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Article by DailyStocks_admin    (04-08-08 03:56 AM)

The Daily Warren Buffett Stock is GE. Berkshire Hathaway owns 7,777,900 shares. As of Dec 31,2007, this represents 0.42% percent of portfolio.

BUSINESS OVERVIEW

General

Unless otherwise indicated by the context, we use the terms “GE,” “GECS” and “GE Capital” on the basis of consolidation described in note 1 to the consolidated financial statements on page 70 of the 2007 Annual Report to Shareowners of General Electric Company (the Company). The financial section of such Annual Report to Shareowners (pages 39 through 113 of that document) is described in Part IV Item 15(a)(1) and set forth in Exhibit 13 of this 10-K Report and is an integral part hereof. References in Parts I and II of this 10-K Report are to the page numbers of the 2007 Annual Report to Shareowners. Also, unless otherwise indicated by the context, “General Electric” means the parent company, General Electric Company.

General Electric’s address is 1 River Road, Schenectady, NY 12345-6999; we also maintain executive offices at 3135 Easton Turnpike, Fairfield, CT 06828-0001.

We are one of the largest and most diversified technology, media, and financial services corporations in the world. With products and services ranging from aircraft engines, power generation, water processing, and security technology to medical imaging, business and consumer financing, media content and industrial products, we serve customers in more than 100 countries and employ more than 300,000 people worldwide. Since our incorporation in 1892, we have developed or acquired new technologies and services that have broadened considerably the scope of our activities.

In virtually all of our global business activities, we encounter aggressive and able competition. In many instances, the competitive climate is characterized by changing technology that requires continuing research and development, as well as customer commitments. With respect to manufacturing operations, we believe that, in general, we are one of the leading firms in most of the major industries in which we participate. The NBC Television Network is one of four major U.S. commercial broadcast television networks. We also compete in syndicated broadcast television programming, cable/satellite television programming activities and in the motion picture industry. The businesses in which GECS engages are subject to competition from various types of financial institutions, including commercial banks, thrifts, investment banks, broker-dealers, credit unions, leasing companies, consumer loan companies, independent finance companies and finance companies associated with manufacturers.

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 often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could adversely or positively affect our future results include: the behavior of financial markets, including fluctuations in interest and exchange rates and commodity and equity prices; the commercial and consumer credit environment; the impact of regulation and regulatory, investigative and legal actions; strategic actions, including acquisitions and dispositions; future integration of acquired businesses; future financial performance of major industries which we serve, including, without limitation, the air and rail transportation, energy generation, media, real estate and healthcare industries; 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.

Our consolidated global revenues increased to $86.5 billion in 2007, compared with $70.8 billion in 2006 and $60.9 billion in 2005. For additional information about our geographic operations, see pages 51 and 52 of the 2007 Annual Report to Shareowners.

Operating Segments

Segment revenue and profit information is presented on page 47 of the 2007 Annual Report to Shareowners. Additional financial data and commentary on recent financial results for operating segments are provided on pages 46-51 of that report and in note 25 (pages 98 and 99) to the consolidated financial statements.

Operating businesses that are reported as segments include Infrastructure, Commercial Finance, GE Money, Healthcare, NBC Universal and Industrial. There is appropriate elimination of the net earnings of GECS and the effect of transactions between segments to arrive at total consolidated data. A summary description of each of our operating segments follows.

During the fourth quarter of 2007, we transferred the Equipment Services business from the Industrial segment to the Commercial Finance segment, where a portion of the business is reported in Capital Solutions. Prior period information has been reclassified to be consistent with the current organization.

We also continue our longstanding practice of providing supplemental information for certain businesses within the segments.

Infrastructure

Infrastructure (33.5%, 30.9% and 30.5% of consolidated revenues in 2007, 2006 and 2005, respectively) is one of the world’s leading providers of essential technologies to developed, developing and emerging countries. Through products and services in aviation, energy, oil and gas, transportation, and water and process technologies, GE is helping to develop the infrastructure of countries all over the world. Infrastructure also provides aviation financing as well as energy and water investing, lending and leasing.

Our operations are located in North America, Europe, Asia and South America.

Aviation and Aviation Financial Services

Aviation produces, sells and services jet engines, turboprop and turbo shaft engines, and related replacement parts for use in military and commercial aircraft. Our military engines are used in a wide variety of aircraft including fighters, bombers, tankers, helicopters and surveillance aircraft, as well as marine applications, and our commercial engines power aircraft in all categories of range: short/medium, intermediate and long-range, as well as executive and regional aircraft. We also produce and market engines through CFM International, a company jointly owned by GE and Snecma, a subsidiary of SAFRAN of France, and the Engine Alliance, LLC, a company jointly owned by GE and the Pratt & Whitney division of United Technologies Corporation. New engines are also being designed and marketed in joint ventures with Rolls-Royce Group plc and Honda Aero, Inc., a division of Honda Motor Co., Ltd.

Infrastructure is party to collaboration agreements that share the financial results of certain aircraft and marine engine lines and their related aero-derivatives. Infrastructure collaboration agreements take the form of both joint ventures and revenue sharing programs.

•

Joint ventures market and sell particular aircraft engine lines, but require negligible direct investment because the venture parties conduct essentially all of the development, production, assembly and aftermarket support activities. Under these agreements, Aviation supplies certain engine components and retains related intellectual property rights. The CFM56 engine line is the product of CFM International and the GP7000 engine line is the product of Engine Alliance, LLC.

•

Revenue sharing programs are a standard form of cooperation for specific product programs in the aviation and aero-derivative industries. These businesses are controlled by Infrastructure, but counterparties have an agreed share of revenues as well as development and component production responsibilities. At December 31, 2007, such counterparty interests ranged from 3% to 49% of various programs; associated distributions are accounted for as costs of production.

