Company Name: General Electric Company (GE) Event: 2014 Electrical Products Group Conference Date: May 21, 2014
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Anyway, now it’s time for me to hand it off to our leading Francophile and highlight of the conference, Mr. Immelt, Vous avez la parole. You have the floor.
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Great Steve. Steven, might I add that was an awfully bold decision you made. Stay here really, you teach us off. So good morning or as we like to say at GE bonjour, it’s good to be with you. Just at the highlight look, 2014 is looking good, on track, no change to the model; we feel good about where we’re positioned. We are executing the strategy to do the retail finance spend, executing on our key initiatives.
But what I really want to spike up today is some ways the company is different, some big advantages we think we are building in areas like analytics and globalization and some portfolio moves and really give you a sense of some of the big changes that are going on inside the company right now.
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So the environment, I would say, generally getting better. U.S. gets a little better. Everyday we see demand for credit. You probably heard this week, Europe growing again. Emerging markets, we’re still quite positive and bullish on the emerging markets. Good value gap, so inflation is benign and lots of volatility around governments around the world. And our big themes continue to be in tact. So we are, I would say more bullish on the environment and feel pretty good about the way GE is positioned in that regard.
The segments, really no update on the segments, off to a good start in the first quarter this year. Power a little stronger, Healthcare a little weaker, but really across-the-board, I would say pretty consistent with the expectations we set out at the beginning of the year. The team is executing well and we are seeing some good acceleration in some key segments. And so we like the profile of the segments and how we are doing. And we think some of the businesses that got off to a tough start, like Energy Management, are going to rebound in the second quarter and ought to still meet objectives for the year.
No change to the way we think about Corporate, I just wanted to highlight a couple of things. Corporate costs are going to be down $500 million, so simplification is driving across the entire platform. And we still plan to do more restructuring than we have gains. So we’re doing a ton of restructuring this year; somewhere between $1 billion and $1.5 billion now to help us this year, next year and into the future, and that’s why Corporate remains a drag. So the earnings to the company would be even higher and the earnings growth rate would be higher if not for the uncovered restructuring, which we think is going to position us going forward.
No real change in cash expectations for the year or revenue expectations for the year. We started off industrial organic growth at 8%. So we feel good about the profile of the company in terms of where it goes. We are executing the strategy. We expect to do the Retail Finance IPO in the third quarter so on track for that. And I think we’ve got more certainty around the timing. We feel good about the third quarter for execution of the IPO. Industrial earnings growth – double-digit earnings growth driven by organic growth in the 4% to 7% range and we continue to see good margin enhancement across our businesses.
GE Capital is on track to earn $7 billion this year. We expect to get a $3 billion dividend from GE Capital this year, but that’s the precursor to getting a ton of cash out of GE Capital next year when we do the Retail Finance spin. So no change in expectations along those lines, and good steady earnings growth while we’re going through the portfolio transformation. So we expect to continue to grow the dividend aligned with earnings. We expect the share as we do the RFS split to get the shares down to 9% to 9.5%. We still expect to do at least $4 billion of dispositions this year, $4 billion of cash.
The balance sheet is extremely strong in financial services and we’re on track to hit the return on invested capital of 17% by 2016 as we talked about in December. So we’re executing the strategy and very focused on the things we’re doing there. We still expect to get a gain in Retail Finance. It’s unclear whether that’s going to be in continuing
2 operations or discontinued operations, it could very well be in disc ops by the time we get there.
So that’s kind of the lay of the land on strategy execution. And the profile of the businesses, look, we really feel like the industrial businesses are gaining momentum, a good backlog. Our initiatives are pretty powerful in terms of sustaining the kind of organic growth we’re getting this year. We see good margin enhancement this year that’s sustainable and leading into the future. And we’re looking at the portfolio and either getting margin enhancement of some of the underachievers or find ways to create value along those lines.
GE Capital, I would say, we now are thinking about by 2015, once we do the Retail Finance spend, a number more like $300 billion in ENI versus $350 billion. So we are going to execute the spend. We are still looking hard at the red assets and see a lot of non-core opportunity. We are seeing good growth in the core GE Capital assets and looking for ways to making GE Capital even more capital efficient as times goes on. So this is the way to profile the company going forward. We think the execution is improving and the strategy is really on track.
