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General Electric Company
203-373-2211
3135
Easton Turnpike
Fairfield, CT 06828
www.ge.com
Sales
$133
billion
Business Description
GE is
one of the largest and most diversified industrial corporations in the
world. We have engaged in developing, manufacturing and marketing a wide
variety of products for the generation, transmission, distribution, control
and utilization of electricity since our incorporation in 1892. Over the
years, we have developed or acquired new technologies and services that have
broadened considerably the scope of our activities.
Our products include major appliances; lighting products; industrial
automation products; medical diagnostic imaging equipment; motors;
electrical distribution and control equipment; locomotives; power generation
and delivery products; nuclear power support services and fuel assemblies;
commercial and military aircraft jet engines; chemicals for treatment of
water and process systems; and engineered materials, such as plastics,
silicones and, through the fourth quarter of 2003, superabrasive industrial
diamonds.
Our services include product services; electrical product supply houses;
electrical apparatus installation, engineering, repair and rebuilding
services; and through the third quarter of 2002, computer related
information services. Through our affiliate, the National Broadcasting
Company, Inc., we deliver network television services, operate television
stations, and provide cable, Internet and multimedia programming and
distribution services. Through another affiliate,
General Electric Capital Services, Inc., we offer a broad array of
financial and other services including consumer financing, commercial and
industrial financing, real estate financing, asset management and leasing,
mortgage services, consumer savings and insurance services, and specialty
insurance and reinsurance.
In virtually all of our global business activities, we encounter aggressive
and able competition. In many instances, the competitive climate is
characterized by changing technology that requires continuing research and
development, as well as customer commitments. With respect to manufacturing
operations, we believe that, in general, we are one of the leading firms in
most of the major industries in which we participate. The NBC Television
Network is one of four major U.S. commercial broadcast television networks.
It also competes with syndicated broadcast television programming and cable
and satellite television programming activities. The businesses in which
GECS engages are subject to competition from various types of financial
institutions, including commercial banks, thrifts, investment banks,
broker-dealers, credit unions, leasing companies, consumer loan companies,
independent finance companies, finance companies associated with
manufacturers, and insurance and reinsurance companies.
This document contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," "will" or words of
similar meaning and include, but are not limited to, statements about the
expected future business and financial performance of GE. Forward-looking
statements are based on management's current expectations and assumptions,
which are inherently subject to uncertainties, risks and changes in
circumstances that are difficult to predict. Actual outcomes and results may
differ materially from these expectations and assumptions due to changes in
global political, economic, business, competitive, market, regulatory and
other factors. We undertake no obligation to publicly update or review any
forward-looking information, whether as a result of new information, future
developments or otherwise.
Our consolidated international revenues increased to $60.8 billion in 2003,
compared with $53.4 billion in 2002 and $51.9 billion in 2001.
Operating Segments
Segment revenue and profit information is presented on page 48 of the 2003
Annual Report to Shareowners. Additional financial data and commentary on
recent financial results for operating segments are provided on pages 49-55
of that report and in note 27 (pages 102 and 103) to the consolidated
financial statements.
Operating businesses that are reported as segments include Aircraft Engines,
Commercial Finance, Consumer Finance, Consumer Products, Equipment
Management, Industrial Products and Systems, Insurance, Medical Systems,
NBC, Plastics, Power Systems, Specialty Materials and Transportation
Systems. There is appropriate elimination of the net earnings of GECS and
the immaterial effect of transactions between segments to arrive at total
consolidated data. A summary description of each of our operating segments
follows.
Aircraft Engines
Aircraft Engines (8.0%, 8.4% and 9.0% of consolidated revenues in 2003, 2002
and 2001, respectively) produces, sells and services jet engines, turboprop
and turbo shaft engines, and related replacement parts for use in military
and commercial aircraft. Our military engines are used in a wide variety of
aircraft that includes fighters, bombers, tankers, helicopters and
surveillance aircraft. The CFM56™, produced by CFM International, a company
jointly owned by GE and Snecma Moteurs of France, and GE's CF6 and GE90®
engines power aircraft in all categories of large commercial aircraft:
short/medium, intermediate and long-range. Applications for the CFM56™
engine include: Boeing's 737-300/-400/-500 series, the next generation
737-600/-700/-800/-900 series, and the 737 business jet; Airbus' A318, A319,
A320, A321 and A340-200/-300 series; and military aircraft such as the
KC-135R, E/KE-3 and E-6. The CF6 family of engines powers intermediate and
long-range aircraft such as Boeing's 747, 767, DC-10 and MD-11 series, as
well as Airbus' A300, A310 and A330 series. The GE90® engine is used to
power Boeing's 777 series twin-engine aircraft. The GP7000, designed and
marketed in a joint venture with the Pratt & Whitney division of United
Technologies Corporation, is offered on Airbus' A380.
