAP Financial Measure. See Financial
Measures That Supplement U.S. Generally Accepted
Accounting Principles Measures (Non-GAAP Financial
Measures) on page 95.
3. Excluding restructuring and other & gains.
15.3%1,2
WITH
CORPORATE
17%1,2
WITHOUT
CORPORATE
(in the past, our
margin targets
excluded Corporate)
HOW WE ARE DEFINING OPERATING PROFIT MARGIN GOING FORWARD3
+50 BPS
EXCLUDING
ALSTOM
WITH
CORPORATE3
INTEGRATING GE-WIDE COUNCILS
Product Management, Supply Chain & Engineering
Leaders councils integrated to prioritize shared
margin goals across functions
LAUNCHING NEW PRODUCT COST LABS
Launching Product Management & Variable
Cost Productivity labs within Global Research solely
focused on product management & costs
16 GE 2015 FORM 10-K