GENERAL ELECTRIC CO – 10-K – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Edgar Online, Inc.

Operations

  The consolidated financial statements of General Electric Company (the Company) combine the industrial manufacturing and services businesses of General Electric Company (GE) with the financial services businesses of General Electric Capital Services, Inc. (GECS or financial services). Unless otherwise indicated by the context, we use the terms "GE," "GECS" and "GECC" on the basis of consolidation described in Note 1 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  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 the Supplemental Information section.  We present Management's Discussion of Operations in five parts: Overview of Our Earnings from 2009 through 2011, Global Risk Management, Segment Operations, Geographic Operations and Environmental Matters. Unless otherwise indicated, we refer to captions such as revenues and earnings from continuing operations attributable to the company simply as "revenues" and "earnings" throughout this Management's Discussion and Analysis. Similarly, discussion of other matters in our consolidated financial statements relates to continuing operations unless otherwise indicated.  Effective January 1, 2011, we reorganized the former Technology Infrastructure segment into three segments - Aviation, Healthcare and Transportation. The prior-period results of the Aviation, Healthcare and Transportation businesses are unaffected by this reorganization. Results for 2011 and prior periods are reported on the basis under which we managed our businesses in 2011.  On February 22, 2012, we merged our wholly-owned subsidiary, GECS, with and into GECS' wholly-owned subsidiary, GECC. The merger simplified our financial services' corporate structure by consolidating financial services entities and assets within our organization and simplifying Securities and Exchange Commission and regulatory reporting. Upon the merger, GECC became the surviving corporation and assumed all of GECS' rights and obligations and became wholly-owned directly by General Electric. Our financial services segment, GE Capital, will continue to comprise the continuing operations of GECC, which now includes the run-off insurance operations previously held and managed in GECS. References to GECS, GECC and the GE Capital segment in this Form 10-K Report relate to the entities or segment as they existed during 2011 and do not reflect the February 22, 2012 merger.  We supplement our GAAP net earnings and earnings per share (EPS) reporting by also reporting an operating earnings and EPS measure (non-GAAP). Operating earnings and EPS include service cost and plan amendment amortization for our principal pension plans as these costs represent expenses associated with employee benefits earned. Operating earnings and EPS exclude non-operating pension cost/income such as interest cost, expected return on plan assets and non-cash amortization of actuarial gains and losses. We believe that this reporting provides better transparency to the employee benefit costs of our principal pension plans and Company operating results.                                         (26) --------------------------------------------------------------------------------   Overview of Our Earnings from 2009 through 2011 Earnings from continuing operations attributable to the Company increased 12% in 2011 and 16% in 2010, reflecting the stabilization of overall economic conditions during the last two years, following the challenging conditions of 2009. Operating earnings (non-GAAP measure) which exclude non-operating pension costs increased 20% to $14.8 billion in 2011 compared with $12.3 billion in 2010. Operating earnings per share (non-GAAP measure) increased 15% to $1.29 in 2011 compared with $1.12 in 2010. Operating earnings per share excluding the effects of our preferred stock redemption (non-GAAP measure) increased 22% to $1.37 in 2011 compared with $1.12 in 2010. We believe that we are seeing continued signs of stabilization in much of the global economy, including in financial services, as GECS earnings from continuing operations attributable to the Company increased 113% in 2011 and 157% in 2010. Net earnings attributable to the Company increased 22% in 2011 reflecting the lack of prior year losses from discontinued operations and a 12% increase in earnings from continuing operations, after increasing 6% in 2010, as losses from discontinued operations in 2010 partially offset the 16% increase in earnings from continuing operations. We begin 2012 with a record backlog of $200 billion and expect to continue our trend of revenue and earnings growth.  Energy Infrastructure (27% and 39% of consolidated three-year revenues and total segment profit, respectively) revenues increased 16% in 2011 primarily as a result of acquisitions during 2011 and higher volume due to increased sales of services at Energy and Oil & Gas, after decreasing 8% in 2010 as the world-wide demand for new sources of power, such as wind and thermal declined with the overall economic conditions. Segment profit decreased 9% in 2011 primarily on lower productivity, driven by the wind turbines business, acquisitions and investment in our global organization and new technology, and lower prices. Segment profit increased 2% in 2010 primarily on higher prices and lower material and other costs. We continue to invest in market-leading technology and services at Energy and Oil & Gas.  Aviation (12% and 20% of consolidated three-year revenues and total segment profit, respectively) revenues and segment profit increased 7% and 6%, respectively, in 2011 and fell 6% and 16%, respectively, in 2010. We continue to invest in market-leading technologies and services at Aviation. Aviation revenues and earnings increased in 2011 as a result of higher volume and higher prices primarily driven by increased services and equipment sales. In 2010 Aviation revenues decreased from a reduction in volume reflecting decreased commercial and military equipment sales and services. Earnings decreased as a result of lower productivity primarily due to product launch and production costs associated with the GEnx engine shipments.  Healthcare (11% and 15% of consolidated three-year revenues and total segment profit, respectively) revenues and segment profit increased 7% and 2%, respectively, in 2011 and 6% and 13%, respectively, in 2010. We continue to invest in market-leading technologies and services at Healthcare. Healthcare revenues increased over this period on increased volume from higher equipment sales and services and the effects of the weaker U.S. dollar. Healthcare earnings improved over this period on increased productivity, higher volume and the effects of weaker U.S. dollar.  Transportation (3% and 3% of consolidated three-year revenues and total segment profit, respectively) revenues and segment profit increased 45% and more than 100%, respectively, in 2011 and fell 12% and 33%, respectively, in 2010. We continue to invest in market-leading technologies and services at Transportation. Transportation revenues improved in 2011 due to higher volume related to increased equipment sales and services. Transportation earnings increased as a result of increased productivity, reflecting improved service margins and higher volume, while they declined in 2010 as the weakened economy had driven overall reductions in U.S. freight traffic and we updated our estimates of long-term product service costs in our maintenance service agreements.  Home & Business Solutions (6% and 2% of consolidated three-year revenues and total segment profit, respectively) revenues have decreased 2% in 2011 and increased 2% in 2010. Home & Business Solutions revenues trended down as a result of lower volume in Appliances. The revenue increase in 2010 was related to increased volume across all businesses. Segment profit decreased 34% in 2011 after increasing 24% in 2010 primarily as a result of lower volume and the effects of inflation.                                         (27) --------------------------------------------------------------------------------   GE Capital (31% and 21% of consolidated three-year revenues and total segment profit, respectively) net earnings increased to $6.5 billion in 2011 and $3.2 billion in 2010 due to the continued stabilization in the overall economic environment. Over the last several years, we tightened underwriting standards, shifted teams from origination to collection and maintained a proactive risk management focus. This, along with recent increased stability in the financial markets, contributed to lower losses and a significant increase in segment profit in 2011 and 2010. We also reduced our ending net investment (ENI), excluding cash and equivalents, from $526 billion at January 1, 2010 to $445 billion at December 31, 2011. General Electric Capital Corporation (GECC) is a diversely funded and smaller, more focused finance company with strong positions in several commercial mid-market and consumer financing segments.  Overall, acquisitions contributed $4.6 billion, $0.3 billion and $2.9 billion to consolidated revenues in 2011, 2010 and 2009, respectively, excluding the effects of acquisition gains following our adoption of an amendment to Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 810, Consolidation. Our consolidated net earnings included an insignificant amount, $0.1 billion and $0.5 billion in 2011, 2010 and 2009, respectively, 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 ongoing results through lower revenues of $12.6 billion, $3.0 billion and $4.7 billion in 2011, 2010 and 2009, respectively. The effects of dispositions on net earnings was a decrease of $0.3 billion in 2011 and increases of $0.1 billion and $0.6 billion in 2010 and 2009, respectively.  Discontinued Operations. Consistent with our goal of reducing GECC ENI and focusing our businesses on selective financial services products where we have domain knowledge, broad distribution, and the ability to earn a consistent return on capital, while managing our overall balance sheet size and risk, in 2011, we sold Consumer RV Marine, Consumer Mexico, Consumer Singapore and Australian Home Lending. Discontinued operations also includes BAC Credomatic GECF Inc. (BAC), our U.S. mortgage business (WMC) and GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.). All of these operations were previously reported in the GE Capital segment.  We reported the operations described above as discontinued operations for all periods presented. For further information about discontinued operations, see "Segment Operations - Discontinued Operations" in this Item and Note 2 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  We declared $7.5 billion in dividends in 2011. Common per-share dividends of $0.61 increased 33% from 2010, following a 25% decrease from the preceding year. In February 2009, we announced the reduction of the quarterly GE stock dividend by 68% from $0.31 per share to $0.10 per share, effective with the dividend approved by the Board in June 2009, which was paid in the third quarter of 2009. In July 2010, our Board of Directors approved a 20% increase in our regular quarterly dividend from $0.10 per share to $0.12 per share and in December 2010, approved an additional 17% increase from $0.12 per share to $0.14 per share. On April 21, 2011, our Board of Directors approved an increase in our regular quarterly dividend to $0.15 per share. On December 9, 2011, our Board of Directors approved an increase in our regular quarterly dividend to $0.17 per share. On February 10, 2012, our Board of Directors approved a regular quarterly dividend of $0.17 per share of common stock, which is payable April 25, 2012, to shareowners of record at close of business on February 27, 2012. In 2011, 2010 and 2009, we declared $1.0 billion (including $0.8 billion as a result of our redemption of preferred stock), $0.3 billion and $0.3 billion in preferred stock dividends, respectively. See Note 15 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report for additional information.  

Except as otherwise noted, the analysis in the remainder of this section presents the results of GE (with GECS included on a one-line basis) and GECS. See the Segment Operations section for a more detailed discussion of the businesses within GE and GECS.

Significant matters relating to our Statement of Earnings are explained below.

                                      (28) --------------------------------------------------------------------------------   GE sales of product services were $41.9 billion in 2011, an increase of 14% compared with 2010, and operating profit from product services was $11.8 billion in 2011, an increase of 15% compared with 2010. Both the sales and operating profit of product services increases were at Energy Infrastructure, Aviation, Transportation and Healthcare.  Postretirement benefit plans costs were $4.1 billion, $3.0 billion and $2.6 billion in 2011, 2010 and 2009, respectively. Costs increased in 2011 primarily due to the continued amortization of 2008 investment losses and the effects of lower discount rates (principal pension plans discount rate decreased from 5.78% at December 31, 2009 to 5.28% at December 31, 2010). Costs increased in 2010 primarily due to the amortization of 2008 investment losses and the effects of lower discount rates (principal pension plans discount rate decreased from 6.11% at December 31, 2008 to 5.78% at December 31, 2009), partially offset by lower early retirement costs.  Our discount rate for our principal pension plans at December 31, 2011 was 4.21%, which reflected current historically low interest rates. Considering the current and expected asset allocations, as well as historical and expected returns on various categories of assets in which our plans are invested, we have assumed that long-term returns on our principal pension plan assets will be 8.0% for cost recognition in 2012, compared to 8.0% in 2011 and 8.5% in both 2010 and 2009. GAAP provides recognition of differences between assumed and actual returns over a period no longer than the average future service of employees. See the Critical Accounting Estimates section for additional information.  

We expect the costs of our postretirement benefits to increase in 2012 by approximately $1.3 billion as compared to 2011, primarily because of the effects of additional 2008 investment loss amortization and lower discount rates.

  Pension expense for our principal pension plans on a GAAP basis was $2.4 billion, $1.1 billion and $0.5 billion for 2011, 2010 and 2009, respectively. Operating pension costs (non-GAAP) for these plans were $1.4 billion in both 2011 and 2010 and $2.0 billion in 2009. Operating earnings include service cost and plan amendment amortization for our principal pension plans as these costs represent expenses associated with employee benefits earned. Operating earnings exclude non-operating pension cost/income such as interest cost, expected return on plan assets and non-cash amortization of actuarial gains and losses. We expect operating pension costs for these plans will be about $1.7 billion in 2012.  The GE Pension Plan was underfunded by $13.2 billion at the end of 2011 as compared to $2.8 billion at December 31, 2010. The GE Supplementary Pension Plan, which is an unfunded plan, had projected benefit obligations of $5.2 billion and $4.4 billion at December 31, 2011 and 2010, respectively. The increase in underfunding from year-end 2010 was primarily attributable to the effects of lower discount rates and lower investment returns. Our principal pension plans discount rate decreased from 5.28% at December 31, 2010 to 4.21% at December 31, 2011, which increased the pension benefit obligation at year-end 2011 by approximately $7.4 billion. A 100 basis point increase in our pension discount rate would decrease the pension benefit obligation at year-end by approximately $7.0 billion. Our GE Pension Plan assets decreased from $44.8 billion at the end of 2010 to $42.1 billion at December 31, 2011, primarily driven by benefit payments made during the year which were partially offset by investment returns. Assets of the GE Pension Plan are held in trust, solely for the benefit of Plan participants, and are not available for general company operations.  On an Employee Retirement Income Security Act (ERISA) basis, the GE Pension Plan was 92% funded at January 1, 2012. We will contribute approximately $1.0 billion to the GE Pension Plan in 2012. Funding requirements are determined as prescribed by ERISA and for GE, are based on the Plan's funded status as of the beginning of the previous year and future contributions may vary based on actual plan results. Assuming our 2012 actual experience is consistent with our current benefit assumptions (e.g., expected return on assets and interest rates), we expect to make about $2.1 billion in contributions to the GE Pension Plan in 2013.                                         (29)

--------------------------------------------------------------------------------   At December 31, 2011, the fair value of assets for our other pension plans was $3.3 billion less than the respective projected benefit obligations. The comparable amount at December 31, 2010, was $2.1 billion. We expect to contribute $0.7 billion to our other pension plans in 2012, compared with actual contributions of $0.7 billion and $0.6 billion in 2011 and 2010, respectively. We fund our retiree health benefits on a pay-as-you-go basis. The unfunded liability for our principal retiree health and life plans was $12.1 billion and $10.9 billion at December 31, 2011 and 2010, respectively. This increase was primarily attributable to the effects of lower discount rates (retiree health and life plans discount rate decreased from 5.15% at December 31, 2010 to 4.09% at December 31, 2011), partially offset by lower cost trends. We expect to contribute $0.6 billion to these plans in 2012 compared with actual contributions of $0.6 billion in both 2011 and 2010.  The funded status of our postretirement benefits plans and future effects on operating results depend on economic conditions and investment performance. For additional information about funded status, components of earnings effects and actuarial assumptions, see Note 12 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  GE other costs and expenses are selling, general and administrative expenses. These costs were 18.5%, 16.3% and 14.3% of total GE sales in 2011, 2010 and 2009, respectively. The vast majority of this 2011 increase was driven by higher pension costs and increased research and development spending. The increase in 2010 is primarily due to higher research and development spending, increased selling expenses to support global growth and higher pension costs, partially offset by lower restructuring and other charges.  Interest on borrowings and other financial charges amounted to $14.5 billion, $15.6 billion and $17.7 billion in 2011, 2010 and 2009, respectively. Substantially all of our borrowings are in financial services, where interest expense was $13.9 billion, $14.5 billion and $16.9 billion in 2011, 2010 and 2009, respectively. GECS average borrowings declined from 2010 to 2011 and from 2009 to 2010, in line with changes in average GECS assets. Interest rates have decreased over the three-year period primarily attributable to declining global benchmark interest rates. GECS average borrowings were $453.2 billion, $472.6 billion and $484.9 billion in 2011, 2010 and 2009, respectively. The GECS average composite effective interest rate was 3.1% in 2011, 3.1% in 2010 and 3.5% in 2009. In 2011, GECS average assets of $592.9 billion were 3% lower than in 2010, which in turn were 3% lower than in 2009. See the Liquidity and Borrowings section for a discussion of liquidity, borrowings and interest rate risk management.  Income taxes have a significant effect on our net earnings. As a global commercial enterprise, our tax rates are affected by many factors, including our global mix of earnings, the extent to which those global earnings are indefinitely reinvested outside the United States, legislation, acquisitions, dispositions and tax characteristics of our income. Our tax rates are also affected by tax incentives introduced in the U.S. and other countries to encourage and support certain types of activity. Our tax returns are routinely audited and settlements of issues raised in these audits sometimes affect our tax provisions.  GE and GECS file a consolidated U.S. federal income tax return. This enables GE to use GECS tax deductions and credits to reduce the tax that otherwise would have been payable by GE.  Our consolidated income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed global operations, including the use of global funding structures, and our 2009 decision to indefinitely reinvest prior-year earnings outside the U.S. There is a benefit from global operations as non-U.S. income is subject to local country tax rates that are significantly below the 35% U.S. statutory rate. These non-U.S. earnings have been indefinitely reinvested outside the U.S. and are not subject to current U.S. income tax. The rate of tax on our indefinitely reinvested non-U.S. earnings is below the 35% U.S. statutory rate because we have significant business operations subject to tax in countries where the tax on that income is lower than the U.S. statutory rate and because GE funds the majority of its non-U.S. operations through foreign companies that are subject to low foreign taxes.  

Income taxes (benefit) on consolidated earnings from continuing operations were 28.5% in 2011 compared with 7.3% in 2010 and (11.6)% in 2009.

                                      (30) --------------------------------------------------------------------------------   We expect our ability to benefit from non-U.S. income taxed at less than the U.S. rate to continue, subject to changes of U.S. or foreign law, including, as discussed in Note 14 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report, the expiration of the U.S. tax law provision deferring tax on active financial services income. In addition, since this benefit depends on management's intention to indefinitely reinvest amounts outside the U.S., our tax provision will increase to the extent we no longer indefinitely reinvest foreign earnings.  Our benefits from lower taxed global operations declined to $2.1 billion in 2011 from $2.8 billion in 2010 and from $3.9 billion in 2009 principally because of lower earnings in our operations subject to tax in countries where the tax on that income is lower than the U.S. statutory rate, and from losses for which there was not a full tax benefit. These decreases also reflected management's decision in 2009 to indefinitely reinvest prior year earnings outside the U.S. The benefit from lower taxed global operations increased in 2011 by $0.1 billion and in 2010 by $0.4 billion due to audit resolutions. To the extent global interest rates and non-U.S. operating income increase we would expect tax benefits to increase, subject to management's intention to indefinitely reinvest those earnings.  Our benefit from lower taxed global operations included the effect of the lower foreign tax rate on our indefinitely reinvested non-U.S. earnings which provided a tax benefit of $1.5 billion in 2011, $2.0 billion in 2010 and $3.0 billion in 2009. The tax benefit from non-U.S. income taxed at a local country rather than the U.S. statutory tax rate is reported in the effective tax rate reconciliation in the line "Tax on global earnings including exports."  The increase in the consolidated effective tax rate from 2010 to 2011 was due in significant part to the high effective tax rate on the pre-tax gain on the NBC Universal (NBCU) transaction with Comcast Corporation (Comcast) discussed in Note 2. This gain increased the consolidated effective tax rate by 12.9 percentage points. The effective tax rate was also higher because of the increase in 2011 of income in higher taxed jurisdictions. This decreased the relative effect of our tax benefits from lower-taxed global operations. In addition, the consolidated income tax rate increased from 2010 to 2011 due to the decrease, discussed above, in the benefit from lower-taxed global operations and the lower benefit from audit resolutions.  

Cash income taxes paid in 2011 were $2.9 billion, reflecting the effects of changes to temporary differences between the carrying amount of assets and liabilities and their tax bases and the timing of tax payments to governments.

  Our consolidated income tax rate increased from 2009 to 2010 primarily because of an increase during 2010 of income in higher-taxed jurisdictions. This decreased the relative effect of our tax benefits from lower-taxed global operations. In addition, the consolidated income tax rate increased from 2009 to 2010 due to the decrease, discussed above, in the benefit from lower-taxed global operations. These effects were partially offset by an increase in the benefit from audit resolutions, primarily a decrease in the balance of our unrecognized tax benefits from the completion of our 2003-2005 audit with the Internal Revenue Service (IRS).  A more detailed analysis of differences between the U.S. federal statutory rate and the consolidated rate, as well as other information about our income tax provisions, is provided in Note 14 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report. The nature of business activities and associated income taxes differ for GE and for GECS and a separate analysis of each is presented in the paragraphs that follow.  We believe that the GE effective tax rate is best analyzed in relation to GE earnings before income taxes excluding the GECS net earnings from continuing operations, as GE tax expense does not include taxes on GECS earnings. GE pre-tax earnings from continuing operations, excluding GECS earnings from continuing operations, were $12.6 billion, $12.0 billion and $12.6 billion for 2011, 2010 and 2009, respectively. On this basis, GE's effective tax rate was 38.3% in 2011, 16.8% in 2010 and 21.8% in 2009.                                         (31) --------------------------------------------------------------------------------   Resolution of audit matters reduced the GE effective tax rate throughout this period. The effects of such resolutions are included in the following captions in Note 14 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                              Audit resolutions -                                       effect on GE tax rate, excluding                                                 GECS earnings                                          2011         2010         2009  Tax on global activities including       (0.9) %      (3.3) %      (0.4) % exports U.S. business credits                    (0.4)        (0.5)           - All other - net                          (0.7)        (0.8)        (0.2)                                          (2.0) %      (4.6) %      (0.6) %     The GE effective tax rate increased from 2010 to 2011 primarily because of the high effective tax rate on the pre-tax gain on the NBCU transaction with Comcast reflecting the low tax basis in our investments in the NBCU business and the recognition of deferred tax liabilities related to our 49% investment in NBCUniversal LLC (NBCU LLC) (see Note 2 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report). This gain increased the GE effective tax rate by 19.7 percentage points. In addition, the effective tax rate increased because of the 2.6 percentage point decrease in the benefit from audit resolutions shown above.  

The GE effective tax rate decreased from 2009 to 2010 primarily because of the 4.0 percentage point increase in the benefit from audit resolutions shown above.