We produce jet engines, such as the CF34®, for executive aircraft and
regional commuter aircraft, including Bombardier's Challenger 604 and
CRJ200/700/900 series of aircraft and Embraer's 170 and 190 series of
aircraft. A new version of the CF34®, the CF34-10A, is currently being
developed to power China's future ARJ21 regional aircraft. We also
manufacture aircraft engine derivatives used for marine propulsion and
industrial power generation sources, the latter of which is also reported as
part of the Power Systems segment. Maintenance, component repair and
overhaul services (MRO), including sales of replacement parts, are provided
for many models of engines, including engines manufactured by competitors,
and represent a significant portion of this segment's profits. In December
2003, we completed the acquisition of the non-destructive testing (NDT)
business of Agfa-Gevaert. This business has been combined with Aircraft
Engines NDT business to offer radiographic, ultrasonic, eddy current and
other inspection solutions that test the structure and tolerance of
materials without damaging them.
The worldwide competition in aircraft jet engines and MRO (including parts
sales) is intense. Both U.S. and export markets are important. Product
development cycles are long and product quality and efficiency are critical
to success. Research and development expenditures, both customer-financed
and internally funded, are important in this segment. Focused intellectual
property strategies and protection of key aircraft engine design,
manufacture, repair and product upgrade technologies are also important.
Potential sales for any engine are limited by, among other things, its
technological lifetime, which may vary considerably depending upon the rate
of advance in the state of the art, by the small number of potential
customers and by the limited number of relevant airframe applications.
Aircraft engine orders tend to follow military and commercial airline
procurement cycles, although cycles for military and commercial engine
procurement are different. Procurements of military jet engines are affected
by changes in global political and economic factors.
In line with industry practice, airframe manufacturers support their sales
of commercial jet aircraft from time to time with long-term financing
commitments to customers, and engine manufacturers are often asked to
participate in such financings. In making such commitments, it is our policy
to establish a secured position in the aircraft being financed. Under such
airline financing programs, we had issued guarantees amounting to $0.4
billion at year-end 2003, and had entered into commitments totaling $1.2
billion to provide financial assistance on future sales of aircraft equipped
with our engines. Our guarantees and commitments are secured by individual
aircraft or pools of aircraft engines related to the specific financing
arrangement. When particular guarantees exceed the value of the associated
security, we consider credit risk of the customer and provide for estimated
losses. At December 31, 2003, the total estimated fair value of aircraft
securing these guarantees exceeded the guaranteed amounts, net of the
associated allowance for losses. See page 49 of the 2003 Annual Report to
Shareowners for information about orders and backlog.
Aircraft Engines is headquartered in Evendale, Ohio and has operations in
North America, Europe, Asia and South America.
Commercial Finance
Commercial Finance (14.1%, 13.4% and 12.5% of consolidated revenues in 2003,
2002, and 2001, respectively) offers an array of financial services
worldwide. With particular expertise in the mid-market segment, we offer
loans, leases, and other financial services to customers, including
manufacturers, distributors and end-users for a variety of equipment and
major capital assets including industrial facilities and equipment,
energy-related facilities, commercial and residential real estate, vehicles,
aircraft, and equipment used in construction, manufacturing, data processing
and office applications, electronics and telecommunications, and healthcare.
We acquired the commercial inventory financing business of Deutsche
Financial Services and the structured finance business of ABB in 2002 and
most of the commercial lending business of Transamerica Finance Corporation
in January 2004.
We operate in a highly competitive environment and are subject to
competition from a variety of financial institutions including commercial
banks, investment banks, leasing companies, financing companies associated
with
manufacturers, and independent finance companies. Industry participants
compete on the basis of interest rates and fees as well as deal structures
and credit terms. Profitability is affected not only by broad economic
conditions that impact customer credit quality and the availability and cost
of capital, but also by successful management of credit risk, operating risk
and market risks such as interest rate and currency exchange risk. Important
factors to continued success include maintaining strong risk management
systems, customer and industry specific knowledge, diverse portfolios,
service and distribution channels, strong collateral and asset management
knowledge, deal structuring expertise and the reduction of costs through
technology and productivity.
Commercial Finance headquarters are in Stamford, Connecticut with offices
throughout the United States and in Canada, Latin America, Europe, and Asia
Pacific. Our activities are conducted through the principal businesses
described below.
Real Estate
Real Estate funds the direct acquisition, refinancing and renovation of real
estate assets, and purchases equity investments in real estate properties.
Our loans generally are intermediate-term senior and subordinated fixed and
floating-rate and are secured by existing income-producing commercial
properties. Our business also includes the origination and term
securitization within one year of low loan to value loans. We invest in and
provide restructuring financing for portfolios of real estate, mortgage
loans, limited partnerships and tax-exempt bonds. Additionally, we invest in
equity positions in a diversified portfolio of real estate assets via direct
real estate ownership and joint venture interests. Property types include
multi-family housing, self-storage facilities, warehouses, parking
facilities, retail centers, senior assisted living facilities and office
properties.
Aviation Services
Aviation Services is a global commercial aviation financial services
business that offers a broad range of financial products to airlines,
aircraft operators, owners, lenders and investors. Financial products
include leases, aircraft purchasing and trading, loans, engine/spare parts
financing, pilot training, fleet planning and financial advisory services.
