10-K 1 frm10k.htm frm10k.htm

United States Securities and Exchange Commission
WASHINGTON, D.C. 20549
 
FORM 10-K

(Mark One)
þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended December 31, 2008
or
¨ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the transition period from ___________to ___________
 
Commission file number 001-00035
 
General Electric Company
(Exact name of registrant as specified in charter)

New York
     
14-0689340
(State or other jurisdiction of incorporation or organization)
     
(I.R.S. Employer Identification No.)
         
3135 Easton Turnpike, Fairfield, CT
 
06828-0001
 
203/373-2211
(Address of principal executive offices)
 
(Zip Code)
 
(Telephone No.)
         
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
 
Name of each exchange on which registered
Common stock, par value $0.06 per share
 
New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:
 
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer þ
Accelerated filer ¨
Non-accelerated filer ¨ 
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No þ
 
The aggregate market value of the outstanding common equity of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter was $265.5 billion. Affiliates of the Company beneficially own, in the aggregate, less than one-tenth of one percent of such shares. There were 10,560,425,000 shares of voting common stock with a par value of $0.06 outstanding at January 30, 2009.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
The definitive proxy statement relating to the registrant’s Annual Meeting of Shareowners, to be held April 22, 2009, is incorporated by reference in Part III to the extent described therein.
 


 
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Table of Contents
 
   
Page
Part I
 
     
Business
3
Risk Factors
12
Unresolved Staff Comments
16
Properties
17
Legal Proceedings
17
Submission of Matters to a Vote of Security Holders
19
   
Part II
 
     
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
 
 
Purchases of Equity Securities
19
Selected Financial Data
21
Management’s Discussion and Analysis of Financial Condition and Results of Operations
22
Quantitative and Qualitative Disclosures About Market Risk
67
Financial Statements and Supplementary Data
67
Changes in and Disagreements With Accountants on Accounting
 
 
and Financial Disclosure
141
Controls and Procedures
141
Other Information
142
   
Part III
 
     
Directors, Executive Officers and Corporate Governance
142
Executive Compensation
143
Security Ownership of Certain Beneficial Owners and Management and
 
 
Related Stockholder Matters
143
Certain Relationships and Related Transactions, and Director Independence
143
Principal Accounting Fees and Services
143
   
Part IV
 
     
Exhibits, Financial Statement Schedules
143
 
148

 

 
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Part I
 
 
Item 1. Business.
 
General
 
Unless otherwise indicated by the context, we use the terms “GE,” “GECS” and “GE Capital” on the basis of consolidation described in Note 1 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report. Also, unless otherwise indicated by the context, “General Electric” means the parent company, General Electric Company (the Company).
 
General Electric’s address is 1 River Road, Schenectady, NY 12345-6999; we also maintain executive offices at 3135 Easton Turnpike, Fairfield, CT 06828-0001.
 
We are one of the largest and most diversified technology, media, and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, we serve customers in more than 100 countries and employ more than 300,000 people worldwide.  Since our incorporation in 1892, we have developed or acquired new technologies and services that have broadened considerably the scope of our activities.
 
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. NBC Universal also competes with other film and television programming producers and distributors, cable/satellite television networks and theme park operators. 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 and finance companies associated with manufacturers.
 
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 financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels and commercial paper exposure as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which GE Capital does business; the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties are described in more detail in Part I, Item 1A. “Risk Factors” of this Form 10-K Report. We do not undertake to update our forward-looking statements.
 
Our consolidated global revenues increased to $97.2 billion in 2008, compared with $86.3 billion in 2007 and $70.5 billion in 2006. For additional information about our geographic operations, see the Geographic Operations section in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K Report.
 

 
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Operating Segments
 
Segment revenue and profit information and additional financial data and commentary on recent financial results for operating segments are provided in the Segment Operations section in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 27 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Operating businesses that are reported as segments include Energy Infrastructure, Technology Infrastructure, NBC Universal, Capital Finance and Consumer & Industrial. Net earnings of GECS and the effect of transactions between segments are eliminated to arrive at total consolidated data. A summary description of each of our operating segments follows.
 
We also continue our longstanding practice of providing supplemental information for certain businesses within the segments.
 
Energy Infrastructure
 
Energy Infrastructure (21.1%, 17.8% and 16.6% of consolidated revenues in 2008, 2007 and 2006, respectively) is a leader in the field of development, implementation and improvement of products and technologies that harness resources such as wind, oil, gas and water.
 
Our operations are located in North America, Europe, Asia, South America and Africa.
 
Energy
 
Energy serves power generation, industrial, government and other customers worldwide with products and services related to energy production, distribution and management. We offer wind turbines as part of our renewable energy portfolio, which also includes solar technology. We also sell aircraft engine derivatives for use as industrial power sources. Gas turbines and generators are used principally in power plants for generation of electricity and for industrial cogeneration and mechanical drive applications. We are a leading provider of Integrated Gasification Combined Cycle (IGCC) technology design and development. IGCC systems convert coal and other hydrocarbons into synthetic gas that, after cleanup, is used as the primary fuel for gas turbines in combined-cycle systems. IGCC systems produce fewer air pollutants compared with traditional pulverized coal power plants. We sell steam turbines and generators 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 offered through joint ventures with Hitachi and Toshiba. In addition, we design and manufacture motors and control systems used in industrial applications primarily for oil and gas extraction and mining. We provide our customers with total solutions to meet their needs through a complete portfolio of aftermarket services, including equipment upgrades, long-term maintenance service agreements, repairs, equipment installation, monitoring and diagnostics, asset management and performance optimization tools, remote performance testing and Dry Low NOx (DLN) tuning. 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.
 
Energy is party to revenue sharing programs that share the financial results of certain aero-derivative lines. These businesses are controlled by Energy, but counterparties have an agreed share of revenues as well as development and component production responsibilities. At December 31, 2008, such counterparty interests ranged from 5% to 49% of various programs; associated distributions to such counterparties are accounted for as costs of production.
 
Worldwide competition for power generation products and services is intense. Demand for power generation is global and, as a result, is sensitive to the economic and political environment of each country in which we do business. The balance of regional growth and demand side management are important factors to evaluate as we plan for future development.
 
Oil & Gas
 
Our technology helps oil and gas companies make more efficient and sustainable use of the world's energy resources.
 

 
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Oil & Gas supplies mission critical equipment for the global oil and gas industry, used in applications spanning the entire value chain from drilling and completion through production, transportation and pipeline inspection and including downstream processing in refineries and petrochemical plants. The business designs and manufactures surface and subsea drilling and production systems, equipment for floating production platforms, compressors, turbines, turboexpanders, high pressure reactors, industrial power generation and a broad portfolio of ancillary equipment.
 
To ensure that the installed base is maintained at peak condition, our service business has over 40 service centers and workshops in all of the world's main oil and gas extraction and production regions. The business also provides upgrades to customers’ machines, using the latest available technology, to extend production capability and environmental performance.
 
In April 2008, Oil & Gas completed the acquisition of the Hydril Pressure Controls business from Tenaris. This addition to the portfolio further extends GE's capabilities in oil and gas drilling systems and opens further opportunities in the technically challenging deep and ultra-deep subsea applications.
 
Water & Process Technologies
 
Water & Process Technologies offers water treatment solutions for industrial and municipal water systems including the supply and related services of specialty chemicals, water purification systems, pumps, valves, filters and fluid handling equipment for improving the performance of water, wastewater and process systems, including mobile treatment systems and desalination processes.
 
For information about orders and backlog, see the Segment Operations section in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K Report.
 
Technology Infrastructure
 
Technology Infrastructure (25.4%, 24.8% and 24.9% of consolidated revenues in 2008, 2007 and 2006, respectively) is one of the world’s leading providers of essential technologies to developed, developing and emerging countries. Around the world, we are helping build healthcare, transportation and technology infrastructure.
 
Our operations are located in North America, Europe, Asia and South America.
 
Aviation
 
Aviation 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 including fighters, bombers, tankers, helicopters and surveillance aircraft, as well as marine applications, and our commercial engines power aircraft in all categories of range: short/medium, intermediate and long-range, as well as executive and regional aircraft. We also produce and market engines through CFM International, a company jointly owned by GE and Snecma, a subsidiary of SAFRAN of France, and Engine Alliance, LLC, a company jointly owned by GE and the Pratt & Whitney division of United Technologies Corporation. New engines are also being designed and marketed in joint ventures with Rolls-Royce Group plc and Honda Aero, Inc., a division of Honda Motor Co., Ltd.
 
Aviation is party to agreements that share the financial results of certain aircraft and marine engine lines. These agreements take the form of both joint ventures and revenue sharing programs.
 
Joint ventures market and sell particular aircraft engine lines, but require negligible direct investment because the venture parties conduct essentially all of the development, production, assembly and aftermarket support activities. Under these agreements, Aviation supplies certain engine components and retains related intellectual property rights. The CFM56 engine line is the product of CFM International and the GP7000 engine line is the product of Engine Alliance, LLC.
 
Revenue sharing programs are a standard form of cooperation for specific product programs in the aviation industry. These businesses are controlled by Aviation, but counterparties have an agreed share of revenues as well as development and component production responsibilities. At December 31, 2008, such counterparty interests ranged from 2% to 49% of various programs; associated distributions to such counterparties are accounted for as costs of production.
 

 
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Aviation also produces global aerospace systems and equipment, including airborne platform computing systems, power generation and distribution products, mechanical actuation products and landing gear, plus various engine components for use in both military and commercial aircraft.
 
We provide maintenance, component repair and overhaul services (MRO), including sales of replacement parts for many models of engines and repair and overhaul of engines manufactured by competitors. These MRO services are often provided under long-term maintenance contracts.
 
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 are important in this business, as are focused intellectual property strategies and protection of key aircraft engine design, manufacture, repair and product upgrade technologies. Our products and services are subject to a number of regulatory standards.
 
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 technology, the small number of potential customers and the limited number of relevant airframe applications. Aircraft engine orders tend to follow military and airline procurement cycles, although these cycles differ from each other.
 
Enterprise Solutions
 
Enterprise Solutions delivers integrated solutions that improve customers’ productivity and profitability. We offer integrated solutions using sensors and non-destructive testing, security and life safety technologies, power system protection and control, and plant automation and embedded computing systems. From home to industry to national security, our technology covers the full spectrum of security solutions, including card access systems, high-tech video monitoring, intrusion and fire detection, real estate and property control, and explosives and narcotics detection. We design and manufacture equipment and systems that enable customers to monitor, protect, control and ensure the safety of their critical applications. These products include sensing instruments that measure temperature, pressure, moisture, gas and flow rate for demanding customer applications. Enterprise Solutions also designs, manufactures and services inspection equipment, including radiographic, ultrasonic, remote visual and eddy current, that monitors and tests materials without disassembling, deforming or damaging them. We deliver automation hardware, software and embedded computing systems designed to help users reduce costs, increase efficiency and enhance profitability through a diverse array of capabilities and products, including controllers, embedded systems, advanced software, motion control, computer numerical controls, operator interfaces, industrial computers, and lasers. We also provide protection & control, communications, power sensing and power quality products and services that increase the reliability of electrical power networks and critical equipment for utility, industrial and large commercial customers. We protect and optimize assets such as generators, transmission lines and motors, to ensure secure wireless data transmission and uninterruptible power.
 
Healthcare
 
Healthcare has expertise in medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery and biopharmaceutical manufacturing technologies. We are dedicated to predicting and detecting disease earlier, monitoring its progress and informing physicians, helping them to tailor treatment for individual patients. Healthcare manufactures, sells and services a wide range of medical equipment that helps provide a fast, non-invasive way for doctors to see broken bones, diagnose trauma cases in the ER, view the heart and its function, and identify early stages of cancers or brain disorders. With X-ray, digital mammography, Computed Tomography (CT), Magnetic Resonance (MR) and Molecular Imaging technologies, Healthcare creates industry-leading products that allow clinicians to see inside the human body more clearly than ever. In addition, Healthcare manufactured technologies include patient monitoring, diagnostic cardiology, ultrasound, bone densitometry, anesthesiology and oxygen therapy, and neonatal and critical care devices. Medical diagnostics and life sciences products include diagnostic imaging agents used in medical scanning procedures, drug discovery, biopharmaceutical manufacturing and the latest in cellular technologies. During 2008, we acquired Whatman plc, a global supplier of filtration products and technologies and Vital Signs, Inc., a global provider of medical products applicable to a wide range of care areas such as anesthesia, respiratory, sleep therapy and emergency medicine.
 
Our 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.
 

 
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We compete with 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.
 
Our products are subject to regulation by numerous government agencies, including the FDA, as well as various laws that apply to claims submitted under Medicare, Medicaid or other government funded healthcare programs.
 
Transportation
 
Transportation provides technology solutions for customers in a variety of industries including railroad, transit, mining, oil and gas, power generation and marine. We serve customers in more than 100 countries.
 
Transportation manufactures high-horsepower diesel-electric locomotives, including the Evolution Series™, the most technologically advanced and most fuel efficient locomotive, which meets or exceeds the U.S. Environmental Protection Agency’s Tier II requirements. We also offer leading drive technology solutions to the mining, transit, marine and stationary, and drilling industries. Our motors operate in thousands of applications, from electrical drive systems for large haulage trucks used in the mining industry to transit cars and drilling rigs, and our engines are used for marine power as well as stationary power generation applications. We also provide gearing technology for critical applications such as wind turbines.
 
Transportation also provides a portfolio of service offerings designed to improve fleet efficiency and reduce operating expenses, including repair services, locomotive enhancements, modernizations, and information-based services like remote monitoring and diagnostics. We provide train control products, railway management services, and signaling systems to increase service levels, optimize asset utilization, and streamline operations for railroad owners and operators. We deliver leading edge tools that improve asset availability and reliability, optimize network planning, and control network execution to plan.
 
For information about orders and backlog, see the Segment Operations section in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K Report.
 
 
NBC Universal (9.3%, 8.9% and 10.7% of consolidated revenues in 2008, 2007 and 2006, respectively) is a diversified media and entertainment company focused on the development, production and marketing of entertainment, news and information to a global audience. NBC Universal, which is 80-percent owned by General Electric and 20-percent owned by Vivendi S.A., is engaged in the production and distribution of film and television programming; the operation of leading cable/satellite television networks around the world; the broadcast of network television through owned and affiliated television stations within the United States; and investment and programming activities in digital media and the Internet. Our premier film company, Universal Pictures, is engaged in the production and world-wide distribution of theatrical, home entertainment and television programming. We own the world-renowned theme park Universal Studios Hollywood, operate and hold an ownership interest in the Universal Studios Florida theme parks and brand, design and develop international theme parks under exclusive licenses. Our cable/satellite television networks provide produced and acquired entertainment, news and information programming to households world-wide. Our cable/satellite television networks include the USA Network, Bravo, CNBC, the SciFi Channel, MSNBC, Oxygen, UniHD, Chiller, Sleuth, mun2 and branded channels across Europe, Asia and Latin America. The NBC television network is one of four major U.S. commercial broadcast television networks. Together, the NBC television network and Telemundo, our U.S. Spanish-language broadcast television network, serve 210 affiliated stations within the United States. At December 31, 2008, we owned and operated 26 television stations each subject to U.S. Federal Communications Commission regulation. We have exclusive U.S. television rights to the 2010 and 2012 Olympic Games, National Football League Sunday Night Football and the Super Bowl in 2012.
 

 
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NBC Universal is subject to a wide range of factors, which could adversely affect our operations. Our broadcast networks, cable television networks and television stations are subject to advertising patterns and changes in viewer taste and preference that can be unpredictable or unforeseen. In addition, future revenues in these properties are dependent upon our ability to obtain, renew or renegotiate long-term programming contracts, including event-based sports programming and contracts for the distribution of our programming to cable/satellite operators. Our television and film production and distribution businesses are affected by the timing and performance of releases in the theatrical, home entertainment and television markets. Technological advances like digital video recorders, Internet streaming and electronic sell-through offer entertainment options through new media, introducing uncertainty to our operations. Other technologies enable the unauthorized copying and distribution of our film and television programming, increasing the risk of piracy. We continue to devote substantial resources to protect our intellectual property against unauthorized use.
 
NBC Universal’s headquarters are in New York, New York, with operations throughout North America, Europe, South America and Asia.
 
