ML19263E145
| ML19263E145 | |
| Person / Time | |
|---|---|
| Site: | 07000754 |
| Issue date: | 12/31/1978 |
| From: | Rosalyn Jones GENERAL ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML19263E144 | List: |
| References | |
| NUDOCS 7906010292 | |
| Download: ML19263E145 (46) | |
Text
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GENER AL h ELECTRIC 1978 Annual Report GE Boar'1 Committees-pne key way to assure
" corporate governance' 7""5'1 Nominating Committee
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Assessing Director candidates
/h and Committee memberships O OperationsCommittee The Board's monitor of GE operating performance Technology and Science Committee Seeking the greatest potential from GE research and development Management Development and Compensation Committee Maintaining the quality of General Electric managerialleadership Public Issues Committee Assuring a thoughtful GE voice on key issues 12302 095 FinanceCommittee Appraisal of General Electric financial planning 7%,
846 01 ogc, 1
Audit Committee gy.
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Independent assessments of sw.3 audits of General Electric JbcGittm
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GE 1978 Annual Report Contents The cover:
3 Financial highlights
" Corporate governance," a term that is 4 The Chairman comments appearing more often in public debate, 6 Consumer Products and Services encompasses a numberofissues con-9 Industrial Products and Components cerning the accountability of business 12 Power Systems managers for the effects that their actions 15 Technical Systems and Materials and decisions have on customers, share 18 Natural Resources owners, employees and the general pub-20 International lic. The main point at issue is whether 22 Research and development business enterprises can themselves pro-23 Board of Directors vide responsible corporate governance or 26 GE people must submit to further Government inter-27 Management vention and regulation. On pages 4-5 of 30 Financialissues this Annual Report, GE's Chairman pre-31 Report of management sents the case for business-initiated 31 Reportof accountants measures to tighten controls and disci-32 Financial statements plines, including steps now being taken to 36 Significant accounting po'icles make corporate boards of directors more 37 Notes to financial statements effective. As a case in point, the front 43 Segment information cover illustrates how, beginning in 1972, 45 Management's discussion and GE Directors have organized seven Com-analysis mittees of the Board, each of which moni-46 Ten-year summary tors t. major area of GE's performance, Note: Unless otherwise indicated by the (, ente.tt, The 1978 Annual Report is one of four quarterly the terms "GE", " General Electric" and " Company" issues of The GeneraIElectric Investor, published are used on the basis of consolidation described to inform share owners and investors about activi-on page 36. Unless otherwise Indicated by the con-ties of the General Electric Company. Others may text, the terms " Utah" and " Utah Internationai" receive the Investor on request.
mean Utai International Inc., as well as all of its
" affiliates and " associated companies" as those Editor: Frederick N. Robinson terms are used on page 36.
Associate Editors: Devere E. Logan; Edna Vercini Financial Editor: Sidney D. spencer GEllER AL $ ELECTRIC, $ and GE are reg.
Editorial Board: David W. Eurke, Manager, Istered trademarks of General Electric Company.
Corporate Communications; J. Hervie Haufler, 8 and @ indicate registered and unregistered trade Manager, Corporate EditoriaI Programs; and service marks of General Eiectric Company.
John L Ingersoll, Manager, Corporate InstitutionalRelations 01979 General Electric Company. Printed in U.S.A.
Art Direction: Jack Hough Associates, Ir c.
Photographers:Chris Anderson,Stan Blanchard, Joseph B. Brignolo, Gary Calderwood, Arthur d'Arazien, Henri Dauman, Walter B. Halstead, Tony Kelly, Russell Ley, Lance Nelson, Steven G. Sweitzer, Carl Weese i
2302 096 2
Annual Report 1978
- = - _ _
Financial highlights (Dollar amounts in millions; per-share amounts in dollars)
Percent For the year 1978 1977 (dee[eas )
Sales of products and services to customers.
$19,654 S17,519 12 %
Other income 419 390 7
Total revenues 20.073 17,909 12 Net earnings applicable to common stock.
1,230 1,088 13 Atyearend Total capital invested S 8,692 S 8,131 7%
Share owners' equ;ty 6,587 5,943 11 Short-and long-term borrowings.
1,954 2,056 (5)
Measurements Net earnings per common share S 5.39 S 4.79 13 %
Dividends declared per common share -
2.50 2.10 19 Operating margin as a percentage of sales.
10.0 %
9.7 %
Earnings as a percentage of sales -
6.3 6.2 Percent earned on average total capital invested.
16.3 15.8 Percent earned on average share owners' equity.
19.6 19.4 Borrowings as a percentage of total capital invested.
22.5 25.3 Revenues Net earnings Percent Operating results by industry segment 1978 1977 inc[ ease 1978 1977 (j"c[$$e) e Consumer products and services.
S 4,788
$ 4,148 15 %
S 300
$ 256 17 %
Net earnings of General Electric Credit Corporation.
77 67 15 77 67 15 4,865 4,215 15 377 323 17 Industrial products and components 4,124 3,698 12 223 191 17 Power systems 3,486 3,218 8
102 75 36 Technical systems and materials.
4,745 4,145 14 278 248 12 Natural resources.
1,032 965 7
180 196 (8)
Foreign multi-industry operations 2,767 2,562 8
78 71 10 General corporate items and eliminations.
(946)
(894)
(8)
(16)
Total Company S20.073 S17,909 12 S1,230
$1,088 13 The results by industry segments here and throughout this Report reflect the Company's Sector organization.
Additional information about industry segments is presented on pages 43 and 44.
Revenues Net earnings Operating results by geographic sc-gment 1978 1977 inc[ ease 1978 1977 inc[ ease United States
$16,443 S14,560 13 %
$ 961 S 846 14 %
Far East including Australia.
1,109 1,056 5
170 162 5
Other areas of the world.
3,270 2,917 12 103 83 24 Elimination of intracompany transactions.
(749)
(624)
(4)
(3)
Total Company.
520,073 S17,909 12 S1.230
$1,088 13 Additional information about geographic segments is presented on page 44.
As used in this Report, " revenues" consists of sales of products and services to customers and other income from external sources.
2302 097 M0 S0B
The Chairman comments Pj General Electric's Centennial year was addition, faster expansion in industrialized y
1 onein which your Company's sales and countries and some recovery in the de-
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eamings reached new highs. Sales rose by veloping nations should strengthen export 12% to $19.7 billion, while earnings of $1.2 markets and trim back this country's t
3 billion, or $5.39 per share, were up 13%.
serious trade deficit.
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Several significant aspects of your The most serious long-term U.S. eco-Company's performance deserve to be nomic problem continues to be inflation.
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singled out:
Its cure will depend primarily on strong Confident of the Company's results and Government fiscal and monetary policies, prospects, your Board of Directors in-and regulatory restraint. If the Govern-creased the quarterly dividend for the third ment's anti-inflationary efforts succeed in year in a row. The increase to 65 cents a moderating the rate of inflation later in share with the July 1978 payment repre-1979, then our economists believe we sented an 18% increase, and together should see a quarter-by-quarter improve-with the earlier increases amounts to more ment in 1980, leading to continued solid than a 62% climb in dividends since expansion based mainly on strong capital July 1976. These increases are in line outlays, revived consumer spending, and with our objective of paying about 50%
a growing world economy.
of current earnings in dividends, retaining For General Electric, the major area of the rest to grow the business in the share uncertainty is near-term consumer spend-General Electric Corporate Executive Ollice, owners' interest, ing - but plans have been developed, and providing overall managerial direction for
+ General Electric's earnings are outper-are being implemented, to maintain good Genera / Electric's span of bucinesses:
forming growth in the U.S. Gross National proht margins desp.te a possible slowing Chairman Reginald H. Jones, center, with Product -an achievement that reflects in consumer demand.
Vice Chairmen Walter D. Dance, left, and management's long-term objective to out-We face the future with ample financial Jack S. ParAer, right.
pace the growth of the economy. Through strengths, incl, ding a solid cash position strategic planning and differentiated re-backed by a favorable 22.5% debt-to-source allocation, we have diversified our capital ratio and a triple-A credit rating.
sources of earnings into a variety of ex-Thus we feel that General Electric is well panding markets, international as well as positionN to ride through any slowing in domestic.
the economy's growth rate and to enter
- General Electric has outgrown its tradi-an upturn with strong, well-directed mo-tional role as an equipment manufacturer mentum.
whose fortunes are governed by the U.S.
We continue toinvest stronglyin the electrl cal load growth curve-the rise in future. As discussed more fully on page 22, the demands for electricity. The Sector we maintained ourvigorous commitment reviews that follow in this Annual Report to research and development in 1978 with show that our businesses are responding expenditures totaling $1,270 million for to a broad range of forces and trends as Company-funded projects and R&D work they tap new sources of growth, including performed under contract. Also, we made new types of products, a wide array of record plant and equipment investments man-made materials and natural re-of $1,055 million.
sources, and varied services businesses.
Most importantly,we have seasoned management,in depth-men and women The outlook:The U.S. economy appears who v.now how to make the most of the to be making a strong start in 1979-Company's considerable assets.
thanks to the tax cut, good housing starts Your managers are optimistic with re-in late '78, and industry's high backlogs of gard to the successful negotiation of new orders for capital good Our GE econo-contracts with labor unions to replace mists do expect a slowdoen in the second those that expire in June 1979. While infla-half as tight money and high consumer tion is a continuing problem, the wage debt will probably dampen co 'sumer and increases granted under the 1976-79 con-housing expenditures.
tract, including cost-of-living adjustments, However, business invest.nent - stimu-have enabled GE employees' earnirgs to lated by tax reductions frc,n the Revenue keep ahead of inflation, so that we do not Act of 1978-should he'p to offset the anticipate the necessity for a substantial slower growth of const.mer markets. In
" catch-up" adjustment.
4 Annual Report 1978
GE's Centennial year was Corporate governance: Your managers on pages 23-25, show that today's Com-oneof newhighs:
consider it one of our basic responsibili-mittee structure, which began to evolve ties to make ourviews known on public in 1972, has been effective in enabling issues affecting business and to strive for your Directors to be more penetrating in changes that will improve the economic, their involvement in the business, as well political and social environment in which as more informed and challenging in their business operates, appraisals of management's performance.
One issue that has been coming into The governance of General Electric is, increasing prominence directly concerns we believe, illustrative of what responsible the relationships among share owners, business enterprises are doing to maintain their boards of directors and business tight controls and disciplines. In business, managers. The shorthand term for this as in any large organization from govern-issue is " corporate governance." For ments to churches, there obviously can
" governance," one might well substitute bc no absolute safeguards against un-Sales (billions)
" responsibility" or " accountability," since ethical or antisocial acts by individuals.
the focal point for this issue is whether But evolutionary business-initiated meas-a
)m sufficiently strong control mechanisms are ures such as the more effective structuring V
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form responsibly in the best interests of against substantial corporate misconduct f Q @h I
Q gy share owners, customers, employees and or serious legal, social or ethical lapses.
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the other constituencies of business.
The great danger, as we see it, is that N
Business critics, citing a few well-publi-business critics will succeed in their efforts
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cized lapses and failures in business per-to swell the ripple of concern represented r
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- y formance, argue that present controls over by corporate governance into still another corporate authority and power are inade-wave of Government regulation and re-Quate, even though the cited cases are striction. U.S. industry's efforts to provide 74 75 76 77 78 exceptions to the standards maintained good values for its customers, and to com-by the overwhelming majority of enter-pete against international producers, are Earnings per share prim While some opponents try to make already hampered by the effects of ex-corporate governance a catchall for their cessive regu!ation in reducing managerial varied grievances against busin 3ss, the flexibility and increasing costs. Rather than E
most substantive issue at prese.it centers add new regulatory burdens, the wiser
.. j on the role and composition of corporate response to the issue of corporate gov-1 g
g boards of directors. The critics claim that ernance is, in our view, to continue L5
-E corporate boards, as presently constituted strengthening the systems of checks and h
.f and organized, provide only a " rubber balances and the lines of accountability stamp" function, automatically giving that are already in place.
managers the approvals they need. Pro-We ask the share owners of General posals for change cover a wide spectrum, Electric to enlarge their own understand-from severe limitations on who can qualify ing of corporate governance, believing 74 75 76 77 78 as directors to the idea of more stringent that the great majority of those who do so Federal, as distinct f rom state, chartering.
will support the efforts of corporate man-This criticism does not seem to apply agers both to make the system work better Dividends declared per share to General Electric. From the Company's and to withstand the impractical and beginnings, GE share owners have been counterproductive measures thct some g gg F
j represented by a Board rr.ade up predomi-critics propose.
- s2 so I fa nantly of Directors from outside the Com-I-
i d pany. Your managers through the years
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Chairman of the Board k(, b ! f ! ! 'k k. ! O; Nevertheless, your Board has accepted and Chief Executive Officer gs.50l F ] p j l~ 1 [~ i [
corporate governance as a valid issue.
February 16,1979 1
Your Directors' early sensitivity has led to 74 78 78 77 78 a structure of the General Electric Board that meets the objectives both of enlarging its role and of facilitating its work.
Thefrontcoverof this AnnualReport depicts the Board's organization into seven Committees, with each assigned 2302 099 to concentrate on monitoring a major aspect of me business. Reports by the Chairmen of these Committees, included The General Electric investor 5
4
Consurner Products and Services l'a 'a""aa')
'78 877
78
75
74 Revenues *
$4,865
$4,215
$3,510
$3,059
$3,413 Not earnings
- 377 323 261 164 128
- Includes not earnings of General Electric Credit Corporation 77 67 57 50 37 John F. Welch, Jr.
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Senior Vice President and Sector Executivo I
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Consumer Products and Services Sector enjoyed a good year in 1978, with revenues up 15% and earnings rising 17%. These amounts include General Electric Credit Corpora-tion's net earnings which showed a strong 15% gain. Some 23% of total GE revenues and 30% of earnings were contributed by the Sector, including a GECC contribution of 6% to earnings. Lighting products had a particularly good year. Major appilance sales were up, but margin rates were slightly lower due to the cost-price squeeze. We are improving productivity and reducing costs in our appliance operations to maintain profitability despite possible slower market growth in 1979. For the longer term, our major thrusts are product innovation, increased emphasis on services and continuing improvement in productivity.
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MEllW90ernathe coneumer prottucts shown above energy-anving mejor appliancee; houseweres; Hghting products, such as newhedagen
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heetNanips; anno products; and air conditioning equipment, exempiltled by Weethertron heet pumps undergoing cilmedc test Others'
- g. 8e0006e60n NceMnts, broedcenting and cabeevenion services; appIlance seMce; and General Electric Credit Corporation:
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Annual Report 1978 2302 100
Lighting products sales and earnings in to open up market opportunities and give 1978 were well ahead of 1977, continuing consumers good reasons for upgrading
..g the strong growth of recent years.This old appliances with new GE or Hotpoint g-record has been accomplished primarily models.
by innovations, particularly developments A new Spacemakert microwave oven,
-1 in high-ef ficiency lighting that conserve which can be wall-mounted or hung from energy and reduce energy costs.
cabinets, combines versatility and sim-Energy-efficient lighting systems such plicity of operation, and builds General as our Lucalox@ lamps are being used for E!ectric's stake in the rapid'y expanding s
1 replacement of lower-efficiency systems market for microwave cooking equipment.
in the lighting of ctreets, stadiums and in-We offered consumers innovations dustrial and municipal buildings. Typical that enable our app;iances to use less g
is the use of 1,000-watt Lucalox lamps at energy. Our new high-performance
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Northern Arizona University's recreation Potscrubber@ lli dishwasher, adding ten i
4 and meeting f acility. Lamp evaluation patentable inventions deriving from more u
showed that these GE lamps could reduce than six years of intensive techaological energy costs and cut installation and and design effort, lowers water consump-maintenance charges while increasing tion by nearly 40% and thus reduces the lighting levels ten percent.
energy required in water heating. Simi-Innovations in GE lighting products include Among the new fluorescentlighting larly, new low-energy-use refrigerators Soft White fluorescents for residential use, products we introduced in the commer-were introduced by GE in 1978.
Flipflash // and FlashBar // for photography, and a new deluxe version of the Bright Stikt cial market in 1978 was the 40-watt We are also innovating in the area of Maxi-Misert indoor fluorescent lamp /
af ter-sale service. Responding to the
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ballast system. Compared with standard needs of theincreasing number of house-fluorescent systems, it uses 14 -to-19%
holds in which all adult members work less wattage, gives 20-to-24% more light outside the home, the Companyin 1978 output per watt and lowers operating further expanded its weekend and eve-costs. Among our new offerings for the ning appliance service in a number of consumer market was a Soft White fluo-locations. General Electric maintains a rescent lamp for home use.
total of 129 factory service operations for
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Lamp technology is opening growth General Electric and Hotpoint major ap-opportunities in other areas. A halogen pliances, room air conditioners and GE sealed-beam automobile hecdlamp, de-television receivers. This GE-operated signed to meet the new U.S. Department service network, reaching from Maine to of Transportation (DOT) standard, was Hawaii, is available to approximately 72%
a introduced in 1978.The DOT standard of the users of tnese GE products and is allows doubling of the present high-beam supplemented by thousands of indepen-p candlepower of two-and four-lamp auto-dent service organizations trained and mobile systems to a maximum of 150,000 franchised by General Electric.
candlepower. The new GE lamps will pro-me vide a brighter, whiter light on high beam, Air conditioning sales increased substan-l.f an added safety margin for motorists.
tially in 1978, benefiting from increased
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in FlipFlash911 and FlashBar ll photo lamp strength in the retail market. The sharp arrays, which provide more uniform light earnings improvement reflected effective distribution for better pictures, are ena-cost controls and favorable volume, bling GE to benefit from rapid growth in both in room air conditioners and in the dernand forinstant cameras.
Weathertron@ heat pump segment of the central air conditioning business.
The Spacemaker microwave oven offers an Major appliances, including GE@ and Strong demand for central air condition, innovative attemative to countertop micro-Hctpoints brands of kitchen and laundry ing in new homes has been a major factor wave cooking. Installed over an electric cook-t p trange,itisconvenient,butupandoff the equipment, had higher sales than in the in the growing penetration of heat pumps counW,2 a buSent and cooktop #gM previous year. Earnings were also up, al-in single-family and multi 4amily home though margin rates were slightly lower as markets. In 1978, heat pumps were in-a result of the cost-price squeeze.We stalled in about 20% of new single-family initiated measures during the year to posi-homes.Weathertron is the number one tion the business to maintsin its profita-brand in this growth market.
bility despite a possible slowing in major appliance markets.
Housewares and audio products had b(
lQl The high rate of housing completions good earnings leverage on higher 1978 in 1978 p.ovided good opportunities for sales. In a business whose success de-our contract market operations, which sell pends on new products and new featurcs, to builders and contractors.
we marketed a wide range of innovative
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Innovations introduced in 1978 helped new products and models in 1978. Our
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new developmen'ts enabled us to tially offset by higher interest expense.
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enter new segments of 9e industry with This wholly-owned, nonconsolidated
-.l the Curl Tamert hair straightener and finance affiliate has steadily diversified 4
5 relaxcr and the cordless electronic digital beyond its original base in the financing of l.
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jfy y scale. A new food processor which in-General Electric consumer products to
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cludes a blender increased General the point where it has extensive interests s*
Electric's already significant position in in commercial and industrial financing as
. j the food processor market. And a new well as in consumer markets in the U.S.
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reinforced the Company's leadership in General Electric constitute the major t
, f ; W'. i i the radio market, portion of products financed by GECC.
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General Electric's housewares busi.
See note 12 to the financial statements E
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-f sonal care, and home safety and security.
report giving further information on Gen-
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for food preparation, garment and per-financial statements. A separate annual l, 9,-
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and players, and CB mobile and base Among the wide range of new housewares and station transceivers.
The outlook for the consumer durables audio models marketedin 1978 were:a digital and services industry iS mixed for 1979, scale that computes weight electronically; a Television receiver operations showed but favorable over the next five years as restyled Toast-R-Ovent toaster that broils, strong gains in sales and earnings in 1978.
large numbers of young adults from the The highlight of the year's new product post-World-War-Il generation enter the Home etr i k aa the url Tamer hair straightener / relaxer; and the His 'n Herst introductions was the Widescreen 1000 age of maximum consumer purchases, FM/AM electronic digita/ clock radio.