On May 4, 2007, Aviation acquired Smiths Aerospace from Smiths Group plc for approximately $5.2 billion in cash. Smiths Aerospace is a $2.4 billion (sales) global aerospace systems and equipment company that provides airborne platform computing systems, power generation and distribution products, mechanical actuation products and landing gear, plus various engine components and a global customer services organization.

We provide maintenance, component repair and overhaul services (MRO), including sales of replacement parts, for many models of engines, including repair and overhaul of engines manufactured by competitors. These MRO services are often provided under long-term maintenance contracts.

The worldwide competition in aircraft jet engines and MRO (including parts sales) is intense. Both U.S. and export markets are important. Product development cycles are long and product quality and efficiency are critical to success. Research and development expenditures are important in this business, as are focused intellectual property strategies and protection of key aircraft engine design, manufacture, repair and product upgrade technologies. Our products and services are subject to a number of regulatory standards.

Potential sales for any engine are limited by, among other things, its technological lifetime, which may vary considerably depending upon the rate of advance in technology, the small number of potential customers and the limited number of relevant airframe applications. Aircraft engine orders tend to follow military and airline procurement cycles, although these cycles differ from each other.

Aviation Financial Services is a global commercial aviation financial services business that offers a broad range of financial products to airlines, aircraft operators, owners, lenders, investors and airport developers. Financial products include leases, aircraft purchasing and trading, loans, engine/spare parts financing, fleet planning and financial advisory services. We operate in a highly competitive environment. Our competitors include aircraft manufacturers, banks, financial institutions, and other finance and leasing companies. Competition is based on lease rates and terms, as well as aircraft delivery dates, condition and availability.

Energy and Energy Financial Services

Energy serves power generation, industrial, government and other customers worldwide with products and services related to energy production, distribution and management. We offer wind turbines as part of our renewable energy portfolio, which also includes solar technology. We also sell aircraft engine derivatives for use as industrial power sources. Gas turbines and generators are used principally in power plants for generation of electricity and for industrial cogeneration and mechanical drive applications. We are a leading provider of Integrated Gasification Combined Cycle (IGCC) technology design and development. IGCC systems convert coal and other hydrocarbons into synthetic gas that, after cleanup, is used as the primary fuel for gas turbines in combined-cycle systems. IGCC systems produce fewer air pollutants compared with traditional pulverized coal power plants. We sell steam turbines and generators to the electric utility industry and to private industrial customers for cogeneration applications. Nuclear reactors, fuel and support services for both new and installed boiling water reactors are offered through a joint ventures with Hitachi and Toshiba. We provide our customers with total solutions to meet their needs through a complete portfolio of aftermarket services, including equipment upgrades, long-term maintenance service agreements, repairs, equipment installation, monitoring and diagnostics, asset management and performance optimization tools, remote performance testing and Dry Low NOx (DLN) tuning. We continue to invest in advanced technology development that will provide more value to our customers and more efficient solutions that comply with today’s strict environmental regulations.

Worldwide competition for power generation products and services is intense. Demand for power generation is global and, as a result, is sensitive to the economic and political environment of each country in which we do business. The balance of regional growth and demand side management are important factors to evaluate as we plan for future development.

Energy Financial Services offers structured equity, debt, leasing, partnership financing, project finance and broad-based commercial finance to the global energy and water industries and invests in operating assets in these industries. During 2007, we acquired a controlling interest in Regency Energy Partners LP, a midstream master limited partnership engaged in the gathering, processing, transporting and marketing of natural gas and gas liquids. We operate in a highly competitive environment. Our competitors include banks, financial institutions, energy and water companies, and other finance and leasing companies. Competition is primarily based on price, that is interest rates and fees, as well as deal structure and terms. As we compete globally, our success is sensitive to the economic and political environment of each country in which we do business.

Oil & Gas

Oil & Gas supplies technology-based equipment and services for the entire oil and gas industry - from drilling and completion to production, transportation, refining, processing, petrochemicals and plastics. We offer a wide range of surface and subsea drilling and production systems, equipment for floating production platforms, compressors, turbines, turboexpanders and industrial power generation equipment. As a global business, Oil & Gas supports the world’s leading national and international oil companies with latest technology products and services that drive improvements in productivity, efficiency and environmental performance.

On February 23, 2007, Oil & Gas acquired Vetco Gray, one of the world’s leading suppliers of drilling, completion and production equipment for onshore and subsea applications in oil and gas fields. The business supplies flow control valves (known as “Christmas trees”), control systems, wellheads, manifolds, risers and associated after-market services.

The global demand for oil and gas, coupled with a geographic imbalance between supply and demand, is promoting investment in the exploration, production, transportation and processing segments of the industry.

Transportation

Transportation provides technology solutions for customers in a variety of industries including railroad, transit, mining, oil and gas, power generation and marine. We serve customers in more than 100 countries.

Transportation manufactures high-horsepower diesel-electric locomotives, including the Evolution Series™, the most technologically advanced and most fuel efficient locomotive, which meets or exceeds the U.S. Environmental Protection Agency’s Tier II requirements. We also offer leading drive technology solutions to the mining, transit, marine and stationary, and drilling industries. Our motors operate in thousands of applications, from electrical drives systems for large haulage trucks used in the mining industry to transit cars and drilling rigs, and our engines are used for marine power as well as stationary power generation applications. We also provide gearing technology for critical applications such as wind turbines.

Transportation also provides a portfolio of services offerings, designed to improve fleet efficiency and reduce operating expenses, including repair services, locomotive enhancements, modernizations, and information-based services like remote monitoring and diagnostics. We provide train control products, railway management services, and signaling systems to increase service levels, optimize asset utilization, and streamline operations for railroad owners and operators. We deliver leading edge tools that improve asset availability and reliability, optimize network planning, and control network execution to plan.