  The GECS effective income tax rate is lower than the U.S. statutory rate primarily because of benefits from lower-taxed global operations, including the use of global funding structures. There is a tax benefit from global operations as non-U.S. income is subject to local country tax rates that are significantly below the 35% U.S. statutory rate. These non-U.S. earnings have been indefinitely reinvested outside the U.S. and are not subject to current U.S. income tax. The rate of tax on our indefinitely reinvested non-U.S. earnings is below the 35% U.S. statutory rate because we have significant business operations subject to tax in countries where the tax on that income is lower than the U.S. statutory rate and because GECS funds the majority of its non-U.S. operations through foreign companies that are subject to low foreign taxes.  We expect our ability to benefit from non-U.S. income taxed at less than the U.S. rate to continue subject to changes of U.S. or foreign law, including, as discussed in Note 14 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report, the expiration of the U.S. tax law provision deferring tax on active financial services income. In addition, since this benefit depends on management's intention to indefinitely reinvest amounts outside the U.S., our tax provision will increase to the extent we no longer indefinitely reinvest foreign earnings.  As noted above, GE and GECS file a consolidated U.S. federal income tax return. This enables GE to use GECS tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECS effective tax rate for each period reflects the benefit of these tax reductions in the consolidated return. GE makes cash payments to GECS for these tax reductions at the time GE's tax payments are due. The effect of GECS on the amount of the consolidated tax liability from the formation of the NBCU joint venture will be settled in cash when GECS tax deductions and credits otherwise would have reduced the liability of the group absent the tax on joint venture formation.                                         (32) --------------------------------------------------------------------------------   The GECS effective tax rate was 12.0% in 2011, compared with (48.4)% in 2010 and 144.3% in 2009. Comparing a tax benefit to pre-tax income resulted in a negative tax rate in 2010. Comparing a tax benefit to a pre-tax loss results in the positive tax rate in 2009. The GECS tax expense of $0.9 billion in 2011 increased by $1.9 billion from a $1.0 billion benefit in 2010. The higher 2011 tax expense resulted principally from higher pre-tax income in 2011 than in 2010, which increased pre-tax income $5.4 billion and increased the expense ($1.9 billion). Also increasing the expense was a benefit from resolution of the 2006-2007 IRS audit ($0.2 billion) that was less than the benefit from resolution of the 2003-2005 IRS audit ($0.3 billion) both of which are reported in the caption "All other-net" in the effective tax rate reconciliation in Note14 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K.  The GECS tax benefit of $3.9 billion in 2009 decreased by $2.9 billion to $1.0 billion in 2010. The lower 2010 tax benefit resulted in large part from the change from a pre-tax loss in 2009 to pre-tax income in 2010, which increased pre-tax income $4.7 billion and decreased the benefit ($1.7 billion), the non-repeat of the one-time benefit related to the 2009 decision (discussed below) to indefinitely reinvest undistributed prior year non-U.S. earnings ($0.7 billion), and a decrease in lower-taxed global operations in 2010 as compared to 2009 ($0.6 billion) caused in part by an increase in losses for which there was not a full tax benefit, including an increase in the valuation allowance associated with the deferred tax asset related to the 2008 loss on the sale of GE Money Japan ($0.2 billion). These lower benefits were partially offset by the benefit from the resolution of the 2003-2005 IRS audit ($0.3 billion).  

Global Risk Management

  A disciplined approach to risk is important in a diversified organization like ours in order to ensure that we are executing according to our strategic objectives and that we only accept risk for which we are adequately compensated. We evaluate risk at the individual transaction level, and evaluate aggregated risk at the customer, industry, geographic and collateral-type levels, where appropriate.  Risk assessment and risk management are the responsibility of management. The GE Board of Directors (Board) has oversight for risk management with a focus on the most significant risks facing the company, including strategic, operational, financial and legal and compliance risks. At the end of each year, management and the Board jointly develop a list of major risks that GE plans to prioritize in the next year. Throughout the year, the Board and the committees to which it has delegated responsibility dedicate a portion of their meetings to review and discuss specific risk topics in greater detail. Strategic, operational and reputational risks are presented and discussed in the context of the CEO's report on operations to the Board at regularly scheduled Board meetings and at presentations to the Board and its committees by the vice chairmen, chief risk officer (CRO), general counsel and other employees. The Board has delegated responsibility for the oversight of specific risks to Board committees as follows:                                         (33) --------------------------------------------------------------------------------

· In 2011, the Board established a Risk Committee. This Committee oversees GE's

risk management of key risks, including strategic, operational (including

product risk), financial (including credit, liquidity and exposure to broad

market risk) and reputational risks, and the guidelines, policies and

processes for monitoring and mitigating such risks. Starting in 2011, as part

of its overall risk oversight responsibilities for GE, the Risk Committee also

began overseeing risks related to GE Capital, which previously was subject to

   direct Audit Committee oversight.     

· The Audit Committee oversees GE's and GE Capital's policies and processes

relating to the financial statements, the financial reporting process,

compliance and auditing. The Audit Committee monitors ongoing compliance

issues and matters, and also annually conducts an assessment of compliance

    issues and programs.    

· The Public Responsibilities Committee oversees risk management related to GE's

public policy initiatives, the environment and similar matters, and monitors

   the Company's environmental, health and safety compliance.     

· The Management Development and Compensation Committee oversees the risk

management associated with management resources, structure, succession

planning, management development and selection processes, and includes a

review of incentive compensation arrangements to confirm that incentive pay

does not encourage unnecessary risk taking and to review and discuss, at least

annually, the relationship between risk management policies and practices,

corporate strategy and senior executive compensation.

· The Nominating and Corporate Governance Committee oversees risk related to the

company's governance structure and processes and risks arising from related

    person transactions.    The GE Board's risk oversight process builds upon management's risk assessment and mitigation processes, which include standardized reviews of long-term strategic and operational planning; executive development and evaluation; code of conduct compliance under the Company's The Spirit & The Letter; regulatory compliance; health, safety and environmental compliance; financial reporting and controllership; and information technology and security. GE's CRO is responsible for overseeing and coordinating risk assessment and mitigation on an enterprise-wide basis. The CRO leads the Corporate Risk Function and is responsible for the identification of key business risks, providing for appropriate management of these risks within GE Board guidelines, and enforcement through policies and procedures. Management has two committees to further assist it in assessing and mitigating risk. The Corporate Risk Committee (CRC) meets periodically, is chaired by the CRO and comprises the Chairman and CEO, vice chairmen, general counsel and other senior level business and functional leaders. It has principal responsibility for evaluating and addressing risks escalated to the CRO and Corporate Risk Function. The Policy Compliance Review Board met 15 times in 2011, is chaired by the company's general counsel and includes the chief financial officer and other senior level functional leaders. It has principal responsibility for monitoring compliance matters across the company.  GE's Corporate Risk Function leverages the risk infrastructures in each of our businesses, which have adopted an approach that corresponds to the company's overall risk policies, guidelines and review mechanisms. Our risk infrastructure operates at the business and functional level and is designed to identify, evaluate and mitigate risks within each of the following categories:  

· Strategic. Strategic risk relates to the company's future business plans and

strategies, including the risks associated with the markets and industries in

which we operate, demand for our products and services, competitive threats,

technology and product innovation, mergers and acquisitions and public policy.

· Operational. Operational risk relates to risks (systems, processes, people and

external events) that affect the operation of our businesses. It includes

product life cycle and execution, product safety and performance, information

   management and data protection and security, business disruption, human    resources and reputation.                                              (34)

--------------------------------------------------------------------------------

· Financial. Financial risk relates to our ability to meet financial obligations

and mitigate credit risk, liquidity risk and exposure to broad market risks,

including volatility in foreign currency exchange rates and interest rates and

commodity prices. Liquidity risk is the risk of being unable to accommodate

liability maturities, fund asset growth and meet contractual obligations

through access to funding at reasonable market rates, and credit risk is the

risk of financial loss arising from a customer or counterparty failure to meet

its contractual obligations. We face credit risk in our industrial businesses,

as well as in our GE Capital investing, lending and leasing activities and

   derivative financial instruments activities.     

· Legal and Compliance. Legal and compliance risk relates to risks arising from

the government and regulatory environment and action, compliance with

integrity policies and procedures, including those relating to financial

reporting, environmental health and safety, and intellectual property risks.

Government and regulatory risk includes the risk that the government or

regulatory actions will impose additional cost on us or cause us to have to

change our business models or practices.

    Risks identified through our risk management processes are prioritized and, depending on the probability and severity of the risk, escalated to the CRO. The CRO, in coordination with the CRC, assigns responsibility for the risks to the business or functional leader most suited to manage the risk. Assigned owners are required to continually monitor, evaluate and report on risks for which they bear responsibility. Enterprise risk leaders within each business and corporate function are responsible to present to the CRO and CRC risk assessments and key risks at least annually. We have general response strategies for managing risks, which categorize risks according to whether the company will avoid, transfer, reduce or accept the risk. These response strategies are tailored to ensure that risks are within acceptable GE Board general guidelines.  Depending on the nature of the risk involved and the particular business or function affected, we use a wide variety of risk mitigation strategies, including delegation of authorities, standardized processes and strategic planning reviews, operating reviews, insurance, and hedging. As a matter of policy, we generally hedge the risk of fluctuations in foreign currency exchange rates, interest rates and commodity prices. Our service businesses employ a comprehensive tollgate process leading up to and through the execution of a contractual service agreement to mitigate legal, financial and operational risks. Furthermore, we centrally manage some risks by purchasing insurance, the amount of which is determined by balancing the level of risk retained or assumed with the cost of transferring risk to others. We manage the risk of fluctuations in economic activity and customer demand by monitoring industry dynamics and responding accordingly, including by adjusting capacity, implementing cost reductions and engaging in mergers, acquisitions and dispositions.  

GE Capital Risk Management and Oversight

GE Capital has a robust risk infrastructure and robust processes to manage risks related to its businesses, and the GE Corporate Risk Function relies upon them in fulfilling its mission.  The GE Risk Committee was established to oversee GE Capital's risk appetite, risk assessment and management processes previously undertaken by the GE Audit Committee. The GECC Board of Directors oversees the GE Capital risk management framework, and approves all significant acquisitions and dispositions as well as significant borrowings and investments. The GECC Board of Directors exercises control over investment activities in the business units through delegations of authority. All participants in the GE Capital risk management process must comply with approval limits established by the GECC Board.  The Enterprise Risk Management Committee (ERMC), which comprises the most senior leaders in GE Capital as well as the GE CRO oversees the implementation of the GE Capital's risk appetite, and senior management's establishment of appropriate systems (including policies, procedures, and management committees) to ensure enterprise risks are effectively identified, measured, monitored, and controlled. Day to day risk oversight for GE Capital is provided by an independent global risk management organization which includes the GE Capital corporate function in addition to risk officers embedded in the individual business units. The Risk Leaders in the business units have dual reporting relationships, reporting both into the local business management and also to the GE Capital corporate-level function leader, which further strengthens their independence.                                         (35) --------------------------------------------------------------------------------    GE Capital's risk management approach rests upon three major tenets: a broad spread of risk based on managed exposure limits; senior, secured commercial financings; and a hold-to-maturity model with transactions underwritten to "on-book" standards. Dedicated risk professionals across the businesses include underwriters, portfolio managers, collectors, environmental or engineering specialists, and specialized asset managers. The senior risk officers have, on average, over 25 years of experience.  GE Capital manages risk categories identified in GE Capital's business environment, which if materialized, could prevent GE Capital from achieving its risk objectives and/or result in losses. These risks are defined as GE Capital's Enterprise Risk Universe, which includes the following risks: strategic (including earnings and capital), liquidity, credit, market and operational (including financial, compliance, information technology, human resources and legal). Reputational risk is considered and managed across each of the categories. GE Capital has made significant investments in resources to enhance its risk management infrastructure, in particular with regard to compliance, market and operational risk, liquidity and capital management.  GE Capital's Corporate Risk function, in consultation with the ERMC, updates the Enterprise Risk Appetite Statement annually. This document articulates the enterprise risk objectives, its key universe of risks and the supporting limit structure. GE Capital's risk appetite is determined relative to its desired risk objectives, including, but not limited to credit ratings, capital levels, liquidity management, regulatory assessments, earnings, dividends and compliance. GE Capital determines its risk appetite through consideration of portfolio analytics, including stress testing and economic capital measurement, experience and judgment of senior risk officers, current portfolio levels, strategic planning, and regulatory and rating agency expectations.  The Enterprise Risk Appetite is presented to the GECC Board and the GE Risk Committee for review and approval at least annually. On a quarterly basis, the status of GE Capital's performance against these limits is reviewed by the GE Risk Committee.  GE Capital acknowledges risk-taking as a fundamental characteristic of providing financial services. It is inherent to its business and arises in lending, leasing and investment transactions undertaken by GE Capital. GE Capital utilizes its risk capacity judiciously in pursuit of its strategic goals and risk objectives.  GE Capital uses stress testing for risk, liquidity and capital adequacy assessment and management purposes, and as an integral part of GE Capital's overall planning processes.  Stress testing results inform key strategic portfolio decisions such as capital allocation, assist in developing the risk appetite and limits, and help in assessing product specific risk to guide the development and modification of product structures. The ERMC approves the high-level scenarios for, and reviews the results of, GE Capital-wide stress tests across key risk areas, such as credit and investment, liquidity and market risk. Stress test results are also expressed in terms of impact to capital levels and metrics, and that information is reviewed with the GECC Board and the GE Risk Committee at least twice a year. Stress testing requirements are set forth in GE Capital's approved risk policies. Key policies, such as the Enterprise Risk Management Policy, the Enterprise Risk Appetite Statement and the Liquidity and Capital Management policies are approved by the GECC Board and the GE Risk Committee at least annually. GE Capital, in coordination with and under the oversight of the GE CRO, provides risk reports to the GE Risk Committee. At these meetings, which occur at least four times a year, GE Capital senior management focuses on the risk strategy and the risk oversight processes used to manage the elements of risk managed by the ERMC.  Operational risks are inherent in GE Capital's business activities and are typical of any large enterprise. GE Capital's Operational Risk Management program seeks to effectively manage operational risk to reduce the potential for significant unexpected losses, and to minimize the impact of losses experienced in the normal course of business.  Additional information about our liquidity and how we manage this risk can be found in the Financial Resources and Liquidity section. Additional information about our credit risk and GECS portfolio can be found in the Financial Resources and Liquidity and Critical Accounting Estimates sections. Additional information about our market risk and how we manage this risk can be found in the Financial Resources and Liquidity section.                                         (36) --------------------------------------------------------------------------------   Segment Operations Effective January 1, 2011, we reorganized the former Technology Infrastructure segment into three segments - Aviation, Healthcare, and Transportation. The prior-period results of the Aviation, Healthcare and Transportation businesses are unaffected by this reorganization. Results of our formerly consolidated subsidiary, NBCU, and our current equity method investment in NBCU LLC are reported in the Corporate items and eliminations line on the Summary of Operating Segments.  Our six segments are focused on the broad markets they serve: Energy Infrastructure, Aviation, Healthcare, Transportation, Home & Business Solutions and GE Capital. In addition to providing information on segments in their entirety, we have also provided supplemental information for certain businesses within the segments for greater clarity.  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 acquisitions or dispositions; and litigation settlements or other charges, responsibility for which preceded the current management team.   Segment profit excludes results reported as discontinued operations, earnings attributable to noncontrolling interests of consolidated subsidiaries 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 sometimes refer to as "operating profit," for Energy Infrastructure, Aviation, Healthcare, Transportation, and Home & Business Solutions; included in determining segment profit, which we sometimes refer to as "net earnings," for GE Capital. Prior to January 1, 2011, segment profit excluded the effects of principal pension plans. Beginning January 1, 2011, we began allocating service costs related to our principal pension plans and no longer allocate the retiree costs of our postretirement healthcare benefits to our segments. This revised allocation methodology better aligns segment operating costs to the active employee costs, which are managed by the segments. This change does not significantly affect reported segment results.  To better serve Oil & Gas customers, Energy's Measurement & Control business was moved to Oil & Gas in October 2011. Measurement & Control addresses sensor-based measurement, inspection, asset condition monitoring and controls needs. In addition, three business units from Energy's acquisition of Dresser were also transferred to Oil & Gas in 2011.  We have reclassified certain prior-period amounts to conform to the current-period presentation. For additional information about our segments, see Part I, Item 1. "Business" and Note 28 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (37) --------------------------------------------------------------------------------

Summary of Operating Segments

                            General Electric Company and consolidated affiliates (In millions)              2011          2010          2009          2008          2007  Revenues Energy              $    43,694     $  37,514     $  40,648     $  43,046     $  34,880 Infrastructure Aviation                 18,859        17,619        18,728        19,239        16,819 Healthcare               18,083        16,897        16,015        17,392        16,997 Transportation            4,885         3,370         3,827         5,016         4,523 Home & Business           8,465         8,648         8,443        10,117        11,026 Solutions    Total industrial      93,986        84,048        87,661        94,810        84,245 revenues GE Capital               45,730        46,422        48,906        65,900        65,625    Total segment        139,716       130,470       136,567       160,710       149,870 revenues Corporate items and       7,584        19,123        17,871        19,127        20,094 eliminations(a) Consolidated        $   147,300     $ 149,593     $ 154,438     $ 179,837     $ 169,964 revenues Segment profit Energy              $     6,650     $   7,271     $   7,105     $   6,497     $   5,238 Infrastructure Aviation                  3,512         3,304         3,923         3,684         3,222 Healthcare                2,803         2,741         2,420         2,851         3,056 Transportation              757           315           473           962           936 Home & Business             300           457           370           365           983 Solutions    Total industrial      14,022        14,088        14,291        14,359        13,435 segment profit GE Capital                6,549         3,158         1,325         7,841        12,179    Total segment         20,571        17,246        15,616        22,200        25,614 profit Corporate items and        (359)       (1,105)         (593)        1,184         1,441 eliminations(a) GE interest and other financial   charges                (1,299)       (1,600)       (1,478)       (2,153)       (1,993) GE provision for         (4,839)       (2,024)       (2,739)       (3,427)       (2,794) income taxes Earnings from            14,074        12,517        10,806        17,804        22,268 continuing operations Earnings (loss) from discontinued   operations, net            77          (873)          219          (394)          (60) of taxes Consolidated net earnings attributable to the $    14,151     $  11,644     $  11,025     $  17,410     $  22,208 Company    

(a) Includes the result of NBCU, our formerly consolidated subsidiary, and our

current equity method investment in NBCUniversal LLC.

See accompanying notes to consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.

   Energy Infrastructure (In millions)      2011        2010        2009  Revenues       $ 43,694    $ 37,514    $ 40,648  Segment profit $  6,650    $  7,271    $  7,105  Revenues   Energy       $ 31,080    $ 29,040    $ 31,858   Oil & Gas      13,663       9,483       9,701  Segment profit   Energy       $  4,992    $  5,887    $  5,736   Oil & Gas       1,872       1,553       1,532     Energy Infrastructure revenues increased 16% or $6.2 billion (including $4.1 billion from acquisitions) in 2011 as higher volume ($5.8 billion) and the effects of the weaker U.S. dollar ($0.9 billion) were partially offset by lower prices ($0.5 billion). Higher volume was mainly driven by acquisitions and an increase in sales of services at both Energy and Oil & Gas. The effects of the weaker U.S. dollar and lower prices were at both Energy and Oil & Gas.                                         (38) --------------------------------------------------------------------------------   Segment profit decreased 9%, or $0.6 billion, as lower productivity ($1.4 billion), driven primarily by the wind turbines business, acquisitions and investment in our global organization and new technology, and lower prices ($0.5 billion), driven primarily by the wind turbines business, were partially offset by higher volume ($1.1 billion), and the effects of deflation ($0.1 billion). Lower productivity, lower prices, higher volume and the effects of deflation were at both Energy and Oil & Gas.  Energy Infrastructure segment revenues decreased 8%, or $3.1 billion, in 2010 as lower volume ($3.3 billion) and the stronger U.S. dollar ($0.4 billion) were partially offset by higher prices ($0.5 billion) and higher other income ($0.1 billion). Lower volume primarily reflected decreases in thermal and wind equipment sales at Energy. The effects of the stronger U.S. dollar were at both Energy and Oil & Gas. Higher prices at Energy were partially offset by lower prices at Oil & Gas. The increase in other income at Energy was partially offset by lower other income at Oil & Gas.  Segment profit increased 2% to $7.3 billion in 2010, compared with $7.1 billion in 2009 as higher prices ($0.5 billion), the effects of deflation ($0.4 billion) and higher other income ($0.1 billion) were partially offset by lower volume ($0.6 billion), the stronger U.S. dollar ($0.1 billion) and decreased productivity ($0.1 billion). Higher prices at Energy were partially offset by lower prices at Oil & Gas. The effects of deflation primarily reflected decreased material costs at both Energy and Oil & Gas. An increase in other income at Energy was partially offset by lower other income at Oil & Gas. Lower volume primarily reflected decreases in wind and thermal equipment sales at Energy and was partially offset by higher volume at Oil & Gas. The effects of the stronger U.S. dollar were at both Energy and Oil & Gas. The effects of decreased productivity were primarily at Energy.  Energy Infrastructure equipment orders increased 39% to $25.6 billion at December 31, 2011. Total Energy Infrastructure backlog increased 8% to $72.7 billion at December 31, 2011, composed of equipment backlog of $23.0 billion and services backlog of $49.7 billion. Comparable December 31, 2010 equipment and service order backlogs were $18.3 billion and $48.8 billion, respectively. See Corporate Items and Eliminations for a discussion of items not allocated to this segment.  Aviation revenues of $18.9 billion in 2011 increased $1.2 billion, or 7%, due primarily to higher volume ($1.1 billion) and higher prices ($0.2 billion), partially offset by lower other income ($0.1 billion). Higher volume and higher prices were driven by increased services ($0.9 billion) and equipment sales ($0.4 billion). The increase in services revenue was primarily due to higher commercial spares sales while the increase in equipment revenue was primarily due to commercial engines.  

Segment profit of $3.5 billion in 2011 increased $0.2 billion, or 6%, due primarily to higher volume ($0.2 billion) and higher prices ($0.2 billion), partially offset by higher inflation, primarily non-material related ($0.1 billion), and lower other income ($0.1 billion). Incremental research and development and GEnx product launch costs offset higher productivity.