Home Television Theater, a flat-screened and as new hfestyles create markets for color TV set with a picture three times the unique products.
size of that on today's standard 25-inch Lighting products markets are ex-color television receiver. These units also pected to display continued strength feature GE's Emmy-award-winning verti-during 1979, spearheaded by higher de-cal interval reference (VIR) broadcast-mand for photo lamps, increased use controlled color signal system.
of energy-efficient lighting, and the mass j(
In late November, the Company was ad-marketing of halogen headlamps for
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of Justice that it would challenge,if con-Our major appliance operations are summated, the previously announced continuing their programs to improve pro-proposal to form a new television receiver ductivity and reduce costs in order to company owned jointly by General maintain profitability despite the antici-p Electric and Hitachi Ltd. of Japan. Alter-pated slow growth in industry sales during M
native relationships with Hitachi are 1979. We are not, however, cutting back under review.
on our programs for innovation. Through new advances in products, with increased Broadcasting and cablevision operations emphasis on the application of electronics
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of General Electric currently include 3 VHF technology, we expect that many con-p television stations,3 AM radio stations sumers will want to replace their appli-and 5 FM radio stations, plus 13 cable-ances earlier.
vision systems. Increased earnings of Advances based on electronics tech-l these businesses in 1978 reflected the nology are also expected to renew growth favorable impact of higher advertising for housewares and audio products be-GE Widescreen 1000 Home Television revenues.
yond the econcmic slowing generally Theater, introduced in 1978, has a 1,003-In February 1979, General Electric and predicted for 1979.
square-inch picture but a depth no greater the Cox Broadcasting Corporation ex-Services businesses such as broad-than that of a traditional 25-inch color console.
ecuted a definitive agreement for com-casting and credit financing offer growth bining Cox Broadcasting (whose principal potentials for General Electric. We are con-businesses are radio and television tinuing to develop our interests in broad-broadcasting and cable television) with casting. The proposed combination with General Electric's broaocasting and Cox Broadcasting Corporation offers the cable-television broadcasting operations.
opportunity for General Electric to extend Completion of the transaction is subject and upgrade its broadcasting operations.
to receipt of corporate and Governmental As an innovative leader in credit mar-approvals.
kets, General Electric Credit Corporation has broadened its scope so that its earn-General Electric Credit Corporation ings are better able to withstand the pres-earnings were $77 million in 1978. Higher sures of slower consumer markets and earned income on receivables was par-higher interest rates expected in 1979.
8 Annual Report 1978 2302 102
Industrial Products and Components (in millions) 1978 1977 1976 1975 1974 Revenues
$4,124
$3,698
$3,270
$3,027
$3,284 Net earnings 223 191 160 133 148 Stanley C. Gault
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Industrial Products and Components accounted for 20% of total GE revenues and 18% of earnings in 1978, reflecting good improvement in all major business elements. Areas of emphasis for our operations included the penetration of new markets, energy-conserving innovations, high-quality product pcrformance and reliability, and further development of service capabilities. As a result of these positive factors, revenues rose 12% above the 1977 level, and earnings were up 17%.
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The General Electric Investor 9
G E Industrial equipment businesses, Component products, such as appliance supplying electrical products 6r construc-and electronic components supplied for
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tion applications in addition to capital usein GE products and those of other
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equipment such as motors, drives and manuf acturers, had significantly higher
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controls, improved sales and earnings 1978 eamings on sales increases that re-as a result of several positive economic flected the year's high levels of spending
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for consumer durables.
One force was the past year's high rates GE in 1978 held its position as the lead-i9 for housing starts and increased volume ing supplier of small electric motors,
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in commercial and industrial construction.
controls and other components to the air
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General Electric's contractor equipment conditioning and appliance industries.
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businesses, providing such products as Growth for these products has been
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V electrical distribution and circuit protec-strengthened by the upsurge in sales of 7
y fd tive equipment, general purpose controls heat pumps for all-electric heating and
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and wiring devices, capitalized on the cooling. High-efficiency specialty motors F8g, <
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t year's market growth to achieve excellent developed by General Electric c7mponent
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operations have been applied by aumber
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We expect these businesses to sustain of heat pump manufacturers-including their strong performance, while we con-GE in the production of its Weathertrons With eating-out enjoying increasing popu-tinue to seek new market opportunities heat pump.
latity, GEis participating with a line of micro-through product Innovation. Among the A breakthrcugh was made ir, the auto, pr cessor-controlleacommercialfoodservice equipment.
General Electric developments announced motive field in 1978 by applying GE com-in 1978 was a low-voltage programmable ponents to automobile air conditioners.
lighting control system that applies com-Our specially-designed cold control, part puter techniques to control the scheduling of a newsystemtodisengagethecom-of lighting in commercial and industrial pressor when air cooling is not required, buildings.
saves up to one mile per gallon in gaso-Many of our products help ourindustrial line consumption. The General Electric customers increase productivity. An im-controls are already standard equipment portant 1978 development was the intro-on some 1979 autos, and the Companyis duction of the Company's new line of limit actively pursuing other energy-saving
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switches whose six-way sealing system applications. Varied General Electric com-
[.M.' r overcomes the major cause of premature ponents for prototype electric cars rep-i " ';'yi-j failure by preventing infiltration of environ.
resent an area of longer-range potential.
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' %l of fer new reliability in the most rugged transformers benefited from two uptrends.
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ing, automotive and matenal-handling increased sales of these transformers for
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power distribution in industrial and com-E+
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crease productivity have given rapid ac-the year's sales rise by heavy-machinery i".
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g computerized numerical control equip-components in their equipment.
ment. These control devices automatically Strengthening of the U.S.economyin Genera / Electric serves industry's drive to guide machine tools through complex 1978 also aided the sales of electronic increase productivity. Shown: new Mark sequences of operations by using com-components, including signal and power Century 91050T numerical control fhat ap-puter-stored instructions to provide added semiconductors, and electronic devices pljs ae casebee fic n yof tnachi e tool g
flexibility.
such as receiving and microwave tubes.
operations.
As a leader in systems utilizing large Our power capacitor business has made electric drive motors and controls to en-a successful transition to a new dielectric hance steel mill productivity, General fluid that is highly efficient as well as Electric is helping many nations through-environmentally acceptable.
out the world fulfill their objective of Also included among the indus;,:al installing their own steel-making capacity.
Products and Components Sector's op-Participation in international markets has erations is General Electric's food service sustained good levels of General Electric equipment business, supplying commer-orders for this equipment in recent years.
cial kitchen appliances.With Americans 2302 104 The worldwide need to increase the use spending more than one-third of their food of coal as an energy source has brought dollars on meals away from home, this expanding market opportunities for motors General Electric operation has developed and controls that power draglines, shovels a growing business in heavy-duty electric and other mining equipment. General cooking and warming products. GE equip-Electric sales of this equipment in 1978 ment is in use in many fast-food restaurant were at record levels, chains as well as in installations that range 10 Annual Report 1978
from the U.S. Senate cafeteria to offshore grammed expenses for capacity expan-7'.d A, ( M i73i 7ff oil-drilling rigs.
sion both geographically-through adding i
4 shops to serve additional market areas-
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Transportation equipment suppl!ed by and by diversifying into new, higher-tech-i-
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"J General Electric includes diesel-electric nology types of services. During the year, and electric locomotives, transit cars, four new shops were added in the U.S. and N
and motorized wheels for large off-high-five in international locations. Represen-I
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t%d way vehicles.
tative of business development are new p
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The year's strong increases in earnings capabilities for instrument repair and
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on somewhat higher sales were led by rental, communication equipment leasing,
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locomotives. General Electric units sold and repair of large, complex pumps and j
well both in the U.S. and in international compressors.
l markets.
- Distribution services, provided by the 9*
l Domestically, the Company's "New General Electric Supply Company. Offer-
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Series" locomotive, whose introduction in ing supply centers stocked with a broad g
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seeking to maintain their rolling stock and utility customers, General Electric Supply prepare for increased coal shipments, had Company benefited from the year's in-
'h its best year in 1978. This "New Series" creased construction activity to achieve
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i design provides a significant advance another year of improved results.
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over previous models by lowering railroad 6
operating costs through superior perform-The outlook for the varied markets served
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ance, reliability and fuel efficiency.
by the Industrial Products and Compo-During 1978, deliveries began on 20 nents Sector is genera!iy favorable:
U.S. emphasis on increasing coal production diesel-electric locomotives for the Philip-
+ Plant and equipment expenditures by is bringing an uptum in orders for General pines, and delivery was completed on 26 U.S. industry are expected to increase Electric motors and controls that power huge units for Kenya. Orders were received dur-considerably faster than the economy as dragline equipment.
ing the year for 83 locomotives for Mexico a whole in 1979, providing continued good to be produced during 1979 and 1980.
markets for our industrial equipment.
~ *~~~~i Our transit car operations in 1978 com-Offshore markets for these products also hj e
pleted production on the 230-car contract remain active.
'f I for the State of New Jersey / Erie Lacka-
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wanna line. With the two-year industry is scheduled to rise significantly in 1979,
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we have sought overhaul and rebuilding the Company's contractor equipment and 3'
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operations.
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has been the application of General Elec-sulting in new locomotive orders, General power oil-drilling rigs. We have partici-1979 with alarge backlog. Also, increased j
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t pated effectively in the growth of this interest in export orders indicates re-p.i[
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newed strength in international markets
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}f, be mounted in the wheels of off-highway in the market for large of f-highway mining 7 +s f 3 -
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haulage vehicles was slowed in 1978 by trucks which use electrical propulsion sys-
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slackness in the copper mining industry, tems similar to those used in locomotives.
a principal user of this equipment. How-
+ While forecasts for consumer durables GE developments to aid environmentalpro-ever, anticipating increased future de-generally anticipate slower markets in tection include new dielectric fluid for elec-mands for surface mining apparatus, we 1979, General Electric's component prod.
trical capacitors, called Dielektro/21, that are investing to suppcrt our leadership ucts operations are striving to offset the is responsive to today's environmental standads.
position in this technology.
ef fects by further penetrating automotive and other markets.
Services businesses conducted by this
+ Worldwide growth in industrial main-Sectorinclude:
tenance and repair markets served by our
- Apparatus service shops, applying GE network of service shops is expected to expertise to the fpatnlenaticbj thsgection, continue wellinto the 1980s.
9 (jg in)r repair and rebuiTdidg'of a fvide spectrum in all of these businessos, we are mak-C UL lV of industrial equipment produced by other ing timelyinvestments in human and manufacturers as well as General Electric, physical resources which will provide our in 1978 earnings from the GE worldwide customers with high-performance prod-network of these shops continued to show ucts as well as effective after-sale excellent growth, even with higher pro-services.
The Geners' Electric investor 11
Power Systems (In millions) 1978 1977 1976 1975 1974 llevenues
$3,486
$3.218
$2,998
$2,885
$2,762 Net earnings 102 75 61 62 94 Thoma: A. Vanderslice G~
h.. s,
.a Senior Vice President and Sector Executive
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Power Systems businesses,which contributed 17% of total GE rev-enues and 8% of net earnings in 1978, had good operating results. New orders for our heavy apparatus were hampered by uncertainties in U.S. electrical load growth and national energy policies. However, we have a number of factors working in our favor, including international strength in gas turbines, substantial nuclear power plant fuel commitments, new growth in meters, and an upswing in our equipment maintenance serv-ices By taking advantage of opportunities in these markets and by their diligent efforts to control coats and reduce breakeven points, our managers in 1978 achieved a 36% gain in earnings on an 8% increase in revenues.
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a h ' Power Systems serve industrial, marine and electric utility markets with products and services such as those illustrated above: powe M
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Power Systems acNeved good operating vide customers with excellent reliability,
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VN results, including a sharp increase in earn-maintainability and fuel flexibility, ings in 1978. Slow growth in electrical Also during the yea, General Electric
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c demand currently leaves many U.S. utili-began work for the U.S. Department of a
a ties with ample reserve margins in gen-Energy for the second phase of a three-
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~D erating capacity. Industry orders for phase program to develop an environ-4 k [<
nuclear power systems remained low, in mentally compatible, highly efficient,
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,f ficstion of Government policies on licens-burn coal-derived fuels. This project is s
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~.:i, ing procedures and disposition of nuclear among the largest ever funded by the U.S.
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waste. These factors are reflected in the Govemmentin the area of lossil power M.k /
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decline in the Sector's backlog of unfilled generation, and involves the design, con-orders. Including nuclear equipment, the struction and testing of key components
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backlog was $11.9 billion at the end of needed for a commercial unit rated at
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previous year end.
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Nuclear systems include boiling water
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up sharply from 1977 on somewhat higher businesc continued to operate at a loss in
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1978, as the Company made further sub-
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prior year, and sales and earnings of ects in the backlog. These expenditures, smaller size steam turbine-generators in addition to the effects of deferments of Electric utilities worldwide, needing addstional were below the 1977 levels.
shipments and cancellations of nuclear power generation in a hurry, have a new highly The orders backlog for steam turbine-orders, are expected to result in continu-reliable option from GE. lt's the MS6001 gas generators was $4.1 billion at year-end ing losses for this business.
tu@ne, a factmppackaged powe plant mat can sta%d far mwquickly man ome 1978, of which $1.9 billion is scheduled For General Electric's nuclear oower
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for shipment af ter 1983. The comparable operations,1978 was a record yearin backlog for 1977 was $4.8 billion, of which terms of plant start-ups. In total, nine
$2.2 billion was scheduled for shipment BWR nuclear plant projects supplied by
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- . f';' y af ter 1982. The decrease f rom the 1977 General Electric and its international E
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year-end backlog was attributable to 1978 licensees reached start-up in five coun-
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shipments that exceeded new orders and tries during the year. The Company's
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- i pected to go into production, year-end 1978 was $5.1 billion, of which j
Earnings of mechanical arive turbines S2.4 billion is scheduled for shipment
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+s were again strong on soniewhat higher af ter 1983. The comparable backlog for
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_f sales. Gerieral Electric remained a leading 1977 was $5.5 billion, of which S23 billion c
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supplier of these units for utility and indus-was scheduled for shipment after 1982.
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trial applications, including petrochemical There are opportunities for profitable
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plants and those used in the production growth in the nuclear fuel and service mar-
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kets. During 1978, we received several j,3g
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An excess of shipping capacity among significant commitments for nuclear power E,
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maritime customers continued in 1978, plant fuel. A closely integrated program
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reducing orders for commercial marine linking our nuclear business and the Sec-
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equipment. Resources of this business tor's installation and service engineering J,-
?- Mw.<$._n were applied to ongoing projects for the operations has been developed to enable United States Navy.
General Electric to pursue the full range Professionals in the technology of GE steam of opportunities from installation to main.
and gas turbine (S TAG) combined-cycle Gas turbina earnings continued strong in tenance of nuclear power facilities.
plants, Deborah Comstock (left), Manager of STAG Electrica/ Design, and Jeanne Place, 1978, as international demand offset low domestic sales. General Electric main-General Electric's power delivery busi-cy3s t[e pl ts a7r ngementIe ib i yI'n T
tained its leadership as a worldwide sup-nesses, producing transformers, power meeting varied customer site requirements.
plier of gas turbines for electric peaking, circuit breakers, switchgear and meters, mid-range and industrial applications, reported sales and earnings well ahead of including pipeline pumping and process 1977, and the market for these products drives.
showed a slight improvement during the During 1978, the Sector shipped its first year. Company prog r6ms for controlling new MS6001 heavy-duty gas turbine for costs, improving efficiency, consolidating electric power generation. This advanced operations and upgrading equipment 2302 107 unitis designed to produce 40% more contributed to improved margins.
output and 10% higher thermal efficiency A new time-of-day IR-70 watthour meter than the MS5001, and is expected to pro-was made available to utilities during the The General Electnc investor 13
/ ~^a
_9-year. The meter is designed to be com-cies in fuel use. High-voltage direct-patible with rate structures that cha'1ge current transmission is another advanced NC according to the time of day in order to technology that seems on the threshold of J
.~ y,~g, encourage customers to spread their elec-growth. Still other opportunities include
~
g g g tricaldemands more evenly overthe daily new meters for load management systerns, cycle. A new GE Automatic Meter Reading and the sophisticated plant maintenance ed ;
and Control (AMRACT) load management capabihty offered by General Electric's M
'g hj system was used in field trials at seven worldwide engineering services oper-utilities during the year, providing remote ations.
time-of-day readings and increased utikty When we look to the late 1980s, we i 0-g influence over demand cycles.
come concerned about the possibility of e.l'.
k g.
A major new high-voltage direct-curent electric power shortages and associated
- g (HVDC) transmission facihty was opened economic dislocations. The nation faces ar
'p' at Lenox, Mass., during the year to f acili-a decade when it will need 10 Create more
, e. -
tate research into more efficient overhead than 17 million new jobs for the growing power transmission systems.
number of men and women of working age. Even with our bert conservation ef-Installation and service engineering forts, economic growth will continue to Electrical consumers' interest in lower-priced businesses, providing on-site engineering require increasing energy supplies, and electric /ty at off-peak, low-demand time services to electric utility, industrial and there is no assurance that " alternative" periods has created a growing market for mar:00 Customers, had higher sales and energy sources, most of which General GE /R-70 programmable t/me-of-day meters, earnings in 1978. Despite the continued Electric is already working on, will be shown on test at the SomerPorth, N H., plant.
Iowlevel of domestic installation proj-capable of meeting our nation's energy ects, these service businesses continue needs.
to grow by successfully pursuing main.
Power Systems managers are seeking tenance opportunities, diversifying into to brir.g these concems to the public's new engineering services on old equip-attention General Electric's view is that ment, and meeting the international de-economic growth here and elsewhere in mand for both equipment installation and the world will continue to require in-maintenance.
creasing energy cupplies. To meet the 4
4 e..lergy needs of the future will demand 6
The outlook for Power Systems busi-intensive developnent of allour energy M
nesses over the short term is f avorable.
options, including coal technologies and i
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Current schedules of increased ship-nuclear power, that can see the United ments, the continued strength projected States through the transition to the time if e
in demand for gas turbines, and a further and when such " renewable resources" as
~
a modest recovery expected in power de-solar, biomass and fusion technology livery markets underlie this f avorable become viable.
outlook.
Our intermediate-term forecasts, how-As reported in previous Annual Reports, ever, are somewhat less optimistic. As customers have required that nuclear fuel
,N the result of the current low level of new be sold with warranties covering the use-domestic orders for power generation and fullife of it,; fuel, even though the experi-power delivery equipment, our current ence base fo: predicting the hfe of riuclear
- s shipping schedules call for an eventual fuci under power plant operating condL reduction in the level of business. Operat-tions is still relatively small. As of Decem-s,
~
ing managers of the Power Systems Sector ber 31,1978, there were open warranty are takira two main types of actions aimed commitments or. fuel with an original sales At Genera! Electric's Pittsfle/d. Mass., facility at sustaining earnings in the face of these value of approximately $900 million, and a laboratory technician uses this kings; e adverse pressures; on fuel in the backlog prese ntly valued at gas-filled capac/ tor to check the qualsty of
- They are maintaining their efferts to
$2.9 billion, covering delive ies through htgh-voltage transmission equipment.
reduce overhead, lower costs and improve the 1980s.
productivity, and thus achieve still lower Additionally, fulfillment of a small num-breakeven points, so that these busi-ber of its nuclear fuel orders requires the nesses will remain profitable at reduced Company to procure uranium concen-production leals.
trate. General Electric has on hand or
- They are vigorously pursuing the avail-under contract sufficient uranium to meet able growth opportunities. These include presently-anticipated requiremants. Aho, overseas markets for power apparatus that some fuel orders include reprocessing, are growing faster than those in the United plutonium fabrication and vsaste disposal States. A number of fuel-short countries services. In view of current United States are showing increased interest in com-Government policies, it is highly un-bined-cycle plants that integrate steam certain whether such services can be and gas turbines to realize high efficien-provided.