Water

Water offers water treatment solutions for industrial and municipal water systems including the supply and related services of specialty chemicals, water purification systems, pumps, valves, filters and fluid handling equipment for improving the performance of water, wastewater and process systems, including mobile treatment systems and desalination processes. During 2006, we acquired ZENON Environmental Inc., a global leader in advanced membranes for water purification and wastewater treatment.

For information about orders and backlog, see page 48 of the 2007 Annual Report to Shareowners.

Commercial Finance

Commercial Finance (19.8%, 20.3% and 20.0% of consolidated revenues in 2007, 2006 and 2005, respectively) offers a broad range of financial services worldwide. We have particular mid-market expertise and offer loans, leases and other financial services to customers, including manufacturers, distributors and end-users for a variety of equipment and major capital assets. These assets include industrial-related facilities and equipment; commercial and residential real estate; vehicles; corporate aircraft; and equipment used in many industries, including the construction, manufacturing, transportation, telecommunications and healthcare industries.

During 2007, we made a number of acquisitions, the most significant of which were Trustreet Properties, Inc.; Diskont und Kredit AG and Disko Leasing GmbH (DISKO) and ASL Auto Service-Leasing GmbH (ASL), the leasing businesses of KG Allgemeine Leasing GmbH & Co.; and Sanyo Electric Credit Co., Ltd.

We operate in a highly competitive environment. Our competitors include commercial banks, investment banks, leasing companies, financing companies associated with manufacturers, and independent finance companies. Competition related to our lending and leasing operations is based on price, that is interest rates and fees, as well as deal structure and terms. Profitability is affected not only by broad economic conditions that affect customer credit quality and the availability and cost of capital, but also by successful management of credit risk, operating risk and market risks such as interest rate and currency exchange risks. Success requires high quality risk management systems, customer and industry specific knowledge, diversification, service and distribution channels, strong collateral and asset management knowledge, deal structuring expertise and the ability to reduce costs through technology and productivity.

Our headquarters are in Norwalk, Connecticut with offices throughout North America, South America, Europe, Australia and Asia.

Capital Solutions

Capital Solutions offers a broad range of financial services worldwide, and has particular mid-market expertise, offering loans, leases, inventory finance, transport solutions and other financial services to customers, including manufacturers, dealers and end-users for a variety of equipment and major capital assets. These assets include retail facilities; vehicles; corporate aircraft; and equipment used in many industries, including the construction, transportation, technology, and manufacturing industries.

Real Estate

Real Estate offers a comprehensive range of capital and investment solutions, including equity capital for acquisition or development, as well as fixed and floating rate mortgages for new acquisitions or re-capitalizations of commercial real estate worldwide. Our business finances, with both equity and loan structures, the acquisition, refinancing and renovation of office buildings, apartment buildings, retail facilities, parking facilities and industrial properties. Our typical real estate loans are intermediate term, may be either senior or subordinated, fixed or floating-rate, and are secured by existing income-producing commercial properties. Certain of our originations of low loan-to-value loans are conducted for term securitization within one year; certain of our equity investments, including properties we acquire for investment, are sold under favorable market conditions. We invest in, and provide restructuring financing for, portfolios of mortgage loans, limited partnerships and tax-exempt bonds.

In the normal course of our business operations, we sell certain real estate equity investments when it is economically advantageous for us to do so. However, as real estate values are affected by certain forces beyond our control (e.g., market fundamentals and demographic conditions), it is difficult to predict with certainty the level of future sales or sales prices. Rental income generally approximates operating expenses, which include depreciation and amortization.

GE Money

GE Money (14.5%, 13.0% and 12.5% of consolidated revenues in 2007, 2006 and 2005, respectively) is a leading provider of financial services to consumers and retailers in over 50 countries around the world. We offer a full range of innovative financial products to suit customers’ needs. These products include private-label credit cards; personal loans; bank cards; auto loans and leases; mortgages; debt consolidation; home equity loans; corporate travel and purchasing cards; deposit and other savings products; small and medium enterprise lending; and credit insurance on a global basis. In September 2007, we committed to a plan to sell our Japanese personal loan business (Lake) and in December 2007, we sold our U.S. mortgage business (WMC).

In 2007, as part of our continued global expansion, we made a number of acquisitions, the most significant of which was a 33% stake in Bank of Ayudhya and private label credit card portfolios of Chevron and Lowe’s.

Our operations are subject to a variety of bank and consumer protection regulations. Further, a number of countries have ceilings on rates chargeable to consumers in financial service transactions. We are subject to competition from various types of financial institutions including commercial banks, leasing companies, consumer loan companies, independent finance companies, manufacturers’ captive finance companies, and insurance companies. Industry participants compete on the basis of price, servicing capability, promotional marketing, risk management, and cross selling. The markets in which we operate are also subject to the risks from fluctuations in retail sales, interest and currency exchange rates, and the consumer’s capacity to repay debt.

Our headquarters are currently in Stamford, Connecticut and our operations are located in North America, South America, Europe, Australia and Asia. In February 2008, we announced that we will move our headquarters to London, England.


Healthcare

Healthcare (9.8%, 10.9% and 11.0% of consolidated revenues in 2007, 2006 and 2005, respectively) has expertise in medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery and biopharmaceutical manufacturing technologies. We are dedicated to predicting and detecting disease earlier, monitoring its progress and informing physicians, helping them to tailor individual treatment for individual patients. Healthcare manufactures, sells and services a wide range of medical equipment: diagnostic imaging systems including equipment for magnetic resonance (MR), computed tomography (CT), positron emission tomography (PET), nuclear and X-ray imaging. Clinical systems including patient monitoring, diagnostic cardiology, ultrasound, bone densitometry, anesthesiology and oxygen therapy, neonatal and critical care devices. Medical diagnostics and life sciences products include diagnostic imaging agents used in medical scanning procedures, protein separation products including chromatography purification systems used in the manufacturing of bio-pharmaceuticals, and high-throughput systems for applications in genomics, proteomics and bioassays. During 2006, we acquired IDX Systems Corporation, a leading healthcare information technology provider and Biacore International AB, a leading provider of systems for protein interaction analysis. We sell products and product services to hospitals, medical facilities, pharmaceutical and biotechnology companies and to the life science research market worldwide. Our product services include remote diagnostic and repair services for medical equipment manufactured by GE and by others, as well as computerized data management and customer productivity services.

