May Aerospace & Defense Forum May 18, 2012 2008 Brian Langan - - PowerPoint PPT Presentation

2008

May Aerospace & Defense Forum

May 18, 2012

Brian Langan

Executive - Actuations COE GE Aviation

Economy

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Environment

Will China growth continue & pull emerging markets? How bad will Europe be? U.S. consumer confidence & job creation How much inflation?

1 2 3 4

Big f fact ctors

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Changing economies – top 10

2 4 6 USA Japan Germany France Italy UK Canada Spain Brazil China 5 10 15 USA China Japan Germany France Brazil UK Italy Russia India

Markets constantly evolving … growth markets ~50% of GDP by 2025

New entrants

2011 2011 1990 1990

U.S. U.S. ($ trillion, GDP in current U.S.$)

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China indicators

Some signs of slower growth, but still expect 7.5%+ GDP Fixed asset investment accelerating +21.5% Inflation getting better ... 50% below July ’11 level Expect government transition to be stable

25 20 15 10 5

1/09 7/09 1/10 7/10 1/11 7/11 1/12

China: Retail Sales & I & Industrial Value Added (%YoY)

Industrial value added

7 6 5 4 3 2 1

11/09 3/10 7/10 11/10 3/11 7/11 11/11

China: C CPI

July ‘11: 6.5% Feb ‘12: 3.2% Retail Sales

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U.S. improving

Consumer “feels” better, but housing still tough

Source: Moody’s Analytics, Bloomberg, BLS, Haver Analytics

450K 400K 350K 300K 250K 200K 150K 100K

12/05 9/06 6/07 3/08 12/08 9/09 6/10 3/11 12/11

Retail Sales ($MM) Mich chigan co consumer co confidence ce index

100 90 80 70 60 50

4/06 1/07 10/07 7/08 4/09 1/10 10/10 7/11

Unemployment rate (%) S&P &P/Case-Shiller Home Price ce Index

(Seasonally Adjusted, Q1 2000 = 100))

12 10 8 6 4 2 7/01 10/02 1/04 4/05 7/06 10/07 1/09 4/10 7/11

210 190 170 150 130 110 90 70 50

9/01 3/03 10/04 3/06 9/07 3/09 9/10

• Avg. since

1978 85.4

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U.S. deficit crisis still looming

• Jan. 2011
• Dec. 2012

Simpson Bowles

• $3.7 B Budget

Cuts

• $1.2 B Revenues
• Recommended

raising Social Security Retirement age

• Medicare cost

share

• $100 B annual

cuts in domestic and DOD

• Cut in Corporate

Tax Rates

Debt Limit D Deal

• $917 B by

capping discretionary spending starting in FY 2012

• Set up Super

Committee to cut $1.2-1.5 Trillion - tax, entitlements, discretionary, defense all on the table

Obama, Boehner Mega Deal with tax increases and entitlement cuts failed over amount of tax increase Senate Gang of 12/Paul Ryan and House Republicans continue deficit reduction efforts

• Aug. 2011

Super Committee close, but

• failed. $1.2
• ver 10 yrs. w/

discretionary cuts, chained CPI and $300 B in tax revenues

• ffered by

Senate R’s

• Nov. 2011

Sequestration takes effect

• $452 B in Defense

Cuts

• $352 B in

Discretionary Bush Tax C Cuts Expire

• Rates, cap. Gains,

child tax credit, estate - $2.84 Trillion Tax E Extenders +AMT lapse

• 2011 + 2012 expiring

including Subpart F Another Debt L Limit Increase needed

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Industry

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$95 $95 $100 $100

Commercial environment

Passenger demand

(Passenger kilometers growth %)

Freight demand

(Freight growth %)

5.4 4.4 5.8 2011 2011 2012F 2012F 2011 2011 2012F 2012F $34 $34 $30 $30 2011 2011 2012F 2012F

Oil Oil

WTI

CFM is a 50/50 JV between GE and Snecma

Monthly a aircr craft product ction rates

(‘11-’14) 737: 35 35  42 42 777: 5  8.3 787: 2  10 10 A320: 36 36  42 42 A380: 2.3  3.5 EJet: : 8.7  9.2

• 0.8

Sources: IATA, EIA, Boeing, Airbus

Aviation product ction implica cations

2011 2014

2,137 2,985

Commercial Units

CFM GEnx GE90 CF34 Other

Weekly Product ction

25 2 3 8 3 31 6 4 8 8

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Fleet Backlog Fleet Backlog Fleet Backlog Fleet Backlog Fleet Backlog Fleet Backlog

Global Commercial look

Aircraft units USA

2,237 6,027 Others

Europe China Latin A America ca Middle East Asia*

*Asia ex-China CFM International is a 50/50 joint company between GE and Snecma. Engine Alliance is a 50/50 JV between GE and P&W

562 562 1,287 1,551 5,091 881 881 957 957 602 602 1,710 2,659 1,959

Source: ASCEND, IATA

64% 64% 36% 36% 56% 56% 44% 44% 68% 68% 32% 32% 58% 58% 42% 42% 53% 53% 47% 47% 58% 58% 42% 42% 42% 42% 58% 58% 46% 46% 54% 54% 59% 59% 41% 41% 52% 52% 56% 56% 48% 48% 42% 42% 58% 58% 42% 42% Traffic ’12 2.2% Traffic ’12 5.5% Traffic ’12 6.5% Traffic ’12 10.7% Traffic ’12 1.7% Traffic ’12 10.1%

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531 531 618 618 178 178 151 151 1,506 2,713 223 223 846 846 1,279 1,293

1970 2012 2021

58 58

263 334 268 284

2012 2021

Fiscal constraints drive DoD pressure

Federal Budget

($ Billions)

196 196 3,717 5,621 DoD base budget

($ Billions) Other Interest Entitlements (DoD base)

14 14 42 42 82 82

531 531

Personnel

618 618

Equipment R&D

Sources: OMB, Punaro Group

0.1%

‘12-’21 CAGR

16.0% 6.8% 0.9% 0.7% 2.7%

Defense (Other)

‘12-’21 CAGR

1.7% 4.7%

42% 42% 19% 19% 14% 14%

Defense spending as % of total

Growth Playbook strategy

Developing upgrades for the installed fleet Targeting international growth

1 2

1.7% (1.8%)

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Long Term Plan

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Lessons Learned

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Invest in your People

Recognize & Reward ... Personal time and connection last longer than money Co-ops help your team carry the load … dollar for dollar huge impact & builds pipeline Continue to advance careers & train… Good people remain employed

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Know your Business

 Focus on Core Competency  Does your organization structure support the current business need?  Are roles and responsibilities clearly defined and align with business goals?  Jobs are equity … utilize local government officials  Talk compliance often. Make is a part of the DNA.

Deliver on commitments…keep it simple

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