  Aviation revenues of $17.6 billion in 2010 decreased $1.1 billion, or 6%, as lower volume ($1.2 billion) and lower other income ($0.1 billion), reflecting lower transaction gains, were partially offset by higher prices ($0.2 billion). The decrease in volume reflected decreased commercial and military equipment sales and services. Lower transaction gains reflect the absence of gains related to the Airfoils Technologies International - Singapore Pte. Ltd. (ATI) acquisition and the Times Microwave Systems disposition in 2009, partially offset by a gain on a partial sale of a materials business and a franchise fee.  Segment profit of $3.3 billion in 2010 decreased $0.6 billion, or 16%, due to lower productivity ($0.4 billion), lower volume ($0.2 billion) and lower other income ($0.2 billion), reflecting lower transaction gains, partially offset by higher prices ($0.2 billion). Lower productivity was primarily due to product launch and production costs associated with the GEnx engine shipments.  Aviation equipment orders increased 33% to $11.9 billion at December 31, 2011. Total Aviation backlog increased 24% to $99.0 billion at December 31, 2011, composed of equipment backlog of $22.5 billion and services backlog of $76.5 billion. Comparable December 31, 2010 equipment and service order backlogs were $20.0 billion and $59.5 billion, respectively. See Corporate Items and Eliminations for a discussion of items not allocated to this segment.                                         (39) --------------------------------------------------------------------------------    Healthcare revenues of $18.1 billion in 2011 increased $1.2 billion, or 7%, due to higher volume ($1.0 billion) and the weaker U.S. dollar ($0.4 billion), partially offset by lower prices ($0.3 billion). The revenue increase was split between equipment sales ($0.7 billion) and services ($0.5 billion). Revenue increased in the U.S. and international markets, with the strongest growth in emerging markets.  

Segment profit of $2.8 billion in 2011 increased 2%, or $0.1 billion, reflecting increased productivity ($0.3 billion), higher volume ($0.2 billion) and the weaker U.S. dollar ($0.1 billion), partially offset by lower prices ($0.3 billion) and higher inflation ($0.1 billion), primarily non-material related.

Healthcare revenues of $16.9 billion in 2010 increased $0.9 billion, or 6%, reflecting higher volume ($1.0 billion) and the weaker U.S. dollar ($0.1 billion), partially offset by lower prices ($0.2 billion). The increase in volume reflected increased equipment sales ($0.7 billion) and services ($0.2 billion).

  Segment profit of $2.7 billion in 2010 increased $0.3 billion, or 13%, due to higher productivity ($0.3 billion), higher volume ($0.2 billion) and the weaker U.S. dollar ($0.1 billion), partially offset by lower prices ($0.2 billion).  Healthcare equipment orders increased 7% to $10.5 billion at December 31, 2011. Total Healthcare backlog increased 1% to $13.5 billion at December 31, 2011, composed of equipment backlog of $3.9 billion and services backlog of $9.6 billion. Comparable December 31, 2010 equipment and service order backlogs were $3.9 billion and $9.5 billion, respectively. See Corporate Items and Eliminations for a discussion of items not allocated to this segment.  Transportation revenues of $4.9 billion in 2011 increased $1.5 billion, or 45%, due to higher volume ($1.5 billion) related to increased equipment sales ($0.9 billion) and services ($0.6 billion). The increase in equipment revenue was primarily driven by an increase in U.S. and international locomotive sales and growth in our global mining equipment business. The increase in service revenue was due to higher overhauls and increased service productivity.  Segment profit of $0.8 billion in 2011 increased $0.4 billion, or over 100%, as a result of increased productivity ($0.4 billion), reflecting improved service margins, and higher volume ($0.1 billion), partially offset by higher inflation ($0.1 billion).  Transportation revenues of $3.4 billion in 2010 decreased $0.5 billion, or 12%, primarily due to lower volume ($0.5 billion). The decrease in volume reflected decreased equipment sales ($0.3 billion) and services ($0.1 billion).  

Segment profit of $0.3 billion in 2010 decreased $0.2 billion, or 33%, due to lower productivity ($0.1 billion) and lower volume ($0.1 billion). Lower productivity was primarily due to higher service costs.

  Transportation equipment orders decreased 31% to $2.2 billion at December 31, 2011. Total Transportation backlog decreased 1% to $15.1 billion at December 31, 2011, composed of equipment backlog of $3.3 billion and services backlog of $11.8 billion. Comparable December 31, 2010 equipment and service order backlogs were $3.7 billion and $11.6 billion, respectively. See Corporate Items and Eliminations for a discussion of items not allocated to this segment.  Home & Business Solutions revenues of $8.5 billion decreased $0.2 billion, or 2%, in 2011 reflecting a decrease in Appliances partially offset by higher revenues at Lighting and Intelligent Platforms. Overall, revenues decreased primarily as a result of lower volume ($0.3 billion) principally in our appliances business, partially offset by the weaker U.S. dollar ($0.1 billion) and increased prices.  Segment profit of $0.3 billion in 2011 decreased 34%, or $0.2 billion, as the effects of inflation ($0.3 billion) and lower volume were partially offset by the effects of the weaker U.S. dollar, increased productivity and increased prices.                                         (40) --------------------------------------------------------------------------------   Home & Business Solutions revenues increased 2%, or $0.2 billion, to $8.6 billion in 2010 compared with 2009 as higher volume ($0.4 billion) and higher other income ($0.1 billion) was partially offset by lower prices ($0.2 billion). The increase in volume reflected increased sales across all businesses. The decrease in price was primarily at Appliances.  

Segment profit increased 24%, or $0.1 billion, to $0.5 billion in 2010, primarily as a result of the effects of productivity ($0.2 billion) and increased other income primarily related to associated companies ($0.1 billion), partially offset by lower prices ($0.2 billion).

GE Capital (In millions)      2011        2010        2009  Revenues       $ 45,730    $ 46,422    $ 48,906 Segment profit $  6,549    $  3,158    $  1,325    

December 31 (In millions) 2011 2010

 Total assets              $ 552,514    $ 565,337     (In millions)                              2011        2010        2009  Revenues

  Commercial Lending and Leasing (CLL) $ 18,178    $ 18,447    $ 20,762   Consumer                               16,781      17,204      16,794   Real Estate                             3,712       3,744       4,009   Energy Financial Services               1,223       1,957       2,117   GE Capital Aviation Services (GECAS)    5,262       5,127       4,594 

Segment profit (loss)

  CLL                                  $  2,720    $  1,554    $    963   Consumer                                3,551       2,523       1,282   Real Estate                              (928)     (1,741)     (1,541)   Energy Financial Services                 440         367         212   GECAS                                   1,150       1,195       1,016     December 31 (In millions)        2011         2010  Total assets   CLL                       $ 193,869    $ 202,650   Consumer                    139,000      147,327   Real Estate                  60,873       72,630   Energy Financial Services    18,357       19,549   GECAS                        48,821       49,106      GE Capital revenues decreased 1% and net earnings increased favorably in 2011 as compared with 2010. Revenues for 2011 and 2010 included $0.3 billion and $0.2 billion, respectively, from acquisitions and were reduced by $1.1 billion and $2.3 billion, respectively, as a result of dispositions. Revenues also increased as a result of the gain on sale of a substantial portion of our Garanti Bank equity investment (the Garanti Bank transaction), the weaker U.S. dollar and higher gains and investment income, partially offset by reduced revenues from lower ENI. Net earnings increased by $3.4 billion in 2011, primarily due to lower provisions for losses on financing receivables, the gain on the Garanti Bank transaction and lower impairments. GE Capital net earnings in 2011 also included restructuring, rationalization and other charges of $0.1 billion and net losses of $0.2 billion related to our Treasury operations.                                         (41) --------------------------------------------------------------------------------    During 2011, GE Capital provided approximately $104 billion of new financings in the U.S. to various companies, infrastructure projects and municipalities. Additionally, we extended approximately $87 billion of credit to approximately 56 million U.S. consumers. GE Capital provided credit to approximately 19,600 new commercial customers and 37,000 new small businesses in the U.S. during 2011 and ended the period with outstanding credit to more than 284,000 commercial customers and 191,000 small businesses through retail programs in the U.S.  GE Capital revenues decreased 5% and net earnings increased favorably in 2010 as compared with 2009. Revenues for 2010 and 2009 included $0.2 billion and $0.1 billion of revenues from acquisitions, respectively, and in 2010 were increased by $0.1 billion and in 2009 were reduced by $2.3 billion as a result of dispositions, including the effects of the 2010 deconsolidation of Regency Energy Partners L.P. (Regency) and the 2009 deconsolidation of Penske Truck Leasing Co., L.P. (PTL). The 2010 deconsolidation of Regency included a $0.1 billion gain on the sale of our general partnership interest in Regency and remeasurement of our retained investment (the Regency transaction). Revenues for 2010 also decreased $0.6 billion compared with 2009 as a result of organic revenue declines primarily driven by a lower asset base and a lower interest rate environment, partially offset by the weaker U.S. dollar. Net earnings increased for 2010 compared with 2009, primarily due to lower provisions for losses on financing receivables, lower selling, general and administrative costs and the gain on the Regency transaction, offset by higher marks and impairments, mainly at Real Estate, the absence of the first quarter 2009 tax benefit from the decision to indefinitely reinvest prior-year earnings outside the U.S., and the absence of the first quarter 2009 gain related to the PTL sale. GE Capital net earnings in 2010 also included restructuring, rationalization and other charges of $0.2 billion and net losses of $0.1 billion related to our Treasury operations.  

Additional information about certain GE Capital businesses follows.

  CLL 2011 revenues decreased 1% and net earnings increased 75% compared with 2010. Revenues decreased as a result of organic revenue declines ($1.1 billion), primarily due to lower ENI, partially offset by the weaker U.S. dollar ($0.5 billion) and higher gains and investment income ($0.4 billion). Net earnings increased in 2011, reflecting lower provisions for losses on financing receivables ($0.6 billion), higher gains and investment income ($0.3 billion), core increases ($0.2 billion) and lower impairments ($0.1 billion).  CLL 2010 revenues decreased 11% and net earnings increased 61% compared with 2009. Revenues in 2010 and 2009 included $0.2 billion and $0.1 billion, respectively, from acquisitions, and in 2010 were reduced by $1.2 billion from dispositions, primarily related to the 2009 deconsolidation of PTL. Revenues in 2010 also decreased $1.2 billion compared with 2009 as a result of organic revenue declines ($1.4 billion), partially offset by the weaker U.S. dollar ($0.2 billion). Net earnings increased by $0.6 billion in 2010, reflecting lower provisions for losses on financing receivables ($0.6 billion), higher gains ($0.2 billion) and lower selling, general and administrative costs ($0.1 billion). These increases were partially offset by the absence of the gain on the PTL sale and remeasurement ($0.3 billion) and declines in lower-taxed earnings from global operations ($0.1 billion).  Consumer 2011 revenues decreased 2% and net earnings increased 41% compared with 2010. Revenues included $0.3 billion from acquisitions and were reduced by $0.4 billion as a result of dispositions. Revenues in 2011 also decreased $0.3 billion as a result of organic revenue declines ($1.4 billion), primarily due to lower ENI, and higher impairments ($0.1 billion), partially offset by the gain on the Garanti Bank transaction ($0.7 billion), the weaker U.S. dollar ($0.5 billion) and higher gains ($0.1 billion). The increase in net earnings resulted primarily from lower provisions for losses on financing receivables ($1.0 billion), the gain on the Garanti Bank transaction ($0.3 billion) and acquisitions ($0.1 billion), partially offset by lower Garanti results ($0.2 billion), and core decreases ($0.2 billion).  Consumer 2010 revenues increased 2% and net earnings increased 97% compared with 2009. Revenues in 2010 were reduced by $0.3 billion as a result of dispositions. Revenues in 2010 increased $0.7 billion compared with 2009 as a result of the weaker U.S. dollar ($0.4 billion) and organic revenue growth ($0.4 billion). The increase in net earnings resulted primarily from core growth ($1.3 billion) and the weaker U.S. dollar ($0.1 billion), partially offset by the effects of dispositions ($0.1 billion). Core growth included lower provisions for losses on financing receivables across most platforms ($1.5 billion) and lower selling, general and administrative costs ($0.2 billion), partially offset by declines in lower-taxed earnings from global operations ($0.7 billion) including the absence of the first quarter 2009                                         (42)

--------------------------------------------------------------------------------   tax benefit ($0.5 billion) from the decision to indefinitely reinvest prior-year earnings outside the U.S. and an increase in the valuation allowance associated with Japan ($0.2 billion).  Real Estate 2011 revenues decreased 1% and net earnings increased 47% compared with 2010.  Revenues decreased as organic revenue declines ($0.4 billion), primarily due to lower ENI, were partially offset by increases in net gains on property sales ($0.2 billion) and the weaker U.S. dollar ($0.1 billion). Real Estate net earnings increased compared with 2010, as lower impairments ($0.7 billion), a decrease in provisions for losses on financing receivables ($0.4 billion) and increases in net gains on property sales ($0.2 billion) were partially offset by core declines ($0.4 billion). Depreciation expense on real estate equity investments totaled $0.9 billion and $1.0 billion in 2011 and 2010, respectively.  Real Estate 2010 revenues decreased 7% and net earnings decreased 13% compared with 2009. Revenues for 2010 decreased $0.3 billion compared with 2009 as a result of organic revenue declines and a decrease in property sales, partially offset by the weaker U.S. dollar. Real Estate net earnings decreased $0.2 billion compared with 2009, primarily from an increase in impairments related to equity properties and investments ($0.9 billion), partially offset by a decrease in provisions for losses on financing receivables ($0.4 billion), and core increases ($0.3 billion). Depreciation expense on real estate equity investments totaled $1.0 billion and $1.2 billion for 2010 and 2009, respectively.  Energy Financial Services 2011 revenues decreased 38% and net earnings increased 20% compared with 2010. Revenues decreased primarily as a result of the deconsolidation of Regency Energy Partners L.P. (Regency) ($0.7 billion) and organic revenue declines ($0.3 billion), primarily from an asset sale in 2010 by an investee. These decreases were partially offset by higher gains ($0.2 billion). The increase in net earnings resulted primarily from higher gains ($0.2 billion), partially offset by the deconsolidation of Regency ($0.1 billion) and core decreases, primarily from an asset sale in 2010 by an investee.  Energy Financial Services 2010 revenues decreased 8% and net earnings increased 73% compared with 2009. Revenues in 2010 included a $0.1 billion$0.1 billion of gains from dispositions. Revenues in 2010 decreased compared with 2009 as a result of organic revenue growth ($0.4 billion), primarily increases in associated company revenues resulting from an asset sale by an investee ($0.2 billion), more than offset by the deconsolidation of Regency. The increase in net earnings resulted primarily from core increases ($0.1 billion), primarily increases in associated company earnings resulting from an asset sale by an investee ($0.2 billion) and the gain related to the Regency transaction ($0.1 billion).  GECAS 2011 revenues increased 3% and net earnings decreased 4% compared with 2010. Revenues for 2011 increased compared with 2010 as a result of organic revenue growth ($0.1 billion). The decrease in net earnings resulted primarily from core decreases ($0.1 billion), reflecting the 2010 benefit from resolution of the 2003-2005 IRS audit, partially offset by lower impairments ($0.1 billion).  GECAS 2010 revenues increased 12% and net earnings increased 18% compared with 2009. Revenues in 2010 increased compared with 2009 as a result of organic revenue growth ($0.5 billion), including higher investment income. The increase in net earnings resulted primarily from core increases ($0.2 billion), including the benefit from resolution of the 2003-2005 IRS audit, lower credit losses and higher investment income, partially offset by higher impairments related to our operating lease portfolio of commercial aircraft.                                          (43) --------------------------------------------------------------------------------  Corporate Items and Eliminations (In millions)                                            2011         2010  

2009

Revenues

   Gains on disposed businesses                     $   3,705    $     105    $     303   Insurance activities                                 3,437        3,596        3,383   NBCU/NBCU LLC                                        1,981       16,901       15,436   Eliminations and other                              (1,539)      (1,479)      (1,251) Total                                              $   7,584    $  19,123    $  17,871  Operating profit (cost)   Gains on disposed businesses                     $   3,705    $     105    $     303   NBCU/NBCU LLC                                          830        2,261        2,264   Insurance activities                                   (58)         (58)         (79)   Principal retirement plans(a)                       (1,898)        (493)  

(230)

Underabsorbed corporate overhead and other costs (2,938) (2,920)

    (2,851) Total                                              $    (359)   $  (1,105)   $    (593)     

(a) Included non-operating (non-GAAP) pension income (cost) of $(1.1) billion,

$0.3 billion and $1.5 billion in 2011, 2010 and 2009, respectively, which

     includes interest costs, expected return on plan assets and non-cash      amortization of actuarial gains and losses. Also included operating      (non-GAAP) pension income (costs) of $(1.4) billion, $(1.4) billion and

$(2.0) billion in 2011, 2010 and 2009, respectively, which includes service

     cost and plan amendment amortization. See the Supplemental Information      section of this Item.     Corporate items and eliminations revenues of $7.6 billion in 2011 decreased $11.5 billion as a $14.9 billion reduction in revenues from NBCU LLC operations resulting from the deconsolidation of NBCU effective January 28, 2011 and $0.3 billion of lower revenues from other disposed businesses were partially offset by a $3.7 billion pre-tax gain related to the NBCU transaction. Corporate items and eliminations costs decreased by $0.7 billion as $3.6 billion of higher gains from disposed businesses, primarily the NBCU transaction, and a $0.6 billion decrease in restructuring, rationalization, acquisition-related and other charges were partially offset by $1.4 billion of higher costs of our principal retirement plans, $1.4 billion of lower earnings from NBCU/NBCU LLC operations and a $0.6 billion increase in research and development spending and global corporate costs.  Certain amounts included in Corporate items and eliminations cost are not allocated to GE operating segments because they are excluded from the measurement of their operating performance for internal purposes. For 2011, these included $0.4 billion at Energy Infrastructure for acquisition-related costs and $0.4 billion at Healthcare, $0.3 billion at Energy Infrastructure, $0.2 billion at Aviation and $0.1 billion at both Home & Business Solutions and Transportation, primarily for technology and product development costs and restructuring, rationalization and other charges.  In 2011, underabsorbed corporate overhead and other costs was flat compared with 2010, as increased costs at our global research centers and global corporate costs were offset by lower restructuring and other charges (including acquisition-related costs) of $0.6 billion. In 2010, underabsorbed corporate overhead and other costs increased by $0.1 billion as compared with 2009, as increased costs at our global research centers and staff costs and lower income from operations of disposed businesses were partially offset by lower restructuring and other charges (including environmental remediation costs related to the Hudson River dredging project) of $0.6 billion.  Discontinued Operations (In millions)                       2011      2010      2009  

Earnings (loss) from discontinued

  operations, net of taxes        $   77    $ (873)   $  219                                            (44)

--------------------------------------------------------------------------------

Discontinued operations primarily comprised BAC, GE Money Japan, WMC, Consumer RV Marine, Consumer Mexico, Consumer Singapore and Australian Home Lending. Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.

  In 2011, earnings from discontinued operations, net of taxes, included a $0.3 billion gain related to the sale of Consumer Singapore and earnings from operations at Australian Home Lending of $0.1 billion, partially offset by incremental reserves for excess interest claims related to our loss-sharing arrangement on the 2008 sale of GE Money Japan of $0.2 billion and the loss on the sale of Australian Home Lending of $0.1 billion.   In 2010, loss from discontinued operations, net of taxes, primarily reflected incremental reserves for excess interest claims related to our loss-sharing arrangement on the 2008 sale of GE Money Japan of $1.7 billion and estimated after-tax losses of $0.2 billion and $0.1 billion on the planned sales of Consumer Mexico and Consumer RV Marine, respectively, partially offset by an after-tax gain on the sale of BAC of $0.8 billion and earnings from operations at Consumer Mexico of $0.2 billion and at BAC of $0.1 billion.  In 2009, earnings from discontinued operations, net of taxes, primarily reflected earnings from operations of BAC of $0.3 billion, Australian Home Lending of $0.1 billion and Consumer Mexico of $0.1 billion, partially offset by incremental reserves for excess interest claims related to our loss-sharing arrangement on the 2008 sale of GE Money Japan of $0.2 billion and loss from operations at Consumer RV Marine of $0.1 billion.  For additional information related to discontinued operations, see Note 2 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  

Geographic Operations

  Our global activities span all geographic regions and primarily encompass manufacturing for local and export markets, import and sale of products produced in other regions, leasing of aircraft, sourcing for our plants domiciled in other global regions and provision of financial services within these regional economies. Thus, when countries or regions experience currency and/or economic stress, we often have increased exposure to certain risks, but also often have new profit opportunities. New profit opportunities include, among other things, more opportunities for expansion of industrial and financial services activities through purchases of companies or assets at reduced prices and lower U.S. debt financing costs.  Revenues are classified according to the region to which products and services are sold. For purposes of this analysis, the U.S. is presented separately from the remainder of the Americas. We classify certain operations that cannot meaningfully be associated with specific geographic areas as "Other Global" for this purpose.  Geographic Revenues (In billions)             2011       2010       2009  U.S.                   $  69.8    $  75.1    $  75.8 Europe                    29.1       31.0       36.3 Pacific Basin             23.2       20.8       19.3 Americas                  13.2       11.7       11.3 Middle East and Africa     9.8        9.0        9.8 Other Global               2.2        2.0        1.9 Total                  $ 147.3    $ 149.6    $ 154.4     Global revenues increased 4% to $77.5 billion in 2011, compared with $74.5 billion and $78.6 billion in 2010 and 2009, respectively. Global revenues to external customers as a percentage of consolidated revenues were 53% in 2011, compared with 50% in 2010 and 51% in 2009. The effects of currency fluctuations on reported results increased revenues by $2.5 billion in 2011, increased revenues by $0.5 billion in 2010 and decreased revenues by $3.9 billion in 2009.                                         (45) --------------------------------------------------------------------------------   GE global revenues, excluding GECS, in 2011 were $54.3 billion, up 9% over 2010. Increases in growth markets of 29% in Latin America, 28% in China and 46% in Australia more than offset decreases of 12% in Western Europe. These revenues as a percentage of GE total revenues, excluding GECS, were 55% in 2011, compared with 50% and 52% in 2010 and 2009, respectively. GE global revenues, excluding GECS, were $49.8 billion in 2010, down 6% from 2009, primarily resulting from decreases in Europe, Middle East and Africa, partially offset by an increase in Latin America.  GECS global revenues decreased 6% to $23.2 billion in 2011, compared with $24.7 billion and $25.7 billion in 2010 and 2009, respectively, primarily as a result of decreases in Western Europe. GECS global revenues as a percentage of total GECS revenues were 47% in 2011, compared with 50% in both 2010 and 2009. GECS global revenue decreased by 4% in 2010 from $25.7 billion in 2009, primarily as a result of decreases in Europe, partially offset by an increase in Australia.   Total Assets (continuing operations) December 31 (In billions)               2011       2010  U.S.                                 $ 335.6    $ 322.8 Europe                                 213.0      250.2 Pacific Basin                           62.3       62.6 Americas                                46.7       41.9 Other Global                            58.4       57.9 Total                                $ 716.0    $ 735.4     Total assets of global operations on a continuing basis were $380.4 billion in 2011, a decrease of $32.2 billion, or 8%, from 2010. GECS global assets on a continuing basis of $319.3 billion at the end of 2011 were 1% lower than at the end of 2010, reflecting declines in Europe, primarily due to dispositions and portfolio run-off in various businesses at Consumer and lower financing receivables and equipment leased to others at CLL.  Financial results of our global activities reported in U.S. dollars are affected by currency exchange. We use a number of techniques to manage the effects of currency exchange, including selective borrowings in local currencies and selective hedging of significant cross-currency transactions. Such principal currencies are the pound sterling, the euro, the Japanese yen, the Canadian dollar and the Australian dollar.  