So if you shift now, what I would like to do the rest of the time is just kind of talk about the future. So you heard, I think the last time we spoke with you about the Alstom transaction. The Alstom transaction would add $0.08 to $0.10 incremental EPS in 2016; we would expect it to close in 2015. We’ve got a great foundation in 170 countries with more than $200 billion of backlog, good team, well-deployed, lots of cash. You’ve got a great foundation. And really on that foundation, I think there is just a couple thoughts I would give you that I will talk a little bit more about today.
One in technology, we’ve always had a great technical company. We’ve got a fantastic profile of new products. And we’re adding to that the capability of executing these products more quickly and at lower cost, so big initiatives are going to make that better.
Probably an unmatched framework in emerging markets. And I think I want to give you more of a sense for how much of a competitive advantage we have as we approach these emerging markets. I know this week we’ve talked a little bit about the Industrial Internet, we’ve been doing it now for four years. So we have I think a head start in terms of how we view analytics and the power that’s going to bring in terms of growth and margins for the company going forward.
With simplification, we’ve kind of expanded that and it really is changing the culture of the company, the way we run the company to make us faster and lower cost and more competitive and we’re tremendously excited about where that leads. And we’re going to execute on those initiatives no matter what.
And then I think the way I look at Alstom is. Alstom allows us to accelerate our portfolio goals, it allows us to get to 75/25 from an industrial/financial service standpoint. It’s a pure play infrastructure play for us and it just makes things better faster as we look
3 forward. So these are the ways that I would like to think about the company really getting better as we look at the future.
So technology is a key advantage for the company. We invest about 5% of our revenue back into R&D. We’re a big patent filer, top 10 patent filer both globally and inside the United States. And this allows us to gain market share. It allows us to drive a good manufacturing cost and grow margins. And allows to fill product line gaps like diesel, power generation capability, other product gaps that we have in the company. So technology is always what sets up the installed base. It’s a key part of our strategy and we think we’re really well positioned.
Every year, I talk about the breadth and depth of the company and the technology that we are advancing. The tier 4 locomotive we think is two years ahead of competition is going to be very well-positioned for 2015 and 2016; it builds a big advantage. The Revolution CT is FDA approved and now out there and positioning us to grow market share in 2015 and beyond.
We made good progress in the Water business and we are now positioned in a ton of the unconventional fuel areas as ways to grow. And we build a high market share, high margin bioprocess manufacturing business that’s well above $1 billion with very high margins and we think these are other things we can do both organically and inorganically inside the company. So we just continue to launch broad and deep technologies inside GE.
We also bring into new industries and one of the ways that we drive synergies with the oil and gas growth we’ve seen is by using the totality of the company in oil and gas and we’re able to do this in ways that highly believable to our customers and far ahead of what our competition can do. So not only do we have all the technologies that we bring into oil and gas, but we can bring healthcare technology into the imaging of pipes and doing inspection, which is number one to big customers like Exxon and BP.
We can bring power conversion to the electrification at the Subsea factory and there is other technologies we can bring to build systems for our customers. We are adding to this by having a Global Research Center in Rio and one in Oklahoma City. So we are really surrounding the industry in a very powerful way that’s recognized by our customers.
And we are doing technology in a different way. I think with FastWorks we are into our second year of really driving this around the company, the H turbine is a good example of a product we brought to market much faster and much lower cost. So, big improvements in cycle time, big improvements in program expense. We are going to be shipping units in 2016. We are bidding on the tremendous array of new opportunities.
Our market share is going to be high in this product. And this was just done a different way. It’s leveraged some of the early H technology we had. We now have hardware engineers, using modern tools, are able to operate more like software engineers in terms of their ability to pivot. And we have got total focus on what customers are expecting so
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61% efficiency, more than 400 megawatts of output. This is going to be the most efficient, biggest unit and out there in record speed by 2016.
From a cost standpoint, all of these engines that we are launching are going to be shipped at lower cost points in the future than how we originally looked at them. And this is going to be because of the work we have done on should cost analysis, advanced manufacturing, better welding techniques, better additive manufacturing techniques, doing a lot in terms of sensors inside our factories.
And so our manufacturing teams are aligned with our engineering teams to do things better and faster in the future than they have ever done before. And we think this, in addition to all of the efforts we’ve had in R&D is just going to make GE that much further ahead than the competition looking forward.
