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

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