Environmental Matters

  Our operations, like operations of other companies engaged in similar businesses, involve the use, disposal and cleanup of substances regulated under environmental protection laws. We are involved in a number of remediation actions to clean up hazardous wastes as required by federal and state laws. Such statutes require that responsible parties fund remediation actions regardless of fault, legality of original disposal or ownership of a disposal site. Expenditures for site remediation actions amounted to approximately $0.3 billion in 2011, $0.2 billion in 2010 and $0.3 billion in 2009. We presently expect that such remediation actions will require average annual expenditures of about $0.4 billion for each of the next two years.  In 2006, we entered into a consent decree with the Environmental Protection Agency (EPA) to dredge PCB-containing sediment from the upper Hudson River. The consent decree provided that the dredging would be performed in two phases. Phase 1 was completed in May through November of 2009. Between Phase 1 and Phase 2 there was an intervening peer review by an independent panel of national experts. The panel evaluated the performance of Phase 1 dredging operations with respect to Phase 1 Engineering Performance Standards and recommended proposed changes to the standards. On December 17, 2010, EPA issued its decision setting forth the final performance standards for Phase 2 of the Hudson River dredging project, incorporating aspects of the recommendations from the independent peer review panel and from GE. In December 2010, we agreed to perform Phase 2 of the project in accordance with the final performance standards set by EPA and increased our reserve by $0.8 billion in the fourth quarter of 2010 to account for the probable and estimable costs of completing Phase 2. In                                         (46) --------------------------------------------------------------------------------   2011, we completed the first year of Phase 2 dredging and commenced work on planned upgrades to the Hudson River wastewater processing facility. Based on the results from 2011 dredging and our best professional engineering judgment, we believe that our current reserve continues to reflect our probable and estimable costs for the remainder of Phase 2 of the dredging project.  

Financial Resources and Liquidity

  This discussion of financial resources and liquidity addresses the Statement of Financial Position, Liquidity and Borrowings, Debt and Derivative Instruments, Guarantees and Covenants, the Consolidated Statement of Changes in Shareowners' Equity, the Statement of Cash Flows, Contractual Obligations, and Variable Interest Entities.  

Overview of Financial Position

Major changes to our shareowners' equity are discussed in the Consolidated Statement of Changes in Shareowners' Equity section. In addition, other significant changes to balances in our Statement of Financial Position follow.

Statement of Financial Position

  Because GE and GECS share certain significant elements of their Statements of Financial Position - property, plant and equipment and borrowings, for example - the following discussion addresses significant captions in the "consolidated" statement. Within the following discussions, however, we distinguish between GE and GECS activities in order to permit meaningful analysis of each individual consolidating statement.  Investment securities comprise mainly investment grade debt securities supporting obligations to annuitants, policyholders and holders of guaranteed investment contracts (GICs) in our run-off insurance operations and Trinity, and investment securities at our treasury operations and investments held in our CLL business collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries. The fair value of investment securities increased to $47.4 billion at December 31, 2011 from $43.9 billion at December 31, 2010. Of the amount at December 31, 2011, we held debt securities with an estimated fair value of $46.3 billion, which included corporate debt securities, asset-backed securities (ABS), residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) with estimated fair values of $26.1 billion, $5.0 billion, $2.6 billion and $2.8 billion, respectively. Net unrealized gains on debt securities were $3.0 billion and $0.6 billion at December 31, 2011 and December 31, 2010, respectively. This amount included unrealized losses on corporate debt securities, ABS, RMBS and CMBS of $0.6 billion, $0.2 billion, $0.3 billion and $0.2 billion, respectively, at December 31, 2011, as compared with $0.4 billion, $0.2 billion, $0.4 billion and $0.2 billion, respectively, at December 31, 2010.  We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell the vast majority of our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future.  Our RMBS portfolio is collateralized primarily by pools of individual, direct mortgage loans (a majority of which were originated in 2006 and 2005), not other structured products such as collateralized debt obligations. Substantially all of our RMBS are in a senior position in the capital structure of the deals and more than 75% are agency bonds or insured by Monoline insurers (on which we continue to place reliance). Of our total RMBS portfolio at December 31, 2011 and December 31, 2010, approximately $0.5 billion and $0.7 billion, respectively, relate to residential subprime credit, primarily supporting our guaranteed investment contracts. A majority of exposure to residential subprime credit related to investment securities backed by mortgage loans originated in 2006 and 2005. Substantially all of the subprime RMBS were investment grade at the time of purchase and approximately 70% have been subsequently downgraded to below investment grade.  Our CMBS portfolio is collateralized by both diversified pools of mortgages that were originated for securitization (conduit CMBS) and pools of large loans backed by high quality properties (large loan CMBS), a majority of which were originated in 2007 and 2006. Substantially all of the securities in our CMBS portfolio have investment grade credit ratings and the vast majority of the securities are in a senior position in the capital structure.                                         (47) --------------------------------------------------------------------------------   Our ABS portfolio is collateralized by senior secured loans of high-quality, middle-market companies in a variety of industries, as well as a variety of diversified pools of assets such as student loans and credit cards. The vast majority of our ABS are in a senior position in the capital structure of the deals. In addition, substantially all of the securities that are below investment grade are in an unrealized gain position.  If there has been an adverse change in cash flows for RMBS, management considers credit enhancements such as Monoline insurance (which are features of a specific security). In evaluating the overall creditworthiness of the Monoline insurer (Monoline), we use an analysis that is similar to the approach we use for corporate bonds, including an evaluation of the sufficiency of the Monoline's cash reserves and capital, ratings activity, whether the Monoline is in default or default appears imminent, and the potential for intervention by an insurance or other regulator.  Monolines provide credit enhancement for certain of our investment securities, primarily RMBS and municipal securities. The credit enhancement is a feature of each specific security that guarantees the payment of all contractual cash flows, and is not purchased separately by GE. The Monoline industry continues to experience financial stress from increasing delinquencies and defaults on the individual loans underlying insured securities. We continue to rely on Monolines with adequate capital and claims paying resources. We have reduced our reliance on Monolines that do not have adequate capital or have experienced regulator intervention. At December 31, 2011, our investment securities insured by Monolines on which we continue to place reliance were $1.6 billion, including $0.3 billion of our $0.5 billion investment in subprime RMBS. At December 31, 2011, the unrealized loss associated with securities subject to Monoline credit enhancement, for which there is an expected credit loss, was $0.3 billion.  Total pre-tax, other-than-temporary impairment losses during 2011 were $0.5 billion, of which $0.4 billion was recognized in earnings and primarily relates to credit losses on non-U.S. government and non-U.S. corporate securities and other-than-temporary losses on equity securities and $0.1 billion primarily relates to non-credit related losses on RMBS and is included within accumulated other comprehensive income.  Total pre-tax, other-than-temporary impairment losses during 2010 were $0.5 billion, of which $0.3 billion was recognized in earnings and primarily relates to credit losses on RMBS, non-U.S. government securities, non-U.S. corporate securities and other-than-temporary losses on equity securities, and $0.2 billion primarily relates to non-credit related losses on RMBS and is included within accumulated other comprehensive income.  Our qualitative review attempts to identify issuers' securities that are "at-risk" of other-than-temporary impairment, that is, for securities that we do not intend to sell and it is not more likely than not that we will be required to sell before recovery of our amortized cost, whether there is a possibility of credit loss that would result in an other-than-temporary impairment recognition in the following 12 months. Securities we have identified as "at-risk" primarily relate to investments in RMBS and non-U.S. corporate debt securities across a broad range of industries. The amount of associated unrealized loss on these securities at December 31, 2011, is $0.6 billion. Unrealized losses are not indicative of the amount of credit loss that would be recognized as credit losses are determined based on adverse changes in expected cash flows rather than fair value. For further information relating to how credit losses are calculated, see Note 3 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report. Uncertainty in the capital markets may cause increased levels of other-than-temporary impairments.  At both December 31, 2011 and December 31, 2010, unrealized losses on investment securities totaled $1.6 billion, including $1.2 billion aged 12 months or longer at December 31, 2011 and $1.3 billion aged 12 months or longer at December 31, 2010. Of the amount aged 12 months or longer at December 31, 2011, more than 70% are debt securities that were considered to be investment grade by the major rating agencies. In addition, of the amount aged 12 months or longer, $0.7 billion and $0.3 billion related to structured securities (mortgage-backed, asset-backed and securitization retained interests) and corporate debt securities, respectively. With respect to our investment securities that are in an unrealized loss position at December 31, 2011, the majority relate to debt securities held to support obligations to holders of GICs. We presently do not intend to sell the vast majority of our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. For additional information, see Note 3 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (48)

--------------------------------------------------------------------------------    Fair Value Measurements. For financial assets and liabilities measured at fair value on a recurring basis, fair value is the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. Additional information about our application of this guidance is provided in Notes 1 and 21 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report. At December 31, 2011, the aggregate amount of investments that are measured at fair value through earnings totaled $5.9 billion and consisted primarily of various assets held for sale in the ordinary course of business, as well as equity investments.  Working capital, representing GE current receivables and inventories, less GE accounts payable and progress collections, increased $1.6 billion at December 31, 2011, compared to December 31, 2010 due to increases in receivables and inventory, and lower progress collections, partially offset by increased accounts payable. As Energy Infrastructure and Aviation deliver units out of their backlogs over the next few years, progress collections of $11.3 billion at December 31, 2011, will be earned, which, along with progress collections on new orders, will impact working capital. Throughout the last five years, we have executed a significant number of initiatives through our Operating Council, such as lean cycle time projects, which have resulted in a more efficient use of working capital. The Operating Council meets at least eight times per year and is led by our Chairman. We discuss current receivables and inventories, two important elements of working capital, in the following paragraphs.  Current receivables for GE totaled to $11.8 billion at the end of 2011 and $10.4 billion at the end of 2010, and included $9.0 billion due from customers at the end of 2011 compared with $8.1 billion at the end of 2010. GE current receivables turnover was 8.3 in 2011, compared with 8.6 in 2010. The overall increase in current receivables was primarily due to the higher volume and acquisitions at Energy Infrastructure ($1.1 billion).  Inventories for GE totaled to $13.7 billion at December 31, 2011, up $2.3 billion from the end of 2010. This increase reflected higher inventories at Energy Infrastructure, partially due to acquisitions ($1.0 billion), Aviation and Transportation. GE inventory turnover was 7.0 and 7.2 in 2011 and 2010, respectively. See Note 5 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  Financing receivables is our largest category of assets and represents one of our primary sources of revenues. Our portfolio of financing receivables is diverse and not directly comparable to major U.S. banks. A discussion of the quality of certain elements of the financing receivables portfolio follows.  Our consumer portfolio is largely non-U.S. and primarily comprises mortgage, sales finance, auto and personal loans in various European and Asian countries. Our U.S. consumer financing receivables comprise 16% of our total portfolio. Of those, approximately 65% relate primarily to credit cards, which are often subject to profit and loss sharing arrangements with the retailer (the results of which are reflected in revenues), and have a smaller average balance and lower loss severity as compared to bank cards. The remaining 35% are sales finance receivables, which provide electronics, recreation, medical and home improvement financing to customers. In 2007, we exited the U.S. mortgage business and we have no U.S. auto or student loans.  Our commercial portfolio primarily comprises senior, secured positions with comparatively low loss history. The secured receivables in this portfolio are collateralized by a variety of asset classes, which for our CLL business primarily include: industrial-related facilities and equipment, vehicles, corporate aircraft, and equipment used in many industries, including the construction, manufacturing, transportation, media, communications, entertainment, and healthcare industries. The portfolios in our Real Estate, GECAS and Energy Financial Services businesses are collateralized by commercial real estate, commercial aircraft and operating assets in the global energy industry, respectively. We are in a secured position for substantially all of our commercial portfolio.                                         (49)

--------------------------------------------------------------------------------   Losses on financing receivables are recognized when they are incurred, which requires us to make our best estimate of probable losses inherent in the portfolio. The method for calculating the best estimate of losses depends on the size, type and risk characteristics of the related financing receivable. Such an estimate requires consideration of historical loss experience, adjusted for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values (including housing price indices as applicable), and the present and expected future levels of interest rates. The underlying assumptions, estimates and assessments we use to provide for losses are updated periodically to reflect our view of current conditions. Changes in such estimates can significantly affect the allowance and provision for losses. It is possible to experience credit losses that are different from our current estimates.  

Our risk management process includes standards and policies for reviewing major risk exposures and concentrations, and evaluates relevant data either for individual loans or financing leases, or on a portfolio basis, as appropriate.

  Loans acquired in a business acquisition are recorded at fair value, which incorporates our estimate at the acquisition date of the credit losses over the remaining life of the portfolio. As a result, the allowance for losses is not carried over at acquisition. This may have the effect of causing lower reserve coverage ratios for those portfolios.  For purposes of the discussion that follows, "delinquent" receivables are those that are 30 days or more past due based on their contractual terms; and "nonearning" receivables are those that are 90 days or more past due (or for which collection is otherwise doubtful). Nonearning receivables exclude loans purchased at a discount (unless they have deteriorated post acquisition). Under FASB ASC 310, Receivables, these loans are initially recorded at fair value and accrete interest income over the estimated life of the loan based on reasonably estimable cash flows even if the underlying loans are contractually delinquent at acquisition. In addition, nonearning receivables exclude loans that are paying on a cash accounting basis but classified as nonaccrual and impaired. "Nonaccrual" financing receivables include all nonearning receivables and are those on which we have stopped accruing interest. We stop accruing interest at the earlier of the time at which collection of an account becomes doubtful or the account becomes 90 days past due. Recently restructured financing receivables are not considered delinquent when payments are brought current according to the restructured terms, but may remain classified as nonaccrual until there has been a period of satisfactory payment performance by the borrower and future payments are reasonably assured of collection.  Further information on the determination of the allowance for losses on financing receivables and the credit quality and categorization of our financing receivables is provided in the Critical Accounting Estimates section of this Item and Notes 1, 6 and 23 to the consolidated financial statements in part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (50) --------------------------------------------------------------------------------

                       Financing receivables at           Nonearning receivables at          Allowance for losses at                     December 31,      December 31,     December 31,      December 31,     December 31,     December 31, (In millions)              2011              2010             2011              2010             2011             2010  Commercial CLL Americas(a)       $      80,505     $      88,558     $      1,862     $       2,573     $        889     $      1,288 Europe                   36,899            37,498            1,167             1,241              400              429 Asia                     11,635            11,943              269               406              157              222 Other(a)                    436               664               11                 6                4                6 Total CLL               129,475           138,663            3,309             4,226            1,450            1,945  Energy  Financial    Services               5,912             7,011               22                62               26               22  GECAS                    11,901            12,615               55                 -               17               20  Other                     1,282             1,788               65               102               37               58 Total  Commercial             148,570           160,077            3,451             4,390            1,530            2,045  Real Estate Debt(b)                  24,501            30,249              541               961              949            1,292 Business  Properties(c)            8,248             9,962              249               386              140              196 Total Real Estate        32,749            40,211              790             1,347            1,089            1,488  Consumer Non-U.S.  residential   mortgages(d)           36,170            40,011            3,349             3,738              706              803 Non-U.S.   installment    and revolving     credit               18,544            20,132              263               289              717              937 U.S. installment  and revolving   credit                 46,689            43,974              990             1,201            2,008            2,333 Non-U.S. auto             5,691             7,558               43                46              101              168 Other                     7,244             8,304              419               478              199              259 Total Consumer          114,338           119,979            5,064             5,752            3,731            4,500 Total             $     295,657     $     320,267     $      9,305     $      11,489     $      6,350     $      8,033     

(a) During 2011, we transferred our Railcar lending and leasing portfolio from

CLL Other to CLL Americas. Prior-period amounts were reclassified to conform

     to the current-period presentation.   

(b) Financing receivables included $0.1 billion and $0.2 billion of construction

     loans at December 31, 2011 and December 31, 2010, respectively.   

(c) Our Business Properties portfolio is underwritten primarily by the credit

quality of the borrower and secured by tenant and owner-occupied commercial

     properties.    (d)  At December 31, 2011, net of credit insurance, approximately 25% of our

secured Consumer non-U.S. residential mortgage portfolio comprised loans

with introductory, below market rates that are scheduled to adjust at future

dates; with high loan-to-value ratios at inception (greater than 90%); whose

terms permitted interest-only payments; or whose terms resulted in negative

amortization. At origination, we underwrite loans with an adjustable rate to

the reset value. Of these loans, 79% are in our U.K. and France portfolios,

which comprise mainly loans with interest-only payments and introductory

below market rates, have a delinquency rate of 15%, have a loan-to-value

ratio at origination of 76% and have re-indexed loan-to-value ratios of 84%

and 56%, respectively. At December 31, 2011, 6% (based on dollar values) of

     these loans in our U.K. and France portfolios have been restructured.                                             (51)

--------------------------------------------------------------------------------   The portfolio of financing receivables, before allowance for losses, was $295.7 billion at December 31, 2011, and $320.3 billion at December 31, 2010. Financing receivables, before allowance for losses, decreased $24.6 billion from December 31, 2010, primarily as a result of collections exceeding originations ($14.9 billion) (which includes sales), write-offs ($7.2 billion) and the stronger U.S. dollar ($1.5 billion), partially offset by acquisitions ($3.6 billion). The $24.6 billion decline in financing receivables excludes financing receivables of $11.5 billion, previously reported in Discontinued operations or Assets of businesses held for sale (primarily non-U.S. residential mortgages and non-U.S. installment and revolving credit) associated with 2011 business and portfolio dispositions. See Note 2 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  Related nonearning receivables totaled $9.3 billion (3.1% of outstanding receivables) at December 31, 2011, compared with $11.5 billion (3.6% of outstanding receivables) at December 31, 2010. Nonearning receivables decreased from December 31, 2010, primarily due to write-offs and discounted payoffs in Real Estate, improved performance in Commercial and improvements in our entry rates in Consumer.  The allowance for losses at December 31, 2011 totaled $6.4 billion compared with $8.0 billion at December 31, 2010, representing our best estimate of probable losses inherent in the portfolio. Allowance for losses decreased $1.7 billion from December 31, 2010, primarily because provisions were lower than write-offs, net of recoveries by $1.5 billion, which is attributable to a reduction in the overall financing receivables balance and an improvement in the overall credit environment. The allowance for losses as a percent of total financing receivables decreased from 2.5% at December 31, 2010 to 2.1% at December 31, 2011 primarily due to a decrease in the allowance for losses as discussed above, partially offset by a decline in the overall financing receivables balance as collections exceeded originations. Further information surrounding the allowance for losses related to each of our portfolios is detailed below.                                         (52) --------------------------------------------------------------------------------

The following table provides information surrounding selected ratios related to nonearning financing receivables and the allowance for losses.

                  Nonearning financing                      receivables             Allowance for losses           

Allowance for losses

                    as a percent of              as a percent of             

as a percent of

                 financing receivables        nonearning financing        total financing receivables                          at                     receivables at                       at                December       December      December       December      December                     31,            31,           31,            31,           31,       December 31,                   2011           2010          2011           2010          2011               2010 Commercial CLL Americas           2.3  %         2.9  %       47.7  %        50.1  %        1.1  %             1.5  % Europe             3.2            3.3          34.3           34.6           1.1                1.1 Asia               2.3            3.4          58.4           54.7           1.3                1.9 Other              2.5            0.9          36.4          100.0           0.9                0.9 Total CLL          2.6            3.0          43.8           46.0           1.1                1.4  Energy             0.4            0.9         118.2           35.5           0.4                0.3 Financial Services  GECAS              0.5              -          30.9              -           0.1                0.2  Other              5.1            5.7          56.9           56.9           2.9                3.2  Total              2.3            2.7          44.3           46.6           1.0                1.3 Commercial  Real Estate Debt               2.2            3.2         175.4          134.4           3.9                4.3 Business           3.0            3.9          56.2           50.8           1.7                2.0 Properties  Total Real         2.4            3.3         137.8          110.5           3.3                3.7 Estate  Consumer Non-U.S.  residential       9.3            9.3          21.1           21.5           2.0                2.0 mortgages Non-U.S.  installment and   revolving        1.4            1.4         272.6          324.2           3.9                4.7 credit U.S. installment  and revolving     2.1            2.7         202.8          194.3           4.3                5.3 credit Non-U.S. auto      0.8            0.6         234.9          365.2           1.8                2.2 Other              5.8            5.8          47.5           54.2           2.7                3.1  Total Consumer     4.4            4.8          73.7           78.2           3.3                3.8  Total              3.1            3.6          68.2           69.9           2.1                2.5    

Included below is a discussion of financing receivables, allowance for losses, nonearning receivables and related metrics for each of our significant portfolios.