We compete with a variety of U.S. and non-U.S. manufacturers and services operations. Technological competence and innovation, excellence in design, high product performance, quality of services and competitive pricing are among the key factors affecting competition for these products and services. Throughout the world, we play a critical role in delivering new technology to improve patient outcomes and productivity tools to help control healthcare costs.

Our products are subject to regulation by numerous government agencies, including the FDA, and various laws apply to claims submitted under Medicare, Medicaid or other federally-funded healthcare programs.

For information about orders and backlog, see page 50 of the 2007 Annual Report to Shareowners.

Our headquarters are in Chalfont St. Giles, United Kingdom and our operations are located in North America, Europe, Asia, Australia and South America.

COMPENSATION

Since 2001, Mr. Immelt has been the company’s CEO and chairman of the Board. Over his 25-year career with the company, he has held a number of key positions, as described in his biography on page 7. Under Mr. Immelt’s leadership, the company has received significant recognition, including being named by FORTUNE magazine as the most admired company globally for five of the past seven years. More than half of the company’s revenues now come from outside the United States, and the company’s portfolio of businesses has been reshaped and built to deliver consistent earnings growth. Revenues have grown 13% year-over-year since 2003, rising to $173 billion in 2007 from $105 billion in 2003, or 65% cumulatively. During the same period, earnings from continuing operations have grown 14% year-over-year, from $13.3 billion in 2003 to $22.5 billion in 2007, or 69% cumulatively. Over $90 billion of cash flow from operating activities has been generated since 2003, enabling the company to return $75 billion to shareowners through dividends and stock buybacks, while at the same time successfully refocusing the company by investing in research and new technologies and by acquiring growth businesses.

At the beginning of each year, Mr. Immelt develops the objectives that he believes need to be achieved for the company to be successful, which he then reviews with the MDCC for the corollary purpose of establishing how his performance will be assessed. These objectives are derived largely from the company’s annual financial and strategic planning sessions, during which in-depth reviews of the company’s growth opportunities are analyzed and goals are established for the upcoming year. They include both quantitative financial measurements and qualitative strategic and operational considerations and are focused on the factors that our CEO and the Board believe create long-term shareowner value. Mr. Immelt reviews and discusses preliminary considerations as to his own compensation with the MDCC. In developing these considerations, he solicits the input of, and receives advice and data from, our senior vice president, human resources. Mr. Immelt does not participate in the final determination of his own compensation.

The MDCC believes that Mr. Immelt performed very well in 2007. He met or exceeded his revenue, earnings, EPS and CFOA targets and made good progress on his ROTC target (+30 basis points). In addition, productivity efforts resulted in a margin expansion of 70 basis points. A comprehensive review of the company’s performance under Mr. Immelt’s leadership can be found in our Annual Report on Form 10-K. In addition to executing the company’s financial plan described above, the MDCC established for 2007 a number of operational and strategic goals for Mr. Immelt. These goals included sustaining financial strength and flexibility, driving organic revenue growth at 2 to 3 times gross domestic product (GDP) and creating a more valuable portfolio of businesses. Retaining an excellent team and a strong culture are ongoing imperatives, and Mr. Immelt was also expected to manage the company’s risk and reputation, build an excellent investor base and lead the Board activities.

Mr. Immelt is continuing to position the company for sustained growth through his strong performance in 2007. This performance, in a difficult economic environment, enabled the company to maintain its solid “Triple-A” credit rating, keep risk at very acceptable levels and return over $25 billion to investors through dividends and the company’s stock buyback program, which was completed one year early. The company exceeded, for the 14th consecutive quarter, its organic revenue growth goal of 2 to 3 times GDP, with revenue from ecomagination-related products and services growing 17%, making this one of GE’s most successful growth initiatives ever.

Mr. Immelt continued to build a more valuable portfolio in 2007, obtaining a highly competitive price for GE Plastics of $11.6 billion, and quickly integrating the newly acquired Smiths Aerospace and VetcoGray businesses. The company has a robust, flexible global platform that has attracted a strong base of value investors. The MDCC believes that Mr. Immelt’s operational and strategic achievements account for GE’s continued high reputation and for GE and its leadership team being consistently ranked among the best in the world in surveys published by FORTUNE , Barron’s and CEO magazines.

Mr. Immelt also had another successful year developing and retaining leaders, managing key leadership transitions at NBCU, Industrial and our human resources function. Mr. Immelt is also continuing to effectively lead the Board by further strengthening its composition and governance practices. In addition, the company successfully negotiated a new four-year labor contract.

Since 2003, Mr. Immelt has received all of his equity incentive compensation in the form of PSUs because the MDCC and Mr. Immelt believe that his equity incentive compensation should be fully at risk and based on key performance measures that are aligned with the interests of our shareowners. As a further indication of Mr. Immelt’s alignment with shareowners, Mr. Immelt purchased 183,000 shares of GE stock in the open market in 2007 and his direct ownership of GE stock as of February 1, 2008 is 1,173,813 shares, 230% of the amount required under the company’s share ownership requirements. He has purchased 469,400 shares in the open market since he became our CEO.