Commercial aviation is an industry in which we have a significant ongoing
interest. As has been widely reported, this industry has been under
pressure, but has undertaken steps to reduce unused capacity and align
costs. Consequently, during 2003, major United States and European airlines
achieved moderate improvements in operations including traffic, revenues and
load factors. Aviation Services, which owned 1,239 commercial aircraft at
December 31, 2003, had 1,236 on lease despite pressure on the industry.
Regional jets, with capacity for 50-90 passengers, have had a significant
effect on the commercial aviation industry in recent years. These jets have
enabled airlines to replace less efficient equipment, both turboprop and
older, narrow-bodied jets. At December 31, 2003, our fleet included 278
regional jets, diversifying total aircraft holdings. We believe that we
continue to offer a suitable range of equipment that is attractive to the
industry.
Commercial Equipment Financing
Commercial Equipment Financing finances manufacturing equipment, facilities,
construction and office equipment, corporate aircraft, franchises, trucks
and trailers and a wide variety of other equipment. We also furnish
customers with direct-source tax-exempt finance programs, as well as lease
and sale/leaseback offerings. Customers include manufacturers, distributors,
dealers, end-users, and municipalities. We also maintain an asset management
operation that redeploys off lease and repossessed equipment and other
assets.
Corporate Financial Services
Corporate Financial Services provides equity, revolving and term debt used
by customers to finance acquisitions, business expansion, refinancings,
recapitalizations and other special situations. Customers are owners,
managers and buyers of both public and private companies, principally
manufacturers, distributors, retailers and diversified service providers.
Our industry specialists concentrate on the retail, and media and
communications industries. We also provide senior debt, subordinated debt
and bridge financing to buyout and private equity firms.
Structured Finance
Structured Finance provides equity, debt and structured investments to its
customers, primarily in the global energy, telecommunications, industrial
and transportation sectors. Financial services and products include
corporate finance, acquisition finance and project finance. Products include
a variety of debt and equity instruments, as well as structured
transactions, including leases and partnerships.
Vendor Financial Services
Vendor Financial Services provides financial services to equipment
manufacturers and dealers/distributors in a variety of industries including
office equipment, industrial equipment, information technology equipment,
motor sports and marine equipment, recreational vehicles and
telecommunications equipment. We offer distribution financing programs,
sales financing and trade payables services, including inventory financing,
accounts receivable financing, formula based lending, private label
financing, rental finance, and warranty and collateral management services.
Healthcare Financial Services
Healthcare Financial Services is exclusively directed to the special needs
of the global healthcare industry. We bring a comprehensive set of financial
products and services to that market, including financing for equipment,
information technology systems, real estate, acquisitions,
recapitalizations, turnarounds, and working capital needs. We also provide
tax-exempt financing for non-profit hospitals, vendor financing programs for
medical equipment suppliers, and equity capital for medical real estate
investments. We serve healthcare companies of all sizes across a wide range
of sectors. Customers include hospitals and health systems; physician
practices; outpatient diagnostic and treatment centers; skilled nursing and
assisted living facilities; medical device manufacturers, life science
companies, and other suppliers of products and services to the healthcare
sector.
Consumer Finance
Consumer Finance (9.6%, 7.8% and 7.5% of consolidated revenues in 2003,
2002, and 2001, respectively) is a leading provider of credit products and
services to consumers, retailers and auto dealers in 38 countries. We offer
a broad range of financial products, including private-label credit cards,
personal loans, bank cards, auto loans, leases and inventory financing,
residential mortgages, corporate travel and purchasing cards, debt
consolidation, home equity loans, and credit insurance. We acquired First
National Bank and the retail sales finance unit of Conseco Finance Corp. in
2003 as part of our continued global expansion.
Our operations are subject to a variety of bank and consumer protection
regulations, including data privacy. Further, a number of countries have
ceilings on rates chargeable to consumers in financial service transactions.
We are subject to competition from various types of financial institutions
including commercial banks, leasing companies, consumer loan companies,
independent finance companies, manufacturers' captive finance companies,
and insurance companies. Industry participants compete on the basis of
price, servicing capability, promotional marketing, risk management, and
cross selling. The markets in which we operate are also subject to the risks
of declining retails sales, changes in interest and currency exchange rates,
and increases in personal bankruptcy filings.
Consumer Finance headquarters are in Stamford, Connecticut and our
operations are located principally in the United States, and in Europe,
Asia, Latin and South America, Australia and New Zealand.
Consumer Finance's activities are conducted through the principal businesses
described below.
Global Consumer Finance
Global Consumer Finance is a leading provider of financial products and
services to retailers, auto dealers, and consumers outside of North America.
We provide private-label credit cards and proprietary credit services to
retailers in Europe, Asia Pacific and, to a lesser extent, Latin and South
America. We also provide a variety of direct-to-consumer credit programs
such as personal loans, bank cards, auto loans and leases, residential
mortgages, debt consolidation, home equity loans and the distribution of
credit insurance. Our customers include retailers such as Tesco, Coles Myer
and Wal-Mart.