  CLL - Americas. Nonearning receivables of $1.9 billion represented 20.0% of total nonearning receivables at December 31, 2011. The ratio of allowance for losses as a percent of nonearning receivables decreased from 50.1% at December 31, 2010, to 47.7% at December 31, 2011, reflecting an overall improvement in the credit quality of the remaining portfolio and an overall decrease in nonearning receivables. The ratio of nonearning receivables as a percent of financing receivables decreased from 2.9% at December 31, 2010, to 2.3% at December 31, 2011, primarily due to reduced nonearning exposures in our healthcare, media, franchise and inventory financing portfolios, which more than offset deterioration in our corporate aircraft portfolio. Collateral supporting these nonearning financing receivables primarily includes assets in the restaurant and hospitality, trucking and industrial equipment industries and corporate aircraft and, for our leveraged finance business, equity of the underlying businesses.                                         (53) --------------------------------------------------------------------------------   CLL - Europe. Nonearning receivables of $1.2 billion represented 12.5% of total nonearning receivables at December 31, 2011. The ratio of allowance for losses as a percent of nonearning receivables decreased from 34.6% at December 31, 2010, to 34.3% at December 31, 2011, primarily due to an increase in nonearning receivables in our senior secured lending portfolio, partially offset by a reduction in nonearning receivables related to account restructuring in our asset-backed lending portfolio and improved delinquency in our equipment finance portfolio. The majority of nonearning receivables are attributable to the Interbanca S.p.A. portfolio, which was acquired in 2009. The loans acquired with Interbanca S.p.A. were recorded at fair value, which incorporates an estimate at the acquisition date of credit losses over their remaining life. Accordingly, these loans generally have a lower ratio of allowance for losses as a percent of nonearning receivables compared to the remaining portfolio. Excluding the nonearning loans attributable to the 2009 acquisition of Interbanca S.p.A., the ratio of allowance for losses as a percent of nonearning receivables decreased from 65.7% at December 31, 2010, to 55.9% at December 31, 2011, for the reasons described above. The ratio of nonearning receivables as a percent of financing receivables decreased from 3.3% at December 31, 2010, to 3.2% at December 31, 2011, as a result of a decrease in nonearning receivables across our equipment finance and asset-backed lending portfolios, partially offset by the increase in nonearning receivables in our senior secured lending portfolio, for the reasons described above. Collateral supporting these secured nonearning financing receivables are primarily equity of the underlying businesses for our senior secured lending and Interbanca S.p.A. businesses, and equipment for our equipment finance portfolio.  CLL - Asia. Nonearning receivables of $0.3 billion represented 2.9% of total nonearning receivables at December 31, 2011. The ratio of allowance for losses as a percent of nonearning receivables increased from 54.7% at December 31, 2010, to 58.4% at December 31, 2011, primarily as a result of collections and write-offs of nonearning receivables in our asset-based financing businesses in Japan, Australia and New Zealand. The ratio of nonearning receivables as a percent of financing receivables decreased from 3.4% at December 31, 2010, to 2.3% at December 31, 2011, primarily due to the decline in nonearning receivables related to our asset-based financing businesses in Japan, Australia and New Zealand, partially offset by a lower financing receivables balance. Collateral supporting these nonearning financing receivables is primarily commercial real estate, manufacturing equipment, corporate aircraft, and assets in the auto industry.  Real Estate - Debt. Nonearning receivables of $0.5 billion represented 5.8% of total nonearning receivables at December 31, 2011. The decrease in nonearning receivables from December 31, 2010, was driven primarily by the resolution of U.S. multi-family and office nonearning loans, as well as European hotel and retail loans, through restructurings, payoffs and foreclosures, partially offset by new European multi-family delinquencies. The ratio of allowance for losses as a percent of nonearning receivables increased from 134.4% to 175.4% reflecting resolution of nonearning loans as mentioned above. The ratio of allowance for losses as a percent of total financing receivables decreased from 4.3% at December 31, 2010 to 3.9% at December 31, 2011, driven primarily by write-offs related to settlements and payoffs from impaired loan borrowers and improvement in collateral values.  The Real Estate financing receivables portfolio is collateralized by income-producing or owner-occupied commercial properties across a variety of asset classes and markets. At December 31, 2011, total Real Estate financing receivables of $32.7 billion were primarily collateralized by owner-occupied properties ($8.2 billion), office buildings ($7.2 billion), apartment buildings ($4.5 billion) and hotel properties ($3.8 billion). In 2011, commercial real estate markets showed signs of improved stability and liquidity in certain markets; however, the pace of improvement varies significantly by asset class and market and the long term outlook remains uncertain. We have and continue to maintain an intense focus on operations and risk management. Loan loss reserves related to our Real Estate-Debt financing receivables are particularly sensitive to declines in underlying property values. Assuming global property values decline an incremental 1% or 5%, and that decline occurs evenly across geographies and asset classes, we estimate incremental loan loss reserves would be required of less than $0.1 billion and approximately $0.2 billion, respectively. Estimating the impact of global property values on loss performance across our portfolio depends on a number of factors, including macroeconomic conditions, property level operating performance, local market dynamics and individual borrower behavior. As a result, any sensitivity analyses or attempts to forecast potential losses carry a high degree of imprecision and are subject to change. At December 31, 2011, we had 119 foreclosed commercial real estate properties totaling $0.7 billion.                                         (54) --------------------------------------------------------------------------------   Consumer - Non-U.S. residential mortgages. Nonearning receivables of $3.3 billion represented 36.0% of total nonearning receivables at December 31, 2011. The ratio of allowance for losses as a percent of nonearning receivables decreased from 21.5% at December 31, 2010, to 21.1% at December 31, 2011. In the year ended 2011, our nonearning receivables decreased primarily due to improving portfolio quality in the U.K. Our non-U.S. mortgage portfolio has a loan-to-value ratio of approximately 75% at origination and the vast majority are first lien positions. Our U.K. and France portfolios, which comprise a majority of our total mortgage portfolio, have reindexed loan-to-value ratios of 84% and 56%, respectively. About 4% of these loans are without mortgage insurance and have a reindexed loan-to-value ratio equal to or greater than 100%. Loan-to-value information is updated on a quarterly basis for a majority of our loans and considers economic factors such as the housing price index. At December 31, 2011, we had in repossession stock 461 houses in the U.K., which had a value of approximately $0.1 billion. The ratio of nonearning receivables as a percent of financing receivables remained constant at 9.3% at December 31, 2011.  Consumer - Non-U.S. installment and revolving credit. Nonearning receivables of $0.3 billion represented 2.8% of total nonearning receivables at December 31, 2011. The ratio of allowance for losses as a percent of nonearning receivables decreased from 324.2% at December 31, 2010 to 272.6% at December 31, 2011, reflecting the effects of loan repayments and reduced originations primarily in our European platforms.  Consumer - U.S. installment and revolving credit. Nonearning receivables of $1.0 billion represented 10.6% of total nonearning receivables at December 31, 2011. The ratio of allowance for losses as a percent of nonearning receivables increased from 194.3% at December 31, 2010, to 202.8% at December 31, 2011, as a result of lower entry rates and improved collections resulting in reductions in our nonearning receivables balance. The ratio of nonearning receivables as a percentage of financing receivables decreased from 2.7% at December 31, 2010 to 2.1% at December 31, 2011, primarily due to lower delinquencies reflecting an improvement in the overall credit environment.  

Nonaccrual Financing Receivables

  The following table provides details related to our nonaccrual and nonearning financing receivables. Nonaccrual financing receivables include all nonearning receivables and are those on which we have stopped accruing interest. We stop accruing interest at the earlier of the time at which collection becomes doubtful or the account becomes 90 days past due. Substantially all of the differences between nonearning and nonaccrual financing receivables relate to loans which are classified as nonaccrual financing receivables but are paying on a cash accounting basis, and therefore excluded from nonearning receivables. Of our $17.0 billion nonaccrual loans at December 31, 2011, $7.5 billion are currently paying in accordance with their contractual terms.                                     Nonaccrual     Nonearning                                    financing      financing 

December 31, 2011 (In millions) receivables receivables

  Commercial CLL                             $     4,512    $     3,309 Energy Financial Services                22             22 GECAS                                    69             55 Other                                   115             65 Total Commercial                      4,718          3,451  Real Estate                           6,949            790  Consumer                              5,316          5,064 Total                           $    16,983    $     9,305                                             (55)

--------------------------------------------------------------------------------   Impaired Loans "Impaired" loans in the table below are defined as larger balance or restructured loans for which it is probable that the lender will be unable to collect all amounts due according to original contractual terms of the loan agreement. The vast majority of our Consumer and a portion of our CLL nonaccrual receivables are excluded from this definition, as they represent smaller balance homogeneous loans that we evaluate collectively by portfolio for impairment.  Impaired loans include nonearning receivables on larger balance or restructured loans, loans that are currently paying interest under the cash basis (but are excluded from the nonearning category), and loans paying currently but which have been previously restructured.  Specific reserves are recorded for individually impaired loans to the extent we have determined that it is probable that we will be unable to collect all amounts due according to original contractual terms of the loan agreement. Certain loans classified as impaired may not require a reserve because we believe that we will ultimately collect the unpaid balance (through collection or collateral repossession).  

Further information pertaining to loans classified as impaired and specific reserves is included in the table below.

                                                               At (In millions)                                    December 31,     December 31,                                                         2011             2010

Loans requiring allowance for losses

  Commercial(a)                                $       2,357    $       2,733   Real Estate                                          4,957            6,812   Consumer                                             3,036            2,446 Total loans requiring allowance for losses            10,350           

11,991

Loans expected to be fully recoverable

  Commercial(a)                                        3,305            3,087   Real Estate                                          3,790            3,005   Consumer                                                69              102 Total loans expected to be fully recoverable           7,164            

6,194

 Total impaired loans                           $      17,514    $      

18,185

Allowance for losses (specific reserves)

  Commercial(a)                                $         812    $       1,031   Real Estate                                            822            1,150   Consumer                                               717              555

Total allowance for losses (specific reserves) $ 2,351 $ 2,736

  Average investment during the period           $      18,384    $      

15,538

 Interest income earned while impaired(b)                 733              391               (a) Includes CLL, Energy Financial Services, GECAS and Other.                       (b) Recognized principally on a cash basis.     We regularly review our Real Estate loans for impairment using both quantitative and qualitative factors, such as debt service coverage and loan-to-value ratios. We classify Real Estate loans as impaired when the most recent valuation reflects a projected loan-to-value ratio at maturity in excess of 100%, even if the loan is currently paying in accordance with contractual terms.  Of our $8.7 billion impaired loans at Real Estate at December 31, 2011, $7.9 billion are currently paying in accordance with the contractual terms of the loan and are typically loans where the borrower has adequate debt service coverage to meet contractual interest obligations. Impaired loans at CLL primarily represent senior secured lending positions.                                          (56) --------------------------------------------------------------------------------

Our impaired loan balance at December 31, 2011 and 2010, classified by the method used to measure impairment was as follows.

                                                  At                                     December 31,     December 31, (In millions)                              2011             2010  Method used to measure impairment Discounted cash flow              $       8,981    $       7,644 Collateral value                          8,533           10,541 Total                             $      17,514    $      18,185   

See Note 1 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report for further information on collateral dependent loans and our valuation process.

  Our loss mitigation strategy is intended to minimize economic loss and, at times, can result in rate reductions, principal forgiveness, extensions, forbearance or other actions, which may cause the related loan to be classified as a troubled debt restructuring (TDR), and also as impaired. Changes to Real Estate's loans primarily include maturity extensions, principal payment acceleration, changes to collateral terms and cash sweeps, which are in addition to, or sometimes in lieu of, fees and rate increases. The determination of whether these changes to the terms and conditions of our commercial loans meet the TDR criteria includes our consideration of all relevant facts and circumstances. At December 31, 2011, TDRs included in impaired loans were $13.7 billion, primarily relating to Real Estate ($7.0 billion), CLL ($3.6 billion) and Consumer ($2.9 billion).  Real Estate TDRs increased from $4.9 billion at December 31, 2010 to $7.0 billion at December 31, 2011, primarily driven by loans scheduled to mature during 2011, some of which were modified during 2011 and classified as TDRs upon modification. For borrowers with demonstrated operating capabilities, we work to restructure loans when the cash flow and projected value of the underlying collateral support repayment over the modified term. We deem loan modifications to be TDRs when we have granted a concession to a borrower experiencing financial difficulty and we do not receive adequate compensation in the form of an effective interest rate that is at current market rates of interest given the risk characteristics of the loan or other consideration that compensates us for the value of the concession. For the year ended December 31, 2011, we modified $4.0 billion of loans classified as TDRs, substantially all in our Debt portfolio. Changes to these loans primarily included maturity extensions, principal payment acceleration, changes to collateral or covenant terms and cash sweeps, which are in addition to, or sometimes in lieu of, fees and rate increases. The limited liquidity and higher return requirements in the real estate market for loans with higher loan-to-value (LTV) ratios has typically resulted in the conclusion that the modified terms are not at current market rates of interest, even if the modified loans are expected to be fully recoverable. We received the same or additional compensation in the form of rate increases and fees for the majority of these TDRs. Of our modifications classified as TDRs in the last twelve months, $0.1 billion have subsequently experienced a payment default.  The substantial majority of the Real Estate TDRs have reserves determined based upon collateral value. Our specific reserves on Real Estate TDRs were $0.6 billion at December 31, 2011 and $0.4 billion at December 31, 2010, and were 8.4% and 8.9%, respectively, of Real Estate TDRs. Although we experienced an increase in TDRs over this period, in many situations these loans did not require a specific reserve as collateral value adequately covered our recorded investment in the loan. While these modified loans had adequate collateral coverage, we were still required to complete our TDR classification evaluation on each of the modifications without regard to collateral adequacy.                                         (57) --------------------------------------------------------------------------------   We utilize certain short-term (three months or less) loan modification programs for borrowers experiencing temporary financial difficulties in our Consumer loan portfolio. These loan modification programs are primarily concentrated in our non-U.S. residential mortgage and non-U.S. installment and revolving portfolios. We sold our U.S. residential mortgage business in 2007 and as such, do not participate in the U.S. government-sponsored mortgage modification programs. For the year ended December 31, 2011, we provided short-term modifications of approximately $1.0 billion of consumer loans for borrowers experiencing financial difficulties, substantially all in our non-U.S. residential mortgage, credit card and personal loan portfolios, which are not classified as TDRs. For these modified loans, we provided insignificant interest rate reductions and payment deferrals, which were not part of the terms of the original contract. We expect borrowers whose loans have been modified under these short-term programs to continue to be able to meet their contractual obligations upon the conclusion of the short-term modification. In addition, we have modified $2.0 billion of Consumer loans for the year ended December 31, 2011, which are classified as TDRs. Further information on Consumer impaired loans is provided in Note 23 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  

Delinquencies

For additional information on delinquency rates at each of our major portfolios, see Note 23 to the consolidated financial statements in Part II. Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.

GECS Selected European Exposures

  At December 31, 2011, we had $92 billion in financing receivables to consumer and commercial customers in Europe. The GECS financing receivables portfolio in Europe is well diversified across European geographies and customers. Approximately 85% of the portfolio is secured by collateral and represents approximately 500,000 commercial customers. Several European countries, including Spain, Portugal, Ireland, Italy, Greece and Hungary ("focus countries"), have been subject to credit deterioration due to weaknesses in their economic and fiscal situations. The carrying value of GECS funded exposures in these focus countries and in the rest of Europe comprised the following at December 31, 2011.  December 31, 2011                                                                       Rest of      Total 

(In millions) SpainPortugalIrelandItaly Greece HungaryEuropeEurope

 Financing receivables,   net of allowance    for loan       $ 2,316    $     601    $    881    $ 7,231    $    88    $ 3,060    $ 78,208    $ 92,385 losses(a)(b)  Investments(c)(d)       2            -          24        611         36        152       2,650       3,475  Derivatives,   net of               47            -           -         86          -          -         177         310 collateral(c)(e) 

Total funded 2,365 601 905 7,928 124

  3,212      81,035      96,170 exposures(f)  Unfunded                -            -           -        311          -        557       8,168       9,036 commitments     

(a) Financing receivable amounts are classified based on the location or nature

     of the related obligor.   

(b) Substantially all relates to non-sovereign obligors. Includes residential

mortgage loans of approximately $35.4 billion before consideration of

purchased credit protection. We have third-party mortgage insurance for

approximately 28% of these residential mortgage loans, substantially all of

which were originated in the U.K., Poland and France.

(c) Investments and derivatives are classified based on the location of the

parent of the obligor or issuer.

(d) Includes $1.1 billion related to financial institutions, $0.5 billion

related to non-financial institutions and $1.9 billion related to sovereign

issuers. Sovereign issuances totaled $0.1 billion, $0.1 billion and $0.1

     billion related to Italy, Hungary and Greece, respectively. We held no      investments issued by sovereign entities in the other focus countries.   

(e) Net of cash collateral, entire amount is non-sovereign.

                                           (58)

--------------------------------------------------------------------------------

(f) Excludes other GECS funded assets in European countries, which comprise cash

and equivalents ($41.6 billion), ELTO ($11.9 billion), real estate held for

investment ($7.3 billion), and cost and equity method investments ($2.5

billion). GECS cash and equivalents in European countries include cash on

short-term placement with highly rated global financial institutions based

in Europe, sovereign central banks and agencies or supra national entities

($24.2 billion) and the remaining $17.4 billion of cash and equivalents is

placed with highly rated European financial institutions on a short-term

     basis and is secured by U.S. Treasury securities ($9.6 billion) and      sovereign bonds of non-focus countries ($7.8 billion), where the value of      our collateral exceeds the amount of our cash exposure.     We manage counterparty exposure, including credit risk, on an individual counterparty basis. We place defined risk limits around each obligor and review our risk exposure on the basis of both the primary and parent obligor, as well as the issuer of securities held as collateral. These limits are adjusted on an ongoing basis based on our continuing assessment of the credit risk of the obligor or issuer. In setting our counterparty risk limits, we focus on high quality credits and diversification through spread of risk in an effort to actively manage our overall exposure. We actively monitor each exposure against these limits and take appropriate action when we believe that risk limits have been exceeded or there are excess risk concentrations. Our collateral position and ability to work out problem accounts has historically mitigated our actual loss experience. Delinquency experience has been improving in our European commercial and consumer platforms in the aggregate, and we actively monitor and take action to reduce exposures where appropriate. Uncertainties surrounding European markets could have an impact on the judgments and estimates used in determining the carrying value of these assets.  Other GECS receivables totaled $13.4 billion at December 31, 2011 and $12.9 billion at December 31, 2010, and consisted primarily of amounts due from GE (primarily related to material procurement programs of $3.5 billion and $2.7 billion at December 31, 2011 and December 31, 2010, respectively), insurance receivables, nonfinancing customer receivables, amounts due under operating leases, amounts accrued from investment income, tax receivables and various sundry items.  Property, plant and equipment totaled $65.7 billion at December 31, 2011, down $0.5 billion from 2010, primarily reflecting a reduction in equipment leased to others principally as a result of the disposal of our CLL marine container leasing business. GE property, plant and equipment consisted of investments for its own productive use, whereas the largest element for GECS was equipment provided to third parties on operating leases. Details by category of investment are presented in Note 7 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  GE additions to property, plant and equipment totaled $3.0 billion and $2.4 billion in 2011 and 2010, respectively. Total expenditures, excluding equipment leased to others, for the past five years were $13.1 billion, of which 40% was investment for growth through new capacity and product development; 24% was investment in productivity through new equipment and process improvements; and 36% was investment for other purposes such as improvement of research and development facilities and safety and environmental protection.  

GECS additions to property, plant and equipment were $9.9 billion and $7.7 billion during 2011 and 2010, respectively, primarily reflecting additions of commercial aircraft at GECAS.

  Goodwill and other intangible assets totaled $84.7 billion and $74.4 billion, respectively, at December 31, 2011. Goodwill increased $8.2 billion from 2010, primarily from the acquisitions of Converteam, the Well Support division of John Wood Group PLC, Dresser, Inc., Wellstream PLC and Lineage Power Holdings, Inc., partially offset by the stronger U.S. dollar. Other intangible assets increased $2.1 billion from 2010, primarily from acquisitions, partially offset by amortization expense. Goodwill and intangible assets were reduced by $19.6 billion and $2.6 billion in 2010 in connection with our decision to transfer the assets of the NBCU business to a joint venture. See Note 8 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (59) --------------------------------------------------------------------------------   All other assets comprise mainly real estate equity properties and investments, equity and cost method investments, derivative instruments and assets held for sale, and totaled $111.7 billion at December 31, 2011, an increase of $17.4 billion, primarily related to our investment in NBCU ($18.0 billion), increases in the fair value of derivative instruments ($4.6 billion) and our investment in PTL ($1.2 billion), partially offset by a decrease in real estate equity investments ($3.3 billion) and the sale of a substantial portion of our equity investment in Garanti Bank ($3.0 billion). During 2011, we recognized other-than-temporary impairments of cost and equity method investments, excluding those related to real estate, of $0.1 billion.  Included in other assets are Real Estate equity investments of $23.9 billion and $27.2 billion at December 31, 2011 and December 31, 2010, respectively. Our portfolio is diversified, both geographically and by asset type. We review the estimated values of our commercial real estate investments at least annually, or more frequently as conditions warrant. Based on the most recent valuation estimates available, the carrying value of our Real Estate investments exceeded their estimated value by about $2.6 billion. Commercial real estate valuations in 2011 showed signs of improved stability and liquidity in certain markets, primarily in the U.S.; however, the pace of improvement varies significantly by asset class and market. Accordingly, there continues to be risk and uncertainty surrounding commercial real estate values. Declines in estimated value of real estate below carrying amount result in impairment losses when the aggregate undiscounted cash flow estimates used in the estimated value measurement are below the carrying amount. As such, estimated losses in the portfolio will not necessarily result in recognized impairment losses. During 2011, Real Estate recognized pre-tax impairments of $1.2 billion in its real estate held for investment, which were driven by declining cash flow projections for properties in certain markets, most notably Japan and Spain, as well as properties we have identified for short-term disposition based upon our updated outlook of local market conditions. Real Estate investments with undiscounted cash flows in excess of carrying value of 0% to 5% at December 31, 2011 had a carrying value of $1.6 billion and an associated estimated unrealized loss of approximately $0.2 billion. Continued deterioration in economic conditions or prolonged market illiquidity may result in further impairments being recognized.  Contract costs and estimated earnings reflect revenues earned in excess of billings on our long-term contracts to construct technically complex equipment (such as power generation, aircraft engines and aeroderivative units) and long-term product maintenance or extended warranty arrangements. Our total contract costs and estimated earnings balances at December 31, 2011 and 2010, were $9.0 billion and $8.1 billion, respectively, reflecting the timing of billing in relation to work performed, as well as changes in estimates of future revenues and costs. Our total contract costs and estimated earnings balance at December 31, 2011, primarily related to customers in our Energy, Aviation and Transportation businesses. Further information is provided in the Critical Accounting Estimates section.  

Liquidity and Borrowings

We maintain a strong focus on liquidity. At both GE and GECS we manage our liquidity to help ensure access to sufficient funding to meet our business needs and financial obligations throughout business cycles.