Capital Finance
 
Capital Finance (36.7%, 38.4% and 37.2% of consolidated revenues in 2008, 2007 and 2006, respectively) offers a broad range of financial products and services worldwide. Services include commercial loans, operating leases, fleet management, financial programs, home loans, credit cards, personal loans and other financial services.
 
Within our Capital Finance operating segment, we operate the businesses described below along product lines. Additionally, in 2008, we have increased our focus on core operations, ability to self-fund and restructuring low return businesses.
 
Our operations are located in North America, South America, Europe, Australia and Asia.
 
Commercial Lending and Leasing (CLL)
 
CLL offers a broad range of financial services worldwide. We have particular mid-market expertise, and offer loans, leases and other financial services to customers, including manufacturers, distributors and end-users for a variety of equipment and major capital assets. These assets include industrial-related facilities and equipment; vehicles; corporate aircraft; and equipment used in many industries, including the construction, manufacturing, transportation, telecommunications and healthcare industries. During 2008, we made a number of acquisitions, the most significant of which were Merrill Lynch Capital and CitiCapital. In January 2009, we acquired Interbanca S.p.A., a leading Italian corporate bank.
 
We operate in a highly competitive environment. Our competitors include commercial banks, investment banks, leasing companies, financing companies associated with manufacturers, and independent finance companies. Competition related to our lending and leasing operations is based on price, that is interest rates and fees, as well as deal structure and terms. Profitability is affected not only by broad economic conditions that affect 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 risks. Success requires high quality risk management systems, customer and industry specific knowledge, diversification, service and distribution channels, strong collateral and asset management knowledge, deal structuring expertise and the ability to reduce costs through technology and productivity.
 
GE Money
 
GE Money, through consolidated entities and associated companies, is a leading provider of financial services to consumers and retailers in over 50 countries around the world. We offer a full range of innovative financial products to suit customers’ needs. These products include, on a global basis, private-label credit cards; personal loans; bank cards; auto loans and leases; mortgages; debt consolidation; home equity loans; deposit and other savings products; and small and medium enterprise lending. In 2008, we acquired a controlling interest in Bank BPH.
 
In December 2007, we sold our U.S. mortgage business (WMC). In September 2007, we committed to a plan to sell our Japanese personal loan business (Lake). During the second quarter of 2008, this planned sale was expanded to GE Money Japan, which comprises Lake and our Japanese mortgage and card businesses, excluding our minority ownership in GE Nissen Credit Co., Ltd. This sale was completed in the third quarter of 2008.
 

 
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In June 2008, we committed to sell the GE Money businesses in Germany, Austria and Finland, the credit card and auto businesses in the U.K., and the credit card business in Ireland. In October 2008, we completed the sale of the GE Money business in Germany. In January 2009, we completed the sale of the remaining businesses, which are included in assets and liabilities of businesses held for sale on the Statement of Financial Position at December 31, 2008.
 
In December 2008, we committed to sell a portion of our Australian residential mortgage business. This sale is expected to be executed during the first quarter of 2009.
 
Our operations are subject to a variety of bank and consumer protection regulations. 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 from fluctuations in retail sales, interest and currency exchange rates, and the consumer’s capacity to repay debt.
 
Real Estate
 
Real Estate offers a comprehensive range of capital and investment solutions, including equity capital for acquisition or development, as well as fixed and floating rate mortgages for new acquisitions or re-capitalizations of commercial real estate worldwide. Our business finances, with both equity and loan structures, the acquisition, refinancing and renovation of office buildings, apartment buildings, retail facilities, hotels, parking facilities and industrial properties. Our typical real estate loans are intermediate term, senior, fixed or floating-rate, and are secured by existing income-producing commercial properties. We invest in, and provide restructuring financing for, portfolios of mortgage loans, limited partnerships and tax-exempt bonds.
 
In the normal course of our business operations, we sell certain real estate equity investments when it is economically advantageous for us to do so. However, as real estate values are affected by certain forces beyond our control (e.g., market fundamentals and demographic conditions), it is difficult to predict with certainty the level of future sales or sales prices.
 
We operate in a highly competitive environment. Our competitors include banks, financial institutions, real estate companies, real estate investment funds and other financial companies. Competition in our equity investment business is primarily based on price, and competition in our lending business is primarily based on interest rates and fees, as well as deal structure and terms. As we compete globally, our success is sensitive to the economic and political environment of each country in which we do business.
 
Energy Financial Services
 
Energy Financial Services offers structured equity, debt, leasing, partnership financing, project finance and broad-based commercial finance to the global energy and water industries and invests in operating assets in these industries. Energy Financial Services also owns a controlling interest in Regency Energy Partners LP, a midstream master limited partnership engaged in the gathering, processing, transporting and marketing of natural gas and gas liquids.
 
We operate in a highly competitive environment. Our competitors include banks, financial institutions, energy and water companies, and other finance and leasing companies. Competition is primarily based on price, that is interest rates and fees, as well as deal structure and terms. As we compete globally, our success is sensitive to the economic and political environment of each country in which we do business.
 
GE Commercial Aviation Services (GECAS)
 
GECAS is a global leader in commercial aircraft leasing and finance, delivering fleet and financing solutions for commercial aircraft. Our airport financing unit makes debt and equity investments primarily in mid-sized regional airports. We also co-sponsor an infrastructure private equity fund, which invests in large infrastructure projects including gateway airports. GECAS also has in its portfolio a wide array of products including leases, debt and equity investments to the global transportation industry (marine, rail and intermodal).
 
We operate in a highly competitive environment. Our competitors include aircraft manufacturers, banks, financial institutions, equity investors, and other finance and leasing companies. Competition is based on lease rate financing terms, aircraft delivery dates, condition and availability, as well as available capital demand for financing.
 

 
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Consumer & Industrial
 
Consumer & Industrial (6.4%, 7.3% and 8.7% of consolidated revenues in 2008, 2007 and 2006, respectively) sells products that share several characteristics − competitive design, efficient manufacturing and effective distribution and service. Strong global competition rarely permits premium pricing, so cost control, including productivity, is key. Despite pricing pressures on many of our products, we also invest in the development of differentiated, premium products that are more profitable. While some Consumer & Industrial products are primarily directed to consumer applications (major appliances, for example), and some primarily to industrial applications (switchgear, for example), others are directed to both markets (lighting, for example).
 
We sell and service major home appliances including refrigerators, freezers, electric and gas ranges, cooktops, dishwashers, clothes washers and dryers, microwave ovens, room air conditioners, and residential water systems for filtration, softening and heating. Brands are GE Monogram®, GE Profile™, GE®, Hotpoint® and GE Café™.
 
We manufacture certain products, and also source finished product and component parts from third-party global manufacturers. A large portion of our appliances sales are through a variety of retail outlets for replacement of installed units. Residential building contractors installing units in new construction is our second major U.S. channel. We offer one of the largest original equipment manufacturer (OEM) service organizations in the appliances industry, providing in-home repair, aftermarket parts and warranty administration. We also manufacture and sell a variety of lamp products for commercial, industrial and consumer markets, including full lines of incandescent, halogen, fluorescent, high-intensity discharge, light-emitting diode, automotive and miniature products.
 
Consumer & Industrial also provides integrated electrical equipment and systems used to distribute, protect and control energy and equipment. We manufacture and distribute electrical distribution and control products, lighting and power panels, switchgear and circuit breakers that are used to distribute and manage power in a variety of residential, commercial, consumer and industrial applications. We also provide customer-focused solutions centered on the delivery and control of electric power, and market a wide variety of commercial lighting systems.
 
The aggregate level of economic activity in markets for such products and services generally lags overall economic slowdowns as well as subsequent recoveries. In the U.S., industrial markets are undergoing significant structural changes reflecting, among other factors, increased international competition and continued commodity cost pressures.
 
Our headquarters are in Louisville, Kentucky and our operations are located in North America, Europe, Asia and Latin America.
 
Discontinued Operations
 
Discontinued operations comprised GE Money Japan; WMC; Plastics; Advanced Materials; GE Life, our U.K.-based life insurance operation; the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions Corporation (GE Insurance Solutions); and Genworth Financial, Inc. (Genworth), our formerly wholly-owned subsidiary that conducted most of our consumer insurance business, including life and mortgage insurance operations.
 
For further information about discontinued operations, see Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 2 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Geographic Data
 
Geographic data are reported in Note 27 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Additional financial data about our geographic operations is provided in the Geographic Operations section in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-K Report.
 

 
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Orders Backlog
 
 
Research and Development
 
GE-funded research and development expenditures were $3.0 billion in both 2008 and 2007, and $2.8 billion in 2006. In addition, research and development funding from customers, principally the U.S. government, totaled $1.3 billion, $1.1 billion and $0.7 billion in 2008, 2007 and 2006, respectively. Technology Infrastructure’s Aviation business accounts for the largest share of GE’s research and development expenditures with funding from both GE and customer funds. Technology Infrastructure’s Healthcare business and Energy Infrastructure’s Energy business also made significant expenditures funded primarily by GE.
 
Expenditures reported above reflect the definition of research and development required by U.S. generally accepted accounting principles. For operating and management purposes, we consider amounts spent on product and services technology to include our reported research and development expenditures, but also amounts for improving our existing products and services, and the productivity of our plant, equipment and processes. On this basis, our technology expenditures in 2008 were $5.3 billion.
 
Environmental Matters
 
Our operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. We are involved in a sizable number of remediation actions to clean up hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Expenditures for site remediation actions amounted to approximately $0.3 billion in 2008 and $0.2 billion in 2007. We presently expect that such remediation actions will require average annual expenditures in the range of $0.3 billion to $0.4 billion over the next two years.
 
In November 2006, the United States Federal District Court approved a consent decree, which had been agreed to by GE and the United States Environmental Protection Agency (EPA), that represents a comprehensive framework for implementation of the EPA’s 2002 decision to dredge polychlorinated biphenyl (PCB)-containing sediments in the upper Hudson River. The dredging will be performed in two phases with an intervening peer review of performance after the first phase. Under the consent decree, we have committed to reimburse the EPA for its past and future project oversight costs and to perform the first phase of dredging, which is scheduled to proceed from May through November of 2009. After completion of the peer review, currently scheduled for 2010, we may be responsible for further costs. Our Statement of Financial Position as of December 31, 2008 and 2007, included liabilities for the probable and estimable costs of the agreed upon remediation activities.
 
Employee Relations
 
At year-end 2008, General Electric Company and consolidated affiliates employed approximately 323,000 persons, of whom approximately 152,000 were employed in the United States. For further information about employees, see Part II, Item 6. “Selected Financial Data” of this Form 10-K Report.
 
Approximately 19,250 GE manufacturing and service employees in the United States are represented for collective bargaining purposes by a total of approximately 125 different union locals. A majority of such employees are represented by union locals that are affiliated with, and bargain in coordination with, the IUE-CWA, The Industrial Division of the Communication Workers of America, AFL-CIO, CLC. During 2007, General Electric Company negotiated four-year contracts with unions representing a substantial majority of the unionized employees in the United States. Most of these contracts will terminate in June 2011.
 
Approximately 3,500 staff employees (and a large number of freelance employees) in the United States are covered by about 160 labor agreements to which NBC Universal is a party. These agreements are with various labor unions, expire at various dates and are generally for a term ranging from three to five years.
 

 
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Executive Officers
 
See Part III, Item 10. “Directors, Executive Officers and Corporate Governance” of this Form 10-K Report for information about Executive Officers of the Registrant.
 
Other
 
Because of the diversity of our products and services, as well as the wide geographic dispersion of our production facilities, we use numerous sources for the wide variety of raw materials needed for our operations. We have not been adversely affected by the inability to obtain raw materials.
 
We own, or hold licenses to use, numerous patents. New patents are continuously being obtained through our research and development activities as existing patents expire. Patented inventions are used both within the Company and are licensed to others, but no operating segment is substantially dependent on any single patent or group of related patents.
 
Agencies of the U.S. Government constitute our largest single customer. An analysis of sales of goods and services as a percentage of revenues follows:
 
 
% of Consolidated Revenues
 
% of GE Revenues
 
2008
 
2007
 
2006
 
2008
 
2007
 
2006
                                   
Total sales to U.S. Government Agencies
3
%
 
2
%
 
2
%
 
4
%
 
3
%
 
4
%
Technology Infrastructure segment
                                 
defense-related sales
2
   
2
   
2
   
3
   
3
   
3
 

 
GE is a trademark and service mark of General Electric Company.
 
The Company’s Internet address is www.ge.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports are available, without charge, on our website, www.ge.com/en/company/investor/secfilings.htm, as soon as reasonably practicable after they are filed electronically with the U.S. Securities and Exchange Commission (SEC). Copies are also available, without charge, from GE Corporate Investor Communications, 3135 Easton Turnpike, Fairfield, CT 06828. Reports filed with the SEC may be viewed at www.sec.gov or obtained at the SEC Public Reference Room in Washington, D.C. Information regarding the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. References to our website addressed in this report are provided as a convenience and do not constitute, or should be viewed as, an incorporation by reference of the information contained on, or available through, the website. Therefore, such information should not be considered part of this report.
 
 
Item 1A. Risk Factors.
 
The following discussion of risk factors contains “forward-looking statements,” as discussed in Item 1. “Business”. These risk factors may be important to understanding any statement in this Annual Report on Form 10-K or elsewhere. The following information should be read in conjunction with Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (MD&A), and the consolidated financial statements and related notes in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Our businesses routinely encounter and address risks, some of which will cause our future results to be different - sometimes materially different - than we presently anticipate. Discussion about important operational risks that our businesses encounter can be found in the MD&A section and in the business descriptions in Item 1. “Business” of this Form 10-K Report. Below, we describe certain important operational and strategic risks. Our reactions to material future developments as well as our competitors’ reactions to those developments will affect our future results.
 

 
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The unprecedented conditions in the financial and credit markets may affect the availability and cost of GE Capital’s funding.
 
The financial and credit markets have been experiencing unprecedented levels of volatility and disruption, putting downward pressure on financial and other asset prices generally and on the credit availability for certain issuers. The U.S. Government and the Federal Reserve Bank recently created a number of programs to help stabilize credit markets and financial institutions and restore liquidity. Many non-U.S. governments have also created or announced similar measures for institutions in their respective countries. These programs have improved conditions in the credit and financial markets, but there can be no assurance that these programs, individually or collectively, will continue to have beneficial effects on the markets overall, or will resolve the credit or liquidity issues of companies that participate in the programs.
 
A large portion of GE Capital’s borrowings have been issued in the commercial paper and term debt markets. GE Capital has continued to issue commercial paper and, as planned, has reduced its outstanding commercial paper balance to $67 billion at the end of 2008. GE Capital has also issued term debt, mainly debt guaranteed by the Federal Deposit Insurance Corporation under the Temporary Liquidity Guarantee Program (TLGP) and, to a lesser extent, on a non-guaranteed basis. Although the commercial paper and term debt markets have remained available to GE Capital to fund its operations and debt maturities, there can be no assurance that such markets will continue to be available or, if available, that the cost of such funding will not substantially increase. If current levels of market disruption and volatility continue or worsen, or if we cannot further reduce GE Capital’s asset levels as planned in 2009, we would seek to repay commercial paper and term debt as it becomes due or to meet our other liquidity needs by using the Federal Reserve’s Commercial Paper Funding Facility (CPFF) and the TLGP, applying the net proceeds of our October 2008 equity offering and the investment by Berkshire Hathaway Inc., drawing upon contractually committed lending agreements primarily provided by global banks and/or seeking other sources of funding. There can be no assurance, however, that the TLGP and the CPFF will be extended beyond their scheduled expiration, or that, under such extreme market conditions, contractually committed lending agreements and other funding sources would be available or sufficient.
 
Our 2009 funding plan anticipates approximately $45 billion of senior, unsecured long-term debt issuance. In January 2009, we completed issuances of $11.0 billion of funding under the TLGP. We also issued $5.1 billion in non-guaranteed senior, unsecured debt with a maturity of 30 years under the non-guarantee option of the TLGP. These issuances, along with the $13.4 billion of pre-funding done in December 2008, bring our aggregate issuances to $29.5 billion or 66% of our anticipated 2009 funding plan. Additionally, we anticipate that we will be 90% complete with our 2009 funding plan by June 30, 2009.
 
Difficult conditions in the financial services markets have materially and adversely affected the business and results of operations of GE Capital and we do not expect these conditions to improve in the near future.
 