Card Services
Card Services is a leading provider of sales financing services to North
American retailers in a broad range of consumer industries. Product
offerings include customized private-label credit card solutions for
retailers such as JC Penney, ExxonMobil, Wal-Mart, Sam's Club, Macy's and
Lowe's. Product offerings also include personal loans, home equity loans,
business credit services, and corporate travel and purchasing cards.
Consumer Products
Consumer Products (6.2%, 6.4% and 6.7% of consolidated revenues in 2003,
2002 and 2001, respectively) manufactures and/or markets major appliances
and a wide range of lighting products for global markets. Both operations
are leaders in technology and product innovation in their industries. Major
appliances include refrigerators, electric and gas cooking products,
microwave ovens, freezers, dishwashers, clothes washers and dryers,
water-softening and filtering products, and room air conditioning equipment.
These are sold under Hotpoint®, GE®, Profile™, Monogram®, and SmartWater™
brands, as well as under private brands for retailers and others. GE
microwave ovens, gas and electric ranges, room air conditioners,
water-softening and filtering products, freezers and some refrigerators are
sourced from suppliers, while investment in GE-owned facilities is focused
on refrigerators, dishwashers, electric ranges and home laundry equipment. A
large portion of appliance sales is for replacement of installed units. Such
sales are affected through a variety of retail outlets. The other principal
channel consists of residential building contractors who install appliances
in new dwellings. We also manufacture approximately 6,000 various lamp
products for commercial, industrial and consumer markets. Product families
include incandescent, Reveal®, halogen, high-intensity discharge,
fluorescent, stage/studio, miniature/sealed beam, projection, automotive and
LEDs (light-emitting diodes). The business also manufactures outdoor
lighting fixtures and systems for commercial, industrial and sports lighting
applications. GE has an extensive U.S. product services network that
provides repair services, extended service plans, warranty administration
and risk management services.
Demand for appliances is influenced by economic trends, such as increases or
decreases in consumer disposable income, availability of credit and housing
construction. Competition is very active in all products and services and
comes from a number of principal manufacturers and suppliers. An important
factor is the degree of product differentiation achieved through innovation
and new product features. Other significant factors include product quality
and cost, brand recognition, customer responsiveness and appliance service
capability.
Consumer Products is headquartered in Louisville, Kentucky, and has
operations in North America, Europe, Asia and South America.
Equipment Management
Equipment Management (3.5%, 3.6% and 3.9% of consolidated revenues in 2003,
2002 and 2001, respectively) helps customers manage, finance and operate a
wide variety of business equipment worldwide. We provide rentals, leases,
sales, asset management services and loans for portfolios of commercial and
transportation equipment, including tractors, trailers, auto fleets,
railroad rolling stock, intermodal shipping containers and modular space
units.
Our operations are conducted in highly competitive markets. Economic
conditions, geographic location, pricing and equipment availability are
important factors in this business. Future success will depend upon the
ability to maintain a large and diverse customer portfolio, optimize asset
mix, maximize asset utilization and effectively manage credit risk. In
addition, we seek to understand and deliver unique product and service
offerings to our customers in the most efficient and cost effective manner.
In September 2003, we acquired the assets of CitiCapital Fleet Services.
Equipment Management headquarters are in Stamford, Connecticut with offices
throughout North America, Europe and Asia Pacific.
Industrial Products and Systems
Industrial Products and Systems (6.3%, 5.6% and 5.3% of consolidated
revenues in 2003, 2002 and 2001, respectively) is composed of Industrial
Systems and GE Supply. Products and services provided by each of the
businesses in this segment are sold primarily to industrial customers,
including original equipment manufacturers, industrial end users, utilities,
electrical contractors, as well as to distributors. These businesses compete
against a variety of both U.S. and non-U.S. manufacturers and service
providers.
Markets for industrial products and services are diverse, global and highly
price competitive. The aggregate level of economic activity in markets for
such products and services generally lag overall economic slowdowns as well
as subsequent recoveries. In the United States, industrial markets are
undergoing significant structural changes reflecting, among other factors,
increased international competition and pressures to modernize productive
capacity. A description of products and services provided by Industrial
Systems and GE Supply follows.
Industrial Systems includes electric motors and related products and
services for the appliance, commercial, industrial, heating, air
conditioning, automotive and utility markets; power delivery and control
products such as circuit breakers, transformers, electricity meters, relays,
capacitors, uninterruptible power supplies for critical processes, and
arresters sold for installation in commercial, industrial and residential
facilities; electrical and electronic industrial automation products,
including drive systems, for metal and paper processing, mining, utilities
and marine applications. Product services include engineering, management
and technical expertise for power plants and other large projects;
maintenance, inspection, repair and rebuilding of electrical apparatus
produced by GE and others; and on-site engineering and upgrading of already
installed products sold by GE and others. Other product services include the
integration of software with hardware (principally motors, drives and
programmable controls) into customized systems solutions for customers in
the semiconductor, water treatment, pulp and paper, and petroleum
industries.