14 Annual Report 1978 3
TechnicalSystems and Materials (In millions) 1978 1977 1976 1975 1974 hevenues
$4,745
$4,145 13.688
$3,251
$3,191 Net earnings 278 248 2u2 160 179 Edward E. Hood, Jr.
f f* ~~ g +~ #f Senior Vice President and Sector Executive
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l',.D y [t(?MR Technical Systems and Materials operations had a good y::ar in 1978, with a 14'4 increase in revenues and a 12% gain in earnings over the 1977 results. Benefiting from high levels of investments in R&D and in plant expansion, the Secto? contributed 22% of total GE revenues and 23% of earnings. Our engineered materials businesses grew strongly in both U.S. and international mar-kets. We won a good share of the year's surge in commercial aircraft engine orders, and our industrial and marine applications of jet-engine technology kept growing. In aerospace, we entered the commercial avionics market and expanded our role in aircraft simulators. We did well both in mobile radio and in the expansion of ourinformation services network.
(continued on pages 16-17) 7. __
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sten above: phnstics ~ production facilities' at the Mount Vernon, ind., plant; aircraft en-V genee; pidaucts, inclugRng she Nimbus G sateillte; medical systems; and information services. Other Sector products include J
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.. aa } 15 The General Electric lavestor
Engineered materials in 1978 enhanced An 3portant breakthrough for us came their role as one of General Electric's with the selection by two major airlines, K strongest growth areas. Earnings in 1978 Delta and American, of our CF6-80A en-t were significantly higher than 1977 on a gine to power the new twin-engine Boeing 4 good sales increase. The diverse spec-767 aircraft. Selection of this General trum of GE high-performance materials Electric engine for 50 firm and 42 optioned ,i includes plastics, silicones, tungsten-car-aircraft made 1978 the most significant bide metals, Man-Madet diamonds and year in the CF6's ten-year history, increas-Borazon8 abrasives. ing to 692 the number of GE-equipped Our broad line of engineered plastics wide-bodied aircraft selected to date by had substantially higher earnings on a 59 customers worldwide. . '6, /*s
- /
strong sales increase and improveo mar-Progress was made on other versions of gins. An important f actor was the in-the CF6 engine. The CF6-32 high-bypass Nibp ~ creased penetration of these rnaterials into turbofan engine is designed to power new the automotive bdustry, both in the U.S. 150- to 180-passenger twiniets and 200-and abroad. GE plastics such as Lexan s passenger trijets. The GE CF6-45 engine, and Noryl8 were increasingly specified as which powem some 747s, was selected .: \\ replacements for metals because of their in 1978 to power the new Airbus Industrie strength and con effectiveness. Specifica-A310 jetliners. The CF6 engine family In production at GE's Evendale, Ohio, plant: tion of GE plastics by auto designers was continues to offer airline customers im. the Cf6 family of engines choren by 58 air-a,so spurred by the drive to achieve im-proved fuel consumption and increased lines to power their passenger jets. provements in fuel efficiencies. Our plas-engine reliability. tics' attractive strength-to-weight ratios Our CFM56 turbof an engine -a lower-allow them to replace heavier metals with thrust powerplant designed for the next equal or better functional performance. generation of short-and medium-range Investments in manuf acturing f acilities aircraft and for re-engining of present during 1978 positioned the Company to r tandard-bodied aircraft-continued its increase its penetration of world markets flight testing program in 1978. The CFM56 for high-performance plastics. At Bergen is a joint development by General Electric op Zoom, The Netherlands, improved and SNECMA of France. manufacturing facilities with new environ-Marine and industrial markets for air-t'y~~' - -
- " " '9 mental protection systems are enabling craft-derived engines remained strong us to expand European sales of Noryl and during the year. We shipped our first pro-Lexan polycarbonate.
duction LM5000 gas generator for indus- \\k f g Industry's drive to improve productivity trial use in 1978. It provides the energy ' ' en ~- benefited our businesses in ultrahard for electrical power generation near cemented tungsten carbide metals and Tokyo, Japan. Application of these en-g ' ~ M g Man-Made diamonds for a wide range of gines continued to broaden-in pipeline lij l - d 9 4e - metal-cutting tools. Carboloy Systems pumping, on oil-wel! drilling rigs, and to announced a new high-performance alu-power the new generation of fast vasse's ~ ,.b minum-oxide-coated cutting insert for ma-for many of the world's navies. n chine tools-the ProMax 5702 insert -that The Company continued its work on Il I._ provides new advances in high-speed both operational and aevelopmental mili-cutting capability and metal-removai rates. taryenginesworldwideduring theyear. A Penetration of GE plastics into European Salesof GE'slineof rochargeabie highlight was the successful maiden flight markets is exemplified by multice!ored Fiat nickal-cadmium batteries grew f aster than of the F-18 aircraft powered by the GE auto bumpers molded of Lexan resin. the industry in 1978. Orders were strong F404 augmented turbofan engine. Proocc-for our new sealed lead-acid batteries, tion began on the T700 engine for the U.S. and we introduced DataSentryt batteries Army's Black Hawk helicopter, while de-that can be mounted on circuit boards to velop:aent continued on a variety of other provide standby power for computers. military and commercial applications. The Company's silicone chemiccis op-erations continued to expand both in the Aerospace earnings, reflecting develop-U.S. and abroad, with the business in sili-ment expenditures, were down somewhat 2302 110 cone sea! ants benefiting from earlier in-on a n,odest sales increase. Included i-vestments in sophisticated manuf acturing this business are such high-technology processes at its Waterford, N.Y., facilities. areas as space technology, defense elec-trenics, advancert energy systems, and GE aircraf t engine businesses serve air-avionics for both military and commercial craf t, marine and industrial markets. aircraft. Highlights of 1978: Better 1978 earnings from hM 0; sales
- GE was selected to build the next-gener-were partially offset by the s:epped-up ation Landsat satellite system, Landsat-D, leve! of cxpenditures for commercial en-for NASA. The system will include an ad-gine development.
vanced spacecraft and a ground data 16 Annual Report 1978
processing complex to improve observa-General Electric and 16% by Honeywell. - C T ~ ~ ~ ~ " tion and inventory of earth's resources. p3 74 " g . Rising aviation fuel costs cont;nue to ex-Communications businesses in which U i i1 u 1 k*8i pand markets for GE simulation products General Electric participates inciude ! f* *. [#jf.$' which permit pilots to " fly" realistic train-our mobile radio operations and com-4 ML i: ing missions in simulators on the ground puter interface equipment. + # 7, f.
- ,l g.t 9
J. s. instead of in actual aircraft. Pilots view GE's mobile radio business had signifi-moving, full-color scenes of the terrain cantly higher sales and earnings, and j K ;;
- y ='
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l generated by complex special-purpose reached a milestone in its development y 7 y '* g,' y,f _ g ;? *, computer systems. Advances in realism of on an international scale. This was the ~l the simulated scenes have also led to introduction of a new FM mobile radio line } gk , ; w contracts for training Army tank crews. based on the technologies of both GE .Kf . An important commercial avionics ap-and our European affiliate, Stomo. With !,~ t,j plication was achieved with the awarding Storno offering the product line in its in-T.,, 6;i, y of a contract for a thrust management temational markets, GE is also marketing
- 7
.. n ,i system for the Boeing 767 aircraf t. Other the equipment as the Centuryr il line, a m ib ] key avionics opportunities are being pur-competitively-priced mobile radio for re- %,w yE a sued on this major aircraft program. liable business communication. c.7 =% 4 J',j~ ~l New technologyis also being empha- '4 g ^ O N' ~ Medical systems supplied by GE include sized for cur data communication equip-ggV ' ['M/ f" equipment and other medical products TermiNet* 200 matrix printer whose com-q,' d - ' ykl f * # j' diagnostic imaging and patient monitorin9 ment. Added to the line in 1978 was the f 4.' and services in which GE's technological puter printout capability delivers speeds V Ky,t : ! progress is benefiting the health-care of up to 200 characters per - mond. field. Our earlier investments in this Engineers from both General Electric and business' production f acilities and our The outlook for these diverse businesses Storno, a GE European athliate. participated continued technology development con-is influenced both by technological and in the development of a new mobile radio line tributed to a year of earnings and sales economic trencs. In terms of technology, combining their technologies. well above the previous year's level. 1978 was a year of continued investment The year saw a continued growth in for the future, and we have in development '~ orders for computed tomography (CT) forecch of these businesses advances ~ ~ ~ - P QJ
- l scanners, with significant gains in offshore aimed at keeping them competitive.
Q gg M." [ markets, especially Jaoan. GE's leader-On the economic front: I<.-. 8>
- 4
-ji[ c st.ipin advancing CT technology has . A slowmg cf the U.S. economy dunng 4,. fi% , k *N A w }' enabled us to achieve this level of strength the second half of 1979 would affect our ~% in the marketplace. short-cycle materials businesses serving i? .e d p'i sk,
- $ O Our new DataCamerat nuclear diag-consumer durables markets. However,
.% M 'N @ %,Mh nostic camera, for accurate measure-we would expect the impact to be partially t i V. ments of heart functions without invasive offset by penetration of new markets and W. g.M procedures, has spearheaded our strong new applications, as well as by expansion @k I -p Q @$.l ,i entryinto nuclear medicine. of our international business. Along with advancesin new technolo- . With manyairlines at the beginning of a
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gies, General Electric continued to im-new ordeis cycle to replace aging equip-r prove ;ts core x-ray product lines. Our ment, we anticipate continued strong f* q( i,i Q~ f. & ${ new L300 image intensifier, coupled with demand in commercial aircraf t engine T; new table and generator designs, provides markets. Orders f or industrial and marine l k *4 J MS 4 s y * .y i fluoroscopic images with less radiation applications also remain at high levels. E "l ~ ' f a
- Cj U.. j and more detail than many competiry
. Aerospace businesses sensitive to the systems. volume of Government-contracted proj-New. more etticient TC-100 series of ects should reflect the projected modest Solartront vacuum tube solar collectors GE's information services business pro-growth rate in defense spending. was introduced in 1978 by Genera / Electric's Sp ce Division in Philadelphia, Pa. duced substantially higher sales and . For our medical systems business, we earnings in 19?8. During the year, our foresee continued strengths stemming worldwice MARK lll 4 remote computing from GE's investments made in prior years. network expanded to Hong Kong, and now Longer-term national efforts to reduce spi-serves over 00 metropolitan areas to-raling medical costs could well be bene-cated in 22 c,ountries. 61so,,;atyear end, ficial to the diagrostic imaging business, General Elec,ttid and Hdneywed inc. com-since this technology is a cost-effective }}{ j j j bined the worldwide operations of GE's key to better diagnoses that can improve Information Services Division and Honey-the quality of health care wnile contribut-well's time-sharing marketing operations ing to lower overall medivi expense. that distribute the GE services in the . Markets for information services and United Kingdom, Europe and Austraha. mobile radio equipment are expected to The new companyis 84%-owned by continue their growth. The General Elecinc Investor 17
Natural Resources (In miTone) 1978 1977 1976 1975 1974 Revenues $1,032 $965 $1,003 $683 $526 Net earnings 180 196 181 108 97 Alexander M. Wilson ~' ~ ^ .' 7 President and Chief Executive Officer ~ Utah InternationalInc. a pO,. x f, ; }- a + ,4 Natural Resources businesses, managed by Utah international Inc., contributed 15% of GE earnings and 5% of revenues in 1978. Despite difficult challenges, earnings de-clined only 8% from 1977's record high. Serious economic pressures affected Japanese and European steel producers, Utah's principal customers. Australian earnings were restrained by a miners' strike of nearly seven weeks and by higher Australian taxes. Earnings from uranium operations were lower also, and the weak market for output from our Brazilian iron ore operation resulted in a loss. Overall, however, as a low-cost producer of raw materials, we were able to operate effectively in a difficult business climate, and we are well positioned to benefit from any improvement in markets. ~~ -, _ ~,,, - - m,,,, - - - - :. - -- - m mg } % ;f[;' ;', % y.S ' v : ^ ~ ~V~~~~~*~\\ Q. . \\ 1 N: 'j Q }% }4 1 pf x (f .n .l ',1 )a f [f !~ fl q. p = gli // ; y ' M l-Y l i: t ug I b W/ + } 'p g j[/; j! O W Q l"".43' e j f f- ~$
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y,*, ~>- --; ~..__ - . 3 I. 1 h. c_ =,... a + .[ o' ' ~~ N b[ 7-1ht N9RnalN8eoscoes busar\\be(s;es consist primarily of operations of the wholly-owned attiliate, Utah InternationalIn pj . tJah end he aNHiesse depicted above: the mining of coking coal, Iron ore and uranium, the production of oiland gas, and extensive landI ( teetoreden and exploration projects. Other activities: mining of steam coal and copper, ocean shipping and land development. _ - -w y w_m_w _,m _x.x m 18 Annual Repott 1978 2302 112
Natural Resources revenues were 7% Utah owns 89% of Blackwaterand 68% P ' g r ~T~'~ T ~ ~ higher in 1978 than in 1977, primarily be-of other Utah-operated coking coal mines. 2_: ~ d cause of the inclusion of revenues of i# .,i Marcona Corporation,which became a Uranium operations, primarily in the U.S., ~ wholly-owned GE affiliate during the yecn are conducted by Pathfinder Mines Marcona, also engaged in mining and Corporation, a wholly-owned, noncon-shipping, was formerly 46%-owned by solidated subsidiary, all of whose common
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-e Utah. stock is held by independent trustees. ! ; *
- I,
.',p= improved earnings from copper and See note 12 to the financial statements petroleum operations were more than for additional information. ~ 4 ', offset bylower earnings from coking Earnings in 1978 were down from 1977, f~
- . 4 coal, uranium and Brazilian iron ore because the 1978 average realized price i'"
a s operations, for uranium oxide was substantially lower. ia% y.. 5% Approximately 83% of 1978 revenues This price decline was due to long-term b. and 71 % of net earnings originated from contract commitments which reduced the L' f y; - . b: ~ non-U.S. operations. proportion of production capacity avail-i^ ~ At the end of 1978, the mineral sales able for spot sales (usually higher-priced) 'f 1." A . 1 g backlog, including uranium, was $5.8 compared to 1977. l ~ m billion, of which $4.6 billion was sched-l. ~f ~.N uled for shipment after 1979. The majority Iron ore operations resulted in a loss l a- ~4 of contracts for this backlog offer substan. for 1978. This was primarily due to the P tial protection against future cost in. first full year of operations at Samarco, a i ~ - creases. Virtually all sales contracts are S600-million Brazilian venture in which l fl . l eJ .D" payable in U.S. dollars. Utah owns 49% of the voting stock and has debt guarantees. Samarco's start-up With the capability to load simultaneously two Australian coking coal activities con. has been technically successful, but co-ships of the 100,000-deadweight-ton class, tinued to be Utah's major source of earn. incided with reduced demand foriron ore Utah's Hay Point port facility in Queensland, ings in 1978. Moderating this contribution products worldwide. Profitabiiity of other fap jty'jo sNpp er als was the impact of a 5% tax increase im. iron ore operations in the U.S., Australia posed by Australia on the taxable incomes and New Zealand improved. of nonresident companies. %Y,dO;.7 a' Despite reduced requirements, partic. Copper activities at the Island Copper ~dN~ DWN Q, $;D v u Utah's coking coal saies in 1978 were a significant turnaround from the loss ex- ~ NhD' [;%[F ularly by established Japanese customers, mine in British Columbia, Canada, showed Q-o, O. limited more by product unavailability perienced in 1977. Higher average price l i 2. ., gQ ' / O caused by the miners' strike than by the realizations for copper and f ;r the two .f lack of marketing opportunities. Buoyed principal byproducts, gold and molybde-l '~ by spot sales both to new customers and num, combined with good mining and mill-to some European long-term contract ing rates to account for the improvement. J customers, shipments during the first six
- D 3 g pp -
months reached a record for any half-year Oil and natural gas operations of wholly-J* ~ period. The strike depressed deliveries in owned Ladd Petroleum Corporation re-j[J4 the third quarter, but the record 5 million ported higher revenues and earnings. tons shipped in the fourth quarter brought Ladd's exploration and drilling operations Steam coal for electric power generation is ano h r re the 1978 total to about the same as 1977. have continued to result in good additions .,a ' ra per n n n o rado. gpet g Utah's significant position as a coking to oil and gas reserves-the key to future coal supplier will be expanded when Nor-revenues and earnings growth, wich Park, our fif th surface coking coal mine in Australia, comes into production Steam coal mining operations are led by in lea 1979. Additional annual capacity of the leased Navajo mine, which fuels the in other activities, earnings of Marcona 4.3 million metric tons will bring total pro-Four Corners Power Plant in New Mexico. Corporation were down, primarily because duction capacity of the Utah-operated The mine's earnings were affected by of lower earnings from a purchase and mines to over 21 million metric tons. lower shipments in 1978. The nearby San resale agreement for Peruvian iron ore To diversify Utah's customer base, new Juan mine, operated by Utah under con-pellets. Utah's land development opera-coking coal sales agreements were tract v!ith the owner, supplies the San Juan tions had iraproved earnings. reached with steel mills in Western and Power Plant. Earnings from this mine im-Eastern Europe, Latin America and the proved, primarily as a result of a renegoti-The outlook: We are a low-cost producer Far East. Japar e e steel mills continue, ated contract which provides for increased with substantial natural resource capabil-however, to be our primary customer and, prices and shipments. Deliveries from ity vital to international economic deve!- in December of 1978, Utah negotiated a our new Trapper mine, located near Craig, opment. Utah's operating and manage-27-month sales contract with the Japanese Colorado, were substantially below ca-ment expertise places us in the forefront of for Blackwater mine coal at terms slightly pacity because of construction delays at international mining activities. These com-less favorable than those in the contract the new Yampa Power Plant, the principal bined strengths support an optimistic which terminated at year end. market for Trapper's coal. viewof the future. The General Electnc investor 19
Internation8I Foreign muiti-industry operations (in missions) 1978 1877 1978 197s 1974 Revenues $2,767 $2,562 $2,334 $2,198 $1,860 Not earnings 78 71 75 58 59 U.S. exports - al: Sectors (In millions) 1978 1977 1976 1975 1974 Saies $2,571 $2,101 $1,915 $1,638 $1,475 John F. Burlingame ' ' ' = ~ ~ ' ^ ~ ~ ' * " - ~- Senior Vice President and Sector Executive '^ ~~' 4
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-..- -.. ?... 1l$.-. L n.t. The International Sector in 1978 made progress in each of its areas of responsibility.The Sector continued to work with the other Sectors to develop and implement their inter-national business strategies. Export sales showed a particularly strong rise, as many GE operations utilized the Sector's international marketing and sales capabilities. Foreign multi-industry operations reported improved results overall, and accounted for 13% of GE's total revenues and 6% of earnings despite de-pressed economic conditions in many of their host countries. Investment positions in several of these businesses wer.e realigned during the year for greater future returns. _v n-,. m-n.-n.-,. w.-- _,,, .,... n,- - . ~. - _ n,- .m u p %y;.g py,
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~.-m wam m, A.? j .0 34e. N ji,, j' - (..- U: '. ~j ~ g 1: j. ( (,1 7os 4 g-5 ' dm._ ; 1 [ i o-uw - L i ( ;The kneameNonel Sec0er's role in marketing U.S. exports is exemplified by GE-powered ship;steelmill drives and gas turbines. The. L Sector 8000 manapen glMersWinct inuW-industry foreign affilletes that manufacture varied lines of products ranging from large electrical i apperatus in BreER to Notpointe appliances produced by Canadian GE's affiliate. Canadian Appliance Manufacturing Company Limited. -1~- -e - owwww m _ - w _.w _..cm A.i _.. .~..J 20 Annual Report 1978
The total international business of the Africa continued to help " pull through" yi 7/~~~~~ ' '] ~ i;7ffgf ( y Company includes the diversified multi-substantial U.S. export orders. Manufac-s { industry operations assigned to the Inter-turing operations in Italy reported an in-W-
- 1 national Sector, U.S. exports by all creased loss in 1978.