Dramatic declines in the housing market, with falling home prices and increasing foreclosures and unemployment, have resulted in significant write-downs of asset values by financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities but spreading to credit default swaps and other derivative securities, have caused many financial institutions to seek additional capital, to merge with other institutions and, in some cases, to fail. Many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers including other financial institutions. This market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. If these conditions continue or worsen, there can be no assurance that we will be able to recover fully the value of certain assets such as goodwill and intangibles. In addition, although we have established allowances for losses in GE Capital’s portfolio of financing receivables that we believe are adequate, significant and unexpected further deterioration in the economy and in default and recovery rates could require us to increase these allowances and write-offs, which, depending on the amount of the increase, could have a material adverse effect on our business, financial position and results of operations.
 

 
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The soundness of other financial institutions could adversely affect GE Capital.
 
GE Capital has exposure to many different industries and counterparties, and routinely executes transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, investment banks and other institutional clients. Many of these transactions expose GE Capital to credit risk in the event of default of its counterparty or client. In addition, GE Capital’s credit risk may be increased when the collateral held by it cannot be realized upon sale or is liquidated at prices not sufficient to recover the full amount of the loan or derivative exposure due to it. GE Capital also has exposure to these financial institutions in the form of unsecured debt instruments held in its investment portfolios. GE Capital has policies relating to initial credit rating requirements and to exposure limits to counterparties (as described in Note 29 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report), which mitigate credit and liquidity risk. There can be no assurance, however, that any losses or impairments to the carrying value of financial assets would not materially and adversely affect GE Capital’s business, financial position and results of operations.
 
The real estate markets in which GE Capital participates are highly uncertain.
 
GE Capital participates in the commercial real estate market in two ways: it provides financing for the acquisition, refinancing and renovation of various types of properties and it also acquires an equity position in various types of properties. The profitability of real estate investments is largely dependent upon the specific geographic market in which the properties are located and the perceived value of that market at the time of sale. Such activity may vary significantly from one year to the next. Rising unemployment, a slowdown in general business activity and recent disruptions in the credit markets have adversely affected, and are expected to continue to adversely affect, the value of real estate assets GE Capital holds. Under current market and credit conditions, there can be no assurance as to the level of sales GE Capital will complete or the net sales proceeds it will realize. Also, there can be no assurance that occupancy rates and market rentals will continue at their current levels given the current economic environment during the period in which GE Capital continues to hold its equity investments in these properties which may result in an impairment to the carrying value of those investments.
 
GE Capital is also a residential mortgage lender in certain geographic markets, particularly in the United Kingdom, that have been and may continue to be adversely affected by declines in residential real estate values and home sale volumes, job losses, consumer bankruptcies and other factors that may negatively impact the credit performance of our mortgage loans. Our allowance for loan losses on these mortgage loans is based on our analysis of current and historical delinquency and loan performance, as well as other management assumptions that may be inaccurate predictions of credit performance in this environment. There can be no assurance that, in this environment, credit performance will not be materially worse than anticipated and, as a result, materially and adversely affect GE Capital’s business, financial position and results of operations.
 
Failure to maintain our “Triple-A” credit ratings could adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets.
 
The major debt rating agencies routinely evaluate our debt. This evaluation is based on a number of factors, which include financial strength as well as transparency with rating agencies and timeliness of financial reporting. In December 2008, Standard & Poor’s Ratings Services affirmed our and GE Capital’s “AAA” long-term and “A-1+” short-term corporate credit ratings but revised its ratings outlook from stable to negative based partly on the concerns regarding GE Capital’s future performance and funding in light of capital market turmoil. On January 24, 2009, Moody’s Investment Services placed the long-term ratings of GE and GE Capital on review for possible downgrade. The firm’s “Prime-1” short-term ratings were affirmed. Moody’s said the review for downgrade is based primarily upon heightened uncertainty regarding GE Capital’s asset quality and earnings performance in future periods. In light of the difficulties in the financial services industry and the difficult financial markets, there can be no assurance that we will successfully implement our 2009 operational and funding plan for GE Capital or, in the event of further deterioration in the financial markets, that completion of our plan and any other steps we might take in response will be sufficient to allow us to maintain our “Triple-A” ratings. Failure to do so could adversely affect our cost of funds and related margins, liquidity, competitive position and access to capital markets. Various debt instruments, guarantees and covenants would require posting additional capital or collateral in the event of a ratings downgrade, but none are triggered if our ratings are reduced to AA-/Aa3 or A-1+/P-1 or higher.
 

 
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Current conditions in the global economy and the major industries we serve also may materially and adversely affect the business and results of operations of our non-financial businesses.
 
The business and operating results of our technology infrastructure, energy infrastructure, consumer and industrial and media businesses have been and will continue to be affected by worldwide economic conditions and, in particular, conditions in the air and rail transportation, energy generation, healthcare, network television and other major industries we serve. As a result of slowing global economic growth, the credit market crisis, declining consumer and business confidence, increased unemployment, reduced levels of capital expenditures, fluctuating commodity prices, bankruptcies and other challenges currently affecting the global economy, our customers may experience deterioration of their businesses, cash flow shortages, and difficulty obtaining financing. As a result, existing or potential customers may delay or cancel plans to purchase our products and services, including large infrastructure projects, and may not be able to fulfill their obligations to us in a timely fashion. Contract cancellations could affect our ability to fully recover our contract costs and estimated earnings. Further, our vendors may be experiencing similar conditions, which may impact their ability to fulfill their obligations to us. Although the new Administration in the United States is expected to enact various economic stimulus programs, there can be no assurance as to the timing and effectiveness of these programs. If the global economic slowdown continues for a significant period or there is significant further deterioration in the global economy, our results of operations, financial position and cash flows could be materially adversely affected.
 
Our global growth is subject to economic and political risks.
 
We conduct our operations in virtually every part of the world. In 2008, approximately 53% of our revenues were attributable to activities outside the United States. Our operations are subject to the effects of global competition. They are also affected by local economic environments, including inflation, recession and currency volatility. Political changes, some of which may be disruptive, can interfere with our supply chain, our customers and all of our activities in a particular location. While some of these risks can be hedged using derivatives or other financial instruments and some are insurable, such attempts to mitigate these risks are costly and not always successful, and our ability to engage in such mitigation has decreased or become even more costly as a result of recent market developments.
 
The success of our business depends on achieving our objectives for strategic acquisitions and dispositions.
 
With respect to acquisitions and mergers, we may not be able to identify suitable candidates at terms acceptable to us, or may not achieve expected returns and other benefits as a result of integration challenges, such as personnel and technology. We will continue to evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives. When we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner (as was the case with our Consumer & Industrial business in 2008), which could delay the accomplishment of our strategic objectives. Alternatively, we may dispose of a business at a price or on terms that are less than we had anticipated. These difficulties have been exacerbated in the current financial and credit environment because some potential sellers may hold onto assets pending a rebound in prices and buyers may have difficulty obtaining the necessary financing. In addition, there is a risk that we may sell a business whose subsequent performance exceeds our expectations, in which case our decision would have potentially sacrificed enterprise value.
 
There are risks inherent in owning our common stock.
 
The market price and volume of our common stock have been, and may continue to be, subject to significant fluctuations. These may arise from general stock market conditions, the impact of the risk factors described above on our financial condition and results of operations, a change in sentiment in the market regarding us or our business prospects or from other factors. Changes in the amounts and frequency of share repurchases or dividends could adversely affect the value of our common stock.
 

 
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We are subject to a wide variety of laws and regulations.
 
Our businesses are subject to regulation under a wide variety of U.S. federal, state and foreign laws, regulations and policies. There can be no assurance that, in response to current economic conditions, laws and regulations will not be changed in ways that will require us to modify our business models and objectives or affect our returns on investment by making existing practices more restricted, subject to escalating costs or prohibited outright. In particular, we expect U.S. and foreign governments to undertake a substantial review and revision of the regulation and supervision of bank and non-bank financial institutions and tax laws and regulation, which may have a significant effect on GE Capital’s structure, operations and performance. We are also subject to regulatory risks from laws that reduce the allowable lending rate or limit consumer borrowing, local liquidity regulations that may increase the risk of not being able to retrieve assets, and changes to tax law that may affect our return on investments. For example, GE’s effective tax rate is reduced because active business income earned and indefinitely reinvested outside the United States is taxed at less than the U.S. rate. A significant portion of this reduction depends upon a provision of U.S. tax law that defers the imposition of U.S. tax on certain active financial services income until that income is repatriated to the United States as a dividend. This provision is consistent with international tax norms and permits U.S. financial services companies to compete more effectively with foreign banks and other foreign financial institutions in global markets. This provision, currently scheduled to expire at the end of 2009, has been scheduled to expire and has been extended by Congress on five previous occasions, including in October of 2008, but there can be no assurance that it will continue to be extended. In the event this provision is not extended after 2009, the current U.S. tax imposed on active financial services income earned outside the United States would increase, making it more difficult for U.S. financial services companies to compete in global markets. If this provision is not extended, we expect our effective tax rate to increase significantly after 2010.
 
We are subject to legal proceedings and legal compliance risks.
 
We are subject to a variety of legal proceedings and legal compliance risks. We and our subsidiaries, our businesses and the industries in which we operate are at times being reviewed or investigated by regulators, which could lead to enforcement actions, fines and penalties or the assertion of private litigation claims and damages. These include investigations by the Department of Justice Antitrust Division and the U.S. Securities and Exchange Commission (SEC) of the marketing and sales of guaranteed investment contracts, and other financial instruments, to municipalities by certain subsidiaries of GE Capital and an investigation by the SEC of possible violations of the securities laws with respect to certain accounting issues, as described in Item 3. “Legal Proceedings” of this Form 10-K Report. Additionally, we and our subsidiaries are involved in a sizable number of remediation actions to clean up hazardous wastes as required by federal and state laws. These include the dredging of polychlorinated biphenyls from a 40-mile stretch of the upper Hudson River in New York State, as described in Item 1. “Business” of this Form 10-K Report. We are also subject to certain other legal proceedings described in Item 3. “Legal Proceedings” of this Form 10-K Report. While we believe that we have adopted appropriate risk management and compliance programs, the global and diverse nature of our operations means that legal compliance risks will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, will arise from time to time.
 
Significant changes in actual investment return on pension assets, discount rates, and other factors could affect our results of operations, equity, and pension contributions in future periods.
 
Our results of operations may be positively or negatively affected by the amount of income or expense we record for our defined benefit pension plans. U.S. generally accepted accounting principles (GAAP) require that we calculate income or expense for the plans using actuarial valuations. These valuations reflect assumptions about financial market and other economic conditions, which may change based on changes in key economic indicators. The most significant year-end assumptions we used to estimate pension income or expense for 2009 are the discount rate and the expected long-term rate of return on plans assets. In addition, we are required to make an annual measurement of plan assets and liabilities, which may result in a significant change to equity through a reduction or increase to Accumulated gains (losses) – net, Benefit plans. At the end of 2008, the projected benefit obligation of our U.S. principal pension plans was $45.1 billion and assets were $40.7 billion. For a discussion regarding how our financial statements can be affected by pension plan accounting policies, see Critical Accounting Estimates – Pension Assumptions in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 6 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report. Although GAAP expense and pension funding contributions are not directly related, key economic factors that affect GAAP expense would also likely affect the amount of cash we would contribute to pension plans as required under the Employee Retirement Income Security Act (ERISA).
 
 
Item 1B. Unresolved Staff Comments.
 
Not applicable.
 

 
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Manufacturing operations are carried out at approximately 285 manufacturing plants located in 40 states in the United States and Puerto Rico and at approximately 245 manufacturing plants located in 41 other countries.
 
 
Item 3. Legal Proceedings.
 
As previously reported, in January 2005, the staff of the U.S. Securities and Exchange Commission (SEC) informed us that it had commenced an investigation and requested certain documents and information with respect to the use of hedge accounting for derivatives by us and General Electric Capital Corporation. In August 2005, the SEC staff advised us that the SEC had issued a formal order of investigation in the matter. The SEC investigation is continuing and the SEC staff has taken testimony in this matter and has requested information about other GE accounting policies and practices, including items related to revenue recognition and our cash flow presentations.
 
We continue to cooperate with the ongoing SEC investigation and to discuss the investigation and issues arising in that investigation and our internal review of certain accounting matters with the SEC staff with a goal of completing our review and resolving these matters. As part of this process, we have had discussions with the SEC staff concerning resolution of these matters. In September 2008, the SEC staff issued a “Wells notice” advising us that it is considering recommending to the SEC that it bring a civil injunctive action against GE for possible violations of the securities laws. We have been informed that the issues the staff may recommend that the SEC pursue relate to the application of SFAS 133 in 2002 and 2003 with respect to accounting for derivatives formerly used to hedge the risk of interest rate changes related to commercial paper and for certain derivatives in which a fee was a part of the consideration for the derivative; a change in 2002 in our accounting for profits on certain aftermarket spare parts primarily in our Aviation business; certain 2003 and earlier transactions involving financial intermediaries in our Rail business; and historical accounting for revenue recognition on product sales subject to in-transit risk of damage, principally in our Healthcare, Infrastructure and Industrial segments. We have already disclosed these items in previously filed SEC reports, including their effects on particular periods and corrected our financial statements with respect to each of them. The cumulative effect of these items on our financial statements was a reduction in net earnings by approximately $300 million in the period from 2001 through December 31, 2007. We have implemented a number of remedial actions and internal control enhancements, also as described in our SEC reports. All of these items were reviewed or discussed with KPMG, which audited our financial statements throughout the periods in question.
 
We disagree with the SEC staff regarding this recommendation and have been in discussions with the staff, including discussion of potential resolution of the matter. We intend to continue these discussions and understand that we will have the opportunity to address any disagreements with the SEC staff with respect to its recommendation through the Wells process with the full Commission. If the Commission were to authorize an action against GE, it could seek an injunction against future violations of provisions of the federal securities laws, including potentially Sections 13(a), 13(b), and 10(b) of the Exchange Act and Section 17(a) of the Securities Act, the imposition of penalties, and other relief within the Commission’s authority. If we were to resolve the matter through a settlement, we would neither admit nor deny the proposed allegations but could agree to the resolution and entry of an injunction. There can be no assurance that we and the SEC would reach agreement on a proposed settlement as a result of our discussions.
 
In July and September 2008, shareholders filed two purported class actions under the federal securities laws in the United States District Court for the District of Connecticut naming us as defendant, as well as our chief executive officer and chief financial officer. These two actions have been consolidated and in January 2009, a consolidated complaint was filed alleging that we and our chief executive officer made false and misleading statements that artificially inflated our stock price between March 12, 2008 and April 10, 2008, when we announced that our results for the first quarter of 2008 would not meet our previous guidance and we also lowered our full year guidance for 2008. This case, which seeks unspecified damages, is at an early stage and we intend to defend ourselves vigorously. In addition, in August 2008, shareholders filed two purported derivative actions in New York State court against our chief executive officer and chief financial officer, the members of our board and us (as nominal defendant) for alleged breach of fiduciary duty and other claims in connection with these events. In December 2008, the plaintiffs in these derivative actions entered into a stipulation to dismiss the actions without prejudice.
 

 
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In October 2008, shareholders filed a purported class action under the federal securities laws in the United States District Court for the Southern District of New York naming us as defendant, as well as our chief executive officer and chief financial officer. The complaint alleges that during a conference call with analysts on September 25, 2008, defendants made false and misleading statements concerning (i) the state of GE’s funding, cash flows, and liquidity and (ii) the question of issuing additional equity, which caused economic loss to those shareholders who purchased GE stock between September 25, 2008 and October 2, 2008, when we announced the pricing of a common stock offering. This case, which seeks unspecified damages, is at the earliest stage and we intend to defend ourselves vigorously.
 
