GE Lighting
Merrill Lynch
Global Industries Conference
December 16th, 2010
Results are preliminary and unaudited. This document contains “forward-looking statements”- that is, statements related to future, not past, events. In this context,
forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,”
“anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us,
particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: current economic and
financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of conditions in the financial
and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels as planned; the impact of conditions in the housing
market and unemployment rates on the level of commercial and consumer credit defaults; changes in Japanese consumer behavior that may affect our estimates of liability
for excess interest refund claims (Grey Zone); our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so;
the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the planned level; the level of demand and
financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and
healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation;
strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global
scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those
expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.
This document may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be
informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. For a
reconciliation of non-GAAP measures presented in this document, see the accompanying supplemental information posted to the investor relations section of our website at
www.ge.com. In this document, “GE” refers to the Industrial businesses of the Company including GECS on an equity basis. “GE (ex. GECS)” and/or “Industrial” refer to GE
excluding Financial Services.
Agenda
• Industry / environment
• GE Lighting business overview
• Reshaping GE Lighting strategy
• Financial results
2
Industry / environment
3
Industry overview
$19B lamp segment
Auto/
Other
18%
Other
10%
HID
12%
Retail
7%
Inc/Hal
18%
Bal
14%
LED
2%
$46B fixture segment
CFL
19%
+
Industry
9%
Household
49%
Office
12%
LFL
17%
Outdoor
13%
Sources: Strategies Unlimited, NEMA, Datapoint Research, Internet Research, GE Analysis
$65B industry
4
Industry dynamics
Regulation/Standards
• Energy efficiency / bans
• Lack of standards definition
Competition
• 100s of entrants
• 3 traditional leaders
Technology
An industry
in transition
• Rapid LED adoption
• Longer life systems
Buying Dynamics
• Value chain “blurring”
• Applications focus
100 year old industry experiencing rapid change
5
Regulation / standards
Product phase-outs by region…
Euro
2010
2012
2014
100W
60W
75W
40W
Incandescent
Reflectors
T8 Halo
North America
2016
Halogen
Reflectors
Halogen A-Line
100W
75W
T12/T8
60W
Halogen PARs
40W
Incandescent
Reflectors
Various energy standards evolving
Rest of the World
6
Technology
Greener & longer life
LED penetration for general lighting
32%
Efficiency of household light sources
LPW
Chip efficiency
Optics
Thermals
Drivers
80
Best
Expected
Worst
60
Electronics
Phosphors
Cathodes
50
16%
40
20
15
1 yr life
Year 90s
Halogen
8%
22 yr life
IR coating
New reflectors
1%
5-9 yr life
Year 2000s
CFL
4%
2%
6%
16%
9%
7%
5%
3%
1%
Year 2010+
LED
2009
• Technology evolving
• Efficiency & performance improving
• Longer life
2010
2011
2012
2013
• LED chip capacity +400% from ’10 - ’14
• End users demand solutions
• Standards setting activity ramping up
Source: Strategies Unlimited, Strategy Analytics, Freedonia, Veeco estimates
7
Buying dynamics … value chain blurring
Wafer
Chips
Packages
Modules &
Lamps
LED Fixtures
8
Environment creates attractive markets
Realities
Industry growth
Energy regulation
5%+
New technologies … higher acquisition
costs but lower life cycle costs
Strong emerging market growth
Urbanization / electrification
10 year average
2010 - 2020
New construction restarts
Sources: Datapoint Research, Strategies Unlimited, GE Analysis, NEMA
9
GE Lighting
10
Winning in Lighting
Customer
Intimacy
Leadership
Products
Scale
Channel
• Create value by solving customer needs in applications