We are a really good global company with a very diversified footprint in the growth markets. I think the work that John Rice has done over the last three or four years has really given us a diversified portfolio. And as you can see the regions have all grown quickly over the last three or four years and that’s going to continue into the future. So being local, being present, being out there has really been beneficial and really been key.
And I think one of the things I want to portray for you is that this notion of localization is a big competitive advantage for GE versus other big companies or small companies. This just gives you a sense of some of the array of investments we have made from multimodality facilities that might be making four or five GE products in India and Saudi Arabia and Nigeria to low cost centers in China, low cost engineering centers in Mexico and Poland, to big localization plays in Africa, Brazil and Australia.
We can just play this – a lot of the oil and gas business has localization content rules. We can just do that better than people because of our scale and breadth. And so you have got to think about us playing this global game better, faster, with more scale than any of competition when you look at how we are positioned today.
Services has always been key to the company. That’s always been a key part of the profitability of the company and we have a long history – a massively huge backlog. The installed base grows about 3% every year, margins continue to get better. So we have got a big installed base, a proven track record of investment around that installed base and we continue to add more value to how our customers see GE and how we are positioned going forward.
And I think what you have heard this week at EPG is something that we have thought about for a long time, which is you may go to bed tonight as an industrial company, but if you are not capable in analytics, you are going to be not competitive in the future. And then maybe the first 100 years of GE was about the physics of the product, but the next period of time is going to be about the analytics. And the way you are going to eat it is through better dollars per installed base, better margins, incremental software sales and tighter relationships with customers.
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And one of the things that makes this so powerful is it is speaking the language of the customer. Things like the Industrial Internet, they are marketing phrases that can rally people behind, but when you sit in an oil and gas CEO’s office or a utility CEO’s office and you talk about no unplanned downtime, asset optimization, enterprise optimization, that’s what this means. That’s what we are building here right? And that’s where we are and that’s where GE can lead and again, it is all about, from our customers’ standpoint, what is a day of downtime at an LNG plant worth? What is 5% increase in a wind turbine worth? And it is all easily monetizable by our customers. We took a very – I would say, intense strategy to build capability, not buy it.
So we have added big players from inside the industry, Bill Ruh from Cisco, Kate Johnson from Oracle. We have got more than 1,000 people at our Center of Excellence in San Ramon. We have got – they build on 10,000 software engineers inside the company already. And we are hiring people that are data scientists and systems architects and we are hiring from all the companies that are out there and our value prop to these people is great. And then we are adding to that commercial folks. We are adding to that salespeople that know how to do outcome selling, systems selling and because we are first, we don’t want to do everything ourselves. Because we are first, we have some real enterprise advantages.
So we have got good partners, people like Cisco and Amazon Web Services. Some strategic alliances with people like Accenture and others like Taleris. We have done some small investing in platforms that we think can enhance the system going forward and so we are building a core capability there and a few acquisitions. But look, guys, we have got the best talent, we have got the best partners and we have built the best foundation as we have started into this process of enhancing our service business going forward. And the intent of all this is just to develop our own middleware. So we have built a software stack that can enable user interface, can enable data acquisition from industrial units and can enable analytics that are built on that.
And this has a chance – this is where all the GE engineers are writing. It has a chance to become an industry standard. We are working with people like SoftBank and other telecom companies that want a license Predix. We call this Predix, which is the middleware. And this allows us to launch new applications in six weeks. So we can now eat this, right? So we are now building – we are at 40 applications so far. We are in a mode where we can add them quickly. And will be, this year, in excess of $1.1 billion run rate that will show up primarily in our service businesses and drive productivity at the same time.
So people, software, output, leadership, first-mover advantage – that’s the way I would think about this initiative in terms of GE. And then here are some of the applications as you travel around the businesses and we will find ways for to show more of this to our investors as time goes on, but if we can stratify all the engines we have in CSAs, if we can stratify the wear use and data around hard and harsh environments and different environments. There is hundreds of millions of dollars of productivity that are built in, in
6 terms of time on wing guarantees and things like that. Wind power up gives 5% more output to a wind asset, which is – if you are a developer that improves your returns by 20%, so massively important.