In recent years, our business has expanded into measurement and sensing
equipment and subsystems used for sensing temperature, humidity, and
pressure; and security equipment and systems, including card access systems,
video and sensor monitoring equipment and integrated facility monitoring
systems. Through a 50-50 joint venture (GE Fanuc Automation Corporation),
which has two operating subsidiaries (one in North America and the other in
Europe), we offer a wide range of high-technology industrial automation
systems and equipment, including computer numerical controls and
programmable logic controls.
Industrial Systems is headquartered in Plainville, Connecticut and operates
in North America, Europe, South America and Asia.
GE Supply is a full-line, international distributor of electrical products,
aerospace parts, power generation products and lighting equipment and
supplies from GE and other leading manufacturers. We serve electrical
contractors, industrial and commercial users, engineer constructors,
original equipment manufacturers, utilities and the aerospace industry. GE
Supply headquarters are in Shelton, Connecticut. Our operating units which
include GE Supply, GE Structured Services and GE Supply Logistics, have more
than 150 branch offices and five distribution Hubs throughout the U.S.,
Mexico, South America, Ireland, the Middle East and Southeast Asia.
Insurance
Insurance (19.5%, 17.6% and 18.9% of consolidated revenues in 2003, 2002 and
2001, respectively) offers a broad range of insurance and investment
products that help consumers create and preserve personal wealth, protect
assets and enhance their life styles. For lenders and investors, it protects
against the risks of default on low-down-payment mortgages. For businesses,
we provide reinsurance and primary commercial insurance products to
insurance companies, Fortune 100 companies, self-insurers and healthcare
providers. Through December 2003, for state and local governments and other
public entities, we offered financial guarantees for a variety of debt
securities.
In November 2003, GE announced its intent for an initial public offering of
a new company, Genworth Financial, Inc. (Genworth), comprising most of our
life and mortgage insurance businesses. GE plans to sell approximately
one-third of Genworth's equity in the IPO, and we expect (subject to market
conditions) to reduce our ownership over the next three years as Genworth
transitions to full independence. We commenced the IPO process in January
2004 and expect to complete the IPO in the first half of the year, subject
to market conditions and receipt of various regulatory approvals.
Insurance headquarters are in Richmond, Virginia with offices in the United
States and in Canada, Europe, Latin America, Australia and Asia Pacific.
Our activities are conducted through the principal businesses described
below.
GE Financial Assurance
GE Financial Assurance provides a wide variety of insurance, protection and
asset management products to help consumers achieve financial security at
every stage of life. Our strategy is to provide dependable products to
address consumer needs for wealth accumulation, retirement income, personal
protection, and wealth transfer. We distribute these products through a
family of regulated insurance affiliates. Our principal product lines in
North America are annuities (deferred and immediate, fixed and variable);
life insurance (universal, term, ordinary and group); guaranteed investment
contracts (including funding agreements); long-term care insurance;
supplementary accident and health insurance; and consumer club memberships.
Principal European product lines and services are payment protection
insurance (designed to protect consumers' loan repayment obligations) and
personal investment products. Product distribution in North America and
Europe is accomplished primarily through four channels: intermediaries
(brokerage general agencies, banks and securities brokerage and financial
planning firms); dedicated sales forces and financial advisors; worksite
distribution; and direct and affinity marketing. During 2003, (consistent
with GE's announced intent to redirect capital to different lines of
business) GE Financial Assurance sold its Japanese life insurance business.
Consolidation in the financial services industry will create fewer but
larger competitors. We believe the principal competitive factors in the sale
of our products are product features, price, commission structure, marketing
and distribution arrangements, brand, reputation, financial strength ratings
and service. We believe that we are well positioned in the current
competitive environment and will benefit from a number of significant
demographic, governmental and market trends, including an aging United
States population with growing retirement income needs, and an increasing
life and lifestyle protection gap.
Many of our activities are regulated by a variety of insurance and other
regulators.
Mortgage Insurance
Mortgage Insurance offers mortgage insurance products that facilitate
homeownership by enabling borrowers to buy homes with low-down-payment
mortgages. These products also aid financial institutions in managing their
capital efficiently by reducing the capital required for low-down-payment
mortgages. We also have leading mortgage insurance operations in Canada,
Australia and the U.K. and a growing presence in Continental Europe.
The mortgage insurance industry is sensitive to the interest rate
environment and housing market conditions. The mortgage insurance industry
is intensely competitive as excess market capacity seeks to underwrite
business being generated from a consolidating customer base. In addition,
considerable influence is exerted on the industry by two
government-sponsored enterprises, which buy the majority of the loans
insured by mortgage insurers.
During 2003, General Electric Mortgage Insurance Corporation (GEMICO),
requested that its financial strength ratings be lowered from AAA/Aaa to
AA/Aa2 positioning our United States business to operate at lower capital
levels. This change improves Mortgage Insurance's capital efficiency and
return on equity while retaining a conservative risk-to-capital ratio.