  Our liquidity and borrowing plans for GE and GECS are established within the context of our annual financial and strategic planning processes. At GE, our liquidity and funding plans take into account the liquidity necessary to fund our operating commitments, which include primarily purchase obligations for inventory and equipment, payroll and general expenses (including pension funding). We also take into account our capital allocation and growth objectives, including paying dividends, repurchasing shares, investing in research and development and acquiring industrial businesses. At GE, we rely primarily on cash generated through our operating activities and also have historically maintained a commercial paper program that we regularly use to fund operations in the U.S., principally within fiscal quarters.                                          (60) --------------------------------------------------------------------------------   GECS liquidity position is targeted to meet our obligations under both normal and stressed conditions. GECS establishes a funding plan annually that is based on the projected asset size and cash needs of the Company, which over the past few years, has included our strategy to reduce our ending net investment in GE Capital. GECS relies on a diversified source of funding, including the unsecured term debt markets, the global commercial paper markets, deposits, secured funding, retail funding products, bank borrowings and securitizations to fund its balance sheet, in addition to cash generated through collection of principal, interest and other payments on our existing portfolio of loans and leases to fund its operating and interest expense costs.  Our 2012 GECS funding plan anticipates repayment of principal on outstanding short-term borrowings, including the current portion of its long-term debt ($82.7 billion at December 31, 2011, which includes $2.7 billion of alternative and other funding), through issuance of long-term debt and reissuance of commercial paper, cash on hand, collections of financing receivables exceeding originations, dispositions, asset sales, and deposits and other alternative sources of funding. Interest on borrowings is primarily repaid through interest earned on existing financing receivables. During 2011, GECS earned interest income on financing receivables of $22.4 billion, which more than offset interest expense of $13.9 billion.  We maintain a detailed liquidity policy for GECS which includes a requirement to maintain a contingency funding plan. The liquidity policy defines GECS' liquidity risk tolerance under different stress scenarios based on its liquidity sources and also establishes procedures to escalate potential issues. We actively monitor GECS' access to funding markets and its liquidity profile through tracking external indicators and testing various stress scenarios. The contingency funding plan provides a framework for handling market disruptions and establishes escalation procedures in the event that such events or circumstances arise.  GECS is a savings and loan holding company under U.S. law and became subject to Federal Reserve Board (FRB) supervision on July 21, 2011, the one-year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The FRB has recently finalized a regulation that requires certain organizations it supervises to submit annual capital plans for review, including institutions' plans to make capital distributions, such as dividend payments. The applicability and timing of this proposed regulation to GECS is not yet determined; however, the FRB has indicated that it expects to extend these requirements to large savings and loan holding companies through separate rulemaking or by order. We expect that GECS capital allocation planning will be subject to FRB review, which could affect the timing of the GE Capital dividend to the parent.  

Actions taken to strengthen and maintain our liquidity are described in the following section.

Liquidity Sources

We maintain liquidity sources that consist of cash and equivalents and a portfolio of high-quality, liquid investments (Liquidity Portfolio) and committed unused credit lines.

  We have consolidated cash and equivalents of $84.5 billion at December 31, 2011, which is available to meet our needs. See Statement of Financial Position. At GECS, about $9 billion is in regulated bank and insurance entities and is subject to regulatory restrictions. Most of GE's cash is held outside the U.S. and is available to fund operations and other growth of non-U.S. subsidiaries; it is also available to fund our needs in the U.S. on a short-term basis without being subject to U.S. tax. Under current tax laws, should GE or GECS determine to repatriate cash and equivalents held outside the U.S., we may be subject to additional U.S. income taxes and foreign withholding taxes. Less than $1 billion is held in restricted countries.  In addition to our $84.5 billion of cash and equivalents, we have a centrally-managed portfolio of high-quality, liquid investments with a fair value of $3.6 billion at December 31, 2011. The Liquidity Portfolio is used to manage liquidity and meet the operating needs of GECS under both normal and stress scenarios. The investments consist of unencumbered U.S. government securities, U.S. agency securities, securities guaranteed by the government, supranational securities, and a select group of non-U.S. government securities. We believe that we can readily obtain cash for these securities, even in stressed market conditions.                                        (61) --------------------------------------------------------------------------------  We have committed, unused credit lines totaling $52.4 billion that have been extended to us by 58 financial institutions at December 31, 2011. These lines include $35.1 billion of revolving credit agreements under which we can borrow funds for periods exceeding one year. Additionally, $16.7 billion are 364-day lines that contain a term-out feature that allows us to extend borrowings for one year from the date of expiration of the lending agreement.  

At December 31, 2011, our aggregate cash and equivalents and committed credit lines were more than twice GECS' commercial paper borrowings balance.

Funding Plan

We have reduced our GE Capital ending net investment, excluding cash and equivalents, from $526 billion at January 1, 2010 to $445 billion at December 31, 2011.

  In 2011, we completed issuances of $26.9 billion of senior unsecured debt and $2.0 billion of subordinated notes with maturities up to 25 years (and subsequent to December 31, 2011, an additional $11.6 billion). Average commercial paper borrowings for GECS and GE during the fourth quarter were $42.4 billion and $15.6 billion, respectively, and the maximum amount of commercial paper borrowings outstanding for GECS and GE during the fourth quarter was $45.0 billion and $18.7 billion, respectively. GECS commercial paper maturities are funded principally through new issuances and at GE are substantially repaid by quarter-end using overseas cash which is available for use in the U.S. on a short-term basis without being subject to U.S. tax.  Under the Federal Deposit Insurance Corporation's (FDIC) Temporary Liquidity Guarantee Program (TLGP), the FDIC guaranteed certain senior, unsecured debt issued by GECC on or before October 31, 2009 for which we paid $2.3 billion of fees to the FDIC for our participation. Our TLGP-guaranteed debt has remaining maturities of $35 billion in 2012. We anticipate funding these and our other long-term debt maturities through a combination of existing cash, new debt issuances, collections exceeding originations, dispositions, asset sales, deposits and other alternative sources of funding. GECC and GE are parties to an Eligible Entity Designation Agreement and GECC is subject to the terms of a Master Agreement, each entered into with the FDIC. The terms of these agreements include, among other things, a requirement that GE and GECC reimburse the FDIC for any amounts that the FDIC pays to holders of GECC debt that is guaranteed by the FDIC.  We securitize financial assets as an alternative source of funding. During 2011, we completed $11.8 billion of non-recourse issuances and had maturities of $12.0 billion. At December 31, 2011, consolidated non-recourse borrowings were $29.3 billion. We anticipate that securitization will remain a part of our overall funding capabilities notwithstanding the changes in consolidation rules described in Notes 1 and 24 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  Our issuances of securities repurchase agreements are insignificant and are limited to activities at certain of our foreign banks. At December 31, 2011 and December 31, 2010, we were party to repurchase agreements totaling $0.1 billion and $0.2 billion, respectively, which were accounted for as on-book financings. We have had no repurchase agreements which were not accounted for as financings and we do not engage in securities lending transactions.  We have deposit-taking capability at 11 banks outside of the U.S. and two banks in the U.S. - GE Capital Retail Bank (formerly GE Money Bank), a Federal Savings Bank (FSB), and GE Capital Financial Inc., an industrial bank (IB). The FSB and IB currently issue certificates of deposit (CDs) in maturity terms from three months to ten years.  

Total alternative funding at December 31, 2011 was $66 billion, composed mainly of $43 billion bank deposits, $9 billion of funding secured by real estate, aircraft and other collateral and $8 billion GE Interest Plus notes. The comparable amount at December 31, 2010 was $60 billion.

                                      (62) --------------------------------------------------------------------------------

Preferred Share Redemption

  On October 16, 2008, we issued 30,000 shares of 10% cumulative perpetual preferred stock (par value $1.00 per share) having an aggregate liquidation value of $3.0 billion, and warrants to purchase 134,831,460 shares of common stock (par value $0.06 per share) to Berkshire Hathaway Inc. (Berkshire Hathaway) for net proceeds of $3.0 billion in cash. The proceeds were allocated to the preferred shares ($2.5 billion) and the warrants ($0.5 billion) on a relative fair value basis and recorded in other capital. The warrants are exercisable for five years at an exercise price of $22.25 per share of common stock and settled through physical share issuance.  The preferred stock was redeemable at our option three years after issuance at a price of 110% of liquidation value plus accrued and unpaid dividends. On September 13, 2011, we provided notice to Berkshire Hathaway that we would redeem the shares for the stated redemption price of $3.3 billion, plus accrued and unpaid dividends. In connection with this notice, we recognized a preferred dividend of $0.8 billion (calculated as the difference between the carrying value and redemption value of the preferred stock), which was recorded as a reduction to our third quarter earnings attributable to common shareowners and common shareowners' equity and a related EPS charge of $0.08. As a result and beginning in the fourth quarter of 2011, we are no longer required to pay the preferred share dividends of $0.3 billion annually. The preferred shares were redeemed on October 17, 2011.  Exchange rate and interest rate risks are managed with a variety of techniques, including match funding and selective use of derivatives. We use derivatives to mitigate or eliminate certain financial and market risks because we conduct business in diverse markets around the world and local funding is not always efficient. In addition, we use derivatives to adjust the debt we are issuing to match the fixed or floating nature of the assets we are originating. We apply strict policies to manage each of these risks, including prohibitions on speculative activities. Following is an analysis of the potential effects of changes in interest rates and currency exchange rates using so-called "shock" tests that seek to model the effects of shifts in rates. Such tests are inherently limited based on the assumptions used (described further below) and should not be viewed as a forecast; actual effects would depend on many variables, including market factors and the composition of the Company's assets and liability portfolio at that time.                                         (63) --------------------------------------------------------------------------------

· It is our policy to minimize exposure to interest rate changes. We fund our

financial investments using debt or a combination of debt and hedging

instruments so that the interest rates of our borrowings match the expected

interest rate profile on our assets. To test the effectiveness of our fixed

rate positions, we assumed that, on January 1, 2012, interest rates increased

by 100 basis points across the yield curve (a "parallel shift" in that curve)

and further assumed that the increase remained in place for 2012. We

estimated, based on the year-end 2011 portfolio and holding all other

assumptions constant, that our 2012 consolidated net earnings would decline by

less than $0.1 billion as a result of this parallel shift in the yield curve.

· It is our policy to minimize currency exposures and to conduct operations

either within functional currencies or using the protection of hedge

strategies. We analyzed year-end 2011 consolidated currency exposures,

including derivatives designated and effective as hedges, to identify assets

and liabilities denominated in other than their relevant functional

currencies. For such assets and liabilities, we then evaluated the effects of

a 10% shift in exchange rates between those currencies and the U.S. dollar,

holding all other assumptions constant. This analysis indicated that our 2012

consolidated net earnings would decline by less than $0.1 billion as a result

of such a shift in exchange rates.

Debt and Derivative Instruments, Guarantees and Covenants

Principal debt and derivative conditions are described below.

  Certain of our derivative instruments can be terminated if specified credit ratings are not maintained and certain debt and derivatives agreements of other consolidated entities have provisions that are affected by these credit ratings. As of December 31, 2011, GE and GECC's long-term unsecured debt credit rating from Standard and Poor's Ratings Service (S&P) was "AA+" with a stable outlook and from Moody's Investors Service ("Moody's") was "Aa2" with a stable outlook. As of December 31, 2011, GE, GECS and GECC's short-term credit rating from S&P was "A-1+" and from Moody's was "P-1". We are disclosing these ratings to enhance understanding of our sources of liquidity and the effects of our ratings on our costs of funds. Although we currently do not expect a downgrade in the credit ratings, our ratings may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating.  Fair values of our derivatives can change significantly from period to period based on, among other factors, market movements and changes in our positions. We manage counterparty credit risk (the risk that counterparties will default and not make payments to us according to the terms of our standard master agreements) on an individual counterparty basis. Where we have agreed to netting of derivative exposures with a counterparty, we offset our exposures with that counterparty and apply the value of collateral posted to us to determine the net exposure. Accordingly, we actively monitor these net exposures against defined limits and take appropriate actions in response, including requiring additional collateral.  Swap, forward and option contracts are executed under standard master agreements that typically contain mutual downgrade provisions that provide the ability of the counterparty to require termination if the long-term credit rating of the applicable GE entity were to fall below A-/A3. In certain of these master agreements, the counterparty also has the ability to require termination if the short-term rating of the applicable GE entity were to fall below A-1/P-1. The net derivative liability after consideration of netting arrangements, outstanding interest payments and collateral posted by us under these master agreements was estimated to be $1.2 billion at December 31, 2011. See Note 22 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (64) --------------------------------------------------------------------------------

Other debt and derivative agreements of consolidated entities:

· Trinity comprises two consolidated entities that hold investment securities,

the majority of which are investment grade, and are funded by the issuance of

GICs. Since 2004, GECC has fully guaranteed repayment of these entities' GIC

obligations. If the long-term credit rating of GECC were to fall below AA-/Aa3

or its short-term credit rating were to fall below A-1+/P-1, certain GIC

holders could require immediate repayment of their investment. To the extent

that amounts due exceed the ultimate value of proceeds realized from Trinity

assets, GECC would be required to provide such excess amount. As of December

31, 2011, the carrying value of the liabilities of these entities was $5.6

billion and the fair value of their assets was $4.7 billion (which included

net unrealized losses on investment securities of $0.7 billion). With respect

to these investment securities, we intend to hold them at least until such

time as their individual fair values exceed their amortized cost. We have the

   ability to hold all such debt securities until maturity.     

· Another consolidated entity also had issued GICs where proceeds are loaned to

GECC. If the long-term credit rating of GECC were to fall below AA-/Aa3 or its

short-term credit rating were to fall below A-1+/P-1, GECC could be required

to provide up to approximately $1.7 billion as of December 31, 2011, to repay

holders of GICs, compared to $2.3 billion at December 31, 2010. These

obligations are included in long-term borrowings in our Statement of Financial

   Position in the consolidated financial statements in Part II, Item 8.    "Financial Statements and Supplementary Data" of this Form 10-K Report.   

· If the short-term credit rating of GECC were reduced below A-1/P-1, GECC would

be required to partially cash collateralize certain covered bonds. The maximum

amount that would be required to be provided in the event of such a downgrade is determined by contract and amounted to $0.7 billion and $0.8 billion at

December 31, 2011 and December 31, 2010, respectively. These obligations are

included in long-term borrowings in our Statement of Financial Position in the

consolidated financial statements in Part II, Item 8. "Financial Statements

and Supplementary Data" of this Form 10-K Report.

Ratio of Earnings to Fixed Charges, Income Maintenance Agreement and Subordinated Debentures

  On March 28, 1991, GE entered into an agreement with GECC to make payments to GECC, constituting additions to pre-tax income under the agreement, to the extent necessary to cause the ratio of earnings to fixed charges of GECC and consolidated affiliates (determined on a consolidated basis) to be not less than 1.10:1 for the period, as a single aggregation, of each GECC fiscal year commencing with fiscal year 1991. GECC's ratio of earnings to fixed charges was 1.52:1 for 2011. No payment is required in 2012 pursuant to this agreement.  Any payment made under the Income Maintenance Agreement will not affect the ratio of earnings to fixed charges as determined in accordance with current SEC rules because it does not constitute an addition to pre-tax income under current U.S. GAAP.  In addition, in connection with certain subordinated debentures for which GECC receives equity credit by rating agencies, GE has agreed to promptly return dividends, distributions or other payments it receives from GECC during events of default or interest deferral periods under such subordinated debentures. There were $7.2 billion of such debentures outstanding at December 31, 2011. See Note 10 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  

Consolidated Statement of Changes in Shareowners' Equity

GE shareowners' equity decreased by $2.5 billion in 2011, compared with an increase of $1.6 billion in 2010 and an increase of $12.6 billion in 2009.

  Net earnings increased GE shareowners' equity by $14.2 billion, $11.6 billion and $11.0 billion, partially offset by dividends declared of $7.5 billion (including $0.8 billion related to our preferred stock redemption), $5.2 billion and $6.8 billion in 2011, 2010 and 2009, respectively.                                         (65) --------------------------------------------------------------------------------  Elements of other comprehensive income (OCI) decreased shareowners' equity by $6.1 billion in 2011 and $2.3 billion in 2010, respectively, compared with an increase of $6.6 billion in 2009, inclusive of changes in accounting principles. The components of these changes are as follows:  

· Changes in benefit plans decreased shareowners' equity by $7.0 billion in

2011, primarily reflecting lower discount rates used to measure pension and

postretirement benefit obligations and lower asset values, partially offset by

amortization of actuarial losses and prior service costs out of accumulated

other comprehensive income (AOCI). This compared with an increase of $1.1

billion and a decrease of $1.8 billion in 2010 and 2009, respectively. The

increase in 2010 primarily reflected prior service cost and net actuarial loss

amortization out of AOCI and higher fair value of plans assets, partially

offset by lower discount rates used to measure pension and postretirement

benefit obligations. The decrease in 2009 primarily related to lower discount

rates used to measure pension and postretirement benefit obligations. Further

information about changes in benefit plans is provided in Note 12 to the

consolidated financial statements in Part II, Item 8. "Financial Statements

   and Supplementary Data" of this Form 10-K Report.     

· Currency translation adjustments increased shareowners' equity by $0.2 billion

in 2011, decreased equity by $3.9 billion in 2010 and increased equity by $4.1

billion in 2009. Changes in currency translation adjustments reflect the

effects of changes in currency exchange rates on our net investment in

non-U.S. subsidiaries that have functional currencies other than the U.S.

dollar. At year end 2011 and 2010, the U.S. dollar strengthened against most

major currencies, including the pound sterling and the euro, and weakened

against the Australian dollar and the Japanese yen. Releases from AOCI related

to dispositions and changes in deferred taxes more than offset the effect in

2011. At year-end 2009, the dollar weakened against most major currencies.

· The change in fair value of investment securities increased shareowners'

equity by $0.6 billion in 2011, reflecting lower interest rates and improved

market conditions related to U.S. corporate securities, partially offset by

adjustments to reflect the effect of the unrealized gains on insurance-related

assets and equity. The change in fair value of investment securities increased

shareowners' equity by an insignificant amount and $2.7 billion in 2010 and

2009, respectively. Further information about investment securities is

provided in Note 3 to the consolidated financial statements in Part II, Item

8. "Financial Statements and Supplementary Data" of this Form 10-K Report.

· Changes in the fair value of derivatives designated as cash flow hedges

increased shareowners' equity by $0.1 billion in 2011, primarily reflecting

lower fair values of interest rate and cross currency hedges which were more

than offset by releases from AOCI contemporaneous with the earnings effects of

the related hedged items, principally as an adjustment of interest expense on

borrowings. The change in the fair value of derivatives designated as cash

flow hedges increased equity by $0.5 billion and $1.6 billion in 2010 and

2009, respectively. Further information about the fair value of derivatives is

provided in Note 22 to the consolidated financial statements in Part II, Item

8. "Financial Statements and Supplementary Data" of this Form 10-K Report.

Statement of Cash Flows - Overview from 2009 through 2011

  Consolidated cash and equivalents were $84.5 billion at December 31, 2011, an increase of $5.6 billion from December 31, 2010. Cash and equivalents totaled $78.9 billion at December 31, 2010, an increase of $7.1 billion from December 31, 2009.  We evaluate our cash flow performance by reviewing our industrial (non-financial services) businesses and financial services businesses separately. Cash from operating activities (CFOA) is the principal source of cash generation for our industrial businesses. The industrial businesses also have liquidity available via the public capital markets. Our financial services businesses use a variety of financial resources to meet our capital needs. Cash for financial services businesses is primarily provided from the issuance of term debt and commercial paper in the public and private markets and deposits, as well as financing receivables collections, sales and securitizations.                                         (66) --------------------------------------------------------------------------------

GE Cash Flow

  GE cash and equivalents were $8.4 billion at December 31, 2011, compared with $19.2 billion at December 31, 2010. GE CFOA totaled $12.1 billion in 2011 compared with $14.7 billion and $16.4 billion in 2010 and 2009, respectively. With respect to GE CFOA, we believe that it is useful to supplement our GE Statement of Cash Flows and to examine in a broader context the business activities that provide and require cash.  GE CFOA decreased $2.7 billion compared with 2010, primarily due to the impact of the disposal of NBCU. In 2010, GE CFOA decreased $1.7 billion compared with 2009, primarily reflecting a decrease in progress collections.  (In billions)                                     2011       2010       2009  Operating cash collections(a)                  $  93.6    $  98.2    $ 104.1 Operating cash payments                          (81.5)     (83.5)     (87.7)

GE cash from operating activities (GE CFOA)(a) $ 12.1$ 14.7$ 16.4

(a) GE sells customer receivables to GECS in part to fund the growth of our

industrial businesses. These transactions can result in cash generation or

cash use. During any given period, GE receives cash from the sale of

receivables to GECS. It also foregoes collection of cash on receivables sold.

The incremental amount of cash received from sale of receivables in excess of

the cash GE would have otherwise collected had those receivables not been

sold, represents the cash generated or used in the period relating to this

activity. The incremental cash generated in GE CFOA from selling these

receivables to GECS increased GE CFOA by $0.9 billion in 2011, decreased GE

CFOA by $0.4 billion in 2010 and increased GE CFOA by an insignificant amount

in 2009. See Note 27 to the consolidated financial statements in Part II,

    Item 8. "Financial Statements and Supplementary Data" of this Form 10-K     Report for additional information about the elimination of intercompany     transactions between GE and GECS.     The most significant source of cash in GE CFOA is customer-related activities, the largest of which is collecting cash following a product or services sale. GE operating cash collections decreased by $4.6 billion in 2011 and decreased by $5.9 billion in 2010. These changes are consistent with the changes in comparable GE operating segment revenues, including the impact of the disposal of NBCU. Analyses of operating segment revenues discussed in the preceding Segment Operations section are the best way of understanding their customer-related CFOA.  The most significant operating use of cash is to pay our suppliers, employees, tax authorities and others for a wide range of material and services. GE operating cash payments decreased in 2011 and 2010 by $2.0 billion and $4.2 billion, respectively. These changes are consistent with the changes in GE total costs and expenses, including the impact of the disposal of NBCU.  Dividends from GECS represented the distribution of a portion of GECS retained earnings and are distinct from cash from continuing operating activities within the financial services businesses. The amounts included in GE CFOA are the total dividends, including normal dividends as well as any special dividends from excess capital, primarily resulting from GECS business sales. Beginning in the first quarter of 2009, GECS suspended its normal dividend to GE. There were no special dividends received from GECS in 2011, 2010 or 2009.  