$'.?c 6 ~ 1 Sectors, sale 3 by nondiversified affiliates + General Electric affiiiates in Australia x( b' I assigned to their appropriate Sectors, again encountered depressed market i i s and offshore business conducted by Utah conditions, while those in the Philippines t ?.# I International. Together, these businesses were able to take advantage of strong 7,' '. ' [ {~ accounted forabout 33% of General market growth. D * ',. i1 i l Electric revenues in 1978, as detailed on l ] page 44. U.S. export sales to extemal customers, j m which are included in their appropiiate ~ $ , ' '.. g Foreign multi-industry operations which Sectors, were up strongly in 1978, totaling /* s e y are the direct responsibility of the Inter- $2.6 billion, compared with $2.1 billion
- j..
C - ? i i A =* i national Sector consist principally of affili-in 1977. With five Sectors participating, the 1, ,g. ,i %N ates manufacturing varied lines of prod-year's increases in exports were led by e __ M M.- ucts oriented toward their host-country aircraf t engines and gas turbines. Some w__ markets. Foreign multi-industry operations $1,662 million of the 1978 total came from increased revenuns 8% and earnings exports to Europe / Africa / Middle East Ore grinding equipment, such as this massive 10% in 1978, including good improve-areas, while sales to customers in the Far ban mill end produced by the Dominion Engi-ments in international construction opera-East and Australia totaled $498 million. neering Works of Canadian Genera / Electric, 9 " tions and most Latin American affiliates. Exports to other areas totaled $411 mil-of h9 ' many pa e o d' + Construction operations,which pro-lion. The International Sector provides the vide the management and technical ex-worldwide sales structure supporting the ~ "~ pertise to take on very large international marketing of these exports. P" projects, maintained their rapid growth, is .I The international Projects Department The outlook is for continued growth in '1 provides system engineering and con-international markets. Many international I struction supervision for projects such as markets served by GE have tended to complete power plants, while our con-grow faster than those in the U.S. Many struction affiliates, operating in the Middle countries, especially the developing coun-East, Africa and Latin America, have the tries, are modernizing elements of their capability for civil works and installations infrastructures, such as electric power, associated with major electric utility and transporta: ion, communications and health industrial projects. A significant portion of services, and these comprise a good General Electric export sales in develop-match for GE technologies. Strategic ing countries is dependent on this planners of GE operations are, with the as-capability. sistance and support of the International At the site of the Guri Dam in Venezuela,
- Latin American manufacturing affiliates, Sector, ef fectively identifying these op-SADE-Venezuela, an Intemationa/ Censtrun-overall, showed a strong performance. Our portunities and allocating the resources ti n Division affiliate, la providing the elec-Venezuelan af filiate continued its growth, to capitalize on them.
trica/ substation and a concrete batching and we invested in upgrading its facilities. The U.S. Government can do much to Wanyc nsuuchonmatwinquaeupleme GE-Mexico also improved its results, improve the prospects of U.S.-based in-maintaining its steady comeback f rom the ternational companies simply by further effects of the 1976 peso devaluation. For recognizing the importance of interna-our Brazilian affiliate,1978 was an off year, tional trade and investment. The urgent with heavy goods manufacture in partic-need is for consistent ground rules that ular showing a decline. give U.S. companies parity with foreign compan es-both of which help match, . Canadian General Electric Company competitors. This means a U.S. foreign to some degree, the support that other Ltd. (CGE) improved its earnings despite a economic policy that removes present countries provide their international com-year of no sales growth, resulting from disincentives, that recognizes the impor-panies. Also,the Administrationtook sluggishness of the Canadian economy. tant relationship of foreign investment to some first steps toward the development The gain in earnings reflected, in part, increased trade, and that establishes new of consistent suppcrt for U.S. foreign the good performance of the new Cana-procedures to facilitate exports. Also im-trade growth. dian Appliance Mar:ufacturing Company portant is successful U.S. participation in These changesin perspective and Limited, estabiished in 1977 to merge the the G ATT negotiations in order to reduce policy are important not merely to General appliance operations of CGE with those of the tax and nontariff barners that limit U.S. Electric and otherinternational compa-two other producers in order to improve manufacturers' access to foreign markets. nies. Such changes are the key to main-our position in Canada's consumer goods in 1978, w e saw encouraging signs that taining the one in every nine U.S. manu-markets.The new company overcame this change in perception is taking place. facturing jobs that is dependent on export anticipated start-up difficulties and im-Congress continued the DISC tax incen-trade and foreign investment, as well as proved its earnings in 1978-a notable tives for export sahs, as well as the de-to reducing the serious deficits in the U.S. achievement in so short a time. ferral of American taxes on unremitted trade balance and to strengthening the
- Affiliates in Europe, the Midd!e East and income of foreign subsidiaries of U.S.
U.S. dollar. P. 0 ( :m' 2302 115 The General Electric Investor 21 i
Research and development General Electric in 1978 positioned itself across the whole spectrum of disciplines 7~ < ~ ' ~ ~ ~ ~ ~ ~ ~ ' to enhance future profitability by making important to GE businesses. In addition, f' [~. ,g !j record investmentsin research and the Company conducts development proJ-g gg' ol development as well as in the moderni-ects at more than 100 laboratories associ- [A q' _y4 zation and expansion of plant and ated with operating components. Allin all, equipment. 15,000 technical-degree holders at i 7* Y s [ The Company supported its R&D efforts General Electric are engaged in science 2" [ AeQ "* g.yy? with a record level of expenditures. The and engineering, with a similar number total of $1,270 million spent on research employed as manufacturing, sales and c b.
- ?1 1
and development during the year in-service engineers. N V, j(g(,^- cluded a Company-funded portion of $521 A sampling of 1978 programs indicates ~H million, substantially above 1977. The the scope of General Electric R&D work: y 7 g remaining $749 million, also a record, was + Power from coal-Long-duration test y performed under contract, primarily for runs were made with an integrated coal ~ q x,_ agencies of the United States Government. gasification/ combined-cycle pilot plant, a f ', 4, ' _ g[ 4, 47 which contains all essential elements of 1 A review of GE technology wasimple-an eventua! full-scale facility for con- ~ o mented in 1978. The objectives of this verting ccal into electricity cleanly and Corporate Technology Study were to ap-efficiently. Energy projects have a high priority, as ex-praise the present status of technology + New materials-A proprietary new en-emplified by research on an advanced battery throughout the Company, to anticipate gineering thermoplastic, X-76, has been that is being developed to help utilities meet future directions, and to strengthen developed, providing a high-strength, peak demands for electricity. This effort is GE's thrust in new areas judged to have lightweight metal substitute. The new supported in part by the Electric Power Re-high technological potential. An important material is flame-resistant and withstands search Institute, the R&D arm of the nation's electnc uul#yinddy. element of the Study was an appraisal of temperatures 100 F higherthan any the Company's technical manpower pro-other General Electric plastic. grams, with the objective of strengthening
- Quieteraircraft engines-Forthe first GE's capability to attract and develop time, aerodynamic conditions have been high-caliber technical people.
achieved in a laboratory acoustic facility The Corporate Technology Study ex-that closely approximate those of a jet i ' ' + amined the technological strengths of 32 airplane in flight. The facility now is being l y-il~ ~
- General Electric business areas and used to develop quieter jet engines.
{ 1 - x evaluated them against their strongest
- Health-care technology-New software competitors worldwide. This analysis developments are being evaluated for g; - ',-, { 3 confirmed the strong position of the Com-computed tomography scanners to be g*
pany's techne'ogy and also documented used in providing nonsurgical postopera-l*'tf( F
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- p the fact that General Ehctric businesses tive tests to determine the success of ranking best in competitive technical coronary bypass surgery. y6. $ ,y strengths have been most profitable.
- Electronics advances-The world's l
,hi i j To help bring all GE businesses up to most efficient high-power transistor has l (' this top ranking, the Company in 1978 been developed and will be applied to e! 4 implemented an even closer integration of electric vehicle control. It is designed to 'dq ~ i technology with strategic planning to provide smooth regulation of speed and
- gr i i
guide the Company's allocation of re-efficient regenerative braking. ld 1 % 'b,' Y ! W I w ? c9 sources for technology. In addition, new lAm s7 (( manpower programs were introduced to Plant and equipment investments to pro- ~ further strengthen General Electric recruit-vide for the growth of the Company's ment of technical people, and the devel-high-technology businesses and to im-The quest for better materials goes on. opment of their career opportunities and prove productivity rose to a new high of Scientists and engineers at the R&D Center nianagement skills. $1,055 million, up 28% from the 1977 level. are investigating amorphous metals, a revolu-The year's expenditures for expanding u nay new class of materials w#h un4ue P P " ha ou A Companywide focus for GE technology plant capacity were led by investments to cje tefect ic r otg el fa mor nd is provided by the GE Research and facilitate the growth of such businesses tr lormers. De selopment Center in Schenectady, as high-performance plastics and aircraft N.Y., employing some 800 scientists and engines. Other investments to increase engineers, plus a supporting staff of nearly productivity and capacity represented a 2302 116 1,200, in the search for new knowledge substantialportionof thetotal. 22 Annual Report 1978
Board of Directors B ard Committees:New Nominating Committee assesses Director candidates, Committee memberships in addition to its ten regular meetings and creased by the Board in May of 1978 by the numerous meetings of its Committees 18%, from 55 to 65 cents per share. 3 during 1978, the Board of Directors con-The Board is made up primarily of Di-ducted a business review which included rectors from outside the Company. Only a reports on GE operationsy he United four are members of GE management; g '_ Kingdom, Western Eur e, Eastern Eu-the other 16 Directors have eamed posi-rope,the Middle East nd Africa. tions of leadership in such fields as busi-4 e as 4 'y The Directors als participated in GE ness, law, education, finance and public 8 Centennial activities [, including a customer p 4 i service. The listing of Directors belowis dinner and the 1978 Information Meeting in order of their Board seniority, with the in October in New York City. yearin which they were first elected The regular quarterly dividend was in-shown in parentheses. Frederick L. Hovde, President Emeritus, James G. Boswell ll, President and Direc. Members of the Nominating Comminee, left to Purdue University, Lafayette, ind. (1956) tor, J. G. Boswell Company, farming and right, front row: Henry H. Henley, Jr., Chair-related businesses, Los Angeles, Calif. man;J. Paul Austin, James G. BosweIIII. B ck row: Charles D. Dickey, Jr., Ralph John E. Lawrence, President, James (1971) azams, MmunM Unle#ed Lawrence & Co., Inc., cotton merchants, Boston, Mass. (1957) Charles D. Dickey, Jr., Chairman of the Board, President and Director, Scott Paper Walter B.Wriston, Chairman of the Board Company, Philadelphia, Pa. (1972) The Committee structure of the Board was and Director, Citicorp and Citibank, N.A., strengthened further in 1978 by the formation New York, N.Y. (1962) Henry L Hillman, President and Director, f a Nominating Committee, which will con-centrate specifically on Board succession The Hillman Company, diversified opera-Ralph Lazarus, Chairman of the Board tions and investments, Pittsburgh, Pa. "he No in ing Committee, supplementing and D, rector, Federated Department (1972) theworkof the sixotherCommitteesof the i Stores, Inc., Cincinnati, Ohio. (1962) Board summarized on pages 24 and 25,is Henry H. Henley, Jr., President and composed of the Chairmen of these other Gilbert H. Scribner,Jr., Chairman of the Director, Cluett, Peabody & Co., Inc., Board Committees. Board and Director, Scribner & Co., real m, r.;facturing and retailing of apparel, The new Committee's responsibilities in-estate and insurance, Chicago, Ill. (1962) Ne Brk, N.Y. (1972) clude the selection of potential candidates for Directorships and the recommendation of Director candidates to the fuIl Beard of Direc-Edmund W.Littlefield, Chairman of the Sila; S. Cathcart, Chairman of the Board t Board and Director, Utah International and I.,irector, Illinois Tool Works ir,c., re me t the u oar c e - Inc., San Francisco, Calif. (1964) diversified products, Chicago, Ill. (1972) ing the structure and membership of each of the other six Board Committees for the en-J. Paul Austin, Chairman of the Board Samuel R. Pierce, Jr., Partner, Battle, suing year. and Director, The Coca-Cola Company, Fowler, Jaffin, Pierce & Kheel, law firm, p Atlanta, Ga. (1964) New York, N.Y. (1974) Jack S. Parker, Vice Chairman of the Gertrude G. Michelson, Senior Vice Henry H. Henley, Jr., Chairman Board, Executive Officer and D, rector, President, Employee and Consumer i General E!ectric Company, Fairfield, Relations, Macy's-New York, retailers, Conn. (1968) New York, N.Y. (1976) Reginald H. Jones, Chairman of the Lewis T. Preston, President and Director, Board, Chief Executive Officer and Direc-J. P. Morgan & Co. 'ncorporated and tor, General Electric Company, Fairfield, Morgan Guaranty Trust Company, New Conn. (1971) York, N.Y. (1976) 2302 117 Walter D. Dance, Vice Chairman of the George M. Low, President, Rensselaer Board, Executive Officer and Director, Polytechnic Institute, Troy, N.Y. (1977) General Electric Company, Fairfield, Conn. (1971) Richard T. Baker, Consultant to Ernst & '(Committees of the Board Ernst, public accountants, Cleveland, continued on pages 24-25) Ohio. (1977) ..,s. The General Electnc Investor 23
Operations Committee:the Board's Technology and Science Committee: Management Development and monitor of GE operating performance seeking the greatest potentialfrom Compensation Committee: maintaining GE research and development the quality of GE managerial leadership Q[L&.y @c y, iQQ ' L ' - .' W W W:.i."'T ~. ~ l 4-
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u jii. g. L J f h[j Q fg %f [q Sy )f n n f q ( b _. ill' xmi. 1-u a - 1- ~* _ a _ -- _ __ Members, left to right, front row: J. Paul Austin, Members, left to right, front row: James G. Members, left to right, front row: Ralph Chairman; Jack S. Parker, Vice Chairman; Boswellll, Chairman; Jack S. Parker and Lazarus, Chairman:J. Paul Austin, Silas S. Gertrude G. Michelson. Back row: James G. Walter D. Dance, Vice Chairmen; Silas S. Cathcart. Back row: John E. Lawrence, Boswellll, Lewis T. Preston, Gilbert H. Cathcart. Back row: Henry L. Hillman, Walter B. Wriston. Scribner, Jr. Frederick L. Hovde, Edmund W. Littlefield, George M. Low. The members of this Committee see it as our With the strcng approval of this Committee, Only nonemployee Directors serve on this function to extend the Board's reach by giving General Electric has, in its Corporate Tech-Committee, which has two principal respon-special attention to General Electric's opera-nology Study, maae an exhaustive effort to sibilities entrusted to it by the Board: to moni-tions. Our concern is to make sure that operat-appraise the present status of its technology for and evaluate officer-level appointments ing matters posing particular challenges and and to anticipate future directions, needs and and succession planning; and to review opportunities are brought before the full Board opportunities. changes in executive compensation and in the in a timely manner. Having reviewed the final phases of this plans by which GE seeks to attract, retain and In view of the Company's growth in inter-Study at the end of 1977, the Committee foi-motivate key employees. national markets, we continued in 1978 to give lowed up in 1978 by examining the Study's During 1978, we met with the Chairman of special emphasis to overseas businesses. We implementation. We satisfied ourselves that the Board to revlew his appraisals of key ex-reviewed with the appropriate managers the the many " action recommendations" are al-ecutives' performance. Independently and Company's off. shore sourcing operations. ready having impact in building technological separately, we conducted an assessment both Our review included the strategic planning for strengths that will make GE businesses more of his appraisals and of his own performance. these operations, the production resources competitive, and in shaping manpower pro-The Board's business reviews, customer allocated to them, and the planning for con-grams that offer greater incentives and op-relations activities and other events enabled trol and management of the financial risks portunities for technical creativity. us to develop firsthand knowledge of GE ex-involved. Our ongoing work included conducting our ecutives and their potentials for increased in line with our interests, the full Board in own independent assessments of the vitality responsibility. We reviewed the status and April conducted s business review of the and quality of GE research and deselopment depth of the Company's executive resources Company's activit: sin Europe, Africa and the activities. We continued to use the Board's with the Chairman and with the Vice President Middle East. reviews with Sector Executives as opportuni- -Executive Manpower. Joint meetings with other Committees dur-ties to inquire into specific technologies we We acted in support of the Board's long-ing the year gave us the opportunity to review consider essential to each Sector's progress. standing position that nonemployee Directors the implementation of the Corporate Tech-We remain mindful, as the share owners' should determine the compensation and nology Study and to study drafts of the Com-representatives, that General Electr.c is a benefit plans appropriate to the executive pany's Annual Report and proxy materials. company based on technological innovation group. As an example, the Stock Option /Per-The members of this Committee come from and product leadership The reviews we con-formance Unit Plan was developed through widely varied business t'ackgrounds. We see ducted in 1978 assured us that GE is main-severalworking sessions of the Committee, this diversity as an advantage allowing us to taining vigorous development programs in the and our modifications were incorporated by apply an independent and broadly experi-areas of greatest potential to the Company the Board in the final pian which was sub-enced perspective to operating matters, help-and to society and that, by carrying through mitted to, and approved by, the share owners ing to assure that General Electric performs its Corporate Technology Study, management in 1978. Again, we met regularly with the responsibly in the interests of the share has taken responsible action aimed at further Chairman to review and decide such matters owners and the public as a whole. strengthening General Electric's technological as executive salaries, option grat.., compen-thrust in the future. sation plan awards and executive pensions. O. - h/ b A ~ M "- ( e em J. Paul Austin, Chairman James G. Boswell 11, Chairman Ralph Lazarus, Cnairman Anpval Report 1978 } 24