GE Global Insurance Holding (Employers Reinsurance Corporation)
Through our principal insurance and reinsurance company affiliates –
Employers Reinsurance Corporation, GE Reinsurance Corporation, the GE
Frankona Group and the Medical Protective Corporation – we write
substantially all lines of reinsurance (where the insured party is another
insurance company) and select lines of direct property and casualty
insurance (where the insured party is a non-insurance company or an
individual).
The reinsurance operations include the reinsurance of property and casualty
risks written by more than 1,000 insurers around the world. Direct insurance
operations are focused on niche lines of business, principally medical
malpractice coverage for physicians and dentists, medical professional
liability for hospitals, errors and omissions coverage for insurance agents
and brokers, professional liability insurance for attorneys, excess
indemnity for self-insurers of medical benefits and excess workers'
compensation for self-insurers. The life reinsurance affiliates are engaged
in the reinsurance of life insurance products, including term, whole and
universal life, annuities, certain health-related coverages and the
provision of financial reinsurance to life insurers. During 2003, we
announced our intent to scale back on life reinsurance operations to improve
overall returns, we ceased writing new life reinsurance business in the
United States and sold our United States life reinsurance business–ERC Life
Reinsurance Corporation.
In our opinion, we compete in the reinsurance marketplace principally on the
basis of our expertise, relationships, financial strength, price and
creativity in developing customized solutions to customer needs. Within the
direct insurance marketplace, we believe we compete principally on the basis
of our product offerings, established relationships with customers and key
distribution partners, price and ease of doing business.
Employers Reinsurance Corporation is one of the largest competitors in its
marketplace. Our property and casualty reinsurance operations are ranked
fifth in the world in terms of net premiums written and we compete with the
world's largest reinsurers as well as dozens of smaller niche competitors.
Our life reinsurance operations are ranked in the top four life reinsurers
in the world.
Maintaining strong financial strength ratings is an important factor in
remaining competitive in both the reinsurance and direct insurance markets
in which we compete. During 2003, certain external credit rating agencies
announced the lowering of financial strength ratings with respect to GE
Global Insurance Holding and subsidiaries, citing poor recent operating
performance as the principal factor. Rating agencies took similar actions to
lower the ratings of many insurers and reinsurers in recent years. Debt
ratings for GE Global Insurance Holding affect $1.7 billion of outstanding
debt. While these ratings were lowered in 2003, they remain investment
grade. We do not believe these actions will materially affect GE Global
Insurance Holding liquidity or capital resources or the ability to write
future business.
Medical Systems
Medical Systems (7.6%, 6.8% and 6.7% of consolidated revenues in 2003, 2002
and 2001, respectively) includes magnetic resonance (MR) scanners, computed
tomography (CT) scanners, Positron Emission Tomography (PET) scanners,
x-ray, patient monitoring, diagnostic cardiology, nuclear imaging,
ultrasound, bone densitometry, anesthesiology and oxygen therapy devices,
neonatal and critical care technology and other diagnostic and therapy
equipment, and product services sold to hospitals and medical facilities
worldwide. Product services include remote diagnostic and repair services
for medical equipment manufactured by GE and by others, as well as
computerized data management and customer productivity services. In 2003, we
acquired Instrumentarium and entered into an agreement to acquire Amersham
plc, a world leader in diagnostic imaging agents and in life sciences.
Medical Systems competes against a variety of U.S. and non-U.S.
manufacturers and services operations. Technological competence and
innovation, excellence in design, high product performance, quality of
services and competitive pricing are among the key factors affecting
competition for these products and services. Throughout the world, we play a
critical role in delivering new technology to improve patient outcomes and
productivity tools to
help control healthcare costs. For information about orders and backlog, see
page 53 of the Annual Report to Shareowners.
Medical Systems is headquartered in Waukesha, Wisconsin and operates in
North America, Europe, Asia, Australia and South America.
