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The Immelt Revolution

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Who is Jeff Immelt?

Joined GE Plastic in 1982 (MBA from Harvard University)

Various global leadership positions over year career inGE

- GE Electronics, GE Medicals, International Marketing Elected as CEO to begin tenure in September 2001

Different personality from J. Welch

- Easygoing, friendly, natural charisma (lead by example)

cf. Jack Welch :Brash, Impetuous, abrasive, feisty(dictatorship)

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CEO Process Implementation

Long Term PlanningCEO Candidacy Programme for an

emergency, 1994

CEO Candidates

24 survived

Management Development and

Compensation Committee

Appraisal on

Personality and

ability(1-2 yrs)

8

Board members collective interviews

Management Ability

Test

(3-4 yrs)

Job rotation in divisions

- One of final three candidates

- designate backup

Decision

Merit (TO/Profits) check and CEO

interview

- young, expansive thinking

Time consumed 6 years 5 months

1. Tracing Young Turks- Scanning high

- potential cases

2. Global Mgt Capability

- Leadership, Strategy

- Human Resource

3. Crisis Capability

- Adversity

- Venture, New Area

4. CEO Candidate

- CEO School

- Competency

5. CEO Cultivation Team

- Professional Support

- Mentor by J. Welch

Jeff, breakthrough in the CEO Factory?

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Immelts Narratives Repositioning the portfolio and diversification

From a process oriented company to creativity andfundamentals

Emphasizes organic growth rather than deals,divesture (Necessity after Welchs era)

Innovation Management Imagination Breakthroughs for sustainable growth

New Ethical policy (Core Value) and its connection topersonnel- 8 Values and 4 Actions (Integrity)

Changing the culture Outsiders to high rank positions Diversifying the top ranks New executive compensation

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Jack Welch Jeff Immelt

Paradigm

Efficiency Oriented

- Strong business and down-

sizing

Effectiveness Oriented

- Growth engines for the future

Methodology6 Sigma

- Quality and costsImagination, Breakthrough Project

Target Market EU, USA (developed)New markets, products, and businesses

- Focusing new emerging market

PortfolioCash Generator

- finance, Service

Infrastructure business, health,

environmental business

- contents, bio, security

OrganizationCulture

Systematic management and

through implementation

- finance oriented

Creativity and ideas for innovation

- Marketing Oriented

- One world

Core value

in the eraBuilt to Last, 1994 Mgt Challenge for the 21st Century, 1999

What are differences ?

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GE Performance Under Immelt

PROFITABILITY RATIOS 12/31/06 12/31/05 12/31/04 12/31/03 12/31/02

Return On Earning Assets 5Yr Avg 19.70 21.38 23.91 25.62 26.23

Reinvestment Rate Total 5Yr Avg 9.31 10.22 12.10 13.36 14.81

Return On Assets 5Yr Avg 3.90 3.82 4.05 4.26 4.49

Return On Invested Capital 5Yr Avg 5.78 6.02 6.70 7.07 7.45

Cash Flow To Sales 5Yr Avg 20.51 19.49 18.38 18.07 16.43

Cost of Goods Sold To Sales 5Yr Avg 36.81 35.39 34.37 36.67 39.54

Gross Profit Margin 5Yr Avg 57.83 59.27 60.23 57.84 54.84

Operating Profit Margin 5Yr Avg 23.28 22.76 22.49 22.87 23.03

Pretax Margin 5Yr Avg 14.95 15.01 14.88 14.99 14.72

Net Margin 5Yr Avg 11.40 10.98 10.75 10.49 10.09

12/31/06 12/31/05 12/31/04 12/31/03 12/31/02 12/31/01

Earnings Per Share 1.99 1.54 1.59 1.55 1.51 1.41

5 Year Average 1.64 1.52 1.47 1.36 1.24 1.10

10,394.00 10,611.00 10,445.00 10,075.00 10,028.00 10,052.00

1.99 1.54 1.59 1.55 1.51 1.41

Earnings Report 1 1 1 1 1 1

0.01 -0.06 -0.10 -0.04

-0.03 -0.11 0.06

-0.07 -0.05 0.11 0.00

PER SHARE DATA

Common Shares used to calc

Earnings Per Share - As

Extra Cedit(Charge) Per Shr

Extra Cedit(Charge) Per Shr

Extra Cedit(Charge) Per Shr

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2001-2004 Performance

Sound Growth

Sales Increase 17%

Net Profit 32%

EPS Growth 27%

But Declining ROE

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Market view

Relative to the S&P500 Composite, General ElectricCo has moderate value characteristics Its appeal is likely to be to income oriented investors.

Has not outperformed the market in recent years

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Why GE under Immelt has not impressedthe stock market?

Business Strategy Change from the growth by M&A to organic growth and

competitive advantage by internal innovation Investors are alarmed by the growth of GE's finance business

Finance companies have lower P/E multiples and thin

margins Exposure to interest rates

Quality of its earnings will not enjoy low tax rate and lowloan-loss provisions in the future

Investors trust dented by accounting of derivative

transactions Jitters in the global and emerging markets could slow GE

growth Reluctancy to sell unattractive units (MBC Universal)

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Why GE under Immelt has notimpressed the stock market?

CEO Discount and no CEO Brand Investors value simplicity- Immelt has diversified the portfolio

Stock Markets like charismatic leaders Immelt has not made its brand as GE CEO Legacy of Welch

Change of Core Values

GE suffered from accounting scandals (Enron), 911incident (Airline Industry), etc.

From Comparative advantage, down-sizing, super MNCto win-win growth, business ethics & responsibility

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How could GE stock make acomeback? Our Story.

Enhance investor relations Simplify the business

Eliminating uncertainties related to key

businesses High growth expectations in

Infrastructure, Aviation, Energy, and Oil &

Gas (late-cycle businesses)Attractive valuation for large cap defensive

stocks

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How could GE stock make acomeback? Our Story.

Increasing shareholder value through:

Margin expansion in the company'sindustrial business

Sustainable global growth

Containing interest rate risk in financial

industry Reshaping the company:

Spinning off selected units

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Thank you!

Questions?