GE Infrastructure Expanding Margins

Transcription

1 GE Infrastructure Expanding Margins John Falconi 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. 0/ Calhoun

2 GE Infrastructure ($ in billions) ~10%+ ~$ / Yr ~10% Proven approach Lead with technology Revenue $42 ~15%+ ~$9 ~10% - 15% Big and growing installed base $8 Population growth infrastructure needs Segment profit Domain knowledge Huge synergy opportunity Op Rate -a) '05 '06E 17% 18% ~ bps/year Great business positioned for solid margin expansion -a) Excludes financial verticals 1

3 Op profit Infrastructure 2H commitments 2H Dynamics 19.4% +150 bps. Energy Turbine shipments ~25% Services revenue ~17% Wind momentum units ~30%+ 17.9% Aviation Commercial engines ~7%; Services ~17% 2H military spares revenue ~5%+ R&D timing 2H'05 2H'06 Oil & Gas Sales ~16% Equipment ~14% & Services ~16% On target for 2H & Total Year 2

4 Technology installed base service ($ in billions) Invest in technology Build installed base New platforms $ (units) Energy a) ~3,000 Optimization and control, environmental services $1.9 Aviation b) ~19,000 Engine controls Rail ~15,000 Network optimization 95 '05 Oil & Gas c) ~26,000 Pipeline inspection Drive lifecycle relationship with our customers expand capabilities & returns a) In service gas turbines >35MW b) CFM Engines (~11,500) - CFM International is a 50/50 JV with Snecma c) Turbines, compressors, & pumps 3

5 Clear results Infrastructure ($ in billions) Revenue $36.8 ~$14.7 Services Services Products ~35% Grow services Products ~55% Greater services share higher margins 4

6 New structure creates opportunity Infrastructure Industrial NBC Universal Healthcare Commercial Financial Services Consumer Finance Energy $19.4B Energy Financial Services $1.5B Oil & Gas $4.3B Water Technologies $2.1B Aviation $12.8B Commercial Aviation Services $4.2B Rail $4.0B JRI BOD /41 5

7 New perspective G&A % revenue Infrastructure 6.4% 5.9% $350MM synergy Rooftops ~1, component repair operations Logistics $1.3B 270 warehouses/ distribution centers Direct material/labor ~$25B annually 05 06E Size, scale & capabilities Requires organizational change Metrics & commitments Long term service backlog $81B Purchased services $1.0B Staff costs $1.2B finance, HR, IT, legal R&D spend $1.5B shared technologies, tools Rethink how we operate simplify 6

8 Integration spectrum H Center of Excellence Synergy Benefits Individual Best Practice Sharing Cross-Business Teams/Councils Rooftops ~$50MM Consolidated Shared Services Sourcing ~$60MM Repair Technology ~$25MM L Business Silo Organization Stage Center of Excellence Delivering on the $350MM created sustainable process 7

9 Rooftops cross business council Key steps Houston example Inventoried ~1,000 rooftops facilitate data mining Target 25% reduction in 06 expiring leases Dispose/sell vacant & discontinued properties Implement 10 city convergence gameplans multi year/geographic Council approval for all new rooftops sites office, manufacturing & warehouse locations sites ~30% reduction target 11 sites ~50% impact Driving for $50MM of savings 8

10 Indirect sourcing shared service Infrastructure indirect sourcing leader Global commodity teams Prof services MRO Tooling Equipment Labor IT Facilities Utilities/EHS Office Aviation Energy Oil & Gas Rail Water Global cross-business commodity teams centralize expertise Sustain best practices monthly pulse Delivering ~$60MM in 06 9

11 Repair technology COE Energy s Repair Development Center Targeting Greater leverage of resources & facilities + Aviation & Transportation Stronger ties to sales, marketing customers Drive 23% reduction in NPI cycle time 25% improvement in CSA productivity Benefits Example: New repairs technology sharing Creating ~$25MM of savings 10

12 What we are learning Simplifying how we are organized enables growth and margin expansion Organizational framework drives cross business opportunities/benefits functional teams, commitments, metrics, tools at all levels Ensure cross business integration is sustainable monthly/quarterly pulse Leaders will operate across businesses and be comfortable depending on their functional teams/associates Simple grounded approach to managing our costs funding growth 11

13 GE Infrastructure / Yr ($ in billions) 09 Dynamics Revenue ~10%+ $42 ~15%+ $8 ~$47 ~$9 ~10% ~10% - 15% Lead with technology New products (GEnx, Wind, EVO, etc.) Achieve run rate margins Big and growing installed base Population growth infrastructure needs R&D $1.5B in Run-Rate Installed Base ~7%/Yr Segment profit Op Rate -a) '05 '06E 17% 18% ~ bps/year Domain knowledge Huge synergy opportunity 5-10% G&A /Yr Fund Growth & Margin Expansion Great business positioned for solid margin expansion -a) Excludes financial verticals 12

14 Growth & Margin Expansion Analyst Meeting July 26, 2006