BUSINESS OF GENERAL ELECTRIC General General Electric, from the time of its incorporation in 1892, has been primarily engaged in developing, manufacturing and marketing a wide variety of products used in the generation, transmission, distribution, control and utilization of electricity and related technologies. It is generally regarded as the largest and one of the most diversified producers of electrical equipment, although its relative position as to individual products varies considerably. As used herein, the term "General Electric" includes the General Electric Company and all majority-owned companies, unless the context otherwise requires. General Electric has a majority interest in, or manages, a number of foreign affiliates engaged primarily in electrical and electronic manufacturing and distributing operations in foreign countries. In addition, General Electric has substantial export sales from the United States. General Electric also has a minority interest in several foreign electrical and electronic manufacturing and distributing companies. Major Categories General Electric products and services are classified in six categories. The approximate amount of sales and income before taxes and minority interest attributable to each of the five categories in the consolidated group, as well as the net income after taxes of General Electric Credit Corporation, a wholly-owned nonconsolidated finance affiliate, are shown below for the last five years: _Year ended December 31_ 1971 1972 1973 1974 1975 (in millions) Sales Consolidated Operations Aerospace....................................... $1,623 $ 1,514 $ 1,611 $ 1,916 $ 1,972 Consumer....................................... 2,383 2,782 3,097 3,214 2,880 Industrial Components and Systems............................................ 2,865 3,158 3,728 4,529 4,320 Industrial Power Equipment......... 2,131 2,249 2,477 2,787 2,922 International.................................. 1,584 1,830 2,318 3,218 3,745 Corporate eliminations.......................... (1,161) (1,294) (1,656) (2,251) (2,440) Total............................... $9,425 $10,239 $11,575 $13,413 $13,399 Income Consolidated Operations (income before taxes) Aerospace....................................... $ 62 $ 47 $ 78 $ 125 $ 127 Consumer....................................... 181 251 260 144 180 Industrial Components and Systems............................................ 238 271 319 423 376 Industrial Power Equipment......... 223 225 228 168 109 International.................................. 139 170 245 290 263 General Electric Credit Corporation (income after taxes).......................... 31 41 42 43 52 Corporate eliminations.......................... (82) (108) (160) (192) (157) Provision for Income Taxes.................. (317) (364) (419) (383) (358) Minority interest in earnings of consolidated affiliates.................................. _(3) _(3) _(8) (10) (11) Total............................... $ 472 $ 530 $ 585 $ 608 $ 581 Notes: Comparisons of results by category should take into account that the factors previously discussed under "General Electric Management's Discussion and Analysis of Statement of Current and Retained Earnings" had varying impacts on sales and income by category. Sales and income for each major category include intercategory transactions. To the extent that sales and income are recognized in more than one category, appropriate elimination is made under the caption "Corporate eliminations." Income before taxes for each major category is after allocation of corporate items, such as expenses of headquarters personnel, corporate research and development, other income, interest and other financial charges. 26 General Electric is one of the largest and most diversified industrial corporations in the world. Its operations are highly decentralized and are organized by groups, down through divisions to well over 100 departments. In general, it is believed that General Electric has a leadership position (i.e., number one or two) in most major markets served. Aggressive competition, often highly concentrated and worldwide, is encountered in all areas of its business activity. In many instances, the competitive climate is characterized by patterns of changing technology requiring continuing research and development commitments and by capital intensive customer needs and producer requirements. A summary description of each of the major categories of General Electric's products and services set forth in the table above, follows. For information concerning recent developments, reference is made to "General Electric Management's Discussion and Analysis of Statement of Current and Retained Earnings." Aerospace General Electric's Aerospace business consists of jet engines for aircraft, industrial and marine applications; and electronic and other high-technology products primarily for space applications and national defense. Jet engines are used in military and commercial aircraft and, to a growing extent, in naval ships and as industrial power sources. General Electric's military engines are used in a wide variety of planes from helicopters to fighters, bombers and transports. Its CF6 is the principal commercial jet engine used in the McDonnell Douglas DC-10 and the engine used exclusively in the A300 European Airbus; it is also used to a limited extent in the Boeing 747. General Electric also produces jet engines for many types of executive aircraft. Sales of replacement parts and services are an important segment of the engine business. The worldwide competition in jet engines is intense and highly concentrated. Product development cycles are very long and product quality and efficiency are critical to success. Potential sales for any engine are limited by its technological lifetime, which may vary considerably depending upon the rate of advance in the state of the art, and by the limited number of potential customers. General Electric is jointly developing with SNECMA, a French manufacturer, a new engine designed for the medium size and range commercial aircraft which are expected to be the next important commercial engine market in the 1980's. In line with industry practice, sales of commercial jet aircraft engines involve long term financing commitments to customers, which commitments are generally unsecured. Electronic and high technology products include missile launch, guidance and re-entry systems, earth orbiting satellites, radar and sonar systems, armament systems, aerospace instruments and aircraft instrumentation and controls. Among the programs served by General Electric are the Polaris, Poseidon and Trident submarine-launched missiles and the land-based Minute Man missile system. Strength in technological competence, excellence of design and efficiency of production are among the key factors affecting competition in these products. Research and development expenditures, both government financed and internally funded, are high in this category. Consumer General Electric manufactures, distributes and services one of the largest and broadest lines of electrical consumer goods in the world. The Consumer category consists of Major Appliances (which also includes appliance services, central air-conditioning and heat pumps); and other consumer products. It also includes broadcasting and cablevision activities, which are subject to government regulation. There is substantial variation among the kinds of customers served, the technology and marketing methods employed and General Electric's relative market position. Major Appliances consist principally of air conditioners, clothes washers and dryers, dishwashers, disposers, electric ranges, refrigerators and freezers. Sales to a variety of retail outlets constitute a major portion of these sales. The majority of such sales, particularly laundry products and refrigerators, are for replacement. The other principal market for major appliances is accounted for by sales to building contractors for installation in new dwellings. Products are sold under both the General Electric and Hotpoint brands. General Electric also produces some appliances for resale under private brands. Competition is very active in all products and comes from a wide variety of manufacturers and suppliers. A major factor influencing competition is price, with the result that important emphasis is placed on minimizing manufacturing costs. Other significant factors include quality, features offered, innovation and appliance service capability. 27