GECS Cash Flow

  GECS cash and equivalents were $76.7 billion at December 31, 2011, compared with $60.3 billion at December 31, 2010. GECS cash from operating activities totaled $21.1 billion for 2011, compared with cash from operating activities of $21.6 billion for the same period of 2010. This was primarily due to increases, compared to the prior year, in cash paid for income taxes of $0.7 billion and decreases in accrued expenses of $1.4 billion, partially offset by increases in net cash collateral held from counterparties on derivative contracts of $1.2 billion.                                         (67)

--------------------------------------------------------------------------------  Consistent with our plan to reduce GECS asset levels, cash from investing activities was $29.2 billion in 2011, resulting from a $14.4 billion reduction in financing receivables due to collections exceeding originations. We received proceeds of $11.6 billion from sales of GE Capital's Australian Home Lending operations ($4.6 billion), Consumer businesses in Mexico ($1.9 billion), Canada ($1.4 billion) and Singapore ($0.7 billion), Consumer RV Marine ($1.8 billion), our Real Estate Interpark business ($0.7 billion), our CLL marine container leasing business ($0.4 billion) and our CLL trailer fleet services business in Mexico ($0.1 billion). Additionally, we received proceeds of $4.4 billion from the sale of our equity method investments in Garanti Bank ($3.8 billion) and Banco Colpatria ($0.6 billion). These increases are partially offset by an increase in equipment purchases, mainly at our GECAS and CLL businesses.  GECS cash used for financing activities in 2011 of $33.1 billion related primarily to a $37.8 billion reduction in total borrowings, consisting primarily of reductions in long-term borrowings and commercial paper, partially offset by an increase in deposits at our banks.  

GECS pays dividends to GE through a distribution of its retained earnings, including special dividends from proceeds of certain business sales.

Intercompany Eliminations

  Effects of transactions between related companies are made on an arms-length basis, are eliminated and consist primarily of GECS dividends to GE or capital contributions from GE to GECS; GE customer receivables sold to GECS; GECS services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECS; information technology (IT) and other services sold to GECS by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECS from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs. For further information related to intercompany eliminations see Note 27 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (68)

--------------------------------------------------------------------------------

Contractual Obligations

As defined by reporting regulations, our contractual obligations for future payments as of December 31, 2011, follow.

                                           Payments due by period                                                                               2017 and (In billions)          Total       2012       2013-2014      2015-2016      thereafter  Borrowings and bank   deposits (Note    $ 453.4     $ 173.8     $    104.5     $     52.6     $     122.5 10) Interest on borrowings and   bank deposits       116.1        12.2           17.5           12.8            73.6 Purchase               57.3        32.5           15.1            4.7             5.0 obligations(a)(b) Insurance              23.7         2.9            3.6            2.5            14.7 liabilities (Note 11)(c) Operating lease obligations   (Note 19)             4.5         1.0            1.4            0.9             1.2 Other                  73.6        23.5           12.5            8.0            29.6 liabilities(d) Contractual obligations of   discontinued          1.4         1.4              -              -               - operations(e)    

(a) Included all take-or-pay arrangements, capital expenditures, contractual

commitments to purchase equipment that will be leased to others, contractual

commitments related to factoring agreements, software acquisition/license

    commitments, contractual minimum programming commitments and any     contractually required cash payments for acquisitions.   

(b) Excluded funding commitments entered into in the ordinary course of business

by our financial services businesses. Further information on these

commitments and other guarantees is provided in Note 25 to the consolidated

    financial statements in Part II, Item 8. "Financial Statements and     Supplementary Data" of this Form 10-K Report.   

(c) Included contracts with reasonably determinable cash flows such as structured

    settlements, certain property and casualty contracts, and guaranteed     investment contracts.   

(d) Included an estimate of future expected funding requirements related to our

pension and postretirement benefit plans and included liabilities for

unrecognized tax benefits. Because their future cash outflows are uncertain,

the following non-current liabilities are excluded from the table above:

deferred taxes, derivatives, deferred revenue and other sundry items. For

further information on certain of these items, see Notes 14 and 22 to the

consolidated financial statements in Part II, Item 8. "Financial Statements

    and Supplementary Data" of this Form 10-K Report.                      (e) Included payments for other liabilities.     

Variable Interest Entities (VIEs)

We securitize financial assets and arrange other forms of asset-backed financing in the ordinary course of business as an alternative source of funding. The securitization transactions we engage in are similar to those used by many financial institutions.

  The assets we securitize include: receivables secured by equipment, commercial real estate, credit card receivables, floorplan inventory receivables, GE trade receivables and other assets originated and underwritten by us in the ordinary course of business. The securitizations are funded with asset-backed commercial paper and term debt.  Substantially all of our securitization VIEs are consolidated because we are considered to be the primary beneficiary of the entity. Our interests in other VIEs for which we are not the primary beneficiary are accounted for as investment securities, financing receivables or equity method investments depending on the nature of our involvement.  At December 31, 2011, consolidated variable interest entity assets and liabilities were $46.7 billion and $35.2 billion, respectively, a decrease of $4.1 billion and $3.1 billion from 2010, respectively. Assets held by these entities are of equivalent credit quality to our on-book assets. We monitor the underlying credit quality in accordance with our role as servicer and apply rigorous controls to the execution of securitization transactions. With the exception of credit and liquidity support discussed below, investors in these entities have recourse only to the underlying assets.                                         (69) --------------------------------------------------------------------------------   At December 31, 2011, investments in unconsolidated VIEs, including our noncontrolling interest in PTL, were $16.5 billion, an increase of $3.9 billion from 2010, primarily related to an increase of $2.1 billion in an investment in asset-backed securities issued by a senior secured loan fund and $1.2 billion in PTL. In addition to our existing investments, we have contractual obligations to fund additional investments in the unconsolidated VIEs to fund new asset origination. At December 31, 2011, these contractual obligations were $4.3 billion, a decrease of $0.7 billion from 2010.  We do not have implicit support arrangements with any VIE. We did not provide non-contractual support for previously transferred financing receivables to any VIE in either 2011 or 2010.  Critical Accounting Estimates  Accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they involve significant judgments and uncertainties. Many of these estimates include determining fair value. All of these estimates reflect our best judgment about current, and for some estimates future, economic and market conditions and their effects based on information available as of the date of these financial statements. If these conditions change from those expected, it is reasonably possible that the judgments and estimates described below could change, which may result in future impairments of investment securities, goodwill, intangibles and long-lived assets, incremental losses on financing receivables, increases in reserves for contingencies, establishment of valuation allowances on deferred tax assets and increased tax liabilities, among other effects. Also see Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report, which discusses the significant accounting policies that we have selected from acceptable alternatives.  Losses on financing receivables are recognized when they are incurred, which requires us to make our best estimate of probable losses inherent in the portfolio. The method for calculating the best estimate of losses depends on the size, type and risk characteristics of the related financing receivable. Such an estimate requires consideration of historical loss experience, adjusted for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates, financial health of specific customers and market sectors, collateral values (including housing price indices as applicable), and the present and expected future levels of interest rates. The underlying assumptions, estimates and assessments we use to provide for losses are updated periodically to reflect our view of current conditions. Changes in such estimates can significantly affect the allowance and provision for losses. It is possible that we will experience credit losses that are different from our current estimates. Write-offs in both our consumer and commercial portfolios can also reflect both losses that are incurred subsequent to the beginning of a fiscal year and information becoming available during that fiscal year which may identify further deterioration on exposures existing prior to the beginning of that fiscal year, and for which reserves could not have been previously recognized. Our risk management process includes standards and policies for reviewing major risk exposures and concentrations, and evaluates relevant data either for individual loans or financing leases, or on a portfolio basis, as appropriate.  Further information is provided in the Global Risk Management section and Financial Resources and Liquidity - Financing Receivables section of this Item, the Asset impairment section that follows and in Notes 1, 6 and 23 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (70) --------------------------------------------------------------------------------   Revenue recognition on long-term product services agreements requires estimates of profits over the multiple-year terms of such agreements, considering factors such as the frequency and extent of future monitoring, maintenance and overhaul events; the amount of personnel, spare parts and other resources required to perform the services; and future billing rate and cost changes. We routinely review estimates under product services agreements and regularly revise them to adjust for changes in outlook. We also regularly assess customer credit risk inherent in the carrying amounts of receivables and contract costs and estimated earnings, including the risk that contractual penalties may not be sufficient to offset our accumulated investment in the event of customer termination. We gain insight into future utilization and cost trends, as well as credit risk, through our knowledge of the installed base of equipment and the close interaction with our customers that comes with supplying critical services and parts over extended periods. Revisions that affect a product services agreement's total estimated profitability result in an adjustment of earnings; such adjustments increased earnings by $0.4 billion in 2011, decreased earnings by $0.2 billion in 2010 and increased earnings by $0.2 billion in 2009. We provide for probable losses when they become evident.  Further information is provided in Notes 1 and 9 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  

Asset impairment assessment involves various estimates and assumptions as follows:

  Investments. We regularly review investment securities for impairment using both quantitative and qualitative criteria. Effective April 1, 2009, the FASB amended ASC 320 and modified the requirements for recognizing and measuring other-than-temporary impairment for debt securities. If we do not intend to sell the security and it is not more likely than not that we will be required to sell the security before recovery of our amortized cost, we evaluate other qualitative criteria to determine whether a credit loss exists, such as the financial health of and specific prospects for the issuer, including whether the issuer is in compliance with the terms and covenants of the security. Quantitative criteria include determining whether there has been an adverse change in expected future cash flows. For equity securities, our criteria include the length of time and magnitude of the amount that each security is in an unrealized loss position. Our other-than-temporary impairment reviews involve our finance, risk and asset management functions as well as the portfolio management and research capabilities of our internal and third-party asset managers. See Note 1 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report, which discusses the determination of fair value of investment securities.  Further information about actual and potential impairment losses is provided in the Financial Resources and Liquidity - Investment Securities section of this Item and in Notes 1, 3 and 9 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  Long-Lived Assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which undiscounted cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount, and the asset's residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. We derive the required undiscounted cash flow estimates from our historical experience and our internal business plans. To determine fair value, we use quoted market prices when available, our internal cash flow estimates discounted at an appropriate interest rate and independent appraisals, as appropriate.                                         (71) --------------------------------------------------------------------------------   Our operating lease portfolio of commercial aircraft is a significant concentration of assets in GE Capital, and is particularly subject to market fluctuations. Therefore, we test recoverability of each aircraft in our operating lease portfolio at least annually. Additionally, we perform quarterly evaluations in circumstances such as when aircraft are re-leased, current lease terms have changed or a specific lessee's credit standing changes. We consider market conditions, such as global demand for commercial aircraft. Estimates of future rentals and residual values are based on historical experience and information received routinely from independent appraisers. Estimated cash flows from future leases are reduced for expected downtime between leases and for estimated technical costs required to prepare aircraft to be redeployed. Fair value used to measure impairment is based on management's best estimate. In determining its best estimate, management evaluates average current market values (obtained from third parties) of similar type and age aircraft, which are adjusted for the attributes of the specific aircraft under lease.  We recognized impairment losses on our operating lease portfolio of commercial aircraft of $0.3 billion and $0.4 billion in 2011 and 2010, respectively. Provisions for losses on financing receivables related to commercial aircraft were an insignificant amount for both 2011 and 2010.  Further information on impairment losses and our exposure to the commercial aviation industry is provided in the Operations - Overview section of this Item and in Notes 7 and 25 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  Real Estate. We review the estimated value of our commercial real estate investments at least annually, or more frequently as conditions warrant. The cash flow estimates used for both estimating value and the recoverability analysis are inherently judgmental, and reflect current and projected lease profiles, available industry information about expected trends in rental, occupancy and capitalization rates and expected business plans, which include our estimated holding period for the asset. Our portfolio is diversified, both geographically and by asset type. However, the global real estate market is subject to periodic cycles that can cause significant fluctuations in market values. Based on the most recent valuation estimates available, the carrying value of our Real Estate investments exceeded their estimated value by about $2.6 billion. Commercial real estate valuations in 2011 showed signs of improved stability and liquidity in certain markets, primarily in the U.S.; however, the pace of improvement varies significantly by asset class and market. Accordingly, there continues to be risk and uncertainty surrounding commercial real estate values. Declines in the estimated value of real estate below carrying amount result in impairment losses when the aggregate undiscounted cash flow estimates used in the estimated value measurement are below the carrying amount. As such, estimated losses in the portfolio will not necessarily result in recognized impairment losses. When we recognize an impairment, the impairment is measured using the estimated fair value of the underlying asset, which is based upon cash flow estimates that reflect current and projected lease profiles and available industry information about capitalization rates and expected trends in rents and occupancy and is corroborated by external appraisals. During 2011, Real Estate recognized pre-tax impairments of $1.2 billion in its real estate held for investment, as compared to $2.3 billion in 2010. Continued deterioration in economic conditions or prolonged market illiquidity may result in further impairments being recognized. Furthermore, significant judgment and uncertainty related to forecasted valuation trends, especially in illiquid markets, results in inherent imprecision in real estate value estimates. Further information is provided in the Global Risk Management and the All other assets sections of this Item and in Note 9 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (72) --------------------------------------------------------------------------------   Goodwill and Other Identified Intangible Assets. We test goodwill for impairment annually and more frequently if circumstances warrant. We determine fair values for each of the reporting units using an income approach. When available and appropriate, we use comparative market multiples to corroborate discounted cash flow results. For purposes of the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our reporting unit valuations ranged from 9.0% to 13.75%. Valuations using the market approach reflect prices and other relevant observable information generated by market transactions involving comparable businesses.  Compared to the market approach, the income approach more closely aligns each reporting unit valuation to our business profile, including geographic markets served and product offerings. Required rates of return, along with uncertainty inherent in the forecasts of future cash flows, are reflected in the selection of the discount rate. Equally important, under this approach, reasonably likely scenarios and associated sensitivities can be developed for alternative future states that may not be reflected in an observable market price. A market approach allows for comparison to actual market transactions and multiples. It can be somewhat more limited in its application because the population of potential comparables is often limited to publicly-traded companies where the characteristics of the comparative business and ours can be significantly different, market data is usually not available for divisions within larger conglomerates or non-public subsidiaries that could otherwise qualify as comparable, and the specific circumstances surrounding a market transaction (e.g., synergies between the parties, terms and conditions of the transaction, etc.) may be different or irrelevant with respect to our business. It can also be difficult, under certain market conditions, to identify orderly transactions between market participants in similar businesses. We assess the valuation methodology based upon the relevance and availability of the data at the time we perform the valuation and weight the methodologies appropriately.  Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. If current conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates described above could change in future periods.  We review identified intangible assets with defined useful lives and subject to amortization for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss occurred requires comparing the carrying amount to the sum of undiscounted cash flows expected to be generated by the asset. We test intangible assets with indefinite lives annually for impairment using a fair value method such as discounted cash flows. For our insurance activities remaining in continuing operations, we periodically test for impairment our deferred acquisition costs and present value of future profits.  

Further information is provided in the Financial Resources and Liquidity - Goodwill and Other Intangible Assets section of this Item and in Notes 1 and 8 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.

  Pension assumptions are significant inputs to the actuarial models that measure pension benefit obligations and related effects on operations. Two assumptions - discount rate and expected return on assets - are important elements of plan expense and asset/liability measurement. We evaluate these critical assumptions at least annually on a plan and country-specific basis. We periodically evaluate other assumptions involving demographic factors, such as retirement age, mortality and turnover, and update them to reflect our experience and expectations for the future. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.                                         (73) --------------------------------------------------------------------------------   Accumulated and projected benefit obligations are measured as the present value of expected payments. We discount those cash payments using the weighted average of market-observed yields for high quality fixed income securities with maturities that correspond to the payment of benefits. Lower discount rates increase present values and subsequent-year pension expense; higher discount rates decrease present values and subsequent-year pension expense.  

Our discount rates for principal pension plans at December 31, 2011, 2010 and 2009 were 4.21%, 5.28% and 5.78%, respectively, reflecting market interest rates.

  To determine the expected long-term rate of return on pension plan assets, we consider current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. In developing future long-term return expectations for our principal benefit plans' assets, we formulate views on the future economic environment, both in the U.S. and abroad. We evaluate general market trends and historical relationships among a number of key variables that impact asset class returns such as expected earnings growth, inflation, valuations, yields and spreads, using both internal and external sources. We also take into account expected volatility by asset class and diversification across classes to determine expected overall portfolio results given current and expected allocations. Asset earnings in our principal pension plans were flat in 2011, and had average annual earnings of 4.7%, 6.7% and 8.7% per year in the 10-, 15- and 25-year periods ended December 31, 2011, respectively. These average historical returns were significantly affected by investment losses in 2008. Based on our analysis of future expectations of asset performance, past return results, and our current and expected asset allocations, we have assumed an 8.0% long-term expected return on those assets for cost recognition in 2012 compared to 8.0% in 2011 and 8.5% in both 2010 and 2009.  

Changes in key assumptions for our principal pension plans would have the following effects.

· Discount rate - A 25 basis point increase in discount rate would decrease

pension cost in the following year by $0.2 billion and would decrease the

   pension benefit obligation at year-end by about $1.9 billion.     

· Expected return on assets - A 50 basis point decrease in the expected return

on assets would increase pension cost in the following year by $0.2 billion.

Further information on our pension plans is provided in the Operations - Overview section of this Item and in Note 12 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.

                                         (74) --------------------------------------------------------------------------------   Income Taxes. Our annual tax rate is based on our income, statutory tax rates and tax planning opportunities available to us in the various jurisdictions in which we operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties. We review our tax positions quarterly and adjust the balances as new information becomes available. Our income tax rate is significantly affected by the tax rate on our global operations. In addition to local country tax laws and regulations, this rate depends on the extent earnings are indefinitely reinvested outside the United States. Indefinite reinvestment is determined by management's judgment about and intentions concerning the future operations of the Company. At December 31, 2011 and 2010, $102 billion and $94 billion of earnings, respectively, have been indefinitely reinvested outside the United States. Most of these earnings have been reinvested in active non-U.S. business operations, and we do not intend to repatriate these earnings to fund U.S. operations. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the U.S. federal income tax liability that would be payable if such earnings were not reinvested indefinitely. Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates. We use our historical experience and our short and long-range business forecasts to provide insight. Further, our global and diversified business portfolio gives us the opportunity to employ various prudent and feasible tax planning strategies to facilitate the recoverability of future deductions. Amounts recorded for deferred tax assets related to non-U.S. net operating losses, net of valuation allowances, were $4.8 billion and $4.4 billion at December 31, 2011 and 2010, respectively, including $0.9 billion and $1.0 billion at December 31, 2011 and 2010, respectively, of deferred tax assets, net of valuation allowances, associated with losses reported in discontinued operations, primarily related to our loss on the sale of GE Money Japan. Such year-end 2011 amounts are expected to be fully recoverable within the applicable statutory expiration periods. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established.  Further information on income taxes is provided in the Operations - Overview section of this Item and in Note 14 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  Derivatives and Hedging. We use derivatives to manage a variety of risks, including risks related to interest rates, foreign exchange and commodity prices. Accounting for derivatives as hedges requires that, at inception and over the term of the arrangement, the hedged item and related derivative meet the requirements for hedge accounting. The rules and interpretations related to derivatives accounting are complex. Failure to apply this complex guidance correctly will result in all changes in the fair value of the derivative being reported in earnings, without regard to the offsetting changes in the fair value of the hedged item.  In evaluating whether a particular relationship qualifies for hedge accounting, we test effectiveness at inception and each reporting period thereafter by determining whether changes in the fair value of the derivative offset, within a specified range, changes in the fair value of the hedged item. If fair value changes fail this test, we discontinue applying hedge accounting to that relationship prospectively. Fair values of both the derivative instrument and the hedged item are calculated using internal valuation models incorporating market-based assumptions, subject to third-party confirmation, as applicable.  At December 31, 2011, derivative assets and liabilities were $10.0 billion and $0.7 billion, respectively. Further information about our use of derivatives is provided in Notes 1, 9, 21 and 22 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (75)

--------------------------------------------------------------------------------   Fair Value Measurements. Assets and liabilities measured at fair value every reporting period include investments in debt and equity securities and derivatives. Assets that are not measured at fair value every reporting period but that are subject to fair value measurements in certain circumstances include loans and long-lived assets that have been reduced to fair value when they are held for sale, impaired loans that have been reduced based on the fair value of the underlying collateral, cost and equity method investments and long-lived assets that are written down to fair value when they are impaired and the remeasurement of retained investments in formerly consolidated subsidiaries upon a change in control that results in deconsolidation of a subsidiary, if we sell a controlling interest and retain a noncontrolling stake in the entity. Assets that are written down to fair value when impaired and retained investments are not subsequently adjusted to fair value unless further impairment occurs.  A fair value measurement is determined as the price we would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of active markets for the identical assets or liabilities, such measurements involve developing assumptions based on market observable data and, in the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date. The determination of fair value often involves significant judgments about assumptions such as determining an appropriate discount rate that factors in both risk and liquidity premiums, identifying the similarities and differences in market transactions, weighting those differences accordingly and then making the appropriate adjustments to those market transactions to reflect the risks specific to our asset being valued. Further information on fair value measurements is provided in Notes 1, 21 and 22 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.  Other loss contingencies are uncertain and unresolved matters that arise in the ordinary course of business and result from events or actions by others that have the potential to result in a future loss. Such contingencies include, but are not limited to environmental obligations, litigation, regulatory proceedings, product quality and losses resulting from other events and developments.  When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the low-end of such range. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be continuously evaluated to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a range of possible loss. When a loss is probable but a reasonable estimate cannot be made, disclosure is provided.  Disclosure also is provided when it is reasonably possible that a loss will be incurred or when it is reasonably possible that the amount of a loss will exceed the recorded provision. We regularly review all contingencies to determine whether the likelihood of loss has changed and to assess whether a reasonable estimate of the loss or range of loss can be made. As discussed above, development of a meaningful estimate of loss or a range of potential loss is complex when the outcome is directly dependent on negotiations with or decisions by third parties, such as regulatory agencies, the court system and other interested parties. Such factors bear directly on whether it is possible to reasonably estimate a range of potential loss and boundaries of high and low estimates.  Further information is provided in Notes 13 and 25 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report.                                         (76)

--------------------------------------------------------------------------------

  Other Information  New Accounting Standards  In June 2011, the FASB issued amendments to existing standards for reporting comprehensive income. Accounting Standards Update (ASU) 2011-05 rescinds the requirement to present a Consolidated Statement of Changes in Share Owners' Equity and introduces a new statement, the Consolidated Statement of Comprehensive Income. The new statement begins with net income and adds or deducts other recognized changes in assets and liabilities that are not included in net earnings under GAAP. For example, unrealized changes in currency translation adjustments are included in the measure of comprehensive income but are excluded from net earnings. The amendments are effective for our first quarter 2012 financial statements. The amendments affect only the display of those components of equity categorized as other comprehensive income and do not change existing recognition and measurement requirements that determine net earnings.  In May 2011, the FASB issued amendments to existing standards for fair value measurement and disclosure, which are effective in the first quarter of 2012. The amendments clarify or change the application of existing fair value measurements, including: that the highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets; that a reporting entity should measure the fair value of its own equity instrument from the perspective of a market participant that holds that instrument as an asset; to permit an entity to measure the fair value of certain financial instruments on a net basis rather than based on its gross exposure when the reporting entity manages its financial instruments on the basis of such net exposure; that in the absence of a Level 1 input, a reporting entity should apply premiums and discounts when market participants would do so when pricing the asset or liability consistent with the unit of account; and that premiums and discounts related to size as a characteristic of the reporting entity's holding are not permitted in a fair value measurement. The impact of adopting these amendments is expected to be immaterial to the financial statements.  