Publicissues Committee: assuring a Finance Committee:appraisalof GE Audit Committee: Independent thoughtful GE voice on keyissties financiel planning assessmentsof auditsof GE , p.?. %Q ~ e; fM . Nf. l bG .' f b; ' ~ (.. 4 [ g E {< s, QT 4,l y [ Jffr.: l 4 r. LD+%l,____% . -- J.- i s-J ~- - ' a Members, left to right, front row: Henty H. Members,left to right, front row:Edmund W. Members, felt to right, front tow: Charles D. Henley, Jr., Chairman; Walter D. Dance, Vice Littlefield, Chairman; Reginald H. Jones, Vice Dickey, Jr., Chairman: Richard T. Baker, Chairman; Gertrude G. Michelson, Richard T. Chairman; Charles D. Dickey, Jr., Henry H. Frederick L. Hovde. Back row: John E. Baker. Back row: Henry L. Hillman, Ralph Henley, Jr. Back row: Lewis T. Preston, Lawrence, George M. Low, SamuelR. Lazarus, Samuel R. Pierce, Jr. Gilbert H. Scribner, Jr., Walter B. Wriston. Pierce. Jr. News headlines have made clear the powerful A typical agenda for the Finance Committee The Audit Committee, which includes only negative effects that societal, regulatory, begins with a report on the Company's finan-Directors from outside the Company, main-economic and politicalissues can have on cial position, moves to reviews of GE's invest-tains an ongoing appraisal of the effective-business. Yet other news stories have under-ments in foreign companies and its exposure ness of audits and theindependence of the scored the benefits that can accrue when in terms of foreign currency, and includes re-public accountants. It recommends, for ap-business leaders speak out effectively on key ports on the operations of the General Electric proval by the full Board and the share owners, public issues such as capital formation, tax Credit Corporation, on purchases of deben-the appointment of the independent public legislation, regulatory excesses and overseas tures for sinking fund purposes, and on GE accountants. It also reviews accounting prin-investments. Pension Trust operations. The agenda also ciples and internal accounting controls, and in this climate, the members of the Board's includes discussion of new business ventures the Annual Report and proxy materials. Public Issues Committee see our role as two-or other matters involving large-scale utiliza-In February, May and September,1978, the fold: to provide an independent checkpoint tion of Company funds. Committee met with partners of Peat, Marwick, on the issues - present or potential-that There is a good reason why we on the Mitchell & Co. At the February meeting, we affect General Electric; and to appraise the Finance Committee give close attention to reviewed the firm's audit for 1977, and in-effectiveness of management's response. matters such as these: they represent financial quired into the degree of cooperation received On the basis of ot.c assessments in 1978, situations that, if not properly managed, from Genera? Electric in carrying out the audit. we are assured that the Company has in place could have a disproportionato " swing" effect in May, we reviewed the organization and the procedures essential for issue identifica-on the Company's financial results. The Board makeup of the firm's audit team assigned to tion, analysis and strategy development, expects us to monitor these situations, using GE, its plan for conducting the 1978 audit, and and for implementation of coordinated in. the strong financial and business experience other services to be provided. ternal and extemal communications pro-of our members to anticipate potential prob-At our May and September meetings,we grams. These procedures are working, and lems and see that appropriate strategies are also met with the manager of GE's corporate GE's voice on key issues is being heard, developed earl / enough to deal with them. audit staff to review the organization and For the past several years, we have stayed Joint meetings with other Committees scope of the Company's own internal audits. particularly alert to changes in Governmental broaden our opportunities to examine the On the baeis of these reviews, we were able regulations that affect business. Our reviews financial asr.ects of the Company's programs to report with confidence to the full Board have covered the Company's compliance and plans in February, as an example, we that the resources allocated to the audit func-with regulations in the areas of occupational shared in the re'.'iew of the Corrpany's Annual tion both by the independent auditors and by safety and health, product safety, and equal Report and proxy materials. General Electric itself are adequate to pro-opportunity. On ;his last issue, we welcomed General Electric's financial stren0ths are a vice the assurances required by the Board. the 1978 conciliation agreement reached great resource. We see it as our special We conducted a number of other reviews, with the U.S. Equal Employment Opportunity province to help assure that this rnource is including a meeting with the Senior Vice Presi-Commission. We agree that this settlement used wiseif, prudently and iesconsibly in the dent - Finance and the Senior Vice President - can be implemented as a fresh opportunity for interests ot share owners er.d of society General Counsel and Secretary to examine the affirmative actions in support of the Com-generally. results of reviews and audits covering the pany's equal opportunity goals. compliance of employees with key GE policies. Yll )l}'\\ Henry H. Henley, Jr., Chairman Edmund W.Uittlefield, Chairman Charles D. Dickey, Jr., Chairman } } jj} 25 The Ge,neral Electr invester
General Electric people GE's U.S. employment, mcluding Utah for the negotiation of new agreements f _ Internationars domestic employees, with the unions. 54 ~ totaled 284,000 at the end of 197b, com-M,.;' pared with 279,000 at the end of 1977. Affirmative action plans te hire veterans Analysis of dornestic General Electric arein place at each Company business k and General Electric Credit Corporation location. As a result of such programs, employment for the year ended September 12% of all persons hired by General 30,1978, shows continued progress in Electric in 1977 and the first three quarters equal employment opportunities for of 1978 were veterans. In addition, GE was p ..g women and minorities. The number of one of the first companies to step forward women managersincreased 15%, from in support of President Carter's special 995 to 1,145, and the number of minonty program -called HIRE-to help reduce managers was up 12%, from 1,079 to unemployment among minority and dis-1,206. Women professionals increased abled veterans. GE pledged to hire 500 18%, from 3,413 to 4,027, and minority veterans in those high-unemployment professionals were up 14%, from 2,598 categories, and as of September 30, when to 2,953. the program ended, the Company had ex- \\ in categories other than managers and ceeded its pledge three times over. professionals, women and minonties also All GE locations also have affirmative At the Fort Wayne, Ind., operation of the continued to make gains, with women action plans to employ the handicapped. Hermetic Motor Department, Neil Waltenburg, holding 36% of thesejobsandminonties who has been legally blind since a 1973 14 %. Overall, women account for 29% of Apprentice programs were in place at inness, carnes out his dudes as a produc#on i the help of special total GE employment and minorities 12%. 27 Companylocations at the end of the ma y An agreement was reached with the third quarter of 1978, with a total of 996 Equal Employment Opportunity Commis-employees participating in 18 different sion (EEOC) on June 15,1978, in settle-training options, up 7% from the 928 par-ment of a 1973 charge. The agreement ticipants at the end of the third quarter recognizes the vigorous efforts made by of 1977. Of the total,13% were women the Company over many years to provide and 9% minorities. And a total of 288 equal employment oppci tunities, formal-apprentices were working toward college "~ ~~~S izes a number of General Electric pro-degrees as part of their apprenticeship. 2 grams, activities and cor'mitments, and General Electric continued to support !( 9 2 sets a positive pattern for fi>ure action. the national effort to increase the number y Among key elements of the agreement are of minonty engineering graduates, a pro-j 4 expanded training programe for hourly gram pioneered by the Company in 1972. .?- employees, an open promotion system, a Um _a. ~~ ~ L x promotion incentive program for women GE's occupational safety and health yy!;, _ h and minorities, and wage structure record and experience continue to com- [j
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'9 modifications. pare favorably with national statistics for {'<s ~ companies in the same lines of business. ~ Wages and benefits were improved in In 1978, in response to the national focus 1978. Pay increases for hourly manufac-on potential health and environmental k 6 turing and salaried employees covered risks from chemicals, GE established by most union contracts amounted to a orocedures specifically providing for minimum of 48 cents per hour (including evaluation and processing of pertinent ] cost-of-living adjustments), keeping them information received from employees. ? ahead of inflation for the current contract. Comparable increases were received by Grants to education by the General m other GE employees. In addition, benefits Electric Foundation totaled $4.3 million in such as pensions, life insurance, weekly 1978. The Foundation maintained its sub-sickness and accident plans, savings, and stantial funding of minority engineering other programs for employees were auto-education and equal opportunity pro-matically improved, since most benefits grams, as well as of science, engineering in GE are directly tied to pay levels. and technology, and business-societal-An Edison Engineering Program member, 'lhe major union contracts cove ring governmental relationships programs. The ./oseph Ho lung, shown in Schenectady, is most hourly employees expire June 30, annual report of the Foundation will be receiving advanced training in technical worA. 1979. The Company is already preparing available in April upon request. e ew P' b and s ce gradua e 26 Annual Report 1978 2302 120
Management The team of 127 managers presented on
- (1 - - ~ ~ j<.7 y
,"'y ,5 this and the following two pages provides 9 J, managerialleadership for General N.. Elecinc. [$ l ' % ' = f;* j 9; M ?%'. A -~ J Integration of the programs and plans - J': of these senior managers is aided by two e C'. g \\.' fl top-level boards. The Corporate Policy i g V Chairmen and the six officers presented at ) e, !,',-, 'i-Board is made up of the Chairman,Vice l .g i. Y - right.These same officers are joined by the l' 'g* = 7 id ^ l 1 .i. p six Sector Executives, pictured earlier in 7 i j,?
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p this Annual Report with their respective ? R^" ^ ~ ' ~ ~,, Sector reviews, to form the Corporate {}Tg]h," Robert R. Freder ek Executive Council. Senior Vice President. Corporate Senior Vice President, Corporate To provide management for the Com-Technology Planning and Developrnent - w "~-- T pany's future, General Electric continued u- - in 1978 to conduct a diverse program of learning opportunities, centered in o ? + General Electric's Management Develop-a ~ {. ment Institute at Crotonville, N.Y., where over 3,500 employees attended manage-ment and professional educational pro- .e grams during the year. ..s Two professionalemployee training g , ). -- ~ --g.. 4 ,ge, programs were developed in 1978 as an j , l gg ', outg rowth of the Companywide Corporate ~ Technology Study's appraisal of Generai Robert B Kurtz Leonard C. Maier, Jr. Electric,s techn, cal manpower recruitment senior Vice President, Corporate Senior Vice President. Corporate i and development: Production and Operating Services Relations + Edison Engineering Program. Created 4. ' W.. to provide a corporate focus on increasing f %"*. ? ~ l technical competence and leadership in . *+ the Company, the Edison Engineering [ j y E 'd Program is designed to give breadth and . f. - depth to an individual's technical experi- } f ii ence while opening new career perspec- .1 .Y % j,' l tives. The Program recruits outstanding
- ]
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rc e' solving studies and opportunities for ) graduate study. This advanced Pin 9 Walter A. Schlotterbeck Alva O. Way qualifies participants in the full spectrum Senior vice President. Senior Vice President. Finance of technicalwork-producing new and General Counsel and Secretary improved products, and developing and applying processes, systems, and state-of-the-art technologies. Program graduates are prepared for future tech- } } [v]L*) 1 <3 1 ILI nological leadership in the Company. . Professional Employee Management Course (PEM). This course is designed to provide direction for newly-appointed GE managers in helping their professional employees pursue careers that lead to increased contribution, achievement and personal satisfaction. 27 The General Electnc investor ,tgX* i 2
Management Corporate Policy Board Reginald H. Jones Walter D. Dance Jack S. Parker Chairmanof the Board and Vice Chairman of the Vice Chairman of the Chief Executive Officer Board and Executive Board and Executive Officer Officer Arthur 'A. Bueche Robert R. Frederick Rober' J. Kurtz Leonard C. Maler, Jr. Walter A. Schlotterbeck Senior Vice President Senior Vice President Senior Vice President Senior Vice President Senior Vice President Corporate Technology Corporate Planning and Corporate Production Corporate Relations General Counsel and Development and Operating Services Secretary Sector Executives John F. Burlingame Stanley C. Gault Edward E. Hood, Jr. Senior Vice Presiaent Senior Vice President and Sector Executive Senior Vice President and Sector Executive and Sector Executive industrial Products and Components Sector Technical Systems and Materials Sector international Sector Operations International Sector Industrial Products and Components Sector Technical Systems and Materials Sector James R. Dirle James P. Curley Ralph B. Glotzbach Charles R. Carson Fred O. MacFee, Jr. VP & General Manager VP & Group Executive VP-Industrial Products VP & Group Executive VP & Group Executive Far East Area Division Industrial Products Group and Components Engineered Materials Aircraft Engine Group Willis E.Forsyth Eugene J. Kovarik Customer and Industry Group VP & General Manager VP & General Manager Reladons Operadon Robert H. Goldsmith Donald E. Debacher VP-Aircraft Engine Latin American Operations Motors and Drives Kertis P. Kuhlman VP-Special Projects Strategic Planning Division VP & General Manager Frank D. Kittredge Donald K. Grierson nd Development VP & General Manager William Longstreet General Electric Supply Latin American Business VP & General Manager Company Division VP & General Manager Operation Metallurgical Division James N. Krebs Development Division Contractor Equipment James M. Mcdonald Glen H. Hiner VP & General Manager Paolo Fresco Division VP & General Manager VP & General Manager Van W. Williams Apparatus Distribution General Manager Military Engine Sales Division Plastics Division Projects Division Africa / Middle East Area VP & Group Executive Danid J Fink Raymond F. Letts Division Component Products Donald E. Perry Alastair C. Gowan Group VP & General Manager VP & Group Executive y & General Manager VP & General Manager George 8. Farnsworth Industrial Sales Division Aerospace Group A!rcraft Engine,,, Manufacturing Division Europe Area Division VP & General Manager Carl J. Schlemmer Lee L Farnham Brian H. Howe E "9 George J. Stathakis Appliance Components VP & General Manager VP & General Manager ce VP & General Manager Division Transportation Systems Aircraft Engine,, Division Charles W. George Engineering Division International Trading Erwin M. Koeritz Services Operations VP & General Manager Peter C. Van Dyck VP & General Manager Louis V.Tomasetti Ai t Equipment Kristian H. Christiansen Electronic Components VP & General Manager VP & General Manager Division Apparatus Service Di VP & General Manager Airlin.e Programs Export Safes and Division Otto Klima Davision (& n]a 0nf Edward Wolf Services Division 9 , E Edward F. Roache mental Systems Division WArcrau En@e VP & General Manager Project and Technology international Thomas 1. Paganelli Assessment Construction Division &G ai M " g r James E. Worsham gg ysems Alton S. Cartwright Division VP & General Manager Chairman of the Board & Commercial Engine Chief ExecutiveOfficer Donald S. Bates Programs Division Canadian General VP & General Manager Electric Company information Services Walter L. Robb Limited (an affiliate of Division VP & General Manager Medical Systems Division General Electric) Christopher T. Kastner VP & General Manager Mobile Communications Division Corporate Stati O'ficers Michael G. Allen R. Howard Annin, Jr. Thomas R. Casey, M.D. Lester W. Dettman Frank P. Doyle VP-Corporate VP-Northeastern VP & Company VP-East Central VP-Corporate Employee Strategy Regional Relations Medical Director Regional Relations Relations Theodore P. LeVino Edward H. Malone Terence E. McClary John B. McKitterick Charles J. Meloun VP-Executive VP-Trust Investments VP-Corporate Financial VP-Corporate VP-Central Regional Manpower Operation Administration Development Relations Donald D. Scarff Roland W. Schmitt Cecil S. Semple Thomas O.Thorsen RJssell E. Whitmyer VP-Atlantic Regional VP-Corporate Research VP-Corporate VP & Comptroller VP & Treasurer Relations and Development Customer Relations 2302 1.22 28 Annual Report 1978
Utah internationalinc. Edmund W. Littlefield Chairman of the Board Alva O.Way Senior Vice Prcsident Finance Thomas A.Vanderslice John F. Welch, Jr. Alexander M. Wilson Senior Vice President and Sector Executive Senior Vice President and Sector Executive President and Chief Executive Officer Power Systems Sector Consumer Products and Services Sector Power Systems Sector Consumer Products and Services Sector Utah International Inc. Roy H. Beaton Donald C. Berkey James A. Baker Richard O.Donegan Alf E.Brandin John H. Moore VP & Group Executive VP & General Manager VP & Group Executive VP & Group Executive Senior VP & Manager President. Ladd Nuclear Energy Group Energy Systems and Lighting Group Major Appliance Group Land Development Petroleum Corporation (a subsidiary of Utah) Technology Division Paul L. Dawson Donald S. Beilman James T. Curry William A. Anders VP & General Manager Richard W. Kinnard VP & General Manager VP & General Manager Financial VP & Keith G.Wallace Nuclear Energy VP & General Manager Lamp Components Major Appliance Treasurer SeniorVP & Manager Austrafasia Division Products Division Switchgear and Division Applied Research ' Leonard Distribution Transformer and Engineering Division he Pr s A. Philip Bray Ralph D. Ketchum ivision SeniorVP & Manager VP & General Manager VP & General Manager Robert E. Fowler, Jr. J. Boyd Nielsen Australian Operations Nuclear Energy Arthur E. Peltosato Lamp Products Division VP & General Manager VP & Controller Projects Division VP-Special Projects Donald W. Lynch Major Appliance,,, Manufacturing Division Charles K. McArthur VP & General Manager Henry E. Stone Bruce O. Roberts VP & General Manager Senior V & Manager VP & General Manager VP & General Manager Air Conditioning Division Richard T. Gratton Utah Development Mining ivision Nuclear Energy Large Transformer Paul W. Van Orden VP,& General Manager Company (a subsidiary Engineering Division Division Major Appliance Boyd C. Paulson of Utah) VP & General Manager Sales and Distnbut. ion Vice President Bertram Wolfe Edward W. Springer Houseware: ~1 Audio Operations George W.Tarleton VP & General Manager General Manager Division Arthur E. Andres VP & Manager. Mineral Nuclear Energy Electric Utility Sales John W. Stanger Programs Division Division VP & General Manager Products Marketing President & Major Appliance Robert O.Wheaton Herman R. Hill William R.Tackaberry General Manager ContractSales D v..i ision VP & Group Executive VP-Power Systems General Electric Credit VP & Manager Turbine Group Customer and Industry Corporation (GECC) William B. Clemmens Exploration Relations Operation (an affil: ate of General VP-Major Appliance Electric) Customer and Industry P& e era Janager Charles C. Thomas Reladons Operation Large Steam Turbine. VP & General Manager Lawrence A.Bossidy Generator Division Installation and Service VP & General Manager Philip J.Drieci Engineering Division GECC Commercial and VP & General Manager '"dustrial Financing Major Appliance & e ra Aa ager -wsion had Sales Nsion Industrial and Marine Steam Turbine Division Raymond F. Pettit Wayman O.Leftwich,Jr. VP & General Manager VP & General Manager hn ha GECC Consumer Major Appliance gG e er nandng Dmsion MaMng Nsion Gas Turbine Division Thomas K. Edentield William B. Frogue Marion S.Kellogg Harry M. Lawson Bruce T.Mitchell J. Glibert Selway VP-Southeastern VP-Southwestern VP-Corporate \\P-Western Regional Secretary General Counsel Regional Relations Regional Relation: Consulting Services Relations Douglas S. Moore J. Russell Mudge Gerhard Neumann Phillips S. Peter VP-Corporate Public VP-Corporate VP-Special Projects VP-Washington Relations Operating Services Coroorate Office James F. Young VP-Technic?l 2302 123 " " "' c ~ 1, 3.. The General Electric Investor 29
Financialissues Corporate governance covers many ac-reporting of financial results and informa-for business growth and jobs. tivities which encompass financial ac - tion essential to informed decision-mak-Accounting procedures are being de-counting and reporting. Debate continues ing by investors. Responsible financial valoped to help measure the impact of over such issues asindependence of reporting is a shared interest among those inflation. However, existing tax policy on public accountants, adequacy of financial having a stake in the progress of your depreciation of plant and equipment does reporting, and responsibility for establish-Company. We intend to remain at the fore-not adequately address the economic ing accounting standards. front of high-quality financial reporting. consequences of inflation on capital The fundamental questicn is whether We also believe that the responsibility formation. continued business-initiated ef forts will for establishing standards of financial In General Electric's case, the hidden do the job, or whether additional Govern-accounting and reporting should be kept impact of inflation is reduced by use of ment regulation is required. in the private sector. GE management vig-LIFO accounting for approximately 80% A current financialissueis whether orously supports the Financial Accounting of inventories. For plant and equipment some services provided by public ac-Standards Board and its procedures, no similar tax allowable practice is per-countants are incompatible with the pri-which we feel contribute significantly to mitted. Using the Securities and Exchange mary audit function and thus compromise even-handed accountino und reporting Commission's replacement cost ap - audit firm independence. standards. proach, depreciation expense for your The AICPA's independent Commission Company in 1978 would have been about on Auditors' Responsibilities concluded, Regulation of the private sector by $310 million greater than amounts re-based on its research, that the facts did not Government in the U.S. has been accel-flected in reported financial results, com-justify a restriction of such services but erating at an alarming pace. Conservative pared with S290 million for 1977. In gen-that management should report on their estimates by the Center for the Study of eral, funds necessary to replace these nature in general response to questions American Business at Washington Uni-shortfalls must come entirely from af ter-raised by those concerned. Subsequently, versity put private sector costs to comply tax profits or from the infusion of capital. the Securities and Exchange Commission with Federal regu'ations at about $98 General Electric spent $1,055 million issued regulations requiring such dis-billion for fiscal 1979. Added to that is for plant and equipment additions in 1978, closure in 1979 proxy statements. another $4.8 billion to operate the regula-some 28% rrore than a year earlier. The As discussed elsewhere in this Report, tory agencies themselves. These com-Company's resource allocation proce-the Audit Committee of the GE Board of bined costs increased 58% since 1976. dures take into account the need to maxi-Directors reviews with the independent There are serious questions about the mize the real return on these expenditures. public accountants the scope of regular ability of U.S. business to underwrite. as audit work as well as the type and extent rapidly as is being required, the increasing The tax burden of your Company,includ-of their"non-audit" services performed levels of resources committed to comply-ing affiliates, amounted in 1978 to over for General Electric. In 1978, these serv-ing with Government regu!ations. The pres-S1.4 billion, consisting of payments and ices consisted of such items as tax return sure of these expenditures on a pervasive accruals for Federal, state, local and for-preparation and consultation, reviews inflation rate, combined with their negative eign income taxes; Social Security taxes; and development of computer systems, impact on badly needed productivity im-other taxes such as those on property; audits of employee benefit plan trusts, and provernents, are legitimate concerns. and certain export duties. In the aggre-acquisition reviews.The Audit Committee General Electric management will con-gate, this tax cost equaled 7.3% of net determined that performance of these tinue to represent these concerns while sales billed, somewhat higher than Com-services could not reasonably have af-participating in the regulatory rule-making pany after-tax earnings of 6.3%. fected the independence of Peat, Marwick, process. Taxes are also paid by our employees Mitchell & Co.'s regular audit work for GE. on salaries and wages, share owners on in our view, concern about the impact Capital formation and the related impacts dividends, suppliers of materials and serv-of "non-audit" services on auditor inde-of inflation and tax policy have been com-ices utilized in Company operations, and, pendence is exaggerated. However, since mented on in the Company's previous in many cases, by customers on their pur-the credibility of auditors is vital ts investor Annual Reports. The issues are worth chase and use of Company products. The confidence, we hope the information now repeating. magnitude of the totalof these taxes shows being provided by public companies, For the individual taxpayer, inflation the significant contribution the Company coupled with board of director review, will boosts earnings into higher tax brackets, and its principal constituencies make to work to lay this issue to rest. reduces or eats into savings, and in-the funding of Government. With respect to financial reporting by creases the costs of most goods and serv-Taxes today do far more than pay for public companies, we believe that con-ices. For the corporation, the impact is the cost of Government. They affect the siderable progress is being made. At much the same. As a result, realearnings whole base of the economy. Because of General Electric, we continue to stress a are often much lower than reported by this critical impact, all citizens should strong system of internal financial con-conventional accounting procedures, and remain informed about taxation and the trols, as discussed in the Report of Man-the real return on investment falls below expenditure programs of Government and agement on the opposite page, and timely levels needed to provide adequate capital make their views known. 30 Annual Report 1978 i is i