On the enterprise side, optimization tools like Taleris, which is a whole airline productivity suite. Rail 360, which is a way to work with the railroads on ways to optimize their fleet. In Healthcare, we have got enterprise suites as well. So we view this as a big growth engine, big margin engine for the company going forward and a place that GE is truly in the lead.
You firmly talk about simplification. I think this has taken on an acceleration inside the company. I think we started with the context of how do we get costs out, particularly in the overhead of the company and now it has blossomed to really have four key parts.
The first one is less is more, that the companies like ours need to have smaller headquarters, fewer layers, simpler processes and we have found that as cost comes out, it has also liberated speed and activity. And I think we are just scratching the surface of where we can go. You add to that a real focus on speed. With FastWorks, we have basically taken lean and added to it some principles from Silicon Valley and it basically puts every process on the clock. I mean that’s the way I look at FastWorks inside the company. It’s not good enough to do those two, you have got to have strong commercial intensity and fundamentally what we are trying to create inside the company is 300,000 people drive to work every day knowing that their future is dependent on the markets and the customers and act accordingly.
So tremendous focus on winning in the marketplace, and really implementing information technology that drives margins and speed and use our scale to achieve administrative scale. And this is a game changer inside the company and one that’s moving very quickly in an important way.
So we’re well on our way of hitting our 12% goal by 2016. Every business has got SG&A as a percentage of revenue down between 5% and 15%. So this is every business across the company. The enabling functions, this is finance and HR, legal things like that are all down 15% to 20% inside the company. Headquarters is down substantially down $500 million. ERPs are more simplified and reduced and just fewer processes, leaner processes more on the clock as you look forward.
And I think people see that scarcity drives better teamwork and more accountability, that everything now is mainstream inside the company and we just think it’s – for us, look, guys, 10 years ago we were 70% inside the United States. Now we are 65% outside of the United States, in 170 countries, across eight business platforms in a world that’s highly regulated, right? Simplification is the way you win in this time period. And so we are driving it very, very hard inside the company.
The customer piece is just as important as the cost-out piece. So when you think about how you run the markets, we basically redeployed people from headquarters into the
7 field. We’ve invested in selling tools and systems, so that our businesses now have configurators and pricing tools and things like that. We have a very strong partnership with marketing and commercial finance to drive competitive advantage in the marketplace.
And if you look at Healthcare, we’ve got more salespeople despite having fewer – less structural costs. We’ve invested in people that know how to sell the entire solutions of the company in the C suite. We can now build the products that we make online with configurators, the entire sales force is on Salesforce.com.
So we have great transparency around information. I can go there and engage with any salesperson in our Oil and Gas and sales business and through Chatter find out how the accounts doing and what’s going on real-time? And very specific share and margin programs that we can execute throughout the sales force.
So huge intensity around the commercial phase at the same time we are taking structural cost out of the company. And then great leveraging of IT tools. So configurators are driving margins, if you look at the big contribution margin improvements we’ve made in the Subsea business, a lot of those have been driven by information technology.
Field services for us, we have a tremendous array of field service people, using Predix and with our analytics platform we can now get to the fingertips of people that are doing plant turnarounds in Algeria, all the expertise around how a part is wearing, what the right techniques are online and immediately.
We are bringing sensors and the Predix platform into our manufacturing plants to help us drive more productivity and more speed inside our manufacturing plants and then overall just big consolidations in ERPs, the number of applications, shared services in the cloud. So I think the way you got to look at simplification is it’s in full flight. And this is going to be big fuel for our margin enhancement as time goes on.
So really, guys, technology I think highly advantaged versus our peers. Globalization, we’ve got a footprint that no one can match globally. Analytics, we are eating it right now. Not a PowerPoint. It is going into the revenue with a big first-mover advantage and I would say culturally a focus on competitiveness, speed, growth, really key for the company going forward.
And I think we have on top of that great base on a great foundation and the change to accelerate the industrial/financial service mix for the company. So, look, Alstom is a deal we like, it’s a deal that’s executable, it’s a deal we are confident in.
We think it changes the portfolio. It allows us to accelerate the portfolio change. And as we go forward, look, we just want to become industrially a pure play infrastructure company. We are going to look for ways to create value around the non-infrastructure types of business inside the company and then GE Capital that’s highly focused on ways that we can be advantaged versus banks and generally give great returns. And when you
8 look at the right-hand side of the page from an infrastructure standpoint, you end up having a really balanced, competitively positioned infrastructure company: big energy portfolio, big oil and gas portfolio.