NBC
NBC (5.1%, 5.4% and 4.6% of consolidated revenues in 2003, 2002 and 2001,
respectively) is principally engaged in the broadcast of network television
services to affiliated television stations within the United States; the
production of live and recorded television programs; the operation, under
licenses from the Federal Communications Commission (FCC), of television
broadcasting stations; the ownership of four cable/satellite networks around
the world, and investment and programming activities in multimedia, the
Internet and cable television. The NBC Television Network is one of four
major U.S. commercial broadcast television networks and serves more than 230
affiliated stations within the United States. At December 31, 2003, we owned
and/or operated 29 VHF and UHF television stations including those located
in Birmingham, AL; Los Angeles, CA; San Diego, CA; Hartford, CT; Miami, FL;
Chicago, IL; New York, NY; Raleigh-Durham, NC; Columbus, OH; Philadelphia,
PA; Providence, RI; Dallas, TX; and Washington, DC. Broadcasting operations,
including the NBC Television Network, Telemundo and owned stations are
subject to FCC regulation. Our operations include investment and programming
activities in cable television, principally through CNBC, MSNBC, CNBC
Europe, and CNBC Asia; equity investments in Arts and Entertainment, The
History Channel, ValueVision, Inc., and a non-voting interest in Paxson
Communications Corporation. In 2002 we acquired the cable network Bravo. Our
strategic alliance with Dow Jones merged the European and Asian business
news services of Dow Jones with those of CNBC to form CNBC Europe and CNBC
Asia and, in addition, permits us to use Dow Jones editorial resources in
the United States. In 2002, we acquired Spanish language broadcaster,
Telemundo. We have entered into long-term arrangements with Triple Crown
Productions that gives us exclusive American broadcast rights to the
Kentucky Derby, the Preakness Stakes and the Belmont Stakes through 2005;
and the National Association For Stock Car Auto Racing (NASCAR) which in
conjunction with Turner Broadcasting System, Inc., gives us the exclusive
television rights to 20 NASCAR races per network per year through 2006. The
business has entered into a long-term arrangement with the United States
Golf Association (USGA) that gives us exclusive national over-the-air
broadcast rights to the USGA's major golf championships through the year
2005. We also have secured exclusive United States television rights to the
2004, 2006, 2008, 2010, 2012 Olympic Games.
In 2003, GE entered into a definitive agreement to merge NBC and Vivendi
Universal Entertainment. The new company to be called NBC Universal, will be
approximately 80% owned by GE and approximately 20% owned by Vivendi
Universal S.A., and/or its subsidiaries.
NBC is headquartered in New York, New York.
Plastics
Plastics (3.9%, 4.0% and 4.2% of consolidated revenues in 2003, 2002 and
2001, respectively) includes high-performance plastics used by compounders,
molders and major original equipment manufacturers for use in a variety of
applications, including fabrication of automotive parts, computer
enclosures, compact disks and optical-quality media, major appliance parts,
telecommunications equipment and construction materials. Market
opportunities for many of these products are created by substituting resins
for other materials, which can provide customers with productivity through
improved material performance at lower system costs. These materials are
sold to a diverse worldwide customer base, mainly manufacturers. Our
business has a significant operating presence around the world and
participates in numerous manufacturing and distribution joint ventures.
The Plastics business environment is characterized by technological
innovation and heavy capital investment. Being competitive requires emphasis
on efficient manufacturing process implementation and significant resources
devoted to market and application development. Competitors include large,
technology-driven suppliers of the same, as well as other functionally
equivalent, materials. The business is highly cyclical and is extremely
sensitive to variations in price and in the availability of raw materials,
such as cumene, benzene and methanol. Availability of manufacturing capacity
from the business or its competitors and anticipation of new product or
material performance requirements are key factors affecting competition.
Application development and associated technology assistance create
incremental market demand. In addition, product and manufacturing process
patents establish barriers to entry in many product lines.
Plastics headquarters are in Pittsfield, Massachusetts and operates in North
America, Asia, Europe and South America.
Power Systems
Power Systems (13.8%, 17.3% and 16.0% of consolidated revenues in 2003, 2002
and 2001) serves power generation, industrial, government and other
customers worldwide with products and services related to energy production,
distribution and management. In 2003, we made several acquisitions,
including Jenbacher A.G. of Austria. These acquisitions continue to improve
our ability to serve our global customers and further add to the portfolio
of complete solutions for the energy industry. The acquisition of Jenbacher
A.G. added reciprocating gas engines to the portfolio. We offer wind
turbines as part of our renewable energy portfolio, which also includes
hydropower and geothermal technology. The business also packages aircraft
engine derivatives for use as industrial power sources. This activity is
also reported in the Aircraft Engines segment. Gas turbines and generators
are used principally in power plants for generation of electricity and for
industrial cogeneration and mechanical drive applications. Our Oil and Gas
business offers advanced technology turbomachinery products and services for
production, LNG, transportation, storage, refineries, petrochemical and
distribution systems. With the acquisition of PII, the business acquired
leading technology in total pipeline integrity solutions including analysis
and pipeline asset management. Steam turbines and generators are sold to the
electric utility industry and to private industrial customers for
cogeneration applications. Nuclear reactors, fuel and support services for
both new and installed boiling water reactors are also a part of this
segment. A complete portfolio of aftermarket services, including equipment
upgrades, contractual services agreements, repairs, equipment installation,
monitoring and diagnostics, asset management and performance optimization
tools, remote performance testing and DLN tuning provides customers total
solutions to meet their needs. We continue to invest in advanced technology
development that will provide more value to our customers and more efficient
solutions that comply with today's strict environmental regulations.
Worldwide competition for power generation products and services is intense.
Demand for most power generation products and services is global and, as a
result, is sensitive to the economic and political environment of each
country in which the business participates, and to regional load growth
requirements and demand side management. In addition, internationally, the
influence of available fuels and related prices has a large impact on
demand. For information about orders and backlog, see page 53 of the Annual
Report to Shareowners.
Power Systems, headquartered in Atlanta, Georgia, operates in North America,
Europe, South America and Asia.