Report of management To the Share Owners of to change. Perhaps the most important mittee, without management present, to General Electric Company safeguard in this system for share owners discuss the results of their audit work and is the fact that the Company has long their opinions on the adequacy of internal We have prepared the accompanying emphasized the selection, training and financial controls and the quality of finan-statement of financial position of General development of professionalfinancial cial reporting. Electric Company and consolidated affili-managers to implement and oversee the Your management has long recognized ates as of December 31,1978 and 1977, proper application of its internal controls its responsibility for conducting the Com-and the related statements of earnings, and the reporting of management's pany's affairs in a manner which is respon-changes in financial position and changes stewardship of corporate assets and main-sive to the ever-increasing complexity of in share owners' equity for the years then tenance of accounts in conformitywith society. This responsibility is reflected ended, including the notes and industry generally accepted accounting principles. in key Cornpany policy statements re-and geographic segment information. Theindependent public accountants garding. among other things, potentially The statements have been prepared in provide an objective, independent review conflicting outside business interests of conformity with generally accepted ac-as to management's discharge of its re-Company employees, proper ccaduct of counting principles appropriate in the sponsibilities insofar as they relate to the domestic and international business ac-circumstances, and include amounts that fairness of reported operating results and tivities, and compliance with antitrust laws. are based on our best estimates and judg-financial condition. They obtain and main-Educational, communication and review ments. Financial information elsewhere tain an understanding of GE's accounting programs are designed to ensure that in this Annual Report is consistent with and financial controls, and conduct such these policies are clearly understood and that in the financial statements. tests and related procedures as they deem that there is awareness that deviation from Your Company maintains a strong sys-necessary to arrive at an opinion on the them will not be tolerated. tem of internal financial controls and pro-fairness of financial statements. cedures, supported by a corporate staff The Audit Committee of the Board of / of traveling auditors and supplemented by Directors, composed solely of Directors resident auditors located around the from outside the Company, meets with the Cha a f the c world. This system is designed to provide independent public accountants, man. e e reasonable assurance, at appropriate agement and internal auditors periodically cost, that assets are safeguarded and that to review the work of each and ensure that N transactions are executed in accordance each is propsly discharging its respon-with management's authorization and re-sibilities. (See Audit Committee report corded and reported properly. The system on page 25.) The independent public Senior Vice President, Finance is time-tested, innovative and responsive accountants have f ree access to this Com-February 16,1979 Report of independent certified public accountants To the Share Owners and Board of Directors of in our opinion, the aforementioned financial statements General Electric Company present fairly the financial position of General Electric Com-pany and consolidated affiliates at December 31,1978 and We have examined the statement of financial position of 1977, and the results of their operations and the changes in General Electric Company and consolidated affiliates as of their financial position for the years then ended, in conformity December 31,1978 and 1977, and the related statements of with generally accepted accounting principles applied on a consistent basis. earnings, changes in financial position and changes in share owners' equity for the years trien ended. Our examinations were made in accordance witidenerailMepted auditing ,[ Md standards, and accordingly included suc$ tbsts of the ac-t hell & Co counting records and such other auditing procedures as we [r e considered necessary in the circumstances. February 16,1979 2302 125 The General Electnc Investor 31
Statement of earnings General Electric Company and consolidated affiliates For the years ended December 31 (In millions) 1978 1977 iniorNNon Sales of products and services to customers. $19,653.8 $17,518.6 note 1 Operating costs note 2 Employee compensation, including benefits. 7,401.3 6,555.5 note 3 Materials, supplies, services and other costs. 9,866.7 8,753.9 Depreciation, depletion and amortization 576.4 522.1 Taxes, except those on iricome 250.6 239.0 increase in inventories during the year (399.1) (249.9) 17,695.9 15,820.6 Operating margin. 1,957.9 1,698.0 Other income. 419.0 390.3 note 4 Interest and other financial charges. (224.4) (199.5) note 5 Earnings before income taxes and minority interest. 2,152.5 1,888.8 Provision for incorne taxes. (893.9) (773.1) note 6 Minority interest in earnings of consolidated affiliates. (28.9) (27.5) Net earnings applicable to common stock. $ 1,229.7 $ 1,088.2 Earnings per common share (in dollars). $5.39 $4.79 note 7 Dividends declared per common share (in dollars). $2.50 $2.10 Operating margin as a percentage of sales. 10.0 % 9.7 % Net earnings as a percentage of sales. 6.3 % 6.2 % The information on pages 31 and 36-44 is an integral part of this statement. 2302 126 be 32 Annual Repod 1978
Statement of financial position General Electric Company and consolidated affiliates Additional At December 31 (In millions) 1978 1977 information Assets Cash $ 1,992.8 $ 1,717.9 note 8 Marketable securities 470.3 560.3 note 8 Current receivables. 3,288.5 2,982.7 note 9 inventories 3,003.4 2,604.3 note 10 Curren) assets. 8,755.0 7,865.2 Property, plant and equipment. 8,328.2 7,514.5 note 11 Accumulated depreciation, depletion and amortization. (4,305.6) (3,930.4) note 11 4,022.6 3,584.1 note 11 Investments 1,410.5 1,433.3 note 12 Other assets - 847.9 814.2 note 13 Total assets. S15,036.0 S13,696.8 Liabilities and equity Shor'-term borrowings S 960.3 772.1 note 14 Accounts payable 1,217.2 1,021.4 Progress collections and price adjustments accrued. 1,667.3 1,369.7 Dividends payable 147.6 125.1 Taxes accrued. 532.6 619.9 Other costs and expenses accrued. 1,650.2 1,508.8 note 15 Current liabilities 6,175.2 5,417.0 Long-term borrowings 993.8 1,284.3 note 16 Other liabilities. 1,129.5 921.2 Total liabilities 8,298.5 7,622.5 Minority interest in equity of consolidated affiliates. 150.8 131.4 Preferred stock ($1 par value; 2,000,000 shares authorized; none issued) Common stock ($2.50 par vplue; 251,500'/)00 shares authorized: 231,463,949 shares issNd 197tf,231,4IO,196 shares issued 1977) 578.7 578.5 Amounts received for stock in excess of par value. 658.0 668.4 Retained earnings 5,522.4 4,862.5 6,759.1 6,109.4 Deduct common stock held in treasury. (172.4) (166.5) Total share owners' equity. 6,586.7 5,942.9 notes 17 and 18 Totalliabilities and equity. S15,036.0 $13,696.8 Commitments and contingent liabilities. note 19 The information on pages 31 and 36-44 is an integral part of this statement. 2302 127 The General Electnc investcr 33
Statement of changes in financial position General Electric Company and consolidated affiliates For the years ended December 31 (In millions) 1978 1977 Source of funds From operations Net earnings $1,229.7 $1,088.2 Less earnings retained by nonconsolidated finance affiliates. (15.7) (14.6) Depreciation, depletion and amortization 576.4 522.1 Income tax timing differer'ces. 31.9 (73.4) Minority interest in earnir gs of consolidated affiliates. 28.9 27.5 1,851.2 1,549.8 increases in long-term borrowings. 95.5 90.3 Newly issued common stock 2.6 54.1 Disposition of t Tsury shares. 189.8 51.9 Increase in current payables other than short-term borrowings. 570.0 651.1 Decrease in investments 22.8 Other - net. 176.3 222.6 Total source of tunds 2.908.2 2,619.8 Application of funds Additions to property, plant and equipment 1,055.1 822.5 Dividends declared on common stock. 569.8 476.9 increase in investments. 147.0 Reduction in long-term borrowings 386.0 128.3 Purchase of treasury shares. 195.7 25.9 Increase in current receivables. 305.8 265.4 Increase in inventories 399.1 249.9 Total application of funds 2,911.5 2,115.9 Net change in cash, marketable securities, and short-term borrowings. S (3.3) S 503.9 Analysis of net change in cash, marketable securities, and short-term borrowings increase in cash and marketable securities S 184.9 $ 664.9 (Increase) in short-term borrowings (188.2) (161.0) S (3.3) S 503.9 The information on pages 31 and 36-44 is an integral part of this statement. 2302 128 s 34 Annual Report 1978
Statement of changes in share owners' equity General Electric Company and consolidated affiliates For the years ended December 31 (Dollar amounts in millions) 1978 1977 1978 1977 Common stock issued (Thousands of shares) Balance January 1 $ 578.5 $ 575.9 231,410 230,369 New shares issued: 0.2 91 Stock options and appreciation rights. Employee savings plans. 0.2 2.4 54 950 Balance December 31 578.7 578.5 231,464 231,410 Amounts received for Stock in excess of par value Balance January 1 668.4 618.3 Excess over par value of amounts received for newly issued shares 2.4 51.5 Loss on disposition nf treasury stock. (12.8) (1.4) Balance December 31 658.0 668.4 Retained earnings Balance January 1 4,862.5 4,251.2 Net earnings 1,229.7 1,088.2 Dividends declared on common stock (569.8) (476.9) Balance December 31 5,522.4 4,862.5 Common stock heldin treasury Balance January 1 (166.5) (192.5) (3,249) (3,748) Purchases (195.7) (25.9) (3,838) (491) Dispositions: Employee savings plans. 116.1 45.6 2,223 859 incentive compensation plans. 8.0 6.3 147 131 Stock options and appreciation rights. 7.0 134 Business acquisitions 58.7 1,155 Balance December 31 (172.4) (166.5) (3,428) (3,249) Total share owners' equity December 31 S6,586.7 SS,942.9 228,036 228,161 The information on pages 31 and 36 44 is an integral part c,f this statement. t i h 2302 129 ~3' The General Electric investor 35
Summary of significant accounting policies Basis of consolidation Investment tax credit The financial statements consolidate the accounts of the The investment tax credit is recorded by the " deferral parent General Electric Company and those of all majority-method." Under this method, the credit is amortized as a re-owned and controlled companies (" affiliated companies"), duction of the provision for taxes over the lives of the facilities except finance companies whose operations are not similar to to which the credit applies, rather than being " flowed those of the consolidated group. All significant items relating through" to income in the year the asset is acquired. to transactions among the parent and affiliated companies are eliminated from the consolidated statements. Inventories The nonconsolidated finance companies are included in the Substantially all manufacturing inventories located in the statement of financial position under investments and are United States are valued on a last-in first-out, or LIFO, basis. valued at equity plus advances. In addition, companies in Manufacturing inventories outside the U.S. are generally val-which GE and/or its consolidated affiliates own 20% to 50% ued on a first-in first-out, or FIFO, basis. Valuations are based of the voting stock (" associated companies") are included on the cost of material, direct labor and manufacturing over-underinvestments, valued at the appropriate share of equity head, and do not exceed net realizable values. Certain indirect plus advances. After-tax earnings of nonconsolidated finance manufacturing expenses are charged directly to operating compar:ies and associated companies are included in the costs during the period incurred, rather than being inventoried. statement of earnings under other income. Mining inventories, which include principally mined ore and A nonconsolidated uranium mining company (see note 12) coal, metal concentrates and mining supplies, are stated at is also included under investments and is valued at cost. the lower of average cost or market. The cost of mining inven-tories includes both direct and indirect costs consisting of Sales labor, purchased supplies and services, and depreciation, The Ccmpany and its consolidated affiliates record a transac-depletion and amortization of property, plant and equipment. tion as a sale only when title to products passes to the cus-tomer or when services are performed in accordance with Property, plant and equipment contract terms. Manufacturing plant and equipment includes the original cost of land, buildings and equipment less depreciation, which is Vacation expense the estimated cost consumed by wear and obsolescence. An Most employees earn credits during the current year for vaca-accelerated depreciation method, based principally on a tions to be taken in the following year. The expense of this sum-of-the-years digits formula, is used to record deprecia-liability is accrued during the year vacations are earned rather tion of the original cost of manufacturing plant and equipment than in the year vacations are taken. purchased and installed in the United States subsequent to 1960. Acquisitions prior to 1961, and most manufacturing Pensions plant and equipment located outside the United States, are Investments of the General Electric Pension Trust, which depreciated on a straight-line basis. If manufacturing plant funds the obligations of the General Electric Pension Plan, are and equipment is subject to abnormal economic conaitions or carried at amortized cost plus programmed appreciation in obsolescence, additional depreciation is provided. Expendi-the common stock portfolio. Recognition of programmed tures for maintenance and repairs of manufacturing plant and appreciation is carried out on a systematic basis which does equipment are charged to operations as incurred, not give undue weight to short-term market fluctuations. The cost of mining properties includes initial expenditures Programmed appreciation will not be recognized if average and cost of major rebuilding projects which substantially book value, calculated on a moving basis over a multiyear increase the usefullives of existing assets. The cost of mining period, exceeds average market value. properties is depreciated, depleted or amortized over the The funding program for the Pension Trust uses 6% as the usefullives of the related assets by use of unit-of-production, estimated rate of future income. This rate includes systematic straight-line, or declining-balance methods. recognition of appreciation in the common stock portfolio. Mining exploration costs are expensed untilit is determined Unfunded prior service liabilities of the Trust are amortized that the development of a mineral deposit is likely to be eco-over 20 years. Net actuarial gains and losses are amortized nomically feasible. After this determination is made, all costs over 15 years, related to further development, including financing costs of Costs of a separate, supplementary pension plan, primarily identifiable new borrowings associated with the development affecting long-service professional and managerial em-of new mining projects, are capitalized. Amortization of such ployees, are not funded. Oun ent service costs and amortiza-costs begins upon commencement of production and is over tion of prior service costs over a period of 20 years are being ten years or the productive life of the property, whichever charged to Company operating costs currently. . j' I,,(' jg lg33, Oil and gas properties are accounted for by use of the full cost method. 36 Annual Report 1978
Notes to financial statements 1978 and 1977, respectively. Estimated market value of Trust
- 1. Sales assets at the end of 1978 was $4,202 million and $3,734 million Approximately one-eighth of sales were to agencies of the at the end of 1977.
U.S. Government, which is the Company's largest single cus-Financial statements of the Pension Trust appear below. tomer. The principal source of these sales was the Tech-nical Systems and Materials segment of the Company's General Electric Pension Trust business. (in minions) 1978 1977 Operating statement
- 2. Operating costs Total assets at January 1 S3.818.7
$3,386.1 Operating costs as classified for reporting to the Securities Company contributions 316.6 279.8 and Exchange Commission are shown below. Employee contributions 83.3 67.9 399.9 347.7 s, West and sun @ncome 23 0 R8 (in rndhons) 1978 1977 Common stock appreciation: Cost of goods sold $14.411.3 $12,744.4 Realized 0.7 11.1 Accrued 75.9 57.1 Selling, general and administrative expenses 3.284 6 3,076.2 Total programmed 76.6 68.2 S17,695.9 $15,820.6 Pensions paid (201.2) (175.1) Total assets at December 31 $4,328.9 $3.818.7 Supplemental details are as follows: Financial position-December 31 U.S. Government obligations and (in mdlions) 1978 1977 guarantees S 103.5 S 141.7 Corporate bonds, notas and mineral Maintenance and repairs $671.5 S599.4 interests 356.0 322.5 Company-funded research and Real estate and mortgages 770.0 735.8 development 520.8 409.2 Common stocks and convertibles 2,781.5 2,431.0 Social decurity taxes 397.0 335.0 4,011.0 3,631.0 Advertising 247.4 219.0 Cash and short-term investments 240.2 141.0 Rent 198.0 156.1 Other assets - net 77.7 46.7 Mineral royalties and export duties 78.8 85.2 Total assets S4.328.9 $3,818.7 The 1977 amount shown above for Company-funded research Funded liabilities: and development reflects reclassification of amounts re-Liability to pensioners $1,638.7 S I,507.7 ported previously, based on extensive review to refine the dis-Liability for pensions to participants not yet retired 2.690.2 2,311.0 tinction between expenditures primarily of an engineering Total funded liabilities 54.328.9 S3,818.7 modification and improvement nature and those of a research and development nature. Costs of the separate supplementary pension plan were Foreign currency translation gains, after recognizing related $35.3 million in 1978 and $12.3 million in 1977. Unamortized income tax effects and minority interest share, were $12.1 li bilities for this supplementary plan were $243 million and $88 million in 1978 and 57.2 million in 1977. million at December 31,1978 and 1977, respectively. Amend-ments to the supplementary pension plan effective January 1, 1978, and changes in Social Security benefits resulted in an
- 3. Employee benefits increase in the unamortized liabilities of approximately $151 General Electric and its affiliates have a number of pension
- IIIIO"-
plans, the total Company cost of which was $381.4 million in 1978 and $319.2 million in 1977. The most significant of these Utah has separate pension plans which are substantially fully funded and the costs of which are included in the total plans is the General Electric Pension Plan, in which substan-tially a!! employees in the U.S. are participating. Obligations of Company costs reported above. the Pension Plan are funded through the GE Pension Trust. Incentive compensation plans were participated in by over 3,000 key employees. Amounts included in costs and ex-Earnings of the Trust, including the programmed recogni-penses for incentive compensation were $47.8 million in 1978 tion of appreciation, as a percentage of book value of the port-and $44.4 million in 1977. folio were 7.8% for 1978 and 7.4% for 1977. Unfunded liabilities of the Trust were estimated to be $639 million at December 31,1978, compared with $732 million at b l}l the end of 1977. Unfunded vested liabilities included in these amounts were $534 million and $596 million at December 31, The General Electric Investor 37 L
Effect of timing differences on U.S.