• Deep understanding of customer economics
• Reliable and dependable partner
• Quality and reliability … systems differentiate
• Access to best in class components
• Critical platform expertise - thermals, optics, electronics
• Global footprint
• Strong balance sheet
• Broad product offering
• GE brand
• Global distribution
• Direct / Indirect application selling
11
GE Lighting revenue profile
($ in billions)
Regions
Channels
North America $1.6
Latin America $0.2
EMEA $0.6
Asia $0.2
Professional
Consumer
$1.6
$1.0
$2.6B in Sales
12
Global Lighting business
16k employees, 33 plants, sales in 150 countries
North America
Europe
4,800 EEs
14 Plants
7,500 EEs
10 Plants
Asia
8 Ohio plants
Mattoon, IL
NELA
Bridgeville, PA
Hendersonville, NC
Goldsboro, NC
2 Kentucky plants
9 Hungary plants
2,800 EEs
4 Plants
Madrid, Spain
3 Mexico plants
3 China plants
Latin America
Yogyakarta, Indonesia
1,100 EEs
3 Plants
13
Technology capability
Global technology footprint …
GE Major milestones…
1879 – 1st Incandescent Lamp
Technology core
competencies …
Cleveland, OH
1962-
• Optical design
• Thermal
management
Budapest, Hungary
• Ceramics
• Electronics
• Reliability
Shanghai, China
1938 - 1st Fluorescent Lamp
1st Visible LED Light
1st Metal Halide Multi-Vapor®
Lamp
1974 - 1st Energy-Saving Fluorescent
1990 - 1st Halogen HIR™ PAR Lamp
2004 - 1st Ceramic Metal Halide
PAR20 and PAR 30 Lamps
2008 - 2010
- Expansion of energy saving,
long life solutions with
LEDs, Linear Fluorescents
and CMH® products
GE never stops re-inventing Lighting
14
Reshaping GE Lighting strategy
15
Reshaping Lighting strategy
Invest in
green products
Commercial
transformation
Reshape
manufacturing
footprint
16
Investing in green products
Increasing new product spend …
… delivering world class products
– 9 Watt … 77% energy savings
– 22 year life
– Omni-directional
+28%
– DOE “best in class” award
– 5 year no maintenance
– Patented optics design
+21%
Green
92%
92%
2009
2010
94%
Core
2011
– Low cost producer
– Highest efficiency
T5 system
– Global leadership in retail ceilings
– 88% lumen maintenance over life
– 90 CRI (color rendering index)
2/3 of new product spend in LED
17
GE LED product portfolio
Traffic
Core Product Segments
Signage
Display
Outdoor
Emerging Growth Opportunities
Indoor
Lamps
A leading LED technology business
18
All LED systems are not the same
GE approach …
Customer
Intimacy
Innovation
& Speed
Quality &
Reliability
Systems
Integration
Every GE LED system:
Focused customer application
development
Performance claims supported
by comprehensive testing
Backed by 100+ yrs lighting experience
Product life rating based on
acceptable light output for
intended application
Designed using Six Sigma
19
Industry recognition
2008 Best in Class Winner
2009 Best in Class Winner
Immersion™ LED Display Case Lighting
Evolve™ R150 LED Cobrahead Luminaire
Street/Roadway Category
GE LED Cove Lighting
2008 Recognized Winner
Tetra® AL10 LED Architectural Lighting
2009 Recognized Winner
Undercabinet Task Lighting Category
Immersion™ RV30 LED Refrigerated Display Lighting
2009 Recognized Winner
Refrigerated Display Lighting Category
Evolve™ LED Series Area Light
2009 Recognized Winner
Parking Lot Lighting Category
Evolve™ LED Contemporary Domed Area Light
2009 Recognized Winner
Pedestrian Scale Lighting Category
20
Walmart
Hospitality
Lighting
LED parking lot lights
Operating Impact
~54% - 80% energy
reduction
~2.8 yr payback
~Reduced maintenance
costs
Other Observed
Benefits
• Better visibility and security • No light pollution
• Light appears like moonlight • Very low offsite visibility
• No mercury
48 sites in North America and Latin America using GE area lights
21
Starbucks
install
Hospitality
Lighting
~ 8000 global stores in 2010
Operating Impact
~$3.1MM energy savings per year
~1.4 year simple project payback
~$2MM in Utility rebates
50 watt PAR20
7 watt LED PAR20
50 watt PAR 30
10 watt LED PAR30
22
Commercial transformation
($ in millions)
1 Focus on end user value
2 Grow emerging markets
3 Invest in the brand
$645
Sales focus
~2X
Distribution
$415
$350
MEA
Distribution
End User
End User
China
Latin
Amer.