As previously reported, the Antitrust Division of the Department of Justice (DOJ) and the SEC are conducting an industry-wide investigation of marketing and sales of guaranteed investment contracts, and other financial instruments, to municipalities. In connection with this investigation, two subsidiaries of GE Capital have received subpoenas and requests for information in connection with the investigation: GE Funding CMS (Trinity Funding Co.) and GE Funding Capital Market Services, Inc. (GE FCMS). GE Capital has cooperated and continues to cooperate fully with the SEC and DOJ in this matter. In July 2008, GE FCMS received a “Wells notice” advising that the SEC staff is considering recommending that the SEC bring a civil injunctive action or institute an administrative proceeding in connection with the bidding for various financial instruments associated with municipal securities by certain former employees of GE FCMS. GE FCMS is one of several industry participants that received Wells notices during 2008. GE FCMS disagrees with the SEC staff regarding this recommendation and has been in discussions with the staff, including discussion of potential resolution of the matter. GE FCMS intends to continue these discussions and understands that it will have the opportunity to address any disagreements with the SEC staff with respect to its recommendation through the Wells process with the full Commission. In March 2008, GE FCMS and Trinity Funding Co., LLC (Trinity Funding) were served with a federal class action complaint asserting antitrust violations. This action has been combined with other related actions in a multidistrict litigation proceeding in the United States District Court for the Southern District of New York. In addition, GE FCMS and Trinity Funding also received subpoenas from the Attorneys General of the State of Connecticut and Florida on behalf of a working group of State Attorneys General in June 2008. GE FCMS and Trinity Funding are cooperating with those investigations.
 
In June 2008, the Environmental Protection Agency (EPA) issued a notice of violation alleging non-compliance with the Clean Air Act at a power cogeneration plant in Homer City, PA. The plant is operated exclusively by EME Homer City Generation L.P., and is owned and leased to EME Homer City Generation L.P. by subsidiaries of GE Capital. The notice of violation does not indicate a specific penalty amount but makes reference to statutory fines. We believe that we have meritorious defenses and that EME Homer City Generation L.P. is obligated to indemnify GE Capital’s subsidiaries and pay all costs associated with this matter.
 
As previously reported, in April 2006 the EPA informed the company that it was contemplating seeking $990,000 in penalties for violations of the Clean Air Act at its Mt. Vernon, Indiana Plastics facility. The EPA asserted that the company failed to adequately control emissions from valves and inlet pipes in an underground piping system. We disagreed with those assertions, and the EPA modified its position to reduce the number of potential violations. In August 2007, ownership of the facility was transferred to Sabic Innovative Plastics as part of the sale of GE's Plastics business. Pursuant to the terms of the sale, Sabic has agreed to take full responsibility for any civil sanctions or corrective actions that may be required pursuant to this matter.
 

 
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Item 4. Submission of Matters to a Vote of Security Holders.
 
Not applicable.
 
 
Part II
 
 
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
 
With respect to “Market Information,” in the United States, GE common stock is listed on the New York Stock Exchange (its principal market). GE common stock is also listed on the London Stock Exchange and on Euronext Paris. Trading prices, as reported on the New York Stock Exchange, Inc., Composite Transactions Tape, and dividend information follow:
 
 
Common stock market price
 
Dividends
(In dollars)
High
 
Low
 
declared
           
2008
         
Fourth quarter
$25.75
 
$12.58
 
$0.31
Third quarter
30.39
 
22.16
 
0.31
Second quarter
38.52
 
26.15
 
0.31
First quarter
37.74
 
31.65
 
0.31
           
2007
         
Fourth quarter
$42.15
 
$36.07
 
$0.31
Third quarter
42.07
 
36.20
 
0.28
Second quarter
39.77
 
34.55
 
0.28
First quarter
38.28
 
33.90
 
0.28

 
As of January 31, 2009, there were approximately 605,000 shareowner accounts of record.
 

 
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During the fourth quarter of 2008, we purchased shares of our common stock as follows.
 
Period(a)
 
Total number
of shares
purchased(a)(b)
 
Average
price paid
per share
 
Total number of
shares purchased
as part of our
share repurchase
programs(a)(c)(d)
 
Approximate dollar
value of shares that
may yet be purchased
under our share
repurchase program(d)
(Shares in thousands)
                                   
2008
                                 
October
   
651
     
$20.45
     
567
           
November
   
704
     
$16.96
     
509
           
December
   
1,855
     
$16.59
     
527
           
Total
   
3,210
     
$17.45
     
1,603
     
$
11.8 billion
 
                                   

(a)
Information is presented on a fiscal calendar basis, consistent with our quarterly financial reporting.
(b)
This category includes 1,607 thousand shares repurchased from our various benefit plans, primarily the GE Savings and Security Program (the S&SP). Through the S&SP, a defined contribution plan with Internal Revenue Service Code 401(k) features, we repurchase shares resulting from changes in investment options by plan participants.
(c)
This balance represents the number of shares that were repurchased through the 2007 GE Share Repurchase Program (the Program) under which we are authorized to repurchase up to $15 billion of our common stock through 2010. The Program is flexible and shares are acquired with a combination of borrowings and free cash flow from the public markets and other sources, including GE Stock Direct, a stock purchase plan that is available to the public. As major acquisitions or other circumstances warrant, we modify the frequency and amount of share repurchases under the Program.
(d)
Effective September 25, 2008, we suspended our share repurchase program for purchases other than for the GE Stock Direct Plan.

 
For information regarding compensation plans under which equity securities are authorized for issuance, see Note 24 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Five-year financial performance graph: 2004-2008
 
Comparison of five-year cumulative return among GE, S&P 500 and Dow Jones Industrial Average
 
The annual changes for the five-year period shown in the graph on this page are based on the assumption that $100 had been invested in GE stock, the Standard & Poor’s 500 Stock Index and the Dow Jones Industrial Average on December 31, 2003, and that all quarterly dividends were reinvested. The total cumulative dollar returns shown on the graph represent the value that such investments would have had on December 31, 2008.
 

 
   
2003
   
2004
   
2005
   
2006
   
2007
   
2008
 
                                     
GE
$
100
 
$
121
 
$
119
 
$
130
 
$
134
 
$
61
 
S&P 500
 
100
   
111
   
116
   
135
   
142
   
89
 
DJIA
 
100
   
106
   
107
   
128
   
139
   
95
 

 

 
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Item 6. Selected Financial Data.
 
The following table provides key information for Consolidated, GE and GECS.
 
 (Dollars in millions; per-share amounts in dollars)
 
2008
   
2007
   
2006
   
2005
   
2004
 
     
   
   
   
   
   
   
   
     
General Electric Company and Consolidated Affiliates
                             
Revenues
$
182,515
 
$
172,488
 
$
151,568
 
$
136,262
 
$
123,814
 
Earnings from continuing operations
 
18,089
   
22,457
   
19,344
   
17,279
   
15,591
 
Earnings (loss) from discontinued operations, net of taxes
 
(679
)
 
(249
)
 
1,398
   
(559
)
 
1,631
 
Net earnings
 
17,410
   
22,208
   
20,742
   
16,720
   
17,222
 
Dividends declared(a)
 
12,649
   
11,713
   
10,675
   
9,647
   
8,594
 
Return on average shareowners’ equity(b)
 
15.9
%
 
20.4
%
 
19.8
%
 
18.1
%
 
18.8
%
Per common share
                             
Earnings from continuing operations – diluted
$
1.78
 
$
2.20
 
$
1.86
 
$
1.63
 
$
1.49
 
Earnings (loss) from discontinued operations – diluted
 
(0.07
)
 
(0.02
)
 
0.13
   
(0.05
)
 
0.16
 
Net earnings – diluted
 
1.72
   
2.17
   
2.00
   
1.57
   
1.65
 
Earnings from continuing operations – basic
 
1.79
   
2.21
   
1.87
   
1.63
   
1.50
 
Earnings (loss) from discontinued operations – basic
 
(0.07
)
 
(0.02
)
 
0.14
   
(0.05
)
 
0.16
 
Net earnings – basic
 
1.72
   
2.18
   
2.00
   
1.58
   
1.66
 
Dividends declared
 
1.24
   
1.15
   
1.03
   
0.91
   
0.82
 
Stock price range
38.52-12.58
 
42.15-33.90
 
38.49-32.06
 
37.34-32.67
 
37.75-28.88
 
Year-end closing stock price
 
16.20
   
37.07
   
37.21
   
35.05
   
36.50
 
Cash and equivalents
 
48,187
   
15,731
   
14,086
   
8,608
   
11,833
 
Total assets of continuing operations
 
796,046
   
786,794
   
674,966
   
588,821
   
578,560
 
Total assets
 
797,769
   
795,683
   
697,273
   
673,210
   
750,252
 
Long-term borrowings
 
330,067
   
319,013
   
260,749
   
212,167
   
207,784
 
Common shares outstanding – average (in thousands)
10,079,923
 
10,182,083
 
10,359,320
 
10,569,805
 
10,399,629
 
Common shareowner accounts – average
 
604,000
   
608,000
   
624,000
   
634,000
   
658,000
 
Employees at year end
                             
United States
 
152,000
   
155,000
   
155,000
   
161,000
   
165,000
 
Other countries
 
171,000
   
172,000
   
164,000
   
155,000
   
142,000
 
Total employees
 
323,000
   
327,000
   
319,000
   
316,000
   
307,000
(c)
                               
GE data
                             
Short-term borrowings
$
2,375
 
$
4,106
 
$
2,076
 
$
972
 
$
3,252
 
Long-term borrowings
 
9,827
   
11,656
   
9,043
   
8,986
   
7,561
 
Minority interest
 
6,678
   
6,503
   
5,544
   
5,308
   
7,236
 
Shareowners’ equity
 
104,665
   
115,559
   
111,509
   
108,633
   
110,181
 
Total capital invested
$
123,545
 
$
137,824
 
$
128,172
 
$
123,899
 
$
128,230
 
Return on average total capital invested(b)
 
14.8
%
 
18.9
%
 
18.5
%
 
16.7
%
 
16.9
%
Borrowings as a percentage of total capital invested(b)
 
9.9
%
 
11.4
%
 
8.7
%
 
8.0
%
 
9.0
%
Working capital(b)
$
3,904
 
$
6,433
 
$
7,527
 
$
7,853
 
$
7,788
 
GECS data
                             
Revenues
$
71,287
 
$
71,936
 
$
61,351
 
$
54,889
 
$
50,320
 
Earnings from continuing operations
 
7,774
   
12,417
   
10,219
   
8,929
   
7,614
 
Earnings (loss) from discontinued operations, net of taxes
 
(719
)
 
(2,116
)
 
439
   
(1,352
)
 
1,114
 
Net earnings
 
7,055
   
10,301
   
10,658
   
7,577
   
8,728
 
Shareowner’s equity
 
53,279
   
57,676
   
54,097
   
50,812
   
54,379
 
Total borrowings
 
514,601
   
500,922
   
426,262
   
362,042
   
355,463
 
Ratio of debt to equity at GE Capital
 
8.76:1
(d)
 
8.10:1
   
7.52:1
   
7.09:1
   
6.45:1
 
Total assets
$
660,902
 
$
646,485
 
$
565,258
 
$
540,584
 
$
618,614
 
                               

Transactions between GE and GECS have been eliminated from the consolidated information.
(a)
Includes $75 million of preferred stock dividends in 2008.
(b)
Indicates terms are defined in the Glossary.
(c)
Includes employees of Genworth, which was subsequently deconsolidated in 2005.
(d)
7.07:1 net of cash and equivalents and with classification of hybrid debt as equity.

 
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Operations
 
Our consolidated financial statements combine the industrial manufacturing, services and media businesses of General Electric Company (GE) with the financial services businesses of General Electric Capital Services, Inc. (GECS or financial services).
 
In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial information but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission (SEC) rules. For such measures, we have provided supplemental explanations and reconciliations in the Supplemental Information section.
 
We present Management’s Discussion of Operations in five parts: Overview of Our Earnings from 2006 through 2008, Global Risk Management, Segment Operations, Geographic Operations and Environmental Matters. Unless otherwise indicated, we refer to captions such as revenues and earnings from continuing operations simply as “revenues” and “earnings” throughout this Management’s Discussion and Analysis. Similarly, discussion of other matters in our consolidated financial statements relates to continuing operations unless otherwise indicated.
 
Overview of Our Earnings from 2006 through 2008
 
Our results for the last three years reflect our strategy to strengthen our position as a worldwide growth company operating in diverse industries in which we maintain strong market-leader positions. During 2008, we encountered unprecedented conditions in the world economy and financial markets that affected all of our businesses. Over the three-year period our consolidated revenues grew 20% on organic growth that averaged 6% per year, yet earnings declined 6%. Our financial services businesses were most significantly affected as earnings fell 24% on a 16% increase in revenues over this three-year period.
 
The information that follows will show how our global diversification and risk management strategies have helped us to grow revenues and industrial earnings to record levels and to outperform our peers in financial services businesses. We also believe that the disposition of our less strategic businesses, our restructuring actions and our investment in businesses with strong growth potential have positioned us well for the future.
 
Energy Infrastructure (19% and 18% of consolidated three-year revenues and total segment profit, respectively) was well positioned to grow significantly over the last several years as the worldwide demand for energy, and for alternative sources of power, such as wind and thermal, rose to new levels. This resulted in a 53% increase in revenues and a 73% increase in segment profit over the three-year period. We continued to invest in market-leading technology and services at Energy, Oil & Gas and Water.
 
Technology Infrastructure (25% and 29% of consolidated three-year revenues and total segment profit, respectively) grew revenues 23% and earnings 12% over the three-year period as we continued to invest in market-leading technologies and services at Aviation and Transportation and strategic acquisitions at Healthcare. Aviation continued to grow revenues and earnings to record levels as one of the world’s leading providers of aircraft engines and services. The Aviation orders backlog also continued to grow, positioning us well for the future. Product services and sales of our Evolution Series locomotives contributed to Transportation’s growth over the last three years and we have invested heavily in expanding our global platform. Healthcare realized benefits from the acquisition of IDX Systems Corporation in 2006, expanding the breadth of our product and service offerings to the healthcare industry. Healthcare was adversely affected by the effects of the Deficit Reduction Act on U.S. equipment sales. In addition, lower sales of surgical imaging equipment resulted from a regulatory suspension on shipments at one of our facilities. We began shipping some of these products in the first half of 2008. Enterprise Solutions offers protection and productivity solutions such as safe facilities, plant automation, power control and sensing applications.
 
NBC Universal (10% and 11% of consolidated three-year revenues and total segment profit, respectively) is a diversified media and entertainment company that has grown through business and geographic diversity. While the television business continues to be challenged by the effects of a difficult economy, our cable business continues to grow and become more profitable. Our film business also continues to perform well, with consistent contributions to earnings.
 

 
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Capital Finance (37% and 39% of consolidated three-year revenues and total segment profit, respectively) is a strong, focused business with leading positions in several mid-market, corporate and consumer financing segments. Our performance has been strong over the long-term, with solid risk management and underwriting through various credit cycles. More recently, we have been affected by economic changes, specifically the disruptions in capital markets, challenging credit market environment and rising unemployment. Our earnings in 2008 and 2007 were $8.6 billion and $12.2 billion, respectively. We expect the current challenging credit and economic environment to continue to affect our earnings in 2009. Throughout 2008, we tightened underwriting standards, shifted teams from origination to collection and maintained a proactive risk management focus. Our focus is to manage through the current challenging credit environment and reposition GE Capital as a diversely funded and smaller finance company.
 
Consumer & Industrial (7% and 3% of consolidated three-year revenues and total segment profit, respectively) is particularly sensitive to changes in economic conditions. Reflective of the downturn in the U.S. housing market, Consumer & Industrial revenues have declined over the three-year period. In response to these tough economic conditions, in 2007, Consumer & Industrial began a restructuring plan focused on reducing manufacturing capacity and transferring work to lower-cost countries. Despite these cost reduction efforts, segment profit declined on higher material and other costs.
 
Overall, acquisitions contributed $7.4 billion, $7.7 billion and $3.9 billion to consolidated revenues in 2008, 2007 and 2006, respectively. Our consolidated earnings included approximately $0.8 billion in 2008, and $0.5 billion in both 2007 and 2006, from acquired businesses. We integrate acquisitions as quickly as possible. Only revenues and earnings from the date we complete the acquisition through the end of the fourth following quarter are attributed to such businesses. Dispositions also affected our ongoing results through higher revenues of $0.1 billion in 2008 and lower revenues of $3.6 billion and $1.3 billion in 2007 and 2006, respectively. This resulted in higher earnings of $0.4 billion in both 2008 and 2007, and $0.1 billion in 2006.
 
Significant matters relating to our Statement of Earnings are explained below.
 