For 2007, based on the MDCC’s evaluation of the company’s performance, his leadership contribution and his potential to enhance long-term shareowner value through continued service, the MDCC increased Mr. Immelt’s cash compensation from $8.3 million to $9.1 million, a 10% increase from 2006. In addition, he was granted 150,000 PSUs on the same terms as the grant he received in September 2006, when he received 250,000 PSUs. Even though Mr. Immelt received fewer PSUs in 2007, the PSU accounting expense reported in the Summary Compensation Table increased. This is primarily attributable to the SFAS 123R expense of PSUs granted to Mr. Immelt prior to 2007, a portion of which was not earned as described in the section below. Under applicable SEC rules, this expense must be recognized over the life of the grant, which is generally five years. In 2007, we recognized expenses relating to six PSU grants, compared with five in 2006 ($8.6 million in 2007 versus $6.1 million in 2006). We believe it is important to clarify the value of PSUs to Mr. Immelt on realization versus the accounting charge since they are 100% at risk and have outcomes that are unknown. Including the SFAS 123R accounting charge and all other compensation, Mr. Immelt’s total compensation for 2007 was $19,591,580, a 10% increase from 2006. We believe that Mr. Immelt’s total compensation is closely connected with the company’s objective to reward, align, motivate and challenge Mr. Immelt to continue leading the company successfully.

PSUs Vested in 2008 . In February 2008, Mr. Immelt received 125,000 shares from the 250,000 PSUs granted to him in 2003 and 90,000 shares from the 180,000 PSUs granted to him in 2006. As shown in the table below, pursuant to the terms of these grants, 50% of the PSUs converted into shares of GE stock because GE’s cash flow from operating activities had grown an average of more than 10% per year over the performance period. The remaining 50% of the PSUs, representing shares with a market value of $7.3 million on the vesting date, were cancelled since GE’s total shareowner return had not met or exceeded that of the S&P 500 over the performance period.

Determining Compensation for Our Other Named Executives in 2007

Each other named executive is a leader of an individual business or function and a vice chairman of the company. As part of the executive management team, they report directly to Mr. Immelt, who develops the objectives that each individual is expected to achieve, and against which their performance is assessed. Similar to Mr. Immelt, these objectives are reviewed with the MDCC at the beginning of each year and are derived largely from the company’s annual financial and strategic planning sessions in which the other named executives participate.

Like Mr. Immelt, their objectives include both quantitative financial measurements and qualitative strategic and operational considerations affecting the company and the businesses or function that the named executives lead. Mr. Immelt leads the assessment of a named executive’s individual performance against the objectives, the company’s overall performance and the performance of his business or function. He then makes an initial compensation recommendation to the MDCC for each named executive, again with the advice of our senior vice president, human resources. The named executives do not play a role in their compensation determination, other than discussing with the CEO their individual performance against their predetermined objectives.

Keith Sherin . Mr. Sherin has been our chief financial officer since 1998 and was named a vice chairman in July 2007. Since he joined GE in 1981, he has assumed roles with increasing responsibilities at many of our key businesses. As the leader of the company’s finance organization, Mr. Sherin’s financial objectives focus on the overall performance of the company and are the same as Mr. Immelt’s. His strategic and operational goals included supporting the businesses with strong and effective finance and controllership functions, leading efforts toward improving those functions, managing healthcare and pension costs, continuing to build relationships with investors, and helping the company sustain its “Triple-A” credit rating in order to access capital on a cost-effective basis.

As described in the above review of Mr. Immelt’s performance and the company’s Annual Report on Form 10-K, the company delivered strong financial results in 2007, and Mr. Sherin’s financial leadership was instrumental in achieving these results. In a difficult economic environment, Mr. Sherin’s financial leadership across the company’s businesses was critical to maintaining a strong balance sheet and “Triple-A” credit rating. Important steps were taken to strengthen the company’s controllership and finance functions by enhancing the company’s technical accounting resources and internal audit function. Mr. Sherin also led efforts to control pension and retiree healthcare costs thereby improving GE’s competitiveness. Mr. Sherin was promoted to vice chairman in 2007, reflecting his success as a GE leader and effective communicator with our investors as well as his contributions to building a stronger finance function.

In light of the assessment of Mr. Sherin’s achievements, he received a $3,000,000 cash bonus, an 18% increase from 2006. In addition, his annual base salary was increased to $1,500,000 effective August 2007 following his promotion to vice chairman. Mr. Sherin received 275,000 stock options and 91,667 RSUs in 2007. His total compensation is in the Summary Compensation Table on page 20.

Mike Neal . Mr. Neal has been the leader of our Commercial Finance business since 2002 and is also a vice chairman of the company. Previously, he was the president and chief operating officer of GE Capital, and held several leadership positions at other businesses since he joined GE in 1979. Mr. Neal’s financial objectives focused on increasing assets, revenues, net income and return on equity in the Commercial Finance business. His strategic and operational goals included accelerating the global growth of his business and improving the business’ margins.

Commercial Finance under Mr. Neal’s leadership had a strong year in 2007. Revenues grew by 11%, to $34.3 billion, and net income of $6.0 billion was a 14% increase from the prior year. Assets grew 23%, to $310 billion, with Europe and Asia growing by more than 30%, while risk and costs were controlled effectively. Although the real estate market presented significant challenges, Mr. Neal demonstrated great leadership in guiding Commercial Finance through this difficult environment and limiting the company’s exposure.

In light of the assessment of Mr. Neal’s achievements, he received a $3,880,000 cash bonus, an 18% increase from 2006. In addition, Mr. Neal received 275,000 stock options and 91,667 RSUs in 2007. His total compensation is in the Summary Compensation Table on page 20.

John Rice . Mr. Rice has been the leader of our Infrastructure business since 2006 and is also a vice chairman of the company. During his career at GE, which began in 1978, he has served as president and CEO of GE Industrial, GE Energy and GE Transportation Systems. For 2007, Mr. Rice’s key financial objectives included increasing revenues, operating profit, net income, cash flow from operating activities and margins in the Infrastructure business. His strategic and operational goals included launching new key technologies to drive performance and margins, integrating acquisitions and managing and improving profits in important business areas that are underperforming.