Energy Management that’s there to facilitate both of those in terms of how you look at where you are into the future. Aviation and Transportation, 25% of the portfolio, global leaders, well-positioned for growth and Healthcare that is core to the company, leverages the Global Research Center, is an anchor tenant as we go to growth markets.
And kind of the infrastructure model on the competitive advantage we think GE has is really technology, global position, interface with customers, very strong brand, infrastructure brand and the ability to finance. And on that foundation we built very big scale-based globally positioned company. So 75/25, strong portfolio, real platform of excellence and competitive advantage, that’s the GE that we are rounding into and growing into as time goes on. So accelerate the portfolio.
The Alstom deal, Jeff and Steve and team and I talked about it when we announced a couple of weeks ago. This is kind of the financials we talked about: $13.5 billion enterprise value, 7.9 pro forma EBITDA multiple, less than 5 after synergies. $1.2 billion of cost synergies by year five basically $4 billion of net synergies, cumulative synergies over five years, and that’s net of cost. So a tremendous synergy potential in the business, good returns, targeting close in 2015.
As I said it’s a deal that’s executable. It’s a deal we’re experiencing and it’s a deal we expect to close from an Alstom standpoint. So that’s – and we have more synergies that we are going to work on than what we told you about. And it’s extremely straightforward, right? It’s – we’ve got a big installed base. We view services as a competitive advantage. Alstom has the installed base and we think we can add value as that takes place. So that’s a pretty clear synergy.
Gas turbine, we’ve got high market share almost 50% gas turbine market share today. But this is way to add more content to that through balance of plant and project management. We have a good onshore wind business; they have offshore wind and hydro, that’s a good framework. We’ve got a very strong growth market platform, they add to the growth market platform. So a lot of the revenues of Alstom are in emerging markets. The combination takes us almost to $60 billion in growth markets.
Alstom has a much stronger steam portfolio than we do and a much stronger grid portfolio than we do. And that I think it’s an addition. We have acquired two Alstom companies. We acquired their gas turbine business in 1999. We acquired their power conversion business in 2011. So we have a lot of Alstom people inside the company and we have great access to what they are doing and how they are doing it. So it gives us confidence as we look at the company and what we can do. So strategic opportunity in a fair place that’s complementary products in common markets, and so that’s kind of the way we’ve looked at this deal as we have gone forward.
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And we are extremely experienced in Europe and France. So we build on a history of CFM, maybe the most successful industrial joint venture in the history of the world. We build on the Thomson CGR relationship that’s more than 25 years old. We acquired the Alstom plant in Belfort. Our biggest advocates in France are the employees of the Alstom plant that we acquired in 1999 that speak very highly of the company and the changes that they have seen. The power conversion is a recent acquisition rounding in the shape and we add to that the work we have done with Nuovo Pignone, building the Oil and Gas business, Jenbacher, Avio, so a tremendously strong framework.
So as a lot of European companies Alstom has a lot of employees globally, but 24,000 outside of France in Europe and 9,000 in France and that’s what GE compares. And you guys have read, as we have spoken to the French government, we talked about this being a base of the power business going forward. We have talked about adding employment in France. So opportunities to – for win in the country and to move some headquarters and local partnerships in France.
So we think this deal is good for France, it’s good for GE, it’s good for Alstom. And we are having constructive dialogues along those lines. And can accomplish that and still generate some great synergies for the business going forward.
So I would say all of this at the top envisioned the kind of synergies that we have in place and as I said, we still have other opportunities beyond that as time goes on. So again, we like the deal. We feel good about the deal, how we are positioned and where we are in terms of the structure and we are going to continue to work constructively with the French government as we look at where we go in the future.
So 2014 looks good. I think we are on track to meet the commitments we made to you in terms of industrial earnings growth, organic growth, margin expansion off to a good first quarter. GE Capital, $7 billion of earnings, $3 billion out of cash, but set up for the Retail Finance IPO this year and the split off next year and using that to retire shares, and then good position overall.
Think about the company technically strong, very strong, globally strong, very strong. Analytics in the lead, I would say a big lead, not a small lead. Simplification, driving real culture change inside the company, and an opportunity to accelerate the portfolio transition. It’s pretty powerful and the team is good.