Discontinued Operations. In September 2007, we committed to a plan to sell our Japanese personal loan business (Lake) upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our minority ownership in GE Nissen Credit Co., Ltd. In December 2007, we completed the exit of WMC as a result of continued pressures in the U.S. subprime mortgage industry. Both of these businesses were previously reported in the Capital Finance segment.
 
In August 2007, we completed the sale of our Plastics business. We sold this business because of its cyclicality, rising costs of natural gas and raw materials, and the decision to redeploy capital resources into higher-growth businesses. During 2006, we sold our Advanced Materials business.
 
In 2006, we substantially completed our planned exit of the insurance businesses through the sale of the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions Corporation (GE Insurance Solutions) and the sale of GE Life, our U.K.-based life insurance operation, to Swiss Reinsurance Company (Swiss Re), and the sale, through a secondary public offering, of our remaining 18% investment in Genworth Financial, Inc. (Genworth), our formerly wholly-owned subsidiary that conducted most of our consumer insurance business, including life and mortgage insurance operations.
 
We reported the businesses described above as discontinued operations for all periods presented. For further information about discontinued operations, see Note 2 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
We declared $12.6 billion in dividends in 2008. Common per-share dividends of $1.24 were up 8% from 2007, following a 12% increase from the preceding year. On February 6, 2009, our Board of Directors approved a regular quarterly dividend of $0.31 per share of common stock, which is payable April 27, 2009, to shareowners of record at close of business on February 23, 2009. This payment will complete the dividend for the first half of 2009. The Board will continue to evaluate the Company’s dividend level for the second half of 2009 in light of the growing uncertainty in the economy, including U.S. government actions, rising unemployment and the recent announcements by the rating agencies. In 2008, we declared $0.1 billion in preferred stock dividends.
 

 
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Except as otherwise noted, the analysis in the remainder of this section presents the results of GE (with GECS included on a one-line basis) and GECS. See the Segment Operations section for a more detailed discussion of the businesses within GE and GECS.
 
GE sales of product services were $35.5 billion in 2008, a 10% increase from 2007. Increases in product services in 2008 and 2007 were led by growth at Energy Infrastructure and Technology Infrastructure. Operating profit from product services was $9.3 billion in 2008, up 3% from 2007.
 
Postretirement benefit plans costs were $2.2 billion, $2.6 billion and $2.3 billion in 2008, 2007 and 2006, respectively. The cost decreased in 2008 primarily because of the effects of prior years’ investment gains, higher discount rates and benefits from new healthcare supplier contracts, partially offset by additional costs of plan benefits resulting from union negotiations and a pensioner increase in 2007. The cost increased in 2007 primarily because of plan benefit changes resulting from new U.S. labor agreements and increases in retiree medical and drug costs, partially offset by increases in discount rates for the year and effects of recent investment gains. The cost increased in 2006 primarily because of the effects of prior-years’ investment losses and lower discount rates.
 
Considering the current and expected asset allocations, as well as historical and expected returns on various categories of assets in which our plans are invested, we have assumed that long-term returns on our principal pension plan assets will be 8.5% for cost recognition in 2009, the same level as we assumed in 2008, 2007 and 2006. GAAP provides recognition of differences between assumed and actual returns over a period no longer than the average future service of employees.
 
We expect the costs of our postretirement benefits in 2009 to be about the same as the 2008 costs. The effects of decreasing discount rates (principal pension plans’ discount rate decreasing from 6.34% to 6.11%) will be largely offset by prior-years’ investment gains and benefits from new healthcare supplier contracts. Assuming our 2009 actual experience is consistent with our current benefit assumptions (e.g., expected return on assets, discount rates and healthcare trend rates), we expect that costs of our postretirement benefits will increase by approximately $1.0 billion in 2010 as compared to 2009, primarily due to amortization of our unamortized losses relating to our principal pension plans.
 
Our principal pension plans were underfunded by $4.4 billion at the end of 2008 as compared to overfunded by $16.8 billion at December 31, 2007. At December 31, 2008, the GE Pension Plan was underfunded by $0.9 billion and the GE Supplementary Pension Plan, which is an unfunded plan, had a projected benefit obligation of $3.5 billion. The reduction in surplus from year-end 2007 was primarily attributable to asset investment performance resulting from the deteriorating market conditions and economic environment in 2008. Our principal pension plans’ assets decreased from $59.7 billion at the end of 2007 to $40.7 billion at December 31, 2008, a 28.2% decline in investment values during the year. Assets of the GE Pension Plan are held in trust, solely for the benefit of Plan participants, and are not available for general Company operations. Although the reduction in pension plan assets in 2008 will impact future pension plan costs, the Company’s requirement to make future cash contributions to the Trust will depend on future market and economic conditions.
 
On an Employee Retirement Income Security Act (ERISA) basis, the GE Pension Plan remains fully funded at January 1, 2009. We will not make any contributions to the GE Pension Plan in 2009. Assuming our 2009 actual experience is consistent with our current benefit assumptions (e.g., expected return on assets and interest rates), we will not be required to make contributions to the GE Pension Plan in 2010.
 
At December 31, 2008, the fair value of assets for our other pension plans was $2.4 billion less than the respective projected benefit obligations. The comparable amount at December 31, 2007 was $1.6 billion. We expect to contribute $0.7 billion to our other pension plans in 2009, compared with actual contributions of $0.6 billion and $0.7 billion in 2008 and 2007, respectively. Our principal retiree health and life plans obligations exceeded the fair value of related assets by $10.8 billion and $11.2 billion at December 31, 2008 and 2007, respectively. We fund our retiree health benefits on a pay-as-you-go basis. We expect to contribute $0.7 billion to these plans in 2009 compared with actual contributions of $0.6 billion in 2008 and 2007.
 
The funded status of our postretirement benefits plans and future effects on operating results depend on economic conditions and investment performance. See Note 6 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report for additional information about funded status, components of earnings effects and actuarial assumptions.
 
GE other costs and expenses are selling, general and administrative expenses. These costs were 12.9%, 14.2% and 14.3% of total GE sales in 2008, 2007 and 2006, respectively.
 

 
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Interest on borrowings and other financial charges amounted to $26.2 billion, $23.8 billion and $18.9 billion in 2008, 2007 and 2006, respectively. Substantially all of our borrowings are in financial services, where interest expense was $25.1 billion, $22.7 billion and $17.8 billion in 2008, 2007 and 2006, respectively. Average borrowings increased over the three-year period. Interest rates increased from 2006 to 2007 attributable to rising credit spreads. Interest rates have decreased from 2007 to 2008 in line with general market conditions. GECS average borrowings were $521.2 billion, $456.4 billion and $389.0 billion in 2008, 2007 and 2006, respectively. GECS average composite effective interest rate was 4.8% in 2008, 5.0% in 2007 and 4.6% in 2006. In 2008, GECS average assets of $667.2 billion were 13% higher than in 2007, which in turn were 17% higher than in 2006. We anticipate that our composite rates will continue to decline through 2009 as a result of decreased benchmark rates globally. However, these decreases in benchmark rates will be partially offset by higher credit spreads and fees associated with government guarantees and higher cash balances resulting from pre-funding of debt maturities and the need to maintain greater liquidity in the current environment. See the Liquidity and Borrowings section for a discussion of liquidity, borrowings and interest rate risk management.
 
Income taxes are a significant cost. As a global commercial enterprise, our tax rates are affected by many factors, including our global mix of earnings, the extent to which those global earnings are indefinitely reinvested outside the United States, legislation, acquisitions, dispositions and tax characteristics of our income. Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions.
 
Income taxes on consolidated earnings from continuing operations were 5.5% in 2008 compared with 15.6% in 2007 and 16.9% in 2006. Our consolidated income tax rate decreased from 2007 to 2008 primarily because of a reduction during 2008 of income in higher-taxed jurisdictions. This increased the relative effect of tax benefits from lower-taxed global operations on the tax rate. In addition, earnings from lower-taxed global operations increased from 2007 to 2008. The increase in the benefit from lower-taxed global operations includes a benefit from the 2008 decision to indefinitely reinvest, outside the U.S., prior-year earnings because the use of foreign tax credits no longer required the repatriation of those prior-year earnings.
 
Our consolidated income tax rate decreased from 2006 to 2007 as the tax benefit on the disposition of our investment in SES and an increase in favorable settlements with tax authorities more than offset a decrease in the benefit from lower-taxed earnings from global operations, which in 2006 included one-time tax benefits from planning to use non-U.S. tax net operating losses.
 
A more detailed analysis of differences between the U.S. federal statutory rate and the consolidated rate, as well as other information about our income tax provisions, is provided in Note 7 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report. The nature of business activities and associated income taxes differ for GE and for GECS and a separate analysis of each is presented in the paragraphs that follow.
 
Because GE tax expense does not include taxes on GECS earnings, the GE effective tax rate is best analyzed in relation to GE earnings excluding GECS. GE pre-tax earnings from continuing operations, excluding GECS earnings from continuing operations, were $13.7 billion, $12.8 billion and $11.7 billion for 2008, 2007 and 2006, respectively. On this basis, GE’s effective tax rate was 24.9% in 2008, 21.8% in 2007 and 21.9% in 2006.
 
Resolution of audit matters reduced the GE effective tax rate throughout this period. The effects of such resolutions are included in the following captions in Note 7 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
 
Audit resolutions –
effect on GE excluding GECS tax rate
 
 
2008
 
2007
 
2006
 
                   
Tax on global activities including exports
 
%
 
(2.7
)%
 
(0.8
)%
All other – net
 
(0.6
)
 
(2.4
)
 
(0.8
)
   
(0.6
)%
 
(5.1
)%
 
(1.6
)%

 
The GE effective tax rate increased from 2007 to 2008 because of the 4.5 percentage point lower 2008 benefit from favorable audit resolutions, partially offset by a 1.0 percentage point increase in the benefit in lower-taxed earnings from global operations, excluding audit resolutions.
 

 
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The GE effective tax rate declined slightly from 2006 to 2007 because the 3.5 percentage point higher 2007 benefit from favorable audit resolutions was largely offset by a 3.3 percentage point decrease in the benefit in lower-taxed earnings from global operations, excluding audit resolutions and the effect of tax law changes. The 2006 benefit from global operations included tax benefits from planning to use non-U.S. net operating losses against profitable operations.
 
The 2006 GE rate reflects the favorable audit resolutions shown above and the benefit of lower-taxed earnings from global operations including tax benefits from planning to use non-U.S. net operating losses against profitable operations.
 
The GECS effective tax rate was (44.0)% in 2008, compared with 9.9% in 2007 and 12.0% in 2006. GE and GECS file a consolidated U.S. federal income tax return that enables GE to use GECS tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECS effective tax rate for each period reflects the benefit of these tax reductions. GE makes cash payments to GECS for these tax reductions at the time GE’s tax payments are due.
 
The GECS rate decreased from 2007 to 2008 primarily because of a reduction during 2008 of income in higher-taxed jurisdictions. This increased the relative effect of tax benefits from lower-taxed global operations on the tax rate, reducing the rate 32.7 percentage points. In addition, earnings from lower-taxed global operations increased from 2007 to 2008, causing an additional 20.7 percentage point rate reduction. The increase in the benefit from lower-taxed global operations includes 6.5 percentage points from the 2008 decision to indefinitely reinvest, outside the U.S., prior-year earnings because the use of foreign tax credits no longer required the repatriation of those prior-year earnings.
 
The GECS income tax rate decreased from 2006 to 2007 as the tax benefit on the disposition of its investment in SES and growth in lower-taxed global earnings, which decreased the GECS effective tax rate 4.0 and 1.0 percentage points, respectively, were partially offset by higher net tax expense related to U.S. and non-U.S. audit activity and from the absence of the 2006 benefit of the reorganization, discussed below, of our aircraft leasing business, which increased the rate 1.6 and 1.1 percentage points, respectively.
 
As a result of the repeal of the extraterritorial income (ETI) taxing regime as part of the American Jobs Creation Act of 2004 (the Act), our aircraft leasing business no longer qualifies for a reduced U.S. tax rate. However, the Act also extended to aircraft leasing the U.S. tax deferral benefits that were already available to other GE non-U.S. active operations. These legislative changes, coupled with a reorganization of our aircraft leasing business and a favorable Irish ruling, decreased the GECS effective tax rate 1.1 percentage points in 2006.
 
Global Risk Management
 
A disciplined approach to risk is important in a diversified organization such as ours in order to ensure that we are executing according to our strategic objectives and that we only accept risk for which we are adequately compensated. It is necessary for us to manage risk at the individual transaction level, and to consider aggregate risk at the customer, industry, geographic and collateral-type levels, where appropriate.
 
The GE Board of Directors maintains overall responsibility for risk oversight, with a focus on the most significant risks facing GE. The Board's Audit Committee oversees GE’s risk policies and processes relating to the financial statements and financial reporting process. The Board's Public Responsibilities Committee oversees risks involved in GE’s public policy initiatives, the environment and similar matters. The Board’s Management Development and Compensation Committee oversees risk related to compensation.
 

 
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The Board’s oversight process builds upon our management’s risk management and assessment processes, which include long-term strategic planning, executive development and evaluation, regulatory and litigation compliance reviews, environmental compliance reviews, GECS Corporate Risk Function and the Corporate Risk Committee. Each year, management and the Board jointly develop a list of major risks that GE plans to address. Throughout the year, either the Board or one of its committees dedicates a portion of their meetings to review and discuss these risk topics in greater detail. Strategic and operational risks are covered in the CEO’s report on operations to the Board at regularly scheduled Board meetings. At least twice a year, the Audit Committee receives a risk update from the GECS risk officer, which focuses on GECS risk strategy and its financial services portfolio, including its processes for managing credit and market risk within its portfolio. In addition, each year, and in some years more frequently, the Audit Committee receives a comprehensive report from GE’s Treasurer on GECS capital markets exposure and its liquidity and funding risks and a comprehensive report from GE’s General Counsel covering compliance issues. Each year, the Committee also reviews and discusses topics related to the financial reporting process, including an update on information technology, controllership, insurance, tax strategies and policies, accounting and numerous reports on regulation, compliance, litigation and investigations affecting GE businesses.
 
The GECS Board of Directors oversees the risk management process, and approves all significant acquisitions and dispositions as well as significant borrowings and investments. All participants in the risk management process must comply with approval limits established by the GECS Board.
 
The GECS Chief Risk Officer is responsible, with the Corporate Risk Function, for establishing standards for the measurement, reporting and limiting of risk; for managing and evaluating risk managers; for approving risk management policies; and for reviewing major risk exposures and concentrations across the organization. The GECS Corporate Risk Function analyzes certain business risks and assesses them in relation to aggregate risk appetite and approval limits set by the GECS Board of Directors.
 
Threshold responsibility for identifying, quantifying and mitigating risks is assigned to our individual businesses. We employ proprietary analytic models to allocate capital to our financing activities, to identify the primary sources of risk and to measure the amount of risk we will take for each product line. This approach allows us to develop early signals that monitor changes in risk affecting portfolio performance and actively manage the portfolio. Other corporate functions such as Controllership, Financial Planning and Analysis, Treasury, Legal and our Corporate Audit Staff support business-level risk management. Businesses that, for example, hedge financial risk with derivative financial instruments must do so using our centrally managed Treasury function, providing assurance that the business strategy complies with our corporate policies and achieves economies of scale. We review risks periodically with business-level risk managers, senior management and our Board of Directors.
 
Dedicated risk professionals across the businesses include underwriters, portfolio managers, collectors, environmental and engineering specialists, and specialized asset managers who evaluate leased asset residuals and remarket off-lease equipment. The senior risk officers have, on average, over 25 years of experience.
 
We manage a variety of risks including liquidity, credit, market and government and regulatory risks.
 
·  
Liquidity risk is the risk of being unable to accommodate liability maturities, fund asset growth and meet contractual obligations through access to funding at reasonable market rates. Additional information about our liquidity and how we manage this risk can be found in the Financial Resources and Liquidity section of this Item and in Notes 18 and 29 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
·  
Credit risk is the risk of financial loss arising from a customer or counterparty failure to meet its contractual obligations. We face credit risk in our investing, lending and leasing activities and derivative financial instruments activities (see the Financial Resources and Liquidity and Critical Accounting Estimates sections of this Item and Notes 1, 9, 12, 13, 29 and 31 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report).
 