Mr. Rice led Infrastructure in 2007 to a strong performance, and successfully completed the integration of key acquisitions in the Aviation business (Smiths Aerospace) and Oil & Gas (VetcoGray). Revenue grew by 23%, operating profit increased 22% and cash flow from operating activities exceeded $9 billion. The performances by the Energy and Oil & Gas businesses were particularly good, and a solid turnaround at the Water business is well underway. Major equipment orders and backlog are at historic highs, as are the growth and business operations in emerging markets. Under Mr. Rice’s leadership, Infrastructure has been very successfully positioned for future growth.

In light of the assessment of Mr. Rice’s achievements, he received a $3,000,000 cash bonus, an 18% increase from 2006. Mr. Rice received 275,000 stock options and 91,667 RSUs in 2007. His total compensation is in the Summary Compensation Table on page 20.

Bob Wright . Mr. Wright has built a long and distinguished career with GE. After 21 years leading and building NBCU, he stepped down as NBCU’s CEO in February 2007, and subsequently as NBCU’s chairman at the end of April 2007. Throughout 2007, Mr. Wright was instrumental in transitioning the leadership of NBCU to Mr. Zucker and helping him launch a very successful turnaround of this business. In addition, Mr. Wright supported the chairman on a number of broader company-wide activities that included developing longer-term business strategies for the company and NBCU. Mr. Wright also provided his leadership and substantial industry expertise to various public policy issues of importance to the company, anti-piracy being key among these, and continued his participation on a number of boards of GE affiliates to ensure that the interests of GE were well served.

In light of the assessment of Mr. Wright’s achievements, he received a $7,590,000 cash bonus, a 10% increase from 2006. He did not receive any equity incentive compensation in 2007. His total compensation is in the Summary Compensation Table on page 20.

Other Compensation Practices

Role of the MDCC and Executives in Establishing and Implementing Compensation Goal . The MDCC has the primary responsibility for assisting the Board in developing and evaluating potential candidates for executive positions and for overseeing the development of executive succession plans. As part of this responsibility, the MDCC oversees the design, development and implementation of the compensation program for the CEO and the other named executives. Our CEO and senior vice president, human resources, assist the MDCC in administering our compensation programs. The senior vice president, human resources, assists the MDCC and participates in its deliberations about compensation matters by providing advisory services and information, such as past compensation, compensation practices and guidelines, company performance, current industry compensation practices and competitive market information. Information setting forth the total annual compensation of each named executive, and potential retirement benefits accruing to each, is also assembled by the human resources function for the MDCC.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations

General Electric Company’s consolidated financial statements represent the combination of the industrial manufacturing and product services businesses of General Electric Company (GE) and the financial services businesses of General Electric Capital Services, Inc. (GECS or financial services).

In the accompanying analysis of financial information, we sometimes use information derived from consolidated financial information but not presented in our financial statements prepared in accordance with U.S. generally accepted accounting principles (GAAP). Certain of these data are considered “non-GAAP financial measures” under the U.S. Securities and Exchange Commission (SEC) rules. For such measures, we have provided supplemental explanations and reconciliations in Exhibit 99 to this report on Form 10-Q.

Unless otherwise indicated, we refer to captions such as revenues and earnings from continuing operations simply as “revenues” and “earnings” throughout this Management’s Discussion and Analysis. Similarly, discussion of other matters in our condensed, consolidated financial statements relates to continuing operations unless otherwise indicated.

Overview

General Electric Company’s earnings from continuing operations increased 7% to $5.086 billion in the third quarter of 2007 compared with $4.749 billion in 2006. Earnings per share (EPS) from continuing operations were $0.50 in the third quarter of 2007, up 9% from last year’s $0.46.

For the first nine months of 2007, earnings from continuing operations increased 17% to $15.656 billion compared with $13.418 billion for the same period in 2006. EPS from continuing operations were $1.53 in the first nine months of 2007, up 19% from last year’s $1.29.

Earnings from discontinued operations, net of taxes, were $0.5 billion for the third quarter of 2007 compared with $0.1 billion for the same period in 2006, including the results of our Japanese personal loan business (Lake), our U.S. mortgage business (WMC), Plastics, Advanced Materials, most of GE Insurance Solutions Corporation (GE Insurance Solutions), GE Life and Genworth Financial, Inc. (Genworth).

Loss from discontinued operations, net of taxes, was $0.1 billion for the first nine months of 2007 compared with earnings of $0.9 billion for the same period in 2006.

Net earnings increased 14% to $5.539 billion and EPS increased 15% to $0.54 in the third quarter of 2007 compared with $4.866 billion and $0.47 per share, respectively, in 2006.

For the first nine months of 2007, net earnings increased 9% to $15.521 billion compared with $14.284 billion for the same period in 2006, and EPS increased 10% to $1.51, compared with last year’s $1.37.

Revenues of $42.5 billion in the third quarter of 2007 were 12% higher than in the corresponding period of 2006, reflecting strong organic growth of 8% and the net effects of acquisitions. A reconciliation between reported and organic revenues is shown in Exhibit 99. Industrial sales increased 11% to $24.7 billion, reflecting strong organic growth, the net effects of acquisitions and the weaker U.S. dollar. Sales of product services (including sales of spare parts and related services) increased 7% to $7.8 billion in the third quarter of 2007. Financial services revenues grew 16% to $18.1 billion as a result of organic revenue growth, the weaker U.S. dollar and the 2006 GECS commercial paper interest rate swap adjustment ($0.2 billion).