I like how the new players are positioned inside the company, so I think that strengthens the company in terms of where we are and I like the way that has all come together, so that’s a plus, a really good bench. And I think the ability to hire from the outside, look, anybody that was here this week, if they are going to become good at the Industrial Internet, they are going to hire people – they are going to have to hire people from the outside.
I mean the software language is Deb’s part, right. Those are the tools; those are in Silicon Valley. They are not in a Fairfield, Connecticut, or Schenectady, New York, or Atlanta,
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Georgia. You are going to have to be able to do that. And from a compensation standpoint, guys, I can tell you we are continuing to evolve our thinking on incentive compensation. We are going to look harder at margins and return on invested capital.
Jeff Bornstein is leading the team right now, he is going to take a look at the incentive comp and how we structure it going into 2015 and beyond. And so just a different company with a lot of good tailwinds and well-positioned for the future. So let me end there and happy to take questions. Got the mics out? Yes, Scott.
Q&A
: Sure, Jeff. I’m sure there is not a lot you can say, so I might be going down a rabbit hole here, but this – Alstom is, excuse my French, becoming a bit of a shit show.
: I’m not sure I know the translation of that, Scott.
: I think it translates as shit show. How do you – I mean, how do you solve for this not becoming a big drama, a bidding war, a huge distraction that ends up with – you end up losing it anyways? And kind of what is plan B? I mean, at what point do you say enough is enough?
I mean, guys, you just have to say this is a company that has done a lot of this in the past. We know how to do diligence, we know how to work with governments, we have an impeccable reputation in France. We are extremely experienced on this, that we know what we will and won’t do in a very disciplined way, and I think have thought all this through.
So I just would say you can describe the show anyway you want, all right. I don’t sit here and say, God, I’m surprised. I just – we’ve done this before and that’s the best – that’s the best I can tell you, right. And I would say at the end, look, guys, I want to give you the impression that we like this deal and we are confident in this deal. We really are. These things will get played out in the media, but underlying: there is a win here for GE, there is a win here for Alstom, and there is a win here for France. And if we weren’t confident we had all three of those things, we wouldn’t be here right now. So you have got to know that.
: Fair enough. And then just – I’m going to steal the microphone for one more second here. The one business that some of us have some concerns about is just U.S. healthcare and it’s really developed markets healthcare, it’s Europe too. And how do you solve for diagnostic equipment kind of – I don’t want to call it secular decline, but
11 maybe flat lining from here with headwinds? I mean are there new business models or new things that you can consider there? I will just stop there.
There is not an acquisition out there that would – we don’t look to see anything other than what it is. And then, Scott, I just think the dust clears at some point, right? There is going to be consolidation on the providers, there is going to be a sense of who the winners and losers are and things like that.
And then I would ask investors to step back and say once that all happens, you still have healthcare that is 20% of the global economy and growing at maybe 2X – even with all those problems. So I think you stay focused in the short-term on what you can fix, but over the long-term, I still think there is some juice in the model. Yeah, Jeff.
: Just back to Alstom, but more just what it means for your power business and the nature of my question is the way you show it, it feels like it’s a nice offensive growth move, but the more I think about it, it kind of feels defensive. And what I mean by that is historically you’ve been able to really cherry pick the gas turbine and avoid all the kind of danger volatility on balance of plant and EPC work and everything. How important is this to protect your gas turbine franchise and if this deal doesn’t happen, is there some other path to go ahead and kind of fortify that position?
And then, look, we finished the year – like if you look at the fourth quarter, we finished last year close to 50% market share in heavy duty gas turbines. So we are able to run this play however we want to run the play. I think this gives us more value content, which I view as totally incremental upside. So it gives us value content on the bottoming cycle, it gives you more value content around the projects. It allows you to be smarter around the world in terms of how the projects take place, but I view that not as playing defense; I view that, Jeff, as incremental upside in terms of where we go.
And then from a grid standpoint, you really do have a chance to make one plus one equal three in terms of grid and things like that. So I think it’s all on offense; I really do. And I think our market share speaks for itself really right now. With the H, guys, we are getting
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– we are extremely well positioned with the H in terms of the bidding we’re doing right now and what we are seeing in the marketplace, and so we feel good about that as well, Jeff.