·  
Market risk is the potential loss in value of investment and other asset and liability portfolios, including financial instruments and residual values of leased assets. This risk is caused by changes in market variables, such as interest and currency exchange rates and equity and commodity prices. We are exposed to market risk in the normal course of our business operations as a result of our ongoing investing and funding activities. Additional information can be found in the Financial Resources and Liquidity section of this Item and in Notes 6, 9, 12, 14, 28 and 29 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 

 
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·  
Government and regulatory risk is the risk that the government or regulatory authorities will implement new laws or rules, amend existing laws or rules, or interpret or enforce them in ways that would cause us to have to change our business models or practices. We manage these risks through the GECS Board, our Policy Compliance Review Board and our Corporate Risk Committee.
 
Other risks include natural disasters, availability of necessary materials, guarantees of product performance and business interruption. These types of risks are often insurable, and success in managing these risks is ultimately determined by the balance between the level of risk retained or assumed and the cost of transferring risk to others.
 
Our risk management approach has the following major tenets: a broad spread of risk based on managed exposure limits; senior, secured commercial financings; and a hold to maturity model with transactions underwritten to our “on-book” standards.
 
The GECC financing portfolios comprise approximately 70% commercial and 30% consumer risk activities, with 53% of the portfolio outside the U.S. Exposure to developing markets is 11% of the portfolio and is primarily through our Eastern European banking operations and Mexican commercial financing activities - where we have operated for over 10 years - and various minority owned joint ventures.
 
The commercial portfolio has a maximum single industry concentration of 6%, excluding the commercial aircraft financing and the commercial real estate businesses, which are diversified separately within their respective portfolios. 67% of all commercial exposures are less than $100 million to any one customer, while 55% are less than $50 million. Our commercial aircraft financing business owns 1,494 aircraft – 56% are narrow body planes and predominantly newer, high-demand models, while only 15% are smaller regional jets and older Boeing 737 classic aircraft. The average age of the fleet is 7 years and our customers include over 230 airlines located in 70 countries. Leased collateral represents asset types we have over 20 years experience managing.
 
The commercial real estate business consists of a real estate investment portfolio, a real estate lending portfolio, and a single tenant financing portfolio. The real estate investment and lending portfolios are global and consist of approximately 8,000 individual properties in 2,600 cities in 31 countries with an average property investment of under $10 million.
 
·  
Our real estate investment portfolio includes approximately 3,200 properties located in 900 cities and 22 countries, with 71% of this portfolio outside the U.S., primarily located in Europe, the U.K., Asia, Canada and Mexico, across a wide variety of property types including office, industrial/warehouse, and multifamily.
 
·  
Our real estate lending portfolio is secured by approximately 4,800 properties in 1,900 cities and 25 countries, with 44% of the assets securing this portfolio located outside the U.S., across a wide variety of property types including office, multifamily and hotel.
 
·  
The single tenant financing portfolio has approximately 4,200 properties in 1,360 cities in the U.S. and Canada, and an average loan size under $3 million.
 
The U.S. consumer portfolio includes private-label credit card and sales financing for over 56 million consumers. The portfolio includes customers across the U.S. and no metropolitan statistical area accounts for more than 4% of the portfolio. The average credit line for the private label portfolio is $600. The non-U.S. portfolio accounts for 80% of all consumer risk activities and includes consumer mortgages, auto loans, personal loans and credit card financing in 43 countries. Western Europe, the U.K., Eastern Europe and Australia/New Zealand are the primary non-U.S. markets. Mortgages represent 43% of the total consumer portfolio. The average loan-to-value (LTV) at origination of the total global mortgage portfolio is approximately 74%. Western Europe, Australia and New Zealand, Ireland and the U.K. account for approximately 80% of the mortgage book. GE employees underwrite all mortgages and originate to hold all mortgages on book. We exited the U.S. mortgage business in 2007.
 
The U.K. mortgage business tightened underwriting criteria throughout 2008 and reduced volume by 54% in response to the weakening home price environment in the U.K. Since mid-2006, the first mortgage loans originated in the U.K. that were greater than 80% LTV are covered by private mortgage insurance for the mortgage balance in excess of 80%. Insured mortgages account for approximately 73% of the portfolio above 80% LTV at origination.
 
The Australia/New Zealand mortgages are generally prime credit, and 94% of the portfolio is covered by private mortgage insurance for the full amount of the mortgage, which is customary in this market.
 

 
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The French mortgage portfolio is generally prime credit, and 29% is insured for mortgage loans greater than 80% LTV (for the mortgage balance in excess of 80%).
 
Segment Operations
 
Our five segments are focused on the broad markets they serve: Energy Infrastructure, Technology Infrastructure, NBC Universal, Capital Finance and Consumer & Industrial. In addition to providing information on segments in their entirety, we have also provided supplemental information for certain businesses within the segments for greater clarity.
 
Segment profit is determined based on internal performance measures used by the Chief Executive Officer to assess the performance of each business in a given period. In connection with that assessment, the Chief Executive Officer may exclude matters such as charges for restructuring; rationalization and other similar expenses; in-process research and development and certain other acquisition-related charges and balances; technology and product development costs; certain gains and losses from dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team.
 
Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations and accounting changes. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment’s management is measured – excluded in determining segment profit, which we sometimes refer to as “operating profit,” for Energy Infrastructure, Technology Infrastructure, NBC Universal and Consumer & Industrial; included in determining segment profit, which we sometimes refer to as “net earnings,” for Capital Finance.
 
We have reclassified certain prior-period amounts to conform to the current period’s presentation. For additional information about our segments, see Note 27 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
 
 
General Electric Company and consolidated affiliates
 
(In millions)
 
2008
   
2007
   
2006
   
2005
   
2004
 
                               
Revenues
                             
Energy Infrastructure
$
38,571
 
$
30,698
 
$
25,221
 
$
21,921
 
$
19,841
 
Technology Infrastructure
 
46,316
   
42,801
   
37,687
   
33,873
   
30,142
 
NBC Universal
 
16,969
   
15,416
   
16,188
   
14,689
   
12,886
 
Capital Finance
 
67,008
   
66,301
   
56,378
   
49,071
   
43,750
 
Consumer & Industrial
 
11,737
   
12,663
   
13,202
   
13,040
   
12,408
 
Total segment revenues
 
180,601
   
167,879
   
148,676
   
132,594
   
119,027
 
Corporate items and eliminations
 
1,914
   
4,609
   
2,892
   
3,668
   
4,787
 
Consolidated revenues
$
182,515
 
$
172,488
 
$
151,568
 
$
136,262
 
$
123,814
 
Segment profit
                             
Energy Infrastructure
$
6,080
 
$
4,817
 
$
3,518
 
$
3,222
 
$
3,100
 
Technology Infrastructure
 
8,152
   
7,883
   
7,308
   
6,188
   
5,412
 
NBC Universal
 
3,131
   
3,107
   
2,919
   
3,092
   
2,558
 
Capital Finance
 
8,632
   
12,243
   
10,397
   
8,414
   
6,593
 
Consumer & Industrial
 
365
   
1,034
   
970
   
732
   
601
 
Total segment profit
 
26,360
   
29,084
   
25,112
   
21,648
   
18,264
 
Corporate items and eliminations
 
(2,691
)
 
(1,840
)
 
(1,548
)
 
(372
)
 
165
 
GE interest and other financial charges
 
(2,153
)
 
(1,993
)
 
(1,668
)
 
(1,319
)
 
(901
)
GE provision for income taxes
 
(3,427
)
 
(2,794
)
 
(2,552
)
 
(2,678
)
 
(1,937
)
Earnings from continuing operations
 
18,089
   
22,457
   
19,344
   
17,279
   
15,591
 
Earnings (loss) from discontinued
                             
operations, net of taxes
 
(679
)
 
(249
)
 
1,398
   
(559
)
 
1,631
 
Consolidated net earnings
$
17,410
 
$
22,208
 
$
20,742
 
$
16,720
 
$
17,222
 

See accompanying notes to consolidated financial statements.

 

 
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Energy Infrastructure
 
(In millions)
 
2008
   
2007
   
2006
 
                   
Revenues
$
38,571
 
$
30,698
 
$
25,221
 
Segment profit
$
6,080
 
$
4,817
 
$
3,518
 

 
(In millions)
 
2008
   
2007
   
2006
 
                   
Revenues
                 
Energy
$
29,309
 
$
22,456
 
$
19,406
 
Oil & Gas
 
7,417
   
6,849
   
4,340
 
                   
Segment profit
                 
Energy
$
4,880
 
$
3,835
 
$
2,918
 
Oil & Gas
 
1,127
   
860
   
548
 

 
Energy Infrastructure revenues rose 26%, or $7.9 billion, in 2008 on higher volume ($6.0 billion), higher prices ($1.4 billion) and the effects of the weaker U.S. dollar ($0.5 billion). The increase in volume reflected increased sales of thermal and wind equipment at Energy, and the effects of acquisitions and increased sales of services at Oil & Gas. The increase in price was primarily at Energy, while the effects of the weaker U.S. dollar were primarily at Energy and Oil & Gas.
 
Segment profit rose 26% to $6.1 billion in 2008, compared with $4.8 billion in 2007, as higher prices ($1.4 billion), higher volume ($1.0 billion) and the effects of the weaker U.S. dollar ($0.1 billion) more than offset the effects of higher material and other costs ($0.7 billion) and lower productivity ($0.5 billion). Volume and material and other costs increased across all businesses of the segment. The effects of productivity were primarily at Energy.
 
Energy Infrastructure revenues rose 22%, or $5.5 billion, in 2007 on higher volume ($4.0 billion), higher prices ($0.8 billion) and the effects of the weaker U.S. dollar ($0.7 billion). The increase in volume reflected increased sales of thermal and wind equipment at Energy, and the effects of acquisitions and increased sales of equipment and services at Oil & Gas. The increase in price was primarily at Energy, while the effects of the weaker U.S. dollar were primarily at Oil & Gas and Energy.
 
Segment profit rose 37% to $4.8 billion in 2007, compared with $3.5 billion in 2006, as higher prices ($0.8 billion), higher volume ($0.7 billion) and productivity ($0.1 billion) more than offset the effects of higher material and other costs ($0.4 billion). The increase in volume primarily related to Energy and Oil & Gas.
 
 

 
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Technology Infrastructure
 
(In millions)
 
2008
   
2007
   
2006
 
                   
Revenues
$
46,316
 
$
42,801
 
$
37,687
 
Segment profit
$
8,152
 
$
7,883
 
$
7,308
 

 
(In millions)
 
2008
   
2007
   
2006
 
                   
Revenues
                 
Aviation
$
19,239
 
$
16,819
 
$
13,017
 
Enterprise Solutions
 
4,710
   
4,462
   
3,951
 
Healthcare
 
17,392
   
16,997
   
16,560
 
Transportation
 
5,016
   
4,523
   
4,159
 
                   
Segment profit
                 
Aviation
$
3,684
 
$
3,222
 
$
2,802
 
Enterprise Solutions
 
691
   
697
   
620
 
Healthcare
 
2,851
   
3,056
   
3,142
 
Transportation
 
962
   
936
   
774
 

 
Technology Infrastructure revenues rose 8%, or $3.5 billion, in 2008 on higher volume ($3.0 billion), the effects of the weaker U.S. dollar ($0.3 billion) and higher prices ($0.2 billion). The increase in volume reflected the effects of acquisitions and increased sales of military and commercial engines and services at Aviation; increased sales in the international diagnostic imaging, clinical systems and life sciences businesses of Healthcare; increased equipment sales at Transportation; and increases at Sensing and Inspection Technologies and Digital Energy at Enterprise Solutions. The effects of the weaker U.S. dollar were primarily at Healthcare and Enterprise Solutions. Higher prices were primarily at Aviation and Transportation, partially offset by lower prices at Healthcare.
 
Segment profit rose 3% to $8.2 billion in 2008, compared with $7.9 billion in 2007, as the effects of productivity ($0.5 billion), higher volume ($0.4 billion) and higher prices ($0.2 billion) more than offset the effects of higher material and other costs ($0.9 billion). The effects of productivity were primarily at Healthcare and Aviation. Volume increases were primarily at Aviation and Transportation. The increase in material costs was primarily at Aviation and Transportation, partially offset by a decrease at Healthcare. Labor and other costs increased across all businesses of the segment.
 
Technology Infrastructure revenues rose 14%, or $5.1 billion, in 2007 on higher volume ($4.6 billion) and the effects of the weaker U.S. dollar ($0.6 billion), partially offset by lower prices ($0.1 billion). The increase in volume reflected the effects of acquisitions and increased sales of commercial engines and services at Aviation; increased sales in the international diagnostic imaging, clinical systems and life sciences businesses of Healthcare; primarily the effects of acquisitions at Enterprise Solutions; and increased sales of equipment and services at Transportation. The effects of the weaker U.S. dollar were primarily at Healthcare and Enterprise Solutions.
 
Segment profit rose 8% to $7.9 billion in 2007, compared with $7.3 billion in 2006, as higher volume ($0.8 billion), productivity ($0.4 billion) and higher sales of minority interests in engine programs ($0.1 billion) more than offset the effects of higher material and other costs ($0.7 billion) and lower prices ($0.1 billion). The increase in volume primarily related to Aviation, Healthcare and Enterprise Solutions. The effects of productivity were primarily at Healthcare and Transportation. The increase in material costs was primarily at Aviation, partially offset by a decrease at Healthcare, and labor and other costs increased across all businesses of the segment.
 
 

 
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NBC Universal revenues increased $1.6 billion, or 10%, to $17.0 billion in 2008, as revenues from the Olympics broadcasts ($1.0 billion) and higher revenues in cable ($0.6 billion) and film ($0.4 billion) were partially offset by lower earnings and impairments related to associated companies and investment securities ($0.3 billion) and lower revenues from our television business ($0.1 billion). Segment profit of $3.1 billion in 2008 was flat compared with 2007, as higher earnings from cable ($0.3 billion) and proceeds from insurance claims ($0.4 billion) were offset by lower earnings and impairments related to associated companies and investment securities ($0.3 billion), losses from the Olympics broadcasts ($0.2 billion), and lower earnings from our television business ($0.1 billion) and film ($0.1 billion).
 
NBC Universal revenues declined 5%, or $0.8 billion, in 2007, primarily from the lack of current-year counterparts to the 2006 Olympics broadcasts ($0.7 billion) and 2006 sale of television stations ($0.2 billion), lower revenues in our broadcast network and television stations as a result of lower advertising sales ($0.5 billion) and lower film revenues ($0.1 billion), partially offset by higher revenues for cable ($0.4 billion) and television production and distribution ($0.3 billion). Segment profit rose 6%, or $0.2 billion, in 2007 as improvements in cable ($0.2 billion), television production and distribution ($0.2 billion), film ($0.1 billion) and the absence of Olympics broadcasts in 2007 ($0.1 billion) were partially offset by the lack of a current-year counterpart to the 2006 sale of four television stations ($0.2 billion) and lower earnings from our broadcast network and television stations ($0.2 billion). See Corporate Items and Eliminations for a discussion of items not allocated to this segment.
 
Capital Finance
 
(In millions)
 
2008
   
2007
   
2006
 
                   
Revenues
$
67,008
 
$
66,301
 
$
56,378
 
Segment profit
$
8,632
 
$
12,243
 
$
10,397
 

 
December 31 (In millions)
 
2008
   
2007
       
                   
Total assets
$
572,903
 
$
583,965
       

 
(In millions)
 
2008
   
2007
   
2006
 
                   
Revenues
                 
Commercial Lending and Leasing (CLL)
$
26,742
 
$
27,267
 
$
25,833
 
GE Money
 
25,012
   
24,769
   
19,508
 
Real Estate
 
6,646
   
7,021
   
5,020
 
Energy Financial Services
 
3,707
   
2,405
   
1,664
 
GE Commercial Aviation Services (GECAS)
 
4,901
   
4,839
   
4,353
 
                   
Segment profit
                 
CLL
$
1,805
 
$
3,801
 
$
3,503
 
GE Money
 
3,664
   
4,269
   
3,231
 
Real Estate
 
1,144
   
2,285
   
1,841
 
Energy Financial Services
 
825
   
677
   
648
 
GECAS
 
1,194
   
1,211
   
1,174
 

 
December 31 (In millions)
 
2008
   
2007
       
                   
Total assets
                 
CLL
$
232,486
 
$
229,608
       
GE Money
 
183,617
   
209,178
       
Real Estate
 
85,266
   
79,285
       
Energy Financial Services
 
22,079
   
18,705
       
GECAS
 
49,455
   
47,189
       

 

 
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Capital Finance 2008 revenues increased by 1%, and net earnings decreased 29%, compared with 2007. Revenues in 2008 and 2007 included $4.4 billion and $0.5 billion from acquisitions, respectively, and in 2008 were benefited by $0.1 billion as a result of dispositions. Revenues in 2008 also decreased $3.3 billion as a result of organic revenue declines ($4.5 billion), partially offset by the weaker U.S. dollar ($1.2 billion). Net earnings decreased by $3.6 billion in 2008, resulting from core declines ($3.5 billion), including an increase of $1.9 billion in the provision for losses on financing receivables, lower investment income ($0.6 billion) and lower securitization income ($0.4 billion), offset by acquisitions ($0.5 billion), the weaker U.S. dollar ($0.3 billion) and dispositions ($0.1 billion). Net earnings included mark-to-market losses and impairments ($1.4 billion), partially offset by increased tax benefits from lower-taxed earnings from global operations ($0.7 billion) and Genpact mark-to-market gains ($0.2 billion).
 