Revenues for the first nine months of 2007 rose 12% to $124.2 billion, compared with $110.5 billion last year. Industrial sales of $70.7 billion were 8% higher than in 2006 reflecting strong organic growth, the effect of acquisitions and the weaker U.S. dollar, partially offset by the effects of the GE Supply disposition in 2006 and the lack of a current-year counterpart to the first quarter 2006 Olympics broadcasts. Financial services revenues for the first nine months of 2007 grew 18% to $52.8 billion as a result of organic revenue growth, including the gain on sale of common stock in Swiss Reinsurance Company (Swiss Re), the weaker U.S. dollar and the second quarter 2006 consolidation of GE SeaCo, an entity previously accounted for using the equity method, partially offset by the 2006 GECS commercial paper interest rate swap adjustment ($0.2 billion).

Overall, acquisitions contributed $2.2 billion and $0.9 billion to consolidated revenues in the third quarters of 2007 and 2006, respectively. Our consolidated net earnings in the third quarters of both 2007 and 2006 included approximately $0.1 billion from acquired businesses. We integrate acquisitions as quickly as possible. Only revenues and earnings from the date we complete the acquisition through the end of the fourth following quarter are attributed to such businesses. Dispositions also affected our operations through lower revenues of $1.1 billion and $0.2 billion in the third quarters of 2007 and 2006, respectively. The effect of dispositions on earnings was a decrease of $0.2 billion in the third quarter of 2007 and an increase of $0.1 billion in the third quarter of 2006.

Acquisitions contributed $5.3 billion and $2.7 billion to consolidated revenues in the first nine months of 2007 and 2006, respectively. Our consolidated net earnings in the first nine months of both 2007 and 2006 included approximately $0.3 billion from acquired businesses. Dispositions also affected our operations through lower revenues of $2.9 billion and $0.7 billion in the first nine months of 2007 and 2006, respectively. The effects of dispositions on earnings were increases of $0.3 billion and $0.2 billion in the first nine months of 2007 and 2006, respectively.

The most significant acquisitions affecting results in 2007 were Vetco Gray; Smiths Aerospace Group Ltd. and Regency Energy Partners LP at Infrastructure; the custom fleet business of National Australia Bank Ltd.; Diskont und Kredit AG and Disko Leasing GmbH (DISKO) and ASL Auto Service-Leasing GmbH (ASL), the leasing businesses of KG Allgemeine Leasing GmbH & Co.; Arden Realty, Inc.; Banque Artesia Nederland N.V.; Trustreet Properties, Inc.; and Sanyo Electric Credit Co., Ltd. at Commercial Finance.

Segment Operations

Operating segments comprise our six businesses focused on the broad markets they serve: Infrastructure, Commercial Finance, GE Money, Healthcare, NBC Universal and Industrial. For segment reporting purposes, certain GECS businesses are included in the industrial operating segments that actively manage such businesses and report their results for internal performance measurement purposes. These include Aviation Financial Services, Energy Financial Services and Transportation Finance reported in the Infrastructure segment, and Equipment Services reported in the Industrial segment.

Segment profit is determined based on internal performance measures used by the Chief Executive Officer to assess the performance of each business in a given period. In connection with that assessment, the Chief Executive Officer may exclude matters such as charges for restructuring; rationalization and other similar expenses; in-process research and development and certain other acquisition-related charges and balances; technology and product development costs; certain gains and losses from dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team.

Segment profit always excludes the effects of principal pension plans, results reported as discontinued operations and accounting changes. Segment profit excludes or includes interest and other financial charges and income taxes according to how a particular segment’s management is measured - excluded in determining segment profit, which we also refer to as “operating profit,” for Healthcare, NBC Universal and the industrial businesses of the Infrastructure and Industrial segments; included in determining segment profit, which we also refer to as “net earnings,” for Commercial Finance, GE Money, and the financial services businesses of the Infrastructure segment (Aviation Financial Services, Energy Financial Services and Transportation Finance) and the Industrial segment (Equipment Services).

Infrastructure revenues increased 19%, or $2.3 billion, in the third quarter of 2007 reflecting higher volume ($1.5 billion), higher prices ($0.3 billion) and the weaker U.S. dollar ($0.1 billion) at the industrial businesses of the segment. The increase in volume reflected increased equipment sales, services and acquisitions at Aviation and Oil & Gas. Higher prices were primarily at Energy and Aviation. Revenues also increased as a result of an acquisition at Energy Financial Services ($0.3 billion).

Segment profit rose 12%, or $0.3 billion, in the third quarter of 2007, as higher prices ($0.3 billion) and higher volume ($0.2 billion) were partially offset by higher material and other costs ($0.3 billion) at the industrial businesses of the segment. Volume increases were primarily at Aviation and Oil & Gas. Higher prices, as well as higher material and other costs, were primarily at Energy and Aviation.

Infrastructure revenues rose 21% to $40.6 billion for the nine months ended September 30, 2007, on higher volume ($5.1 billion), increased prices ($0.6 billion) and the weaker U.S. dollar ($0.4 billion) at the industrial businesses of the segment. The increase in volume reflected the effects of acquisitions at Aviation and Oil & Gas; increased sales of commercial engines and services at Aviation; and equipment at Energy and Transportation. Price increases were primarily at Energy and Aviation, while the effects of the weaker U.S. dollar were primarily at Oil & Gas and Energy. Revenues for the nine months also increased as a result of organic revenue growth ($0.4 billion), primarily related to gains on the sale of aircraft, and acquisitions ($0.1 billion) at Aviation Financial Services, and an acquisition ($0.3 billion) and organic revenue growth ($0.1 billion) at Energy Financial Services.

Segment profit for the first nine months of 2007 rose 20% to $7.4 billion, compared with $6.1 billion in 2006, as higher volume ($0.8 billion), higher prices ($0.6 billion) and productivity ($0.2 billion) were partially offset by higher material and other costs ($0.6 billion) at the industrial businesses of the segment. Volume increases were primarily at Aviation, Energy and Oil & Gas. The effects of higher prices were primarily at Energy and Aviation. We realized productivity improvements at Energy, Transportation and Water. Higher material and other costs were primarily at Aviation and Energy. Segment profit for the first nine months also increased as a result of core growth at Aviation Financial Services ($0.1 billion).

