May Aerospace & Defense Forum May 18, 2012 2008 Brian Langan Executive - Actuations COE GE Aviation
Economy 2 Leadership Council 4/20/2012
Environment Big f fact ctors Will China growth continue & pull 1 emerging markets? How bad will Europe be? 2 U.S. consumer confidence & job creation 3 How much inflation? 4 3 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
Changing economies – top 10 ($ trillion, GDP in current U.S.$) 6 1990 1990 4 2 0 U.S. USA Japan Germany France Italy UK Canada Spain Brazil China 2011 2011 15 10 New entrants 5 0 U.S. USA China Japan Germany France Brazil UK Italy Russia India Markets constantly evolving … growth markets ~50% of GDP by 2025 4 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
China indicators China: Retail Sales & I & Industrial Value Added (%YoY) Some signs of slower 25 growth, but still expect Retail Sales 20 7.5%+ GDP 15 10 Industrial value added Fixed asset investment 5 accelerating +21.5% 0 1/09 7/09 1/10 7/10 1/11 7/11 1/12 China: C CPI Inflation getting better ... July ‘11: 6.5% 7 6 50% below July ’11 level 5 4 3 Feb ‘12: 3.2% Expect government 2 1 transition to be stable 0 11/09 3/10 7/10 11/10 3/11 7/11 11/11 5 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
U.S. improving Retail Sales ($MM) Mich chigan co consumer co confidence ce index 450K 100 Avg. since 400K 90 1978 350K 85.4 80 300K 250K 70 200K 60 150K 50 100K 12/05 9/06 6/07 3/08 12/08 9/09 6/10 3/11 12/11 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 12 (Seasonally Adjusted, Q1 2000 = 100)) 210 10 190 170 8 150 6 130 4 110 90 2 70 0 50 7/01 10/02 1/04 4/05 7/06 10/07 1/09 4/10 7/11 9/01 3/03 10/04 3/06 9/07 3/09 9/10 Source: Moody’s Analytics, Bloomberg, BLS, Haver Analytics Consumer “feels” better, but housing still tough 6 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
U.S. deficit crisis still looming Jan. 2011 Aug. 2011 Nov. 2011 Dec. 2012 Simpson Bowles Debt Limit D Deal Super Sequestration takes • $3.7 B Budget Committee • $917 B by effect close, but Cuts capping • $452 B in Defense failed. $1.2 • $1.2 B Revenues discretionary Cuts Recommended over 10 yrs. w/ • spending $352 B in • raising Social discretionary starting in FY Discretionary Security cuts, chained 2012 Bush Tax C Cuts Expire Retirement age CPI and $300 B • Set up Super • Rates, cap. Gains, in tax • Medicare cost Committee to child tax credit, share revenues cut $1.2-1.5 estate - $2.84 Trillion $100 B annual offered by • Trillion - tax, Tax E Extenders +AMT cuts in domestic Senate R’s entitlements, lapse and DOD discretionary, • 2011 + 2012 expiring • Cut in Corporate defense all on including Subpart F Tax Rates the table Another Debt L Limit Increase needed Obama, Boehner Mega Senate Gang of 12/Paul Deal with tax increases Ryan and House and entitlement cuts Republicans continue failed over amount of deficit reduction efforts tax increase 7 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
Industry 8 8 Leadership Council Aviation 1Q’12 CEC 4/20/2012 2/28/2012 GE Proprietary Information – For Internal Use Only
Commercial environment Passenger demand Freight demand Oil Oil (Passenger kilometers growth %) ( Freight growth %) WTI $34 $34 2012F 2012F 2011 2011 $30 $30 5.8 5.4 $100 $100 $95 $95 4.4 -0.8 2011 2011 2012F 2012F 2011 2011 2012F 2012F Monthly a aircr craft product ction rates Aviation product ction implica cations (‘11 - ’14) Commercial Units 2,985 2,137 737: 35 35 42 42 777: 5 8.3 2011 2014 787: 2 10 10 A320: 36 36 42 42 Weekly Product ction CFM 25 31 GEnx 2 6 GE90 3 4 A380: 2.3 3.5 EJet: : 8.7 9.2 CF34 8 8 Other 3 8 9 Leadership Council 4/20/2012 Sources: IATA, EIA, Boeing, Airbus GE Proprietary Information – For Internal Use Only CFM is a 50/50 JV between GE and Snecma
Global Commercial look Aircraft units Europe China Traffic ’12 1.7% USA Traffic ’12 10.7% 5,091 1,710 Traffic ’12 2.2% 42% 42% 32% 32% 6,027 1,551 44% 44% 58% 58% 602 602 42% 42% 68% 68% 41% 41% 2,237 58% 58% 59% 59% 36% 36% 56% 56% Fleet Backlog 64% 64% Fleet Backlog Fleet Backlog Middle East Asia* Latin A America ca Traffic ’12 10.1% Traffic ’12 6.5% 957 957 Traffic ’12 5.5% 881 881 2,659 1,287 42% 42% 46% 46% 52% 52% 1,959 42% 42% 58% 58% 54% 54% 42% 42% 562 562 56% 56% 47% 47% Fleet Backlog 58% 58% 48% 48% 53% 53% Fleet Backlog Fleet Backlog Others 10 *Asia ex-China Leadership Council CFM International is a 50/50 joint company between GE and Snecma. 4/20/2012 Engine Alliance is a 50/50 JV between GE and P&W Source: ASCEND, IATA GE Proprietary Information – For Internal Use Only
Fiscal constraints drive DoD pressure Federal Budget DoD base budget ‘12 - ’21 ‘12 - ’21 CAGR CAGR ($ Billions) ($ Billions) 5,621 618 618 1.7% 4.7% 531 531 0.1% 1,293 Other 0.7% Equipment 284 R&D 268 3,717 846 846 16.0% Interest 334 2.7% 1,279 Personnel 263 223 223 2,713 6.8% Entitlements 2012 2021 1,506 Growth Playbook strategy 196 196 0.9% Defense 1 Developing upgrades for the installed fleet 151 151 178 178 (Other) (1.8%) 58 58 14 14 (DoD base) 1.7% 618 618 42 42 531 531 2 82 82 Targeting international growth 1970 2012 2021 Defense spending 42% 42% 19% 19% 14% 14% as % of total Sources: OMB, Punaro Group 11 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
Long Term Plan 12 12 Leadership Council Aviation 1Q’12 CEC 4/20/2012 2/28/2012 GE Proprietary Information – For Internal Use Only
13 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
Lessons Learned 14 13 GE Aviation Leadership Council GE Proprietary Information - For Internal Use Only – DO NOT DISTRIBUTE 4/20/2012 GE Proprietary Information – For Internal Use Only
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 15 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
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 16 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
17 Leadership Council 4/20/2012 GE Proprietary Information – For Internal Use Only
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