Capital Finance 2007 revenues and net earnings both increased 18%, compared with 2006. Revenues in 2007 included $3.5 billion from acquisitions and were reduced by $2.7 billion as a result of dispositions. Revenues in 2007 also increased $9.1 billion as a result of organic revenue growth ($6.8 billion) and the weaker U.S. dollar ($2.3 billion). The increase in net earnings resulted primarily from core growth ($1.0 billion), higher securitization income ($0.4 billion) and the weaker U.S. dollar ($0.3 billion). Core growth included $0.5 billion representing the total year’s tax benefit on the disposition of our investment in SES, growth in lower-taxed earnings from global operations ($0.4 billion) and the sale of part of our Garanti investment ($0.2 billion), partially offset by declines in fair value of retained interests in securitizations ($0.2 billion). See Corporate Items and Eliminations for a discussion of items not allocated to this segment.
 
Additional information about certain Capital Finance businesses follows.
 
CLL 2008 revenues decreased 2% and net earnings decreased 53% compared with 2007. Revenues in 2008 and 2007 included $1.8 billion and $0.2 billion, respectively, from acquisitions and in 2008 were reduced by $0.3 billion as a result of dispositions. Revenues in 2008 decreased $1.9 billion compared with 2007 as a result of organic revenue declines ($2.3 billion), partially offset by the weaker U.S. dollar ($0.5 billion). Net earnings decreased by $2.0 billion in 2008, resulting from core declines ($2.2 billion), including an increase of $0.5 billion in the provision for losses on financing receivables and lower investment income ($0.3 billion), partially offset by acquisitions ($0.4 billion) and the effect of the weaker U.S. dollar ($0.1 billion). Net earnings included mark-to-market losses and impairments ($0.8 billion), the absence of the effects of the 2007 tax benefit on the disposition of our investment in SES ($0.5 billion) and SES gains ($0.1 billion), partially offset by Genpact mark-to-market gains ($0.2 billion).
 
CLL 2007 revenues and net earnings increased 6% and 9%, respectively, compared with 2006. Revenues in 2007 and 2006 included $2.1 billion and $0.1 billion, respectively, from acquisitions, and in 2007 were reduced by $2.7 billion as a result of dispositions. Revenues in 2007 also increased $1.9 billion as a result of organic revenue growth ($1.2 billion) and the weaker U.S. dollar ($0.7 billion). The increase in net earnings resulted from acquisitions ($0.2 billion), core growth ($0.1 billion) and the weaker U.S. dollar ($0.1 billion), partially offset by dispositions ($0.1 billion). Core growth included $0.5 billion representing the total year’s tax benefit on the disposition of our investment in SES, partially offset by $0.2 billion of higher credit losses and $0.1 billion in charges related to mark-to-market adjustments to loans held-for-sale. Investment income included higher SES gains ($0.1 billion), offset by impairments of securitization retained interests ($0.1 billion).
 
GE Money 2008 revenues increased 1% and net earnings decreased 14% compared with 2007. Revenues for 2008 included $0.7 billion from acquisitions and $0.4 billion from the gain on sale of our Corporate Payment Services (CPS) business and were reduced by $0.2 billion from dispositions. Revenues in 2008 also decreased $0.6 billion compared with 2007 as a result of organic revenue declines ($1.2 billion), partially offset by the weaker U.S. dollar ($0.6 billion). The decrease in net earnings resulted primarily from core declines ($0.5 billion) and lower securitization income ($0.5 billion). The decreases were partially offset by the gain on the sale of our CPS business ($0.2 billion), the weaker U.S. dollar ($0.1 billion) and acquisitions ($0.1 billion). Core declines primarily resulted from lower results in the U.S., reflecting the effects of higher delinquencies ($1.2 billion), partially offset by growth in lower-taxed earnings from global operations ($1.0 billion), including the decision to indefinitely reinvest, outside the U.S., prior-year earnings.
 
GE Money 2007 revenues and net earnings increased 27% and 32%, respectively, compared with 2006. Revenues in 2007 included $0.4 billion from acquisitions. Revenues in 2007 also increased $4.8 billion as a result of organic revenue growth ($3.5 billion) and the weaker U.S. dollar ($1.4 billion). The increase in net earnings resulted primarily from core growth ($0.3 billion), higher securitization income ($0.4 billion), the sale of part of our Garanti investment ($0.2 billion) and the weaker U.S. dollar ($0.2 billion). Core growth included growth in lower-taxed earnings from global operations ($0.3 billion), partially offset by lower results in the U.S., reflecting the effects of higher delinquencies ($0.4 billion).
 

 
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Real Estate 2008 revenues decreased 5% and net earnings decreased 50% compared with 2007. Revenues for 2008 included $0.3 billion from acquisitions. Revenues in 2008 also decreased $0.7 billion compared with 2007 as a result of organic revenue declines ($0.8 billion), partially offset by the weaker U.S. dollar ($0.2 billion). Real Estate net earnings decreased $1.1 billion compared with 2007, primarily from a decline in net earnings from real estate equity investments ($1.2 billion), partially offset by an increase in net earnings from real estate lending. Net earnings from the sale of real estate equity investments in 2008 were lower as a result of increasingly difficult market conditions. In the normal course of our business operations, we sell certain real estate equity investments when it is economically advantageous for us to do so. However, as a result of deterioration in current and expected real estate market liquidity and macroeconomic trends, it is difficult to predict with certainty the level of future sales or sales prices.
 
Real Estate assets at December 31, 2008, increased $6.0 billion, or 8%, from December 31, 2007, including $12.1 billion, or 34%, attributable to an increase in real estate lending, partially offset by a $6.4 billion, or 16%, decline in real estate equity investments. During 2008, we sold real estate equity investment assets with a book value totaling $5.8 billion, which resulted in net earnings of $1.3 billion that were partially offset by losses, impairments and depreciation.
 
Real Estate 2007 revenues and net earnings increased 40% and 24%, respectively, compared with 2006. Revenues in 2007 included $0.3 billion from acquisitions. Revenues in 2007 also increased $1.8 billion as a result of organic revenue growth ($1.5 billion) and the weaker U.S. dollar ($0.2 billion). Real Estate net earnings increased 24% compared with 2006, primarily as a result of a $0.5 billion increase in net earnings from sales of real estate investments.
 
Real Estate assets at December 31, 2007, increased $25.5 billion, or 47%, from December 31, 2006, of which $12.6 billion was real estate investments, also up 47%. During 2007, we sold real estate assets with a book value totaling $7.0 billion, which resulted in net earnings of $2.1 billion.
 
Energy Financial Services 2008 revenues and net earnings increased 54% and 22%, respectively, compared with 2007. Revenues in 2008 and 2007 included $1.6 billion and $0.3 billion, respectively, from acquisitions. The increase in net earnings resulted primarily from core growth ($0.2 billion), partially offset by lower investment income ($0.1 billion).
 
Energy Financial Services 2007 revenues and net earnings increased 45% and 4%, respectively, compared with 2006. The increase in revenues resulted primarily from acquisitions ($0.6 billion) and organic revenue growth ($0.1 billion). The increase in net earnings resulted primarily from core growth.
 
GECAS 2008 revenues increased 1% and net earnings decreased 1% compared with 2007. The increase in revenues is primarily a result of organic revenue growth ($0.1 billion), partially offset by lower investment income. The decrease in net earnings resulted primarily from lower investment income, partially offset by core growth.
 
GECAS 2007 revenues and net earnings increased 11% and 3%, respectively, compared with 2006. The increase in revenues resulted primarily from organic revenue growth ($0.4 billion) and acquisitions ($0.1 billion). The increase in net earnings resulted primarily from core growth.
 
Consumer & Industrial revenues decreased 7%, or $0.9 billion, to $11.7 billion in 2008 compared with 2007 as lower volume ($1.2 billion) was partially offset by higher prices ($0.2 billion) and the effects of the weaker U.S. dollar ($0.1 billion). The decrease in volume reflected tightened spending in the U.S. market. Segment profit decreased 65%, or $0.7 billion, to $0.4 billion as higher material and other costs ($0.4 billion), lower volume ($0.2 billion), lower productivity ($0.1 billion) and the effects of the weaker U.S. dollar on manufacturing costs ($0.1 billion) were partially offset by higher prices ($0.2 billion).
 
Consumer & Industrial revenues decreased 4%, or $0.5 billion, in 2007 compared with 2006 as lower volume ($0.8 billion) was partially offset by the effects of the weaker U.S. dollar ($0.2 billion) and higher prices ($0.1 billion). The decrease in volume reflects the sale of GE Supply in the third quarter of 2006. Segment profit rose 7%, or $0.1 billion, as productivity ($0.3 billion) and higher prices ($0.1 billion) were partially offset by higher material and other costs ($0.4 billion). See Corporate Items and Eliminations for a discussion of items not allocated to this segment.
 

 
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Corporate Items and Eliminations
 
(In millions)
 
2008
   
2007
   
2006
 
                   
Revenues
                 
Insurance activities
$
3,335
 
$
3,962
 
$
3,692
 
Eliminations and other
 
(1,421
)
 
647
   
(800
)
Total
$
1,914
 
$
4,609
 
$
2,892
 
                   
Operating profit (cost)
                 
Insurance activities
$
(202
)
$
145
 
$
57
 
Principal pension plans
 
(244
)
 
(755
)
 
(877
)
Underabsorbed corporate overhead
 
(341
)
 
(437
)
 
(266
)
Other
 
(1,904
)
 
(793
)
 
(462
)
Total
$
(2,691
)
$
(1,840
)
$
(1,548
)

 
Corporate Items and Eliminations include the effects of eliminating transactions between operating segments; results of our insurance activities remaining in continuing operations; certain items in our treasury operations; cost of, and cost reductions from, our principal pension plans; underabsorbed corporate overhead; certain non-allocated amounts described below; and a variety of sundry items. Corporate Items and Eliminations is not an operating segment. Rather, it is added to operating segment totals to reconcile to consolidated totals on the financial statements.
 
Certain amounts included in the line “Other” above are not allocated to segment results for internal measurement purposes. In 2008, amounts primarily related to restructuring, rationalization and other charges were $0.5 billion at each of Capital Finance and NBC Universal, $0.4 billion at Technology Infrastructure and $0.3 billion at each of Energy Infrastructure and Consumer & Industrial. Included in these amounts in 2008 were technology and product development costs of $0.2 billion at NBC Universal and $0.1 billion at Technology Infrastructure and net losses on business exits of $0.2 billion at Capital Finance. In 2007, amounts primarily related to restructuring, rationalization and other charges were $0.5 billion at Technology Infrastructure, $0.4 billion at each of Consumer & Industrial (including $0.1 billion of product quality issues) and Capital Finance, $0.3 billion at NBC Universal, and $0.2 billion at Energy Infrastructure. Included in these amounts in 2007 were technology and product development costs of $0.1 billion at NBC Universal. GECS amounts are on an after-tax basis.
 
Corporate Items and Eliminations include the elimination of transactions between our segments. In 2007, revenues, eliminations and other included a $0.9 billion gain on sale of a business interest to Hitachi by the Energy business and a $0.6 billion gain on sale of Swiss Re common stock.
 
Other operating profit (cost) reflects a $0.9 billion gain on sale of a business interest to Hitachi by the Energy business and a $0.3 billion (after-tax basis) gain on sale of Swiss Re common stock in 2007 and gains from sales of business interests of $0.4 billion in 2006, principally GE Supply.
 
Discontinued Operations
 
(In millions)
 
2008
   
2007
   
2006
 
                   
Earnings (loss) from discontinued
                 
operations, net of taxes
$
(679
)
$
(249
)
$
1,398
 

 
Discontinued operations comprised GE Money Japan; WMC; Plastics; Advanced Materials; GE Life, our U.K.-based life insurance operation; the property and casualty insurance and reinsurance businesses and the European life and health operations of GE Insurance Solutions and most of its affiliates; and Genworth, our formerly wholly-owned subsidiary that conducted most of our consumer insurance business, including life and mortgage insurance operations. Results of these businesses are reported as discontinued operations for all periods presented.
 
During the third quarter of 2007, we committed to a plan to sell our Lake business and recorded an after-tax loss of $0.9 billion, which represents the difference between the net book value of our Lake business and the projected sale price. During 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our minority ownership interest in GE Nissen Credit Co., Ltd. In connection with this sale, and primarily related to our Japanese mortgage and card businesses, we recorded an incremental $0.4 billion loss in 2008.
 

 
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In December 2007, we completed the sale of our WMC business for $0.1 billion in cash, recognizing an after-tax loss of $0.1 billion. In connection with the transaction, certain contractual obligations and potential liabilities related to previously sold loans were retained.
 
In August 2007, we completed the sale of our Plastics business to Saudi Basic Industries Corporation for $11.6 billion in cash. As a result, we recognized an after-tax gain of $1.6 billion.
 
Loss from discontinued operations, net of taxes, in 2008 was $0.7 billion, primarily reflecting a loss from operations ($0.3 billion), and the estimated incremental loss on disposal ($0.4 billion) at GE Money Japan.
 
Loss from discontinued operations, net of taxes, in 2007 was $0.2 billion, reflecting a loss from operations at WMC ($0.9 billion), an estimated after-tax loss on the planned sale of Lake ($0.9 billion), a loss from operations at GE Money Japan ($0.3 billion), and an after-tax loss on the sale of our WMC business ($0.1 billion), partially offset by a tax adjustment related to the 2004 initial public offering of Genworth ($0.1 billion). This was partially offset by an after-tax gain on sale of our Plastics business ($1.6 billion) and earnings from Plastics operations ($0.3 billion).
 
Earnings from discontinued operations, net of taxes, in 2006 were $1.4 billion, reflecting earnings at our Plastics and Advanced Materials businesses ($1.0 billion). Also included in these earnings were earnings at GE Money Japan and WMC ($0.3 billion), Genworth ($0.2 billion) and GE Insurance Solutions ($0.1 billion), partially offset by a loss at GE Life ($0.2 billion).
 
For additional information related to discontinued operations, see Note 2 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Geographic Operations
 
Our global activities span all geographic regions and primarily encompass manufacturing for local and export markets, import and sale of products produced in other regions, leasing of aircraft, sourcing for our plants domiciled in other global regions and provision of financial services within these regional economies. Thus, when countries or regions experience currency and/or economic stress, we often have increased exposure to certain risks, but also often have new profit opportunities. Potential increased risks include, among other things, higher receivable delinquencies and bad debts, delays or cancellations of sales and orders principally related to power and aircraft equipment, higher local currency financing costs and slowdown in established financial services activities. New profit opportunities include, among other things, more opportunities for lower cost outsourcing, expansion of industrial and financial services activities through purchases of companies or assets at reduced prices and lower U.S. debt financing costs.
 
Revenues are classified according to the region to which products and services are sold. For purposes of this analysis, U.S. is presented separately from the remainder of the Americas. We classify certain operations that cannot meaningfully be associated with specific geographic areas as “Other Global” for this purpose.
 