Research and Development

  GE-funded research and development expenditures were $4.6 billion, $3.9 billion and $3.3 billion in 2011, 2010 and 2009, respectively. In addition, research and development funding from customers, principally the U.S. government, totaled $0.8 billion, $1.0 billion and $1.1 billion in 2011, 2010 and 2009, respectively. Aviation accounts for the largest share of GE's research and development expenditures with funding from both GE and customer funds. Energy Infrastructure's Energy business and Healthcare also made significant expenditures funded primarily by GE.  

Orders and Backlog

  GE Infrastructure equipment orders increased 24% to $50.1 billion at December 31, 2011. Total GE Infrastructure backlog increased 14% to $200.2 billion at December 31, 2011, composed of equipment backlog of $52.7 billion and services backlog of $147.5 billion. Orders constituting backlog may be cancelled or deferred by customers, subject in certain cases to penalties. See the Segment Operations section of this Item for further information.                                         (77) --------------------------------------------------------------------------------

Supplemental Information

Financial Measures that Supplement Generally Accepted Accounting Principles

  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 U.S. Securities and Exchange Commission rules. Specifically, we have referred, in various sections of this Form 10-K Report, to:  ·  Industrial cash flow from operating activities (Industrial CFOA)       

· Operating earnings, operating EPS and operating EPS excluding the effects of

the preferred stock redemption

· Operating and non-operating pension costs (income)

· Average GE shareowners' equity, excluding effects of discontinued operations

· Ratio of debt to equity at GECS, net of cash and equivalents and with

   classification of hybrid debt as equity     

· GE Capital ending net investment (ENI), excluding cash and equivalents

· GE pre-tax earnings from continuing operations, excluding GECS earnings from

continuing operations, the corresponding effective tax rates and the

reconciliation of the U.S. federal statutory rate to those effective tax rates

The reasons we use these non-GAAP financial measures and the reconciliations to their most directly comparable GAAP financial measures follow.

  Industrial Cash Flow from Operating Activities (Industrial CFOA) (In millions)                         2011        2010        2009        2008        2007  Cash from GE's operating   activities, as reported         $ 12,057    $ 14,746    $ 16,405    $ 19,138    $ 23,301 Less dividends from GECS                 -           -           -       2,351       7,291 Cash from GE's operating

activities, excluding dividends

  from GECS (Industrial CFOA)     $ 12,057    $ 14,746    $ 16,405    $ 16,787    $ 16,010                                            (78)

--------------------------------------------------------------------------------   We refer to cash generated by our industrial businesses as "Industrial CFOA," which we define as GE's cash from operating activities less the amount of dividends received by GE from GECS. This includes the effects of intercompany transactions, including GE customer receivables sold to GECS; GECS services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECS; information technology (IT) and other services sold to GECS by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECS from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs. We believe that investors may find it useful to compare GE's operating cash flows without the effect of GECS dividends, since these dividends are not representative of the operating cash flows of our industrial businesses and can vary from period to period based upon the results of the financial services businesses. Management recognizes that this measure may not be comparable to cash flow results of companies which contain both industrial and financial services businesses, but believes that this comparison is aided by the provision of additional information about the amounts of dividends paid by our financial services business and the separate presentation in our financial statements of the Financial Services (GECS) cash flows. We believe that our measure of Industrial CFOA provides management and investors with a useful measure to compare the capacity of our industrial operations to generate operating cash flow with the operating cash flow of other non-financial businesses and companies and as such provides a useful measure to supplement the reported GAAP CFOA measure.                                          (79)

--------------------------------------------------------------------------------  Operating Earnings, Operating EPS and Operating EPS Excluding the Effects of the Preferred Stock Redemption (In millions; except earnings per share)          2011           2010       

V%

Earnings from continuing operations $ 14,074$ 12,517

     12  % attributable to GE Less: Non-operating pension costs (income),        688           (204) net of tax Operating earnings                           $  14,762      $  12,313       

20 %

  Earnings per share - diluted(a) Continuing earnings per share                $    1.23      $    1.14            8  % Less: Non-operating pension costs (income),       0.06          (0.02) net of tax Operating earnings per share                      1.29           1.12       

15 %

  Less: Effects of the preferred stock              0.08              - 

redemption

 Operating EPS excluding the effects of the preferred stock redemption                                   $    1.37      $    1.12           22  %    

(a) Earnings-per-share amounts are computed independently. As a result, the sum

of per-share amounts may not equal the total.

    Operating earnings excludes non-service related pension costs of our principal pension plans comprising interest cost, expected return on plan assets and amortization of actuarial gains/losses. The service cost and prior service cost components of our principal pension plans are included in operating earnings. We believe that these components of pension cost better reflect the ongoing service-related costs of providing pension benefits to our employees. As such, we believe that our measure of operating earnings provides management and investors with a useful measure of the operational results of our business. Other components of GAAP pension cost are mainly driven by market performance, and we manage these separately from the operational performance of our businesses. Neither GAAP nor operating pension costs are necessarily indicative of the current or future cash flow requirements related to our pension plan. We also believe that this measure, considered along with the corresponding GAAP measure, provides management and investors with additional information for comparison of our operating results to the operating results of other companies. We also believe that operating EPS excluding the effects of the $0.8 billion preferred dividend related to the redemption of our preferred stock (calculated as the difference between the carrying value and the redemption value of the preferred stock) is a meaningful measure because it increases the comparability of period-to-period results.   

Operating and Non-Operating Pension Costs (Income) (In millions)

                            2011        2010        2009  

Service cost for benefits earned $ 1,195$ 1,149$ 1,609 Prior service cost amortization

           194         238         426 Operating pension costs                 1,389       1,387       2,035  

Expected return on plan assets (3,940) (4,344) (4,505) Interest cost on benefit obligations 2,662 2,693 2,669 Net actuarial loss amortization 2,335 1,336 348 Non-operating pension costs (income) 1,057 (315) (1,488)

Total principal pension plans costs $ 2,446$ 1,072$ 547

                                            (80)

--------------------------------------------------------------------------------  We have provided the operating and non-operating components of cost for our principal pension plans. Operating pension costs comprise the service cost of benefits earned and prior service cost amortization for our principal pension plans. Non-operating pension costs (income) comprise the expected return on plan assets, interest cost on benefit obligations and net actuarial loss amortization for our principal pension plans. We believe that the operating components of pension costs better reflects the ongoing service-related costs of providing pension benefits to our employees. We believe that the operating and non-operating components of cost for our principal pension plans, considered along with the corresponding GAAP measure, provide management and investors with additional information for comparison of our pension plan costs and operating results with the pension plan costs and operating results of other companies.  Average GE Shareowners' Equity, Excluding Effects of Discontinued Operations(a) December 31 (In millions)           2011         2010         2009         2008         2007  Average GE shareowners'   equity(b)                    $ 122,289    $ 116,179    $ 110,535    $ 113,387    $ 113,842 Less the effects of the   average net investment in   discontinued operations          4,340       13,137       17,092        8,859       12,830 Average GE shareowners'

equity, excluding effects of

discontinued operations(a) $ 117,949$ 103,042$ 93,443$ 104,528$ 101,012

(a) Used for computing return on average GE shareowners' equity and return on

    average total capital invested (ROTC).            (b) On an annual basis, calculated using a five-point average.    Our ROTC calculation excludes earnings (losses) of discontinued operations from the numerator because U.S. GAAP requires us to display those earnings (losses) in the Statement of Earnings. Our calculation of average GE shareowners' equity may not be directly comparable to similarly titled measures reported by other companies. We believe that it is a clearer way to measure the ongoing trend in return on total capital for the continuing operations of our businesses given the extent that discontinued operations have affected our reported results. We believe that this results in a more relevant measure for management and investors to evaluate performance of our continuing operations, on a consistent basis, and to evaluate and compare the performance of our continuing operations with the ongoing operations of other businesses and companies.  Definitions indicating how the above-named ratios are calculated using average GE shareowners' equity, excluding effects of discontinued operations, can be found in the Glossary.  Ratio of Debt to Equity at GECS, Net of Cash and Equivalents and with Classification of Hybrid Debt as Equity December 31 (Dollars in millions)             2011              2010          2009  GECS debt                            $     443,097     $     470,520     $ 493,324   Less cash and equivalents                 76,702            60,257        62,575   Less hybrid debt                           7,725             7,725         7,725                                      $     358,670     $     402,538     $ 423,024  GECS equity                          $      77,110     $      68,984     $  70,833   Plus hybrid debt                           7,725             7,725         7,725                                      $      84,835     $      76,709     $  78,558  Ratio                                        4.23:1            5.25:1        5.39:1                                           (81)

--------------------------------------------------------------------------------  We have provided the GECS ratio of debt to equity on a basis that reflects the use of cash and equivalents to reduce debt, and with long-term debt due in 2066 and 2067 classified as equity. We believe that this is a useful comparison to a GAAP-based ratio of debt to equity because cash balances may be used to reduce debt and because this long-term debt has equity-like characteristics. The usefulness of this supplemental measure may be limited, however, as the total amount of cash and equivalents at any point in time may be different than the amount that could practically be applied to reduce outstanding debt, and it may not be advantageous or practical to replace certain long-term debt with equity. In the first quarter of 2009, GE made a $9.5 billion payment to GECS (of which $8.8 billion was further contributed to GECC through capital contribution and share issuance). Despite these potential limitations, we believe that this measure, considered along with the corresponding GAAP measure, provides investors with additional information that may be more comparable to other financial institutions and businesses.  

GE Capital Ending Net Investment (ENI), Excluding Cash and Equivalents

                                                      December 31,     January 1, (In billions)                                                2011         2010(a)  GECC total assets                                    $      553.7    $     653.6   Less assets of discontinued operations                      1.1           

15.1

   Less non-interest bearing liabilities                      32.3           50.3 GE Capital ENI                                              520.3          588.2   Less cash and equivalents                                  75.7           61.9

GE Capital ENI, excluding cash and equivalents $ 444.6 $ 526.3

    (a)  As originally reported.    We use ENI to measure the size of our GE Capital segment. We believe that this measure is a useful indicator of the capital (debt or equity) required to fund a business as it adjusts for non-interest bearing current liabilities generated in the normal course of business that do not require a capital outlay. We also believe that by excluding cash and equivalents, we provide a meaningful measure of assets requiring capital to fund our GE Capital segment, as a substantial amount of this cash and equivalents resulted from debt issuances to pre-fund future debt maturities and will not be used to fund additional assets. Providing this measure will help investors measure how we are performing against our previously communicated goal to reduce the size of our financial services segment.  GE Pre-Tax Earnings from Continuing Operations, Excluding GECS Earnings from Continuing Operations and the Corresponding Effective Tax Rates (Dollars in millions)                       2011         2010         2009  

GE earnings from continuing $ 19,078$ 15,060$ 13,730 operations before income taxes

Less GECS earnings from continuing 6,432 3,023 1,177 operations Total

                                $    12,646     $ 12,037     $ 12,553  

GE provision for income taxes $ 4,839$ 2,024$ 2,739 GE effective tax rate, excluding

            38.3  %      16.8  %      21.8  % GECS earnings                                            (82)

--------------------------------------------------------------------------------  Reconciliation of U.S. Federal Statutory Income Tax Rate to GE Effective Tax Rate, Excluding GECS Earnings                                        2011        2010        2009  

U.S. federal statutory income tax 35.0 % 35.0 % 35.0 % rate Reduction in rate resulting from

   Tax on global activities including   (7.9)      (13.5)      (12.0) exports   U.S. business credits                (2.3)       (2.8)       (1.1)   NBCU gain                            14.9           -           -   All other - net                      (1.4)       (1.9)       (0.1)                                         3.3       (18.2)      (13.2)

GE effective tax rate, excluding 38.3 % 16.8 % 21.8 % GECS earnings

     We believe that the GE effective tax rate is best analyzed in relation to GE earnings before income taxes excluding the GECS net earnings from continuing operations, as GE tax expense does not include taxes on GECS earnings. Management believes that in addition to the Consolidated and GECS tax rates shown in Note 14 to the consolidated financial statements in Part II, Item 8. "Financial Statements and Supplementary Data" of this Form 10-K Report, this supplemental measure provides investors with useful information as it presents the GE effective tax rate that can be used in comparing the GE results to other non-financial services businesses.                                         (83) --------------------------------------------------------------------------------

   Glossary  

Backlog Unfilled customer orders for products and product services (12 months for product services).

Borrowing Financial liability (short or long-term) that obligates us to repay cash or another financial asset to another entity.

  Borrowings as a percentage of total capital invested For GE, the sum of borrowings and mandatorily redeemable preferred stock, divided by the sum of borrowings, mandatorily redeemable preferred stock, noncontrolling interests and total shareowners' equity.  Cash equivalents Highly liquid debt instruments with original maturities of three months or less, such as commercial paper. Typically included with cash for reporting purposes, unless designated as available-for-sale and included with investment securities.  

Cash flow hedges Qualifying derivative instruments that we use to protect ourselves against exposure to variability in future cash flows. The exposure may be associated with an existing asset or liability, or with a forecasted transaction. See "Hedge."

Commercial paper Unsecured, unregistered promise to repay borrowed funds in a specified period ranging from overnight to 270 days.

Comprehensive income The sum of Net Income and Other Comprehensive Income. See "Other Comprehensive Income".

  Derivative instrument A financial instrument or contract with another party (counterparty) that is designed to meet any of a variety of risk management objectives, including those related to fluctuations in interest rates, currency exchange rates or commodity prices. Options, forwards and swaps are the most common derivative instruments we employ. See "Hedge."  Discontinued operations Certain businesses we have sold or committed to sell within the next year and therefore will no longer be part of our ongoing operations. The net earnings, assets and liabilities, and cash flows of such businesses are separately classified on our Statement of Earnings, Statement of Financial Position and Statement of Cash Flows, respectively, for all periods presented.  

Effective tax rate Provision for income taxes as a percentage of earnings from continuing operations before income taxes and accounting changes. Does not represent cash paid for income taxes in the current accounting period. Also referred to as "actual tax rate" or "tax rate."

  Ending Net Investment (ENI) is the total capital we have invested in the financial services business. It is the sum of short-term borrowings, long-term borrowings and equity (excluding noncontrolling interests) adjusted for unrealized gains and losses on investment securities and hedging instruments. Alternatively, it is the amount of assets of continuing operations less the amount of non-interest bearing liabilities.  

Equipment leased to others Rental equipment we own that is available to rent and is stated at cost less accumulated depreciation.

  Fair value hedge Qualifying derivative instruments that we use to reduce the risk of changes in the fair value of assets, liabilities or certain types of firm commitments. Changes in the fair values of derivative instruments that are designated and effective as fair value hedges are recorded in earnings, but are offset by corresponding changes in the fair values of the hedged items. See "Hedge."                                         (84) --------------------------------------------------------------------------------

Financing receivables Investment in contractual loans and leases due from customers (not investment securities).

  Forward contract Fixed price contract for purchase or sale of a specified quantity of a commodity, security, currency or other financial instrument with delivery and settlement at a specified future date. Commonly used as a hedging tool. See "Hedge."  

Goodwill The premium paid for acquisition of a business. Calculated as the purchase price less the fair value of net assets acquired (net assets are identified tangible and intangible assets, less liabilities assumed).

Guaranteed investment contracts (GICs) Deposit-type products that guarantee a minimum rate of return, which may be fixed or floating.

  Hedge A technique designed to eliminate risk. Often refers to the use of derivative financial instruments to offset changes in interest rates, currency exchange rates or commodity prices, although many business positions are "naturally hedged" - for example, funding a U.S. fixed-rate investment with U.S. fixed-rate borrowings is a natural interest rate hedge.  

Intangible asset A non-financial asset lacking physical substance, such as goodwill, patents, licenses, trademarks and customer relationships.

  Interest rate swap Agreement under which two counterparties agree to exchange one type of interest rate cash flow for another. In a typical arrangement, one party periodically will pay a fixed amount of interest, in exchange for which that party will receive variable payments computed using a published index. See "Hedge."  Investment securities Generally, an instrument that provides an ownership position in a corporation (a stock), a creditor relationship with a corporation or governmental body (a bond), rights to contractual cash flows backed by pools of financial assets or rights to ownership such as those represented by options, subscription rights and subscription warrants.  Match funding A risk control policy that provides funding for a particular financial asset having the same currency, maturity and interest rate characteristics as that asset. Match funding is executed directly, by issuing debt, or synthetically, through a combination of debt and derivative financial instruments. For example, when we lend at a fixed interest rate in the U.S., we can borrow those U.S. dollars either at a fixed rate of interest or at a floating rate executed concurrently with a pay-fixed interest rate swap. See "Hedge."  Monetization Sale of financial assets to a third party for cash. For example, we sell certain loans, credit card receivables and trade receivables to third-party financial buyers, typically providing at least some credit protection and often agreeing to provide collection and processing services for a fee. Monetization normally results in gains on interest-bearing assets and losses on non-interest bearing assets. See "Securitization" and "Variable interest entity."  

Noncontrolling interest Portion of shareowner's equity in a subsidiary that is not attributable to GE.

Operating profit GE earnings from continuing operations before interest and other financial charges, income taxes and effects of accounting changes.

Option The right, not the obligation, to execute a transaction at a designated price, generally involving equity interests, interest rates, currencies or commodities. See "Hedge."

  Other Comprehensive Income Changes in assets and liabilities that do not result from transactions with shareowners and are not included in net income but are recognized in a separate component of shareowners' equity. Other Comprehensive Income includes the following components: -  Investment securities - Unrealized gains and losses on securities classified    as available-for-sale.                                           (85)

--------------------------------------------------------------------------------

- Currency translation adjustments - The result of translating into U.S. dollars

   those amounts denominated or measured in a different currency.   -  Cash flow hedges - The effective portion of the fair value of cash flow

hedges. Such hedges relate to an exposure to variability in the cash flows of

   recognized assets, liabilities or forecasted transactions that are    attributable to a specific risk.   -  Benefit plans - Unamortized prior service costs and net actuarial losses    (gains) related to pension and retiree health and life benefits.   -  Reclassification adjustments - Amounts previously recognized in Other

Comprehensive Income that are included in net income in the current period.

     Product services For purposes of the financial statement display of sales and costs of sales in our Statement of Earnings, "goods" is required by U.S. Securities and Exchange Commission regulations to include all sales of tangible products, and "services" must include all other sales, including broadcasting and other services activities. In our Management's Discussion and Analysis of Operations we refer to sales under product service agreements and sales of both goods (such as spare parts and equipment upgrades) and related services (such as monitoring, maintenance and repairs) as sales of "product services," which is an important part of our operations.  Product services agreements Contractual commitments, with multiple-year terms, to provide specified services for products in our Energy Infrastructure, Aviation and Transportation installed base - for example, monitoring, maintenance, service and spare parts for a gas turbine/generator set installed in a customer's power plant.  

Productivity The rate of increased output for a given level of input, with both output and input measured in constant currency.

Progress collections Payments received from customers as deposits before the associated work is performed or product is delivered.

  Qualified special purpose entities (QSPEs) A type of variable interest entity whose activities are significantly limited and entirely specified in the legal documents that established it. There also are significant limitations on the types of assets and derivative instruments such entities may hold and the types and extent of activities and decision-making they may engage in.  Retained interest A portion of a transferred financial asset retained by the transferor that provides rights to receive portions of the cash inflows from that asset.  Return on average GE shareowners' equity Earnings from continuing operations before accounting changes divided by average GE shareowners' equity, excluding effects of discontinued operations (on an annual basis, calculated using a five-point average). Average GE shareowners' equity, excluding effects of discontinued operations, as of the end of each of the years in the five-year period ended December 31, 2011, is described in the Supplemental Information section.  Return on average total capital invested For GE, earnings from continuing operations before accounting changes plus the sum of after-tax interest and other financial charges and noncontrolling interests, divided by the sum of the averages of total shareowners' equity (excluding effects of discontinued operations), borrowings, mandatorily redeemable preferred stock and noncontrolling interests (on an annual basis, calculated using a five-point average). Average total shareowners' equity, excluding effects of discontinued operations as of the end of each of the years in the five-year period ended December 31, 2011, is described in the Supplemental Information section.                                         (86) --------------------------------------------------------------------------------   Securitization A process whereby loans or other receivables are packaged, underwritten and sold to investors. In a typical transaction, assets are sold to a special purpose entity, which purchases the assets with cash raised through issuance of beneficial interests (usually debt instruments) to third-party investors. Whether or not credit risk associated with the securitized assets is retained by the seller depends on the structure of the securitization. See "Monetization" and "Variable interest entity."  Subprime For purposes of Consumer related discussion, subprime includes consumer finance products like mortgage, auto, cards, sales finance and personal loans to U.S. and global borrowers whose credit score implies a higher probability of default based upon GECC's proprietary scoring models and definitions, which add various qualitative and quantitative factors to a base credit score such as a FICO score or global bureau score. Although, FICO and global bureau credit scores are a widely accepted rating of individual consumer creditworthiness, the internally modeled scores are more reflective of the behavior and default risks in the portfolio compared to stand-alone generic bureau scores.  Turnover Broadly based on the number of times that working capital is replaced during a year. Current receivables turnover is total sales divided by the five-point average balance of GE current receivables. Inventory turnover is total sales divided by a five-point average balance of inventories. See "Working capital."  Variable interest entity An entity that must be consolidated by its primary beneficiary, the party that holds a controlling financial interest. A variable interest entity has one or both of the following characteristics: (1) its equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support from other parties, or (2) as a group, the equity investors lack one or more of the following characteristics: (a) the power to direct the activities that most significantly affect the economic performance of the entity, (b) obligation to absorb expected losses, or (c) right to receive expected residual returns.  

Working capital Represents GE current receivables and inventories, less GE accounts payable and progress collections.

Wordcount:

35166