Commercial Finance revenues and net earnings increased 17% and 12%, respectively, compared with the third quarter of 2006. Revenues for the third quarter of 2007 and 2006 included $0.6 billion and $0.1 billion from acquisitions, respectively, and in 2007 were reduced by $0.5 billion as a result of dispositions. Revenues for the quarter also increased $1.0 billion compared with the third quarter of 2006 as a result of organic revenue growth ($0.8 billion) and the weaker U.S. dollar ($0.2 billion). Net earnings increased by $0.2 billion in the third quarter of 2007, with $0.3 billion from core growth before credit losses and investment income. Core growth included $0.1 billion representing one quarter of the total year’s tax benefit on the disposition of SES, $0.1 billion of higher credit losses and $0.1 billion in charges related to mark-to-market adjustments to loans held-for-sale, and impairment of securitization retained interests.

Commercial Finance revenues and net earnings increased 16% and 17%, respectively, compared with the first nine months of 2006. Revenues for the first nine months of 2007 and 2006 included $1.7 billion and $0.1 billion from acquisitions and in 2007 were reduced by $1.7 billion as a result of dispositions. Revenues for the first nine months also increased $2.7 billion compared with the first nine months of 2006 as a result of organic revenue growth ($2.2 billion) and the weaker U.S. dollar ($0.5 billion). Net earnings increased by $0.6 billion in the first nine months of 2007, with $0.8 billion from core growth before credit losses and investment income including higher SES gains ($0.1 billion), the weaker U.S. dollar ($0.1 billion) and acquisitions ($0.1 billion). Core growth included $0.4 billion representing nine months of the total year’s tax benefit on the disposition of SES, $0.2 billion of higher credit losses and $0.1 billion in charges related to mark-to-market adjustments to loans held-for-sale, and impairment of securitization retained interests.

GE Money revenues and net earnings increased 23% and 13%, respectively, in the third quarter of 2007. Revenues for the third quarter of 2007 included $0.1 billion from acquisitions. Revenues for the quarter also increased $1.0 billion compared with the third quarter of 2006 as a result of organic revenue growth ($0.7 billion) and the weaker U.S. dollar ($0.3 billion). The $0.1 billion increase in net earnings resulted primarily from higher securitizations, the weaker U.S. dollar and core growth. Core growth included growth in lower-taxed earnings from global operations and lower results in the U.S. as a result of the effects of higher delinquencies and declines in fair value of retained interests in securitizations.

GE Money revenues and net earnings increased 28% and 40%, respectively, in the first nine months of 2007. Revenues for the first nine months of 2007 included $0.3 billion from acquisitions. Revenues for the first nine months also increased $3.7 billion compared with the first nine months of 2006 as a result of organic revenue growth ($2.8 billion) and the weaker U.S. dollar ($0.9 billion). The increase in net earnings resulted primarily from higher securitizations ($0.4 billion), core growth ($0.4 billion), including growth in lower-taxed earnings from global operations and declines in fair value of retained interests in securitizations, and the weaker U.S. dollar ($0.1 billion).

Healthcare revenues increased $0.2 billion, or 4%, in the third quarter of 2007, as higher volume ($0.2 billion) and the weaker U.S. dollar ($0.1 billion) were partially offset by lower prices ($0.1 billion). Despite price pressures on U.S. equipment sales, revenues of the life sciences and clinical systems businesses and sales of international equipment rose. Segment profit of $0.7 billion in the third quarter of 2007 was about the same in the third quarter of 2006, as higher volume ($0.1 billion) and the effects of productivity ($0.1 billion) were offset by lower prices ($0.1 billion) and higher labor and other costs ($0.1 billion).

Healthcare revenues increased $0.1 billion to $12.0 billion in the first nine months of 2007, as the effects of the weaker U.S. dollar ($0.3 billion) and higher volume ($0.2 billion) were partially offset by lower prices ($0.3 billion). Despite price pressures on U.S. equipment sales, revenues of the clinical systems, life sciences and medical diagnostics businesses, and sales of international equipment rose. Segment profit of $2.0 billion in the first nine months of 2007 was about the same in the first nine months of 2006 as the effects of productivity ($0.3 billion) and higher volume ($0.1 billion) were offset by lower prices ($0.3 billion) and higher labor and other costs ($0.1 billion).

NBC Universal revenues increased $0.1 billion, or 3%, in the third quarter of 2007, as higher revenues in television studio and distribution ($0.1 billion), film ($0.1 billion) and cable ($0.1 billion), were partially offset by lower ad revenues in certain television businesses ($0.1 billion). Segment profit rose 9% to $0.6 billion primarily on improvements in television studio and distribution ($0.1 billion), partially offset by the effects of lower ad revenues noted above ($0.1 billion).

NBC Universal reported revenues of $10.9 billion in the first nine months of 2007, a decline of $1.1 billion, or 9%, from 2006, as the lack of a current-year counterpart to the 2006 Olympic Games broadcasts ($0.7 billion), lower ad revenues in certain television businesses ($0.4 billion), lower film revenues ($0.3 billion), primarily from lower DVD sales, and the absence of a current-year counterpart to the sale of four television stations in 2006 ($0.2 billion) were partially offset by higher revenues in television studio and distribution ($0.2 billion) and cable ($0.1 billion). Segment profit increased 5%, or $0.1 billion, as improvements in television studio and distribution ($0.2 billion), cable ($0.1 billion) and the absence of Olympic broadcasts in 2007 ($0.1 billion) were partially offset by the lack of a current-year counterpart to last year’s station sales ($0.2 billion) and the effects of lower ad revenues ($0.1 billion).

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