Geographic Revenues
 
(In billions)
 
2008
   
2007
   
2006
 
                   
U.S.
$
85.3
 
$
86.2
 
$
81.1
 
Europe
 
44.0
   
39.9
   
32.6
 
Pacific Basin
 
23.6
   
21.8
   
17.7
 
Americas
 
14.8
   
12.6
   
11.5
 
Middle East and Africa
 
10.1
   
8.0
   
5.5
 
Other Global
 
4.7
   
4.0
   
3.2
 
Total
$
182.5
 
$
172.5
 
$
151.6
 

 
Global revenues rose 13% to $97.2 billion in 2008, compared with $86.3 billion and $70.5 billion in 2007 and 2006, respectively. Global revenues to external customers as a percentage of consolidated revenues were 53% in 2008, compared with 50% and 47% in 2007 and 2006, respectively. The effects of currency fluctuations on reported results were to increase revenues by $2.0 billion, $4.0 billion and $0.1 billion in 2008, 2007 and 2006, respectively.
 

 
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GE global revenues in 2008 were $59.4 billion, up 19% over 2007, led by increases at Energy Infrastructure and Technology Infrastructure, primarily in the Middle East and Africa, Europe and the Pacific Basin. GE global revenues as a percentage of total GE revenues was 53% in 2008, compared with 50% and 48% in 2007 and 2006, respectively. GE global revenues were $49.8 billion in 2007, up 16% over 2006, led by increases at Energy Infrastructure and Technology Infrastructure, primarily in the Middle East and Africa, Europe and the Pacific Basin.
 
GECS global revenues rose 4% to $37.8 billion in 2008, compared with $36.5 billion and $27.5 billion in 2007 and 2006, respectively. GECS global revenues as a percentage of total GECS revenues were 53% in 2008, compared with 51% and 45% in 2007 and 2006, respectively. The effects of currency fluctuations on reported results were to increase revenues by $1.2 billion and $2.3 billion in 2008 and 2007, respectively, compared with a decrease of $0.1 billion in 2006.
 
GECS revenues in the Middle East and Africa grew 25% in 2008, primarily as a result of organic revenue growth at GECAS. Revenues grew 11% in the Americas and 6% in Europe in 2008, primarily as a result of organic revenue growth, acquisitions and the effects of the weaker U.S. dollar, primarily at GE Money and CLL. Revenues in the Pacific Basin remained flat in 2008 from 2007.
 
Total Assets (continuing operations)
 
December 31 (In billions)
 
2008
   
2007
 
             
U.S.
$
395.6
 
$
364.5
 
Europe
 
228.0
   
236.5
 
Pacific Basin
 
75.0
   
87.8
 
Americas
 
40.9
   
42.6
 
Other Global
 
56.5
   
55.4
 
Total
$
796.0
 
$
786.8
 

 
Total assets of global operations on a continuing basis were $400.4 billion in 2008, a decrease of $21.9 billion, or 5%, from 2007. GECS global assets on a continuing basis of $328.4 billion at the end of 2008 were 10% lower than at the end of 2007, reflecting core declines and the effects of the stronger U.S. dollar in Europe, the Pacific Basin and the Americas, partially offset by acquisitions, primarily at GE Money and CLL.
 
 
Environmental Matters
 
Our operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. We are involved in a sizable number of remediation actions to clean up hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Expenditures for site remediation actions amounted to approximately $0.3 billion in 2008 and $0.2 billion in 2007. We presently expect that such remediation actions will require average annual expenditures in the range of $0.3 billion to $0.4 billion over the next two years.
 
In November 2006, the United States Federal District Court approved a consent decree, which had been agreed to by GE and the United States Environmental Protection Agency (EPA), that represents a comprehensive framework for implementation of the EPA’s 2002 decision to dredge polychlorinated biphenyl (PCB)-containing sediments in the upper Hudson River. The dredging will be performed in two phases with an intervening peer review of performance after the first phase. Under the consent decree, we have committed to reimburse the EPA for its past and future project oversight costs and to perform the first phase of dredging, which is scheduled to proceed from May through November of 2009. After completion of the peer review, currently scheduled for 2010, we may be responsible for further costs. Our Statement of Financial Position as of December 31, 2008 and 2007, included liabilities for the probable and estimable costs of the agreed upon remediation activities.
 

 
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Financial Resources and Liquidity
 
This discussion of financial resources and liquidity addresses the Statement of Financial Position, the Statement of Changes in Shareowners’ Equity, the Statement of Cash Flows, Contractual Obligations, Off-Balance Sheet Arrangements, and Debt Instruments, Guarantees and Covenants.
 
The fundamental differences between GE and GECS are reflected in the measurements commonly used by investors, rating agencies and financial analysts.
 
Overview of Financial Position
 
Major changes to our shareowners’ equity are discussed in the Consolidated Statement of Changes in Shareowners’ Equity section. In addition, other significant changes to balances in our Statement of Financial Position follow.
 
Statement of Financial Position
 
Because GE and GECS share certain significant elements of their Statements of Financial Position – property, plant and equipment and borrowings, for example – the following discussion addresses significant captions in the “consolidated” statement. Within the following discussions, however, we distinguish between GE and GECS activities in order to permit meaningful analysis of each individual consolidating statement.
 
Investment securities comprise mainly investment-grade debt securities supporting obligations to annuitants and policyholders in our run-off insurance operations and holders of guaranteed investment contracts (GICs). Investment securities amounted to $41.4 billion at December 31, 2008, compared with $45.3 billion at December 31, 2007. Of the amount at December 31, 2008, we held debt securities with an estimated fair value of $33.9 billion, which included residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) with estimated fair values of $4.3 billion and $2.1 billion, respectively. Unrealized losses on debt securities were $5.4 billion and $1.1 billion at December 31, 2008, and December 31, 2007, respectively. This amount included unrealized losses on RMBS and CMBS of $1.1 billion and $0.8 billion at the end of 2008, as compared with $0.2 billion and an insignificant amount, respectively, at the end of 2007. Unrealized losses increased as a result of continuing market deterioration, and we believe primarily represent adjustments for liquidity on investment-grade securities.
 
Of the $4.3 billion of RMBS, our exposure to subprime credit was approximately $1.3 billion, and those securities are primarily held to support obligations to holders of GICs. A majority of these securities have received investment-grade credit ratings from the major rating agencies. We purchased no such securities in 2008 and an insignificant amount of such securities in 2007. These investment securities are collateralized primarily by pools of individual direct-mortgage loans, and do not include structured products such as collateralized debt obligations. Additionally, a majority of our exposure to residential subprime credit related to investment securities backed by mortgage loans originated in 2006 and 2005.
 
We regularly review investment securities for impairment using both quantitative and qualitative criteria. Quantitative criteria include the length of time and magnitude of the amount that each security is in an unrealized loss position and, for securities with fixed maturities, whether the issuer is in compliance with terms and covenants of the security. Qualitative criteria include the financial health of and specific prospects for the issuer, as well as our intent and ability to hold the security to maturity or until forecasted recovery. In addition, our evaluation at December 31, 2008, considered the continuing market deterioration that resulted in the lack of liquidity and the historic levels of price volatility and credit spreads. With respect to corporate bonds, we placed greater emphasis on the credit quality of the issuers. With respect to RMBS and CMBS, we placed greater emphasis on our expectations with respect to cash flows from the underlying collateral and, with respect to RMBS, we considered the availability of credit enhancements, principally monoline insurance. Our other-than-temporary impairment reviews involve our finance, risk and asset management functions as well as the portfolio management and research capabilities of our internal and third-party asset managers.
 
When an other-than-temporary impairment is recognized for a debt security, the charge has two components: (1) the loss of contractual cash flows due to the inability of the issuer (or the insurer, if applicable) to pay all amounts due; and (2) the effects of current market conditions, exclusive of credit losses, on the fair value of the security (principally liquidity discounts and interest rate effects). If the expected loss due to credit remains unchanged for the remaining term of the debt instrument, the latter portion of the impairment charge is subsequently accreted to earnings as interest income over the remaining term of the instrument. When a security is insured, a credit loss event is deemed to have occurred if the insurer is expected to be unable to cover its obligations under the related insurance contract.
 

 
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Other-than-temporary impairment losses totaled $1.6 billion in 2008 and $0.1 billion in 2007. In 2008, we recognized other-than-temporary impairments, primarily relating to retained interests in our securitization arrangements, RMBS and corporate debt securities of infrastructure, financial institutions and media companies. In 2007, we recognized other-than-temporary impairments, primarily for our retained interests in our securitization arrangements. Investments in retained interests in securitization arrangements also decreased by $0.1 billion during 2008, reflecting declines in fair value accounted for in accordance with a new accounting standard that became effective at the beginning of 2007.
 
Monoline insurers (Monolines) provide credit enhancement for certain of our investment securities. At December 31, 2008, our investment securities insured by Monolines totaled $3.1 billion, including $1.1 billion of our $1.3 billion investment in subprime RMBS. Although several of the Monolines have been downgraded by the rating agencies, a majority of the $3.1 billion is insured by investment-grade Monolines. The Monoline industry continues to experience financial stress from increasing delinquencies and defaults on the individual loans underlying insured securities. We regularly monitor changes to the expected cash flows of the securities we hold, and the ability of these insurers to pay claims on securities with expected losses. At December 31, 2008, if the Monolines were unable to pay our anticipated claims based on the expected future cash flows of the securities, we would have recorded an impairment charge of $0.3 billion, of which $0.1 billion would relate to expected credit losses and the remaining $0.2 billion would relate to other market factors.
 
Our qualitative review attempts to identify issuers’ securities that are “at-risk” of impairment, that is, with a possibility of other-than-temporary impairment recognition in the following 12 months. Of securities with unrealized losses at December 31, 2008, $0.7 billion of unrealized loss was at risk of being charged to earnings assuming no further changes in price, and that amount primarily related to investments in RMBS and CMBS securities, equity securities, securitization retained interests, and corporate debt securities of financial institutions and media companies. In addition, we had approximately $2.9 billion of exposure to commercial, regional and foreign banks, primarily relating to corporate debt securities, with associated unrealized losses of $0.4 billion. Continued uncertainty in the capital markets may cause increased levels of other-than-temporary impairments.
 
At December 31, 2008, unrealized losses on investment securities totaled $5.7 billion, including $3.5 billion aged 12 months or longer, compared with unrealized losses of $1.3 billion, including $0.5 billion aged 12 months or longer at December 31, 2007. Of the amount aged 12 months or longer at December 31, 2008, more than 80% of our debt securities were considered to be investment-grade by the major rating agencies. In addition, of the amount aged 12 months or longer, $1.9 billion and $1.4 billion related to structured securities (mortgage-backed, asset-backed and securitization retained interests) and corporate debt securities, respectively. With respect to our investment securities that are in an unrealized loss position at December 31, 2008, we intend to hold them at least until such time as their individual fair values exceed their amortized cost and we have the ability to hold all such debt securities until their maturities. The fair values used to determine these unrealized gains and losses are those defined by relevant accounting standards and are not a forecast of future gains or losses. For additional information, see Note 9 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Fair Value Measurements. Effective January 1, 2008, we adopted Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) 157, Fair Value Measurements, for all financial instruments and non-financial instruments accounted for at fair value on a recurring basis. Adoption of SFAS 157 did not have a material effect on our financial position or results of operations. During the fourth quarter, our methodology remained consistent with prior quarters for measuring fair value of financial instruments trading in volatile markets. Additional information about our application of SFAS 157 is provided in Note 28 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Working capital, representing GE current receivables and inventories, less GE accounts payable and progress collections, was $3.9 billion at December 31, 2008, down $2.5 billion from December 31, 2007, reflecting higher progress collections at Energy. As Energy delivers units out of its backlog over the next few years, progress collections of $13.1 billion at December 31, 2008, will be earned, affecting working capital adversely. Nonetheless, our performance is expected to improve in 2009 as a result of our Operating Council’s initiatives (e.g., lean projects on cycle time), which will significantly offset the decrease in progress collections.
 
We discuss current receivables and inventories, two important elements of working capital, in the following paragraphs.
 

 
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Current receivables for GE amounted to $15.1 billion at both the end of 2008 and 2007, and included $11.3 billion due from customers at the end of 2008 compared with $11.0 billion at the end of 2007. GE current receivables turnover was 7.5 in 2008, compared with 7.3 in 2007. See Note 10 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Inventories for GE amounted to $13.6 billion at December 31, 2008, up $0.8 billion from the end of 2007. This increase reflected higher inventories from purchases at Energy Infrastructure. GE inventory turnover was 8.0 and 8.3 in 2008 and 2007, respectively. See Note 11 to the consolidated financial statements in Part II, Item 8. “Financial Statements and Supplementary Data” of this Form 10-K Report.
 
Financing receivables is our largest category of assets and represents one of our primary sources of revenues. A discussion of the quality of certain elements of the financing receivables portfolio follows. For purposes of that discussion, “delinquent” receivables are those that are 30 days or more past due; and “nonearning” receivables are those that are 90 days or more past due (or for which collection has otherwise become doubtful).
 
Our portfolio of financing receivables is diverse and not directly comparable to major U.S. banks. Historically, we have had less consumer exposure, which over time has had higher loss rates than commercial exposure. Our consumer exposure is largely non-U.S. and primarily comprises mortgage, sales finance, auto and personal loans in various European and Asian countries. Our U.S. consumer financing receivables comprise 7% of our total portfolio. Of those, approximately 42% relate primarily to credit cards, which are often subject to profit and loss sharing arrangements with the retailer (the results of which are reflected in GECS revenues), and have a smaller average balance and lower loss severity as compared to bank cards. The remaining 58% are sales finance receivables, which provide electronics, recreation, medical and home improvement financing to customers. In 2007, we exited the U.S. mortgage business and we have no U.S. auto or student loans.
 
Our commercial portfolio primarily comprises senior, secured positions with comparatively low loss history. The secured receivables in this portfolio are collateralized by a variety of asset classes, including industrial-related facilities and equipment; commercial and residential real estate; vehicles, aircraft, and equipment used in many industries, including the construction, manufacturing, transportation, telecommunications and healthcare industries. In addition, 2% of this portfolio is unsecured corporate debt.
 
Losses on financing receivables are recognized when they are incurred, which requires us to make our best estimate of probable losses inherent in the portfolio. Such estimate requires consideration of historical loss experience, adjusted for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values, and the present and expected future levels of interest rates. Our risk management process includes standards and policies for reviewing major risk exposures and concentrations, and evaluates relevant data either for individual loans or financing leases, or on a portfolio basis, as appropriate.
 

 
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Financing
receivables
 
Nonearning
receivables
 
Allowance for
losses
 
December 31 (In millions)
 
2008
   
2007
   
2008
   
2007
   
2008
   
2007
 
                                     
CLL
                                   
Equipment and
                                   
leasing and other
$
99,769
 
$
96,817
 
$
1,526
 
$
939
 
$
894
 
$
661
 
Commercial and
                                   
industrial
 
64,332
   
58,863
   
1,128
   
757
   
415
   
276
 
                                     
GE Money
                                   
Non-U.S. residential
                                   
mortgages
 
59,595
   
73,042
   
3,317
   
2,465
   
382
   
246
 
Non-U.S. installment
                                   
and revolving credit
 
24,441
   
34,669
   
413
   
533
   
1,051
   
1,371
 
U.S. installment and
                                   
revolving credit
 
27,645
   
27,914
   
758
   
515
   
1,700
   
985
 
Non-U.S. auto
 
18,168
   
27,368
   
83
   
75
   
222
   
324
 
Other
 
9,244
   
10,198
   
152
   
91
   
214
   
162
 
                                     
Real Estate(a)
 
46,735
   
32,228
   
194
   
25
   
301
   
168
 
                                     
Energy Financial
                                   
Services
 
8,392
   
7,898
   
241
   
   
58
   
19
 
                                     
GECAS
 
15,429
   
14,197
   
146
   
   
60
   
8
 
                                     
Other
 
4,031
   
5,111
   
38
   
71
   
28
   
18
 
Total
$
377,781
 
$
388,305
 
$
7,996
 
$
5,471
 
$
5,325
 
$
4,238
 
                                     

(a)
Financing receivables included $731 million and $452 million of construction loans at December 31, 2008 and 2007, respectively.

 

 
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Nonearning
receivables as
a percent of financing
receivables
 
Allowance for losses
as a percent of
nonearning receivables
 
Allowance for losses
as a percent of total
financing receivables
 
December 31
 
2008
   
2007
   
2008
   
2007
   
2008
   
2007
 
                                     
CLL
                                   
Equipment and
                                   
leasing and other
 
1.5
%
 
1.0