Specialty Materials
Specialty Materials (2.3%, 1.8% and 1.4% of consolidated revenues in 2003,
2002 and 2001, respectively) has a broad product offering, servicing diverse
industries, including automotive, cosmetics, semiconductors, oil drilling,
petrochemical, consumer and telecommunications. We manufacture and sell high
performance specialty materials including silicones, polymer additives, high
purity quartzware and industrial grade and until the sale of the
Superabrasives business in late 2003, gem quality diamonds. We also provide
and sell engineered chemicals and treatment services to water and process
systems. Specialty materials products are used by compounders, molders and
major original equipment manufacturers in a variety of applications,
including fabrication of automotive parts, medical parts, electronics
equipment, semi-conductor equipment and construction tools. Market
opportunities for many of these products are created by substituting
specialty materials for other materials, providing customers with
productivity through improved material performance at lower system costs.
Water treatment programs are sold to process system facilities in
industrial, commercial and institutional applications. The portfolio of
products and services are sold to a diverse worldwide customer base. We have
a significant operating presence around the world and participate in several
manufacturing and distribution joint ventures. In July 2003, we completed
the acquisition of OSi Specialties, a leading, global supplier of silanes,
specialty silicones and urethane additives. Also, in 2003, we completed the
divestiture of our Specialty Chemicals and Superabrasives units.
Our business environment is characterized by technological innovation and
heavy capital investment. Being competitive requires emphasis on efficient
manufacturing process implementation and significant resources devoted to
market and application development. Competitors include large,
technology-driven suppliers of the same, and other functionally equivalent
materials.
Specialty Materials is headquartered in Wilton, Connecticut and has
operations in North America, Europe, Asia and South America.
Transportation Systems
Transportation Systems (1.9%, 1.8% and 1.9% of consolidated revenues in
2003, 2002 and 2001, respectively) is one of the world's leading suppliers
to the railroad, transit, and mining industries, providing freight and
passenger locomotives, motorized drive systems for mining trucks and drills,
diesel engines for marine and stationary markets, electrical propulsion and
control systems for rapid transit cars, railway signaling and communications
systems, value added services, and information technology solutions.
Product services include maintenance and repair of locomotives, locomotive
components, and communications and logistics systems for locomotive and
train control. GE locomotives currently operate in more than 50 countries
worldwide. Information about Transportation Systems orders and backlog is
provided on page 54 of the 2003 Annual Report to Shareowners.
Transportation Systems headquarters are in Erie, Pennsylvania.
Transportation Systems operates in North America, Europe and South America.
All Other GECS
All Other GECS (1.2%, 2.0% and 3.8% of consolidated revenues in 2003, 2002
and 2001, respectively) includes activities and businesses that we do not
measure within one of the four other financial services segments. A
description of All Other GECS principal businesses follows.
IT Solutions
IT Solutions is a provider of a broad array of information technology
services and products, including full life cycle services that provide
customers with cost-effective control and management of their information
systems. Services offered include remote network/server/security monitoring
and management, client support covering asset management, help desk and desk
side support, as well as program management and professional services for
the security, network, server and storage environments. Products offered
include desktop personal computers, client server systems, UNIX systems,
local and wide area network hardware, and software. IT Solutions serves
commercial, educational and governmental customers in the United States and
Canada. During 2003, IT Solutions sold its business units in Europe.
Competition in information technology services and products is very active
and comes from a number of principal manufacturers and other distributors
and resellers. Markets for services and products are highly price
competitive. Additionally, many information technology product manufacturers
are bypassing traditional information technology resellers in favor of
direct manufacturer relationships with the ultimate end-users. IT Solutions'
headquarters are in Erlanger, Kentucky.
GE Equity
GE Equity manages equity investments in early-stage, early growth, pre-IPO
companies. This portfolio consists primarily of direct investments in
convertible preferred and common stocks in both public and private
companies; we also participate in certain investment limited partnerships.
The portfolio includes investments in the technology and communications,
media and entertainment, business services, financial services and
healthcare sectors. The portfolio is geographically diversified with
investments located throughout the United States, as well as in Europe, Asia
and Latin America. We ceased making new investments in 2002 but continue to
provide financial support to companies in our portfolio which will be
managed for maximum value over time, eventually liquidating. Headquarters
are in Stamford, Connecticut.
American Communications
American Communications (Americom) engaged primarily as a satellite service
supplier to a diverse array of customers, including the broadcast and cable
TV industries, as well as broadcast radio. It also supplied integrated
communications services for government and commercial customers. Americom
also operated communications satellites and maintained a supporting network
of earth stations, central terminal offices, and telemetry, tracking and
control facilities. In 2001 we exchanged our satellite operations,
comprising the stock of Americom and other related assets and liabilities,
for a combination of cash and 31% of the publicly-traded stock of SES
Global, a leading satellite company, in order to create the world's largest
satellite services provider. Our investment in SES Global is accounted for
on the equity method within Commercial Finance.
Ticker
GE
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