- 4. OtherIncome Federalincome taxes iS"crNs Necrease) in provision for income taxes (in millions) 1978 1977 1978 1977 Net earnings of GE Credit Corporation S 77.3
$ 67.2 Tax over book depreciation S 25.5 5 19.0 Income from: Undistributed earnings of affiliates Marketable securities and ban k deposits 140.4 88.2 and associated companies 8.0 19.1 Customer financing 48.6 46.5 Margin on installment sales (10.1) (12.4) Associated companies and noncon-Provision for warranties (31.1) (27.1) solidated uranium mining affiliate 33.7 62.2 Other-net (5.8) (21.9) Royalty and technical agreements 44.3 49.5 $(13.5) S(23.3) Otherinvestments: Interest 18.6 19.0 The cumulative net effect of timing differences has resulted in a deferred-tax asset which is shown under other assets. Ot sund items 6 70 $419.0 $390.3 Reconciliation from statutory to effective income tax rates Other sundry items incit de gains from sales of marketable equity securities of 56.5 million in 1978 and S22.3 million 1978 1977 in 1977. U.S. Federal statutory rate 48.0 % 48.0 % Reduction in taxes resulting from:
- 5. Interest and other financial charges Concolidated affiliate earnings (including Amounts applicable to principal items of long-term borrow-DISC) subject to aggregate effective ings were $98.0 million in 1978 and $94.4 million in 1977.
tax rates generally less than 48% (3.4) (2.6) Inclusion of earnings of the Credit Corporation in before-tax income
- 6. Provision forincome taxes on an "after-tax" basis (1.7)
(1.8) (in millions) 1978 1977 income tax at capital gains rate (0.6) (0.7) U.S. Federal income taxes: Other - net 0.4 (0.9) Estimated amount payable $590.4 5526.3 Effective tax rate 41.5 % 40.9 % Effect of timing differences (13.5) (23.3) !nvestment credit deferred - net 24.9 23.7 601.8 526.7
- 7. Earnings per common share Foreign income taxes:
Earnings per share are based on the average number of Estimated amount payable 221.1 272.1 shares outstanding. Any dilution which would result from the Effect of timing differences 45 4 (50.1) potential exercise or conversion of such items as stock 266.5 222.0 options or convertible debt outstanding is insignificant (less Other (principally state and local than 1 % in 1978 and 1977). income taxes) 25.6 24.4 $893.9 5773.1
- 8. Cash and marketable securities All U.S. Federal income tax returns have been closed through Time deposits and certificates of deposit aggregated $1,746.8 1971.
mi!! ion at December 31,1978, and $1,537.1 million at Provision has been made for Federal income taxes to be December 31,1977. Deposits restricted as to usage and with-paid on that portion of the undistributed earnings of affiliates drawal or used as partial compensation for short-term borrow-and associated compames expected to be remitted to the par-ing arrangements were not material. ent company. Undistributed earnings intended to be reinvested Marketable securities (none of which are equity securities) indefinitely in affiliates and associated companies totaled $815 are carried at the lower of amortized cost or market value. million at the end of 1978 and $650 million at the end of 1977. Carrying value was substantially the same as market value at Changes in estimated foreign income taxes payable and in year-end 1978 and 1977. Included at year-end 1978 were U.S. the effect of timing differences result principally from in-treasury obligations of $393.7 million ($371.4 million in 1977). creased foreign carnings and tax rates, and from recognizing in 1978 for tax payment purposes the results of transactions
- 9. Current receivables in Australia and Canada recorded for financial reporting pur-poses in other periods.
(in millions) December 31 1978 1977 Investment credit amounted to $50.7 million in 1978, com-Customers' accounts and notes $2.922.3 S2,576.0 pared with S43.4 million in the prior year. In 1978, S25.8 million Associated companies 27.8 88.5 was added to net earnings, compared with S19.7 million in Nonconsolidated affiliates 2.8 1.6 1977. At the end of 1978, the amount still deferred and to be Other 414.1 384.2 included in net earnings in future years was $162.0 million. 3.367.0 3,050.3 Less allowance for losses (78.5) (67.6) 53,288.5 52,982.7 02 132 38 Annual Report 1978
Condensed consolidated financial statements forthe General
- 10. Inventories Electric Credit Corporation (the principai nonconsolidated (in miillons)
December 31 1978 1977 finance affiliate) are shown below. More detailed information is available in General Electric Credit Corporation's 1978 Raw materials and workin process $1,802.3 $1,629.0 Annual Report, copies of which may be obtained by writing to: Finished goods 943.0 808.9 General Electric Credit Corporation, P.O. Box 8300, Stamford, Unbilled shipments 258.1 166.4 Conn.06904. 53.003.4 $2.604.3 General Electric Credit Corporation About 80% of totalinventories are in the United States. Financial position If the FIFO method of inventory accounting had been used (in millions) December 31 1978 1977 by the Company, inventories would have been $1,519.0 million higher than reported at December 31,1978 ($1,294.9 Cash and marketable securities $ 367.5 $ 278.6 million higher than reported at December 31,1977). Receivables: Time sales and loans 5,898.7 4,914.8 Deferred income (843.9) (686.7)
- 11. Property, plant and equipment 5,054.8 4,228.1 Investment in feases 1,031.7 922.1 (in millions) 1978 1977 Sundry receivables 78.1 67.0 Major classes at December 31:
Total receivables 6,164.6 5,217.2 Manufacturing plant and equipment Allowance for losses (199.3) (178.1) Land and improvements $ 123.5 $ 121.0 Net receivables 5,965.3 5,039.1 Buildings, structures and related Other assets 325.9 217.0 I assets $6.6583 M343 Mach ery a d equipment 7 70 4 Notes payable: Leasehold costs and manufacturing plant under construction 232.4 166.5 Due within one year $2,953.0 $2,345.1 Mineral property, plant and Long-term - senior 1,571.1 1,382.8 equipment 1,251.5 1,043.1 - subordinated 325.5 325.5 $8,328.2 $7.514.5 Other liabilities 513.7 361.4 Cost at January 1 $7,514.5 $6,954.8 Total liabi'ities 5 363.3 4,414.8 Additions 1,055.1 822.5 Deferred income taxes 618.9 520.7 Dispositions (241.4) (262.8) Capital stock 443.7 381.9 Cost at December 31 $8,328.2 $7,514.5 Additional paid-in capital 11.5 11.5 Retained earn!ngs 221.3 205.8 Accumulated depreciation, depletion Equity 676.5 599.2 and amortization Totalliabilities, deferred income Balance at January 1 $3.930.4 $3,598.4 taxes and equity $6.658.7 $5.534.7 Current-year provision 576.4 522.1 Dispositions (191.1) (174.0) Current and retained earnings Other changes (10.1) (16.1) (In millions) For the year 1978 1977 Balance at December 31 $4.305.6 $3,930.4 Earned income $ 813.6 $ 656.6 Property, plant and equipment less Expenses-depreciation, depletion and amortization at December 31 -$4,022.6 $3,584.1 Interest and d.iscount 336.7 237.8 Operating and administrative 315.1 259.9 Provision for losses-receivables 56.4 76.1 -other assets 8.0 (2.0)
- 12. Investments Provision for income taxes 20.1 17.6 (in millions)
December 31 1978 1977 730.3 589.4 Nonconsolidated finance affiliates S 683.6 5 605.2 ea n n9 e ( S Nonconco!idated uranium mining affiliate 86.7 86.7 Retained earnings at January 1 205.8 192.1 Miscellaneous investments (at cost): Reta.ined earnings at December 31 $ 221.3 $ 205.8 Government and government. guaranteed securities 241.4 269.3 Other 119.1 105.8 Advances to nonconsolidated finance affiliates aggregated 360.5 375.1 S0.7 million at the end of 1978 and 1977. Marketable equity securities: Investment in the nonconsolidated uranium mining affiliate HoneywellInc. 20.4 consists of investment in a wholly-owned affiliate (established Other 37.4 37.7 in the course of obtaining a U.S. Department of Justice Busi-37.4 58.1 ness Advisory Clearance Procedure Letterin connection with Associated companies 257.1 322.8 the 1976 Utah merger) to which all uranium business of Utah Less allowance for losses (14.8) (14.6) has been transferred. All common stock of this affiliate has $1.410.5 $1,433.3 been placed in a voting trust controlled by independent voting trustees. Prior to the year 2000, General Electric and its The General Electric investor 39
affiliates may not withdraw the common stock from the voting trust except for sale to unaffiliated third parties. Directors and
- 14. Short-term borrowings officers of the affiliate may not be directors, officers, or em-The average balance of short-term borrowings, excluding the ployees of General Electric, Utah or of any cf their affiliates.
current portion of long-term borrowings, was $714.8 million Uranium may not be sold by this affiliate, in any state or form, during 1978 (calculated by averaging all month-end balances to, or at the direction of, General Electric or its affiliates. for the year) compared with an average balance of $663.5 All outstanding shares of preferred stock of the uranium million in 1977. The maximum balance included in these cal-affiliate are retained by Utah as an affiliate of General Electric. culations was $747.6 million and $7T-6.3 million at the end of Payment of cumulative quarterly dividends out of legally avail-August 1978 and November 1977, respectively. The average able funds on this preferred stock is mandatory in amounts effective interest rate for the year 1978 was 14.3% and for equal to 85% of the affiliate's net after-tax income for the 1977 was 13.2%. These average rates represent total short-previous quarter (without taking account of any deduction for term interest expense divided by the average balance out-exploration expense as defined). Utah, as holder of the pre-standing. A summary of short-term borrowings and the ferred stock, must make loans with up to 10-year maturities applicable interest rates is shown below. when requested by the affiliate, provided that the aggregate amount of such loans does not at any time exceed preferred Short-term borrowings dividend payments for the immediately preceding two (in millions) December 31 1978 1977 calendar years. The estimated realizable value of miscellaneous invest- ^7 ate at Average ments at December 31,1978, was $350 million ($370 million at Amount Dec.31 AmcJnt DeC 31 December 31,1977). Parent notes with trust Marketable equity securities are valued at the lower of cost departments $302.4 10.24 % $309.0 6 85 % or market. Aggregate market value of marketable equity Consolidated affiliate securities was $173 million and $129 million at year-end 1978 bank borrowings 362.4 20.58 308 0 22.23 and 1977, respectively. At December 31,1978, gross unreal. Other, including current ized gains on marketable equity securities were $136 million. $rj' w"i long-term o s Cost of the investment in HoneywellInc was the appraised $960.3 S772.1 fair value recorded on October 1,1970, when the General Electric information systems equipment business was trans-ferred to Honeywell Information Systems Inc. Parent borrowings are from U.S. sources. Borrowings of con-At December 31,1977, GE held 524,000 shares of solidated affiliated companies are primarily from foreign Honeywell common stock. GE sold all of its remaining 524,000 sources. Current portion of long-term borrowings for 1978 shares of Honeywell common stock in 1978 and sold 1,460,000 incluces General Electric 6% % Debentures ($125.0 million) shares in 1977. Average cost was used to determine the due in July 1979, and Utah 7W % Guaranteed Notes ($20.0 amount of realized gains entering into the determination of million) due in March 1979. Other borrowings include amounts net income. from nonconsolidated affiliates of $59.4 million in 1978 ($65.7 million in 1977). Although the total unused credit available to the Company
- 13. Otherassets through banks and commercial credit markets is not readily On moons)
December 31 1978 f quantifiable, informal credit lines in excess of $1 billion had been extended by approxirhately 100 U.S. banks at year end. Long-term receivables $286.6 S332.7
- 15. Other costs and expenses accrued s r er f n nc ng 10 7 Recoverable engineering costs on The balance at the end of 1978 included comper.3ation and govemment contracts 98.9 65.1 benefit costs accrued of $572.8 million and interest expense Real estate developrnent projectc 79.0 75.0 accrued of $35.2 million. At the end of 1977, compensation Deferred income taxes 75.3 118.0 and benefit costs accrued were $532.7 million and interest Licenses and other intangibles-net 40.9 33.1 expense accrued was $31.5 million.
Other 36.8 30.9 $847.9 $814.2 Licenses and other intangibles ucquired af ter October 1970 are being amortized over appropriate periods of time. 2302 134 40 Annual Report 1978
Borrowings include 4% % Guaranteed Debentures due in
- 16. Long-term borrowings 1987, which are convertible until June 15,1987, into General (In millions)
Sinking fund / Electric common stock at $80.75 a share, and SW % Sterling / Outstanding December 31 1978 1977 da e penod E3.6 million ($7.4 million), convertible from October 1976 into General Electric Company: GE common stock at $73.50 a share. Durinq 1978, General 5 6%% Debentures $ - $ 125.0 1979 None Electric Overseas Capital Corporation 4% /o Guaranteed 5%% Notes 75.0 81.3 1991 1972-90 Bonds having a face value of $1.9 million ($1.9 million in 1977) 5.30% Debentures 100.9 113.3 1992 1973-91 and a reacquired cost of $1.5 million ($1.4 million in 1977) 7% % Debentures 156.5 171.0 1996 1977-95 were retired in accordance with sinking fund provisions. 8% % Debentures 300.0 300.0 2004 1985-03 All other long-term borrowings were largely by foreign and real estate development atiiliates with various interest rates 7
- Gu eed Notes 20.0 1979 None and maturities.
Notes with banks 22.7 104.4 1981 1978-81 Long-term borrowing maturities during the next five years, Assoc. company note 29.1 1986 1981-86 including the portion classified as current, are $215 8 million 8% Guaranteed Sinking in 1979, $80.0 million in 1980, $50.5 million in 1981, $45.9 Fund Debentures 17.8 19.2 1987 1977-87 million in 1982, and $44.0 million in 1983. These amounts are 7.6% Notes 36.0 40.0 1988 1974-88 after deducting reacquired debentures held in treasury for Other 26.2 7.8 sinking fund requirements. General Electric Overseas Capital Corporation: 4% % Bonds 26.9 29.8 1985 1976-84
- 17. Share owners' equity
.0 50.0 1987 None Common stock held in treasury at December 31,1978, in-5 S om cluded 1,629,911 shares for the deferred compensation pro-Guaranteed Loan Stock 7.4 6.8 1993 None visions of incentive compensation plans (1,491,515 shares at Other 37.0 59.0 December 31,1977). These shares are carried at market value All other 137.4 127.6 at the time of allotment, which amounted to $80.0 million and $993.8 $1,284.3 $73.2 million at December 31,1978 and 1977, < espectively. The liability is recorded under other liabilities. Other com-n sM in keasg wM MaM aWst aggmaM The amounts shown in the preceding table are after deduction 1,797,806 and 1,758,055 shares at December 31,1978 and of the face value of securities held in treasury as shown below. 1977, respectively. These shares are held for future corporate requirements, including distributions under employee savings Face value of long-term borrowings in treasury plans, incentive compensation awards and possible ccnver-(In milhons) December 31 1978 1977 sion of General Electric Overseas Capital Corporation convert-ible indebtedness. The maximum number of shares required General Electric Company: 5.30% Debentures $39.1 $36.7 for conversions was 737,725 at December 31,1978 and 1977. 7% % Debentures 29.0 21.8 Corporate requirements of shares for benefit plans and General Electric Overseas Capital conversions may be met either from unissued shares or from Corporation: shares in treasury. 4% % Bonds 6.0 5.1 Retained earnings at year-end 1978 inc!uded approxi-mately $232.4 million representing the excess of eamings of General Electric 5.30% Debentures having a face value of nonconsolidated affiliates over dividends received since their $10.0 million in 1978 and 1977, and a reacquired cost of $7.6 formation. In addition, retained earnings have been reduced million in 1978 and 1977, and General Electric 7W % Deben-by $4.0 million, which represents the change in equity in as-tures having a face value of $7.3 million in 1978 and $7.2 mil-sociated companies since acquisition. At the end of 1977, lion in 1977, and a reacquired cost of $6.6 million in 1978 and these amounts were increases of $216.7 million and $63.2 1977, were retired in accordance with sinking fund provisions. million, respectively. General Electric 5%% Notes having a f ace value of $6.3 mil-tion ($6.2 million in 1977) were retired in accordance with prepayment provisions.
- 18. Stock option plans and performance units Utah International Inc. notes with banks are payable in vary-The plan approved by the share owners in 1978, and previous ing installments to 1981 and were subject to average interest plans under which options remain outstanding, provide con-rates at year-end 1978 and 1977 of 8.4% and 7.7%, respec-tinuing incentives for more than 500 employees. Option price under these plans is the full market value of GE common stock tively.
7 on date of grant. Employees can only exercise options to the Borrowings of GenehafElectric' Overseas Capital Corpora-tion are unconditionally guaranteed by General Electric as to extent that installments have matured, normally annually, over payment of principal, premium if any, and interest. This Cor-a period of fouryears under the 1978 plan and nine years poration primarily assists in financing capital requirements of under prior plans. foreign companies in which General Electric has an equity The 1973 plan provided, and the 1978 plan provides, for interest, as well as financing certain customer purchases. granting stock appreciation rights to holders of options under O (, T s ' i* The General Electric investor 41
present and past plans which permit them to surrender exer- ~ cisable options or a portion of an option in exchange for an Unaudited notes to amount equal to the excess of the market price of the common financial Statements stock on the date the right is exercised over the option price. The Management Development and Compensation Committee (Ccmmittee) of the Board of Directors determines whether this amount will be distributed in GE shares, cash or both. The 1978 plan provides for granting performance units a:. a A. Operations by quarter for 1978 and 1977 (unaudited) means of awarding incentive remuneration to plan participants in lieu of options and stock appreciation righ:s. Performance First Second Third Fourth gii, , m m,ii,on,: units are granted for award periods not exceeding five calendar prin n sm anis m m us) quarter quarter quarter quarter years with an achievable value fixed by the Committee at the 1978-date of grant which does not exueed 90% of the fair market SalAs of products and value of GE common stock on that date. The Committee alsc services to customers $4,443.4 $4,963.8 $4,842.9 $5,433.7 sets principal and minimum targets to be achieved and deter-Operating margin 413.4 520.3 464.1 560.1 mines the value actually assigned to performance units at the Net eamings 247.8 319.4 298.9 363.6 end of the award period in relaticn to the degree to which Net eamings per the principal target has been achieved. Failure to achieve the common share 1.09 1.40 1.31 1.59 minimum target makes the performance unit valueless. Even 1977-if the targets are echieved, performance units will only be paid Sales oi products and when, if, and to the extent the Committee determines to make services to customers $4,063.0 $4,383.3 $4,348.7 $4,723.6 paymerit. No performance units have been paid to dato. Operating margin 356.7 420.1 440.8 480.4 At the end of 1978, there were 3,561,026 shares available Net earnings 215 4 271.9 268.5 332.4 for the 1978 plan and 3,234,404 shares covered by outstand-Net eamings per ing options granted under prior plans, for a total of 6,795,430 common share 0.95 1.20 1.18 1.46 shares. Of this total amount, 1,659,724 shares were subject to exercisable options,2,429,129 shares were under options B. Estiinated current replacement cost of certain assets not yet exercisable, and 2,706,577 shares were available for and certain costs and expenses (unaudited) granting options in the future. Appreciation rights relating to in inflationary periods, the cost of replacing certain assets, unexpired options for 1,652,494 and 1,151,190 shares were such as plant and equipment and inventories, with equivalent outstanding at December 31,1978 and 1977, respectively. productive capacity or goods is generally higher than the cost Performance units with a per-unit maximum achievable value incurred when such assets were originally acquired. The of $28.00 relating on a one-to-one basis to unexpired options Securities and Exchange Commission (SEC) requires that for 854,449 shares were outstanding at December 31,1978. estimates be made of replacement costs for certain assets The number of shares available for granting options at the end and the effect of the assumed replacement on certain costs of 1977 was 238,767. A summary of stock option transactions and expenses. In accordance with the SEC's requirement, the during the last two years is shown below. Company has made such estimates and willinclude them in as "10-K Report" to be filed with that agency at the end of Stock options March 1979. For further information about the impact of in-Average per share flation, see page 30 of this Report. Shares subject Option Market to Opt lOn price price Balance at Jan.1,1977 2,982.102 551.00 $55.63 Options granted 695,693 51.56 51.56 ]n9 174 Options exercised (91,572) 44.55 52.75 JUL iJU Options surrendered on exer-cise of appreciation rights (51,950) 43.17 53.36 Options terminated (143,340) 54.39 Balance at Dec. 31,1977 3,388,933 51.26 49.75 Options granted 1,123,107 50.60 50.60 Options exercised (132,921) 43.93 53.21 Options surrendered on exer-cise of appreciation rights (71,325) 43.64 51.85 Options terminated (218,941) 52.87 Balance at Dec. 31,1978 4,088.853 51.37 47.13
- 19. Commitments and contingent liabilities Lease commitments and contingent liabilities, consisting of guarantees, pending litigation, taxes and other claims, in the opinion of management, are not considered to be materialin relation to the Company's financial position.