2009
Aligning & adding resources
Sell value of right products
Deliver innovative end user
solutions
2010
2013
Expand commercial coverage
Expand local fulfillment
Broaden product solutions
Invest in advertising … tell
ecomaginationSM story
Refresh packaging
Consumer education
23
1
Bringing value to end users
Customer
Green Product
T5 Fluorescent
System
Linear & compact
Fluorescent System
Benefit
$100k reduction in energy
and maintenance costs
61% energy/maintenance
savings … €114k annually
Rome Metro Line
LED Infusion™
85% more efficient
with 6x longer life
Metal Halide
Technology leadership
24
Growing
in emerging markets
Lighting
2Hospitality
25,507 LED street lights
Annual Operating Impact
• Eliminates ~6,000
maintenance calls
• 29.2 mega watts
energy savings
• Greenhouse gas savings =
to 4,000 cars annually
“…LEDs are the future of lighting solutions and Chetumal and its municipality are
setting the standards for other cities in Latin America and the world to follow.”
Andres Ruiz Morcillo, President of Othon P. Blanco Municipality
25
3
Consumer options post legislation
Incandescent A-Line
Retail
Life
Ownership Cost
$ 0.50
8 Months
$113
Customer
Advantages
Familiarity
Lowest retail
Quality of light
Instant on/brightness
Dimmable
Disadvantages
Short life
Inefficient
26
3
Consumer options post legislation
Retail
Life
Ownership Cost
Spiral® CFL
Halogen
Incandescent A-Line
$ 0.50
8 Months
$113
$2.00
8 Months
$123
LED
$3.00
5 Years
$32
$50.00
22 Years
$73
Customer
Advantages
Familiarity
Lowest retail
Quality of light
Instant on/brightness
Dimmable
Incandescent QOL
Lower retail
No mercury
Instant on/brightness
Dimmable
Familiar size/shape
Long life
Energy savings
Lowest cost to own
Instant on/improving
Longest life
Energy savings
No mercury
Instant on/brightness
More like incandescent
Low life cycle cost
Disadvantages
Short life
Inefficient
Short life
Energy savings
Highest cost to own
Dimmable
Mercury
Instant brightness
Familiar size & shape
Initial retail price point
Providing customers with options
27
3
GE Lighting & ecomagination
GE wide actions…
… in sync with Lighting
‘10 – ‘15 Actions
1
Double R&D to $10B
2
Grow 2X of GE’s growth
3
Reduce energy intensity by 60%
4
Reduce water consumption 25%
5
Create jobs
+
Bold Initiatives
1
$200M ecomagination VC fund
2
10 flagship partnerships
3
20MM Smart Energy Homes
Lighting Actions
• Largest offering of environmental
products within the GE portfolio
• 700+ ecomaginationSM
certified products
• Third-party product certification
(ENERGY STAR® and RoHS)
Core Tech
Energy Savings
New Tech
~75%
~55%
28
Reshaping manufacturing footprint
($ in millions)
2,000
1
Incandescent impact example
1
Actions
Exit core production affected by
legislation
A-Line Incandescent
# INC Plants
1,500
8
1,000
2
500
2
Build “Centers of Excellence” for
sustained core products
3
Scale LED supply chain
Compact Fluorescent
-
2006
2
2014
Pre
Post
Linear fluorescent COE example
Bucyrus, Ohio
# LFL Plants
3
4
Develop supply base for products
affected longer-term
1
Pre
Post
$60mm investment
$435 invested … $140 annual payback
29
Financial results
30
Lighting financial results
($ in billions)
Revenue
+
$2.8
$2.5
~$2.6
++
Improving financial performance
Executing on restructuring
4x
Investing in products &
commercial transformation
Op
profit
’08
’09
’10
’11
Industry leading return
on total capital
31
Wrap Up
• Industry evolving … GE opportunity
• GE’s a global leader
• Clear strategy … investing for the future
• Improving financial results
32