Growth & Margin Expansion

Transcription

1 Growth & Margin Expansion Analyst Meeting July 26, 2006 Growth & Margin Analyst Meeting /1

2 GE Growth & Margin Expansion Analyst Meeting Keith S. Sherin July 26, 2006 This document contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," or "will." Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties which could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest rates and commodity prices; strategic actions, including dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; unanticipated loss development in our insurance businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business, competitive and regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

3 GE strategy Safe + reliable growth company 20% By 08 GE advantage scale + breadth + depth Great businesses founded on market leadership, domain expertise, competitive advantage & financial strength 2-3X GDP 10+% Reliable execution with businesses that perform consistently while expanding returns Revenue Earnings growth Expanding returns Performance accelerating Expanding OP rate & ROTC $10+B FCF/year Clear strategy & financial goals Common initiatives where we can scale ideas with speed driving incremental returns A simple structure & strong team filled with people who have broad + deep careers Growth & Margin Analyst Meeting /3

4 Process for growth Technology/ services Growth leaders Customers Innovation Execute for growth Commercial Excellence Globalization Yields: consistent + valuable + visible growth Growth & Margin Analyst Meeting /4

5 Growth through NPS & Lean Six Sigma Organic growth 2-3X GDP Lean Six Sigma + Net Promoter Score 5% Historic Today Using GE operating rigor & tools to drive growth Metric NPS Lean Six Sigma Work-out Lean improves customer facing processes Net Promoter Score (NPS) measures success with customer Simple & clear 30 Lean showcases in place New product Introduction (NPI), Inquiry to Order (ITO), Order to Remittance (OTR) Utilize operating discipline + metrics to drive growth Growth & Margin Analyst Meeting /5

6 Margin expansion Industrial op profit % (Ex. pension) 13.5% 15.0% Target: 100 bps./yr Drivers of expansion Services improve mix Installed base growth Product innovation margin expansion Technology & global competitive cost position '04 '06 Simplification G&A cost out Funding R&D & selling costs Funding growth & margin expansion Growth & Margin Analyst Meeting /6

7 Op profit dynamics ex. pension 2H commitments Drivers +80 bps. 15.4% 16.2% + Productivity + Infrastructure services = product + NBCU 4Q comparison Plastics price/inflation 2H'05 2H'06 Total year & 2H on track Growth & Margin Analyst Meeting /7

8 Services improving mix ($ in billions) Cost Installed base life cycle Design & test Revenue Locomotives Aircraft Eng. Gas Turbines Margin expansion services mix % Industrial revenue Op profit % ~+2 pts. ~28% ~30% ~25% ~29% ~+4 pts Years Growing infrastructure installed base 5% growth in 06 Installed base early in life cycle 40% of aircraft engines yet to reach first shop visit Energy F/H 4-year average Loco average age '02 '06E '02 '06E Mix = margin Revenue CAGR 02-06E Product ~8% Service ~10% +80 bps. margin each year Best years are ahead of us Growth & Margin Analyst Meeting /8

9 Technology & Product Leadership New Technology & Products Wind Biosciences High-end Plastics GE 90 Life Sciences Oil & Gas Evo High-end Appliances Cable/Stations/DVD HCIT Security Nanotechnology GEnx Sensors Optimization ESBWR Water NDT IGCC Controls Environmental Keep improving core Cost Quality Installed base Past 5 Years Funding +65% Capability: 1 4 GRC People: +20% EB engineers Growing Installed Base Expanding Margins EVO, Wind & Clinical Systems Product Innovation Foundation For Margin Expansion Growth & Margin Analyst Meeting /9

10 Product leadership Strong pipeline new products Contribution margin a) $3-4B % 38% +100 pts. R&D annual spend IB projects (a- ex. NBCU Today Next 3 years Company wide focus simplification funding growth Technology funded in run rate IBs generate $3B in 06 Leveraging successful product introductions Strong product managers with deep domain Globally competitive costs Product leadership to deliver 1 pt. improvement over next 3 years Growth & Margin Analyst Meeting /10

11 Simplification attack on G&A G&A % revenue 11.1% 10.5% 10.2% ~ 9.2% Focus Driving lower costs Company wide council Common measurements Regular review rhythm Reducing entities, P&Ls, rooftops & systems Establishing COEs '04 '05 '06E '07F Focused on cycle time Lean Revenue/G&A headcount Continuous cost out focus Growth & Margin Analyst Meeting /11

12 Summary & agenda Growth through NPS & lean six sigma Gary Reiner Commercial Finance Mike Pilot Consumer Finance Mark Begor Healthcare Dee Mellor Infrastructure Dave Tucker Margin expansion through services, product leadership & simplification Lloyd Trotter Energy: Wind Vic Abate Healthcare: Clinical Systems Omar Ishrak Commercial Finance Jeff Bornstein Infrastructure John Falconi Wrap-up/Q&A Keith Sherin Growth & Margin Analyst Meeting /12

13 Growth & Margin Expansion Analyst Meeting July 26, 2006 Growth & Margin Analyst Meeting /13