42 Annual Report 1978
Industry segment information Revenues (In millions) For tne years ended December 31 Total revenues Intersegment sales External sales and other income 1978 1977 1978 1977 1978 1977 Consumer products and services $ 4,787.8 $ 4,148.1 $ 188.6 $161.9 $ 4,599.2 $ 3,966.2 Net earnings of GE Credit Corp. 77 3 67.2 77.3 67.2 4,865.1 4,215.3 188.6 181.9 4,676.5 4,033.4 Indus* rial products and components 4,123.8 3,698.1 468.5 431.5 3,655.3 3,266.6 Power systems 3,485.7 3,217.6 174.4 153.9 3,311.3 3,063.7 Technical systems and rnaterials 4,744.6 4,144.6 189.0 .48.0 4,555.6 3,996.6 Natural resources 1,032.2 965.1 1,032.2 965.1 Foreign multi-industry operations 2.767.3 2,562.1 55.3 49.4 2.712.0 2,512.7 General corporate llems and eiminations (945.9) (893.9) (1,075.8) (964.7) 129.9 70.8 Total $20.072.8 $17,908.9 $20.072.8 $17.908.9 Segment operating profit Net earnings For the years ended December 31 For the years ended December 31 1978 1977 1978 1977 Consumer products and services $ 573.3 $ 482.8 $ 300.2 $ 255.9 Net earnings of GE Credit Corp. 77.3 67.2 77.3 67 2 650.6 550.0 377.5 323.1 Industrial products and components 426.3 366.7 222.5 191.1 Powemystems 196.3 162.7 102.1 75.5 Technical systems and materials 545.3 473.7 277.8 247.5 Natural resourcos 371.5 389.2 180.1 196.2 Foreign multi-industry operations 244.9 210.8 77.4 70.6 Total segment operating pro'it 2.434.9 2,153.1 General corporate items and eliminations (58.0) (64.8) (7.7) (15.8) Interest and other financial charges (224.4) (199 5) Total $2,152.5 $1.888.8 $1,229.7 $1,088.2 Assets Property, plant and equipment At December 31 For the years ended December 31 Depreciation. Additions depletion & amortization 1978 19b 1978 1977 1978 1977 Consumer products and services' $ 2,018.5 $ 1,791.9 $ 169.0 $127.0 $104.2 $101.0 investment in GE Credit Corp. 677.3 600.0 2.695.8 2,391.9 169.0 127.0 104.2 101.0 Industrial products and components 2,125.1 1,925.1 165.6 147.7 91.1 83.8 Power systems 2,104.6 2,152.8 84.3 81.6 78.7 73.2 Technical systems and materials 2,682.7 2,128.3 289.2 203.8 149.6 126.3 Natural resources 1,489.3 1,386.0 212.5 131.6 77.5 66.9 Foreign multi-industryhbrations 2.099.6 1,849.0 118.9 115.9 63.8 52.7 General corporate items and eliminations 1.838.9 1,863.7 15.6 14.9 11.5 18.2 Total $15.036.0 $13,696.8 $1,055.1 $822.5 $576.4 $522.1 Consumer products and services consists of major appli-General Electric Credit Corporation, a wholly-owned ances (which also includes appliance service), air condition-nonconsolidated finance affiliate, engages primarily in con-ing equipment, lighting products, housewares and audio sumer, commercial and industrial financing, principally in products and services, television receivers and broadcasting the U.S. Products of companies other than General Electric and cablevision services. constitute a major portion of products financed by GECC. The General Electric Investor 43
Industrial products and components includes compo-acquisition and development. nt:nts (appliance controls, small motors and electronic com-Foreign multi-industry operations consists principally of ponents); industrial capital equipment (construction, automa-foreign affiliates who manufacture products primarily for sale tion, and transportation); maintenance, inspection, repair in their respective home markets. and rebuilding of electric and mechanicai apparatus; and a network of supply houses offering products of General E!ectric In general, it is GE's policy to price internal sales as nearly and other inanufacturers. as practicable to equivalent commercial selling prices. Power systems includes steam turbine-generators, gas in computing net earnings, general corporate expenses turbines, nuclear power reactors and nuclear f uel asseniblies, and interest and other financial charges have been allocated transformers, switchgear, meters, and installation and main-to the industry segments. General corporate expenses tenance engineering services. are allocated principally on the basis of cost of operations, Technice i systems and materials consists of jet engines with certain exceptions and reductions which recognize the for aircraf t, industrial and marine applications; electronic and varying degrees to which affiliated companies maintain their other high-technology products and services primarily for own corporate structures. Interest and other financial charges space applications and national defense; materials (engi-are allocated to parent company components based princi-neering clastics, silicones, industrial cutting materials, lami-pally on cash flow, and affiliated companies generally service nated and insulating materials, and batteries); medical and their own debt. In addition, provision for income taxes ($893.9 communications equipment; and time sharing, computing, million in 1978, $773.1 million in 1977) is allocated based on and remote data processing. the total corporate of fective tax rate, except f-CECC and Natural resources includes the mining of coking coal (prin-natural resources, whose income taxes are ca culated sepa-cipally in Australia), uranium, steam coal, iron, and copper. rate ly. Minority interest ($28.9 million in 1978, S27.5 million in addition, it includes oil and natural gas production, ocean in 1977) is allocated to operating components having respon-shipping (primarily in support of mining operations) and land sibility for investments in consolidated affiliatcs. Geographic segment information Revenues (In millions) For the years ended December 31 Total revenues Intersegment sales External sales and other income 1978 1977 1978 1977 1978 1977 United States $16.443.1 $14,560.4 $362.6 S340.3 $16.080.5 $14,220.1 Far East including Australia 1,108.8 1,056.2 241.8 204.0 867.0 852.2 Other areas of the wor!d 3.270.4 2,916.7 145.1 80.1 3,125.3 2,836.6 Elimination of intracompany transactions (749.5) (624.4) (749.5) (624.4) Total $20.072.8 S17.908.9 S - S - $20.072 8 S17,908.9 included in United States revenues were export sales to un-($1,216.9 million in 1977) were to customers in Europe, Africa affiliated customers of $2,570.7 million in 1978 and $2,101.2 and the Middle East; and $498.1 millica in 1978 ($574.2 mil-million in 1977. Of such sales, $1.661.9 million in 1978 lion in 1977) were to customers in the Far East and Australia. Net earnings Assets For the years ended December 31 At December 31 1978 1977 1978 1977 United States $ 960.6 $ 846.3 511,410.4 $10,491.5 Far East including Australia 170.1 161.6 888.5 871.2 Other areas of the world 103.6 83.5 2.826.8 2,414.8 Elimination of intracompany transactions (4.6) (3.2) (89.7) (80.7) Total S1.229.7 S1.088.2 515.036.0 513.696.8 Revenues, net earnings and assets associated with foreign million and $1,655.6 million. respectively. On a comparable operations are shown in the tabulation above. At December basis at December 31,1977, foreign operation liabilities, mi-31,1978, foreign operation liabilities, minority interest in nority interest in equity and GE interest in equity were $1,798.7 equity and GE interest in equity were $1,909.4 million, $150.3 million, $131.3 million and $1,356.0 million, respectively. 02 138 44 Annual Report 1978
Management's discussion and analysis of statement of earnings General: The financial statements and related notes provide Industrial products and components revenues for 1978 detailed information about operating results, financial posi-were up 12% and earnings were up 17%. Businesses serving tion, changes therein, and industry and geographic segments construction, locomotive, and appliance components for the years 1978 and 1977. Summary data for the last ten markets were particularly strong. In 1977, eamings and sales years are on pages 46 and 47. were up 19% and 13%, respectively, from 1976, generally Because of the diversity of the Company's business, com-led by the same business components as in 1978. menta about the relative impact of physical volume and selling Power systems businesses earnings in 1978 were 36% prices on year-to-year changes in sales can only be general-higher on an 8% revenue increase. Large steam turbine-ized. However, it is estimated that greater volume accounted generator and power delivery products principally accounted for about two-thirds of the increase of $2.1 billion or 12% in for the higher 1978 earnings. Earnings for 1977 were up 23% sales in 1978 from 1977. Sales for 1977 increased $1.8 billion from the low level for 1976 on a 7% revenue increase. Gas (12%) from 1976, and it is estimated that somewhat more than turbine and power delivery products were principal contrib-half of the increase resulted from higher volume. utors. As planned, the Company's nuclear business operated Other income from a variety of operating and nonoperating at a loss in 1978 as it had in the previous two years. sources was $419.0 million, or 7% more in 1978 than 1977. Technical systems and materials revenues and earnings Major sources of c'.herincome are shown in note 4 to the finan-were up 14% and 12%, respectively, in 1978, with engineered cial statements. From 1976 to 1977, other income increased materials reporting substantially higher results and medical $116.0 million, or 42%. Principal 1977 increases were from systems, information services, and communications busi-operationc of associated companies and a nonconso!idated nesses also having significant increases. Better aircraf t engine uranium mining affiliate and interest on a higher average level earnings from higher 1978 sales were partially offset by the of marketable securities and bank deposits. stepped-up level of commercial engine development expen-Operating costs are summarized in the table on pages 46 ditures. Earnings in 1977 increased 23% from 1976 on 12% and 47. Principal elements of operating costs for 1978 and higher revenues. All major business elements contributed 1977 are in the statement of earnings on page 32. Continuing to the increases. cost control, combined with higher sales, resulted in an in-Natural resources revenues were 7% higher in 1978 than in crease in operating margin (sales less operating costs) in 1977, but earnir, s were down 8%. Australian coking coal 1978 from 1977, and in 1977 from 1976. The ratio of oper-shipments were about the same as for 1977, despite generally a'ing margin to sales increased to 10.0% in 1978 from the poor world steel markets. However, coking coal earnings 9.7% rate in 1977, which was the same as the 1976 rate. were, lower, principally because of a miners' strike of nearly Interest and other financial charges were 12% more in 1978 seven weeks and higher Australian taxes. Canadian copper than 1977, due principally to a somewhat higher level of foreign and U.S. petroleum operations reported improved results. borrowings in connection with overseas cperations and some-Lower earnings from uranium operations and losses associ-what higher domestic interest rates. i he 1977 interest expense ated with the weak market for production from Brazilian iron was up 14% from 1976, principally because of an increased ore operations were other factors contributing to the decrease level of offshore borrowings. in earnings. Revenues for 1977 were 4% below 1976, primarily Provision for income taxes increased 16% in 1978 from because uranium operations were no longer consolidated, but 1977 because of higher tax 3ble earnings after a 16% increase earnings were up 8% despite general weakness in steel mar-from 1976 for the same reason.The relationship of income kets for Australian coking coal and severely depressed copper tax provisions to income before taxes was 41.5% for 1978, prices in 1977. " Spot" sales of coking coallargely offset 40.9% for 1977, and 41.1 % for 1976. reduced deliveries to Japanese steel mills, although spot prices were generally lower than long-term contract prices. Industry segm m results: Financial data by industry segment The major positive factor was improved dividend income from for 1978 and 1977 are presented on pages 43 and 44. Detailed the nonconsolidated uranium mining affiliate. comments on 1978 results compared with 1977 are included Foreign multi-industry earnings for 1978 were up 10% on on pages 6 through 21. Reference should be made to thcse 8% higher revenues, led by international construction opera-comments, as well as to the summary of revenues and net tions and Latin American operations. Other affiliates generally eamings for the last five years which also is presented on reported improved results, with the exception of those in Italy pages 6 through 21. A r6 sum 6 of significant items comparing which sustain 6e ' higher loss than in the previous year. Earn-1978 with 1977, and 1977 with 1976, is included below. ings also included a nonrecurring gain from sale of an invest-Consumer products and services 1978 revenues and earn-ment in an associated company. Revenues in 1977 were up ings, including GE Credit Corporation, were up 15% and 17%, 10% from 1976, but earnings were down 5%, principally be-respective % with all major businesses contributing to the im-cause of no counterpart to a nonrecurring gain on sale of an provements, although major appliance margin rates were investment, the adverse impact of start-up costs associated slightly lower as a result of the cost-price squeeze. Benefiting with an appliance affiliate in Canada, and depressM eccnomic from generally strong markets in 1977, earnings that year conditions affecting consumer goods operations in a number were up 24% from 1976 on a 20% increase in revenues. of areas. .i The General Electric investor 45 2302 139
Ten-year summary (e) (Dollar amounts in mittions; per-share amounts in dollars) 1978 1977 1976 1975 1974 Summary of operations Sales of products and services to customers. S19,653.8 $17,518.6 $15,697.3 S l4,105.1 $13,918.2 Materials, engineering and production costs. 14,411.3 12,744.4 11,481.2 10,624.2 10,458.1 Selling, general and administrative expenses. 3.284.6 3,076.2 2,688.2 2,294.3 2,289.4 Operating costs. 17,695.9 15,820.6 14,169.4 12,918.5 12,747.5 Operating margin. 1,957.9 1,698.0 1,527,9 1,186.6 1,170.7 Other income. 419.0 390.3 274.3 174.2 206.7 Interest and other financial charges. (224.4) (199.5) (174.7) (186.8) (196.5) Earnings before income taxes and minority interest. 2,152.5 1,888.8 1,627.5 1,174.0 1,180.9 Provision forincome taxes. (893.9) (773.1) (668.6) (459.8) (457.4) Minority interest. (28.9) (27.5) (28.3) (25.7) (18.2) Net earnings. S 1.229.7 $ 1,088.2 S 930.6 S 688.5 S 705.3 Earnings per common share (b). S 5.39 S 4.79 S 4.12 S 3.07 S 3.16 Dividends declared per common share (c). S 2.50 S 2.10 S 1.70 S 1.60 1.60 Earnings as a percentage of sales. 6.3% 6.2 % 5.9 % 4.9 % 5.1 % Earned on average share owners' equity. 19.6 % 19.4 % 18.9 % 15.7 % 17.8 % Dividends-General Electric. S 569.8 476.9 $ 332.5 S 293.1 S 291.2 Dividends-Utah International Inc. (d). S 28.3 33.1 5 23.9 Shares outstanding-everage (in thousands) (e). 227,985 227,154 225,791 224,262 222,921 Share owner accounts-average. 552,000 553,000 566,000 582,000 566,000 Market price range per share (c) (f). 57 % -43 % 57 % -47 % 59 % -46 52 % -32 % 65-30 Price / earnings ratio range (c), 11-8 12-10 14-11 17-10 19-9 Current assets. S 8,755.0 $ 7,865.2 S 6,685.0 $ 5,750.4 S 5,334.4 Current liabilities. 6.175.2 5,417.0 4,604.9 4,163.0 4,032.4 Working capital. S 2,579.8 S 2,448.2 $ 2,080.1 $ 1.587.4 S 1,302.0 Short-term borrowings. S 960.3 772.1 S 611.1 $ 667.2 S 655.9 Long-term borrowings 993.8 1,284.3 1,322.3 1,239.5 1,402.9 Minority interest in equity of consolidated affiliates. 150.8 131.4 119.0 104.6 86.4 Share owners' equity. 6,586.7 5.942.9 5,252.9 4,617.0 4,172.2 Total capital invested. S 8,691.6 $ 8,130.7 5 7,305.3 $ 6,628.3 S 6.317.4 Earned on average total capital invested. 16.3 % 15.8 % 15.1 % 12.5 % 13.4 % Property, plant and equipment additions. S 1,055.1 $ 822.5 S 740.4 S 588.2 S 812.9 Depreciation, depletion and amortization. 576.4 522.1 486.2 470.5 415.0 Employees-average worldwide. 401,000 384,000 380,000 380,000 409,000 (a) Unless specifically noted, all years are adjusted to include Utah Interna-(e) includes General Electric average shares outstanding plus, in 1976 and tional Inc., which became a wholly-owned affiliate of General Eiectric prior years, outstanding overage shares previously reported by Utah multi-on December 20,1976, through the exchange of 41,002.034 shares of plied by 1.3. Adjustments have been made for a two-for-one GE stock split General Electric common stock for all of the outstanding shares of Utah. In 1971 and the two-for-one and three-for-one Utah stock splits effected (b) Computed using outstanding shares as described in note (e). in the form of stock dividends in 1973 and 1969, respectively. (c) For General Electric common stock as reported in the years shown. (f) Represents high and low market prices as reported on New York Stock (d) Reflects transactions prior to merger date. Exchange through January 23,1976, and as reported on the Consolidated Tape thereafter. 2302 140 46 Annual Repod 1978
Supplementalinformation i Dividends declared 1973 1972 1971 1970 1969 (Cents per share) 1978 1977 $11,944.6 $10,473.7 $9,556.7 $8,833.8 $8,526.4 First quarter 55e 45e Second quader 65 55 8,76.!.8 7,676.3 7,053.4 6,491.3 6,399.2 Third quarter 65 55 2,112.1 1,920.8 1,731.3 1,758.7 1,619.5 Fourth quarter 65 55 10.874.9 9,597.1 8,784.7 8,250.0 8,013.7 1,069.7 876.6 772.0 583.8 507.7 202.9 207.3 176.6 127.7 120.0 Genera! Electric common stock (142.6) (120.8) (102.1) (105.5) (83.8) [g'r *an ow y quarter) 1,129.8 963.1 846.5 606.0 543.9 1978 1977 (456.5) (385.5) (332.8) (237.2) (240.8) (11.9) (5.0) (4.2) (5.8) 2.3 First quarter $49% $43% $55% $49 $ 661.4 S 572.6 S 509 5--- $ 363.0 $ 305.4 Second quarter 54 % 45 % 57 % 47 % Third quarter 57 % 49 % 56W 50 % S 2.97 S 2.57 2.30 S 1.66 1.41 Fourth quarter 53 % 45 % 52 % 47 % 1.50 S 1.40 1.38 S 1.30 1.30 5.5 % 5.5% 5.3 % 4.1 % 3.6 % 18.4 % 17.5 % 17.2 % 13.4 % 11.8 % Form 10-K and other supplemental information The information in the financial statements in this Report. in the opinion of management, substantially conforms with S 272.9 254.8 $ 249.7 5 235.4 S 235.2 or exceeds the information required in the annual state-S 14.0 12.8 11.4 S 8.9 7.6 ments constituting part of the "10-K Report" submitted to 222,631 222,503 221,591 218,938 217,048 the Securities and Exchange Commission, except for cur-543,000 542,000 529,000 535,000 525,000 rent replacement cost data. Certain supplemental informa-75 % -55 73-58 % 66 % -46 % 47 % -30 % 49 % -37 tion, considered nonsubstantive, is included in that report, 24-17 25-20 26-18 26-17 32-24 however, and copies will be available without charge from: Investor Relations, Genera Electric Company, Fairfield. Connecticut 06431. S 4,597.4 S 4,056.8 $3,700.0 $3,383.1 $3,362.6 Copies of the General Electric Pension Plan the Summary 3.588.2 2.920.8 2.893.8 2,689.4 2,398.2 Annual Report for GE employee benefit plans subject to the $ 1,009.2 $ 1,136_0 $ 806.2 S 693.7 $ 964.4 Employee Retirement Income Security Act of 1974, and other GE employee benefit plan documents and information S 675.6 453.3 $ 581.7 $ 670.2 S 351.5 are available by writing to investor Relations and specifying 1,166.2 1,191.2 1,016.2 691.3 813.6 the information desired. 62.4 53.4 50.4 45.0 42.3 3,774.3 3,420.2 3,105.4 2.819.1 2,610.8 S 5.678.5 5 5,118.1 S4,753.7 S4,225.6 S3,818.2 Transfer Agents Generaf Efectric Company 13.7 % 12.7 % 12.3 % 10.2 % 8.8 % Securities Transfer Operation 570 Lexington Avenue S 734.6 5 500.8 $ 710.8 $ 685.3 $ 567,3 New York, New York 10022 371.9 343.7 289.5 348,1 365.0 The First National Bank of Boston Shareholder Services Division 392,000 373,000 366,000 398,000 412,000 P.O. Box 644 Boston, Massachusetts 02102 2302 141 The General Electric Investor 47
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