: Yeah, just one Alstom and then one GE Capital. On Alstom, I mean you’ve made the point of it accelerates, right. It accelerates to the 75%, so it’s the fastest way to get you there. You didn’t say it was the best thing. I mean, is this the best thing in the M&A pipeline, so if this doesn’t…?
Without Alstom, we were still going to hit 70% industrial/financial by 2016. So we had a pathway and a roadway to get there. But from a financial standpoint, Shannon, it’s just – it’s well-priced, the synergies are good, it pays for itself quickly. So if you look at the pipeline, it’s not the only thing that’s there, but it’s an attractive thing, it’s in bulk, so that I think that’s a good thing as well. And so when we add all that up, we thought it was worth – we think it’s good for investors and puts us in a good spot.
: And then on GE Capital?
: We are already going to hit 70, right, so it’s not like – we are already going down the path.
: No, I just meant you are not going to do any other M&A now 2014 and 2015. What’s the opportunity…
: I think this is the one we’re looking at right now, yeah.
: When you get to $300 billion of ENI at GE Capital, what’s the GE Capital dividend look like?
: Do you think you could still grow it and do specials after this is all done?
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: Just a question on Synchrony timing?
: So third quarter is it we’re targeting third quarter, or do we have regulatory permission to do it in third quarter now?
: And then you sort of talked about extracting more value out of GE Capital, you highlighted assets shrinking down to $300 billion. Can you extract the cash out of GE Capital before completing the Synchrony IPO? As you continue to sell down? Can you…
: Thanks Jeff. I’d like to get some more color around that $4 billion in divestitures that you’re looking at over the near term. And you’re phrasing today is the candidates would be those that fall under the category of non-infrastructure. And you have certainly got more than $4 billion of non-infrastructure candidates, you could be looking at. And you also don’t typically talk about names, so I am not expecting names. But, maybe can you provide for us a color about the approach, the timing of some of these divestitures to get down to that industrial technology model that you’re looking for. And maybe some of the idea of staged exits and partnerships and what kind of ways might these divestitures take form so we could be prepared for that?
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: And just one clarification out of these divestitures for this year you are contemplating, would there be gains that would be used to offset some of the naked restructuring you are looking for now?
: So you’ve taken the development cycle the H-class down from 5 years to 2.5 years, 3 years, and that’s an extraordinary leap of technology. What is the biggest driver? I know its FastWorks, I know you think simplification, but what is the biggest thing or driver of that cycle time reduction? And then on top of that you said 39 bids for the H-class 39 proposals and thing that’s a lot of activity and is that geographically diversified or is it focused in certain areas?
And then it is – I would say there is a reasonable amount of bidding activity in the U.S. that is largely IPPs. So, you’re saying IPP bids in the U.S. and then Asia is huge, like Asia, we basically I would say for the last three or four years have received no orders in Korea. So, Korea is now an open door for us to again and so those would be the two big places, I would say Asia and the U.S. It is going to primarily going to be base look. Yes, Julian.
: Thanks. I guess in Oil and Gas the kind of execution on large projects has been a little uneven in the last few years. So with more balance of plant, more EPC, Alstom, I guess what would change in how you’re managing those large projects, I think about $8 billion of that backlog is…
15 makes you smarter. It will make us smarter across the company, not just in Power or Oil and Gas. Okay, go ahead, Steve.
: Not yet. Yes. So last year, we had a lot more buy side questions coming in. There are only a couple this year from around the room, one of them is simple, I think what’s the revenue base or GE Mining today or they still using a 2016 revenue target of $5 billion even with the Alstom deal happening?
: Okay. And then this one is how should we think about restructuring in 2015 and 2016, with or without Alstom versus a $1 billion number in 2014. So how much?
: And this is from another one here that is saying to what extent you worried about multiple compression for overall GE after the deal, given Alstom’s low multiple historically and other things may be slowing, why not a big buyback instead?
: And maybe since there aren’t more from the audience one last one from me.
: Right. But, so let’s assume that the earlier question was whether it’s true or not that you’re actually able to get the margin side of Alstom, whatever bad situation it is in today, you can get the cost side. A lot of the pushback that I get on it I know is at a top line organic growth level that – to what extent you have conviction on the top line of what you’re buying?
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<< Steven Winoker, analyst, Sanford C. Bernstein & Co., LLC >>
Jeff thanks.
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Great, Steve. Thanks.
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