A. Results of Operations

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

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

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

Overview

General Electric Company's earnings from continuing operations decreased 4% to $5.394 billion in the second quarter of 2008 compared with $5.613 billion in 2007. Earnings per share (EPS) from continuing operations were $0.54 in the second quarter of 2008, flat compared with $0.54 in the second quarter of 2007.

For the first six months of 2008, earnings from continuing operations decreased 7% to $9.755 billion compared with $10.541 billion for the same period in 2007. EPS from continuing operations were $0.98 in the first six months of 2008, down 4% compared with $1.02 in the first six months of 2007.

Loss from discontinued operations, net of taxes, was $0.3 billion for the second quarter of 2008 compared with $0.2 billion for the same period in 2007, including the results of our Japanese personal loan business (Lake) and our Japanese mortgage and card businesses, excluding our minority ownership in GE Nissen Credit Co., Ltd. (GE Money Japan), our U.S. mortgage business (WMC), Plastics, Advanced Materials, most of GE Insurance Solutions Corporation (GE Insurance Solutions), GE Life and Genworth Financial, Inc. (Genworth).

Loss from discontinued operations, net of taxes, was $0.4 billion for the first six months of 2008 compared with $0.6 billion for the same period in 2007.

Net earnings decreased 6% to $5.072 billion and EPS decreased 2% to $0.51 in the second quarter of 2008 compared with $5.382 billion and $0.52 per share, respectively, in the second quarter of 2007.

For the first six months of 2008, net earnings decreased 6% to $9.376 billion, compared with $9.953 billion for the same period in 2007, and EPS decreased 3% to $0.94, compared with $0.97 in the first six months of 2007.

Revenues of $46.9 billion in the second quarter of 2008 were 11% higher than in the corresponding period of 2007, reflecting organic growth of 5%, the weaker U.S. dollar and the net effects of acquisitions and dispositions. A reconciliation between reported and organic revenues is shown in Exhibit 99(a). Industrial sales increased 15% to $27.8 billion, reflecting strong organic growth, the weaker U.S. dollar and the net effects of acquisitions and dispositions. Sales of product services (including sales of spare parts and related services) grew 18% to $9.5 billion in the second quarter of 2008. Financial services revenues increased 11% over the comparable period of last year to $19.1 billion, reflecting the net effects of acquisitions and dispositions and the weaker U.S. dollar.

Revenues for the first six months of 2008 rose 9% to $89.2 billion, compared with $81.6 billion for the first six months of 2007. Industrial sales of $52.0 billion were 13% higher than in 2007 reflecting strong organic growth, the net effects of acquisitions and dispositions and the weaker U.S. dollar. Financial services revenues for the first six months of 2008 increased 7% to $37.2 billion as a result of the effects of acquisitions and dispositions and the weaker U.S. dollar, partially offset by organic revenue declines, including the 2007 gain on sale of Swiss Reinsurance Company (Swiss Re) common stock.

Overall, acquisitions contributed $2.1 billion and $1.8 billion to consolidated revenues in the second quarters of 2008 and 2007, respectively. Our consolidated earnings in the second quarters of 2008 and 2007 included approximately $0.3 billion and $0.1 billion, 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 operations through lower revenues of $0.9 billion and $0.7 billion in the second quarters of 2008 and 2007, respectively. The effect of dispositions on earnings was a decrease of $0.5 billion in the second quarter of 2008 and an increase of $0.4 billion in the second quarter of 2007.

Acquisitions contributed $4.4 billion and $3.1 billion to consolidated revenues in the first six months of 2008 and 2007, respectively. Our consolidated net earnings in the first six months of 2008 and 2007 included approximately $0.4 billion and $0.1 billion, respectively, from acquired businesses. Dispositions also affected our operations through lower revenues of $0.5 billion and $1.7 billion in the first six months of 2008 and 2007, respectively. The effects of dispositions on earnings was a decrease of $0.2 billion and an increase of $0.4 billion in the first six months of 2008 and 2007, respectively.

The most significant acquisitions affecting results in 2008 were Smiths Aerospace Group Ltd.; Vetco Gray; Hydril Pressure Control; Sondex PLC; and Regency Energy Partners LP at Infrastructure; Merrill Lynch Capital; Sanyo Electric Credit Co., Ltd.; and Diskont und Kredit AG and Disko Leasing GmbH (DISKO) and ASL Auto Service-Leasing GmbH (ASL), the leasing businesses of KG Allgemeine Leasing GmbH & Co. at Commercial Finance; and Oxygen Media Corp. and Sparrowhawk Holdings Ltd. at NBC Universal.

We continue to explore strategic options for our Consumer & Industrial businesses with a primary focus on spinning off the entire unit (Appliances, Lighting and Industrial) to existing GE shareholders.

Segment Operations

Operating segments comprise our six businesses focused on the broad markets they serve: Infrastructure, Commercial Finance, GE Money, Healthcare, NBC Universal and Industrial Products (formerly known as Industrial). For segment reporting purposes, certain GECS businesses including Aviation Financial Services, Energy Financial Services and Transportation Finance are reported in the Infrastructure segment because Infrastructure actively manages such businesses and reports their results for internal performance measurement purposes.

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

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

We have reclassified certain prior-period amounts to conform to the current-period's presentation. In addition to providing information on segments in their entirety, we have also provided supplemental information for certain businesses within the segments.

Infrastructure

                              Three months ended       Six months ended
                                   June 30                 June 30
(In millions)                      2008       2007        2008       2007

Revenues                    $    17,552   $ 13,934   $  32,512   $ 26,136

Segment profit              $     3,174   $  2,563   $   5,762   $  4,771

Revenues
Aviation                    $     4,923   $  4,079   $   9,243   $  7,530
Aviation Financial Services       1,081      1,088       2,312      2,337
Energy                            7,003      5,195      12,643      9,862
Energy Financial Services           989        417       1,759        741
Oil & Gas                         1,895      1,821       3,430      2,969
Transportation                    1,202      1,107       2,350      2,235

Segment profit
Aviation                    $       914   $    828   $   1,689   $  1,527
Aviation Financial Services         252        266         639        654
Energy                            1,222        895       2,129      1,584
Energy Financial Services           178        169         323        270
Oil & Gas                           255        189         416        291
Transportation                      241        217         495        431

Infrastructure revenues increased 26%, or $3.6 billion, in the second quarter of 2008 on higher volume ($2.3 billion), higher prices ($0.4 billion) and the weaker U.S. dollar ($0.3 billion) at the industrial businesses of the segment. The increase in volume reflected the increased sales of thermal and wind equipment and services at Energy; the effects of acquisitions and increased sales of engine services and commercial engines at Aviation; increases in both equipment and chemical sales at Water; and increased equipment sales at Transportation; partially offset by lower volume at Oil & Gas. The effects of the weaker U.S. dollar were primarily at Energy and Oil & Gas, while higher prices were principally at Energy and Aviation. Revenues also increased as a result of financial services' acquisitions ($0.6 billion), primarily at Energy Financial Services.

Segment profit rose 24%, or $0.6 billion, as higher volume ($0.4 billion), higher prices ($0.4 billion) and productivity ($0.1 billion) were partially offset by higher material and other costs ($0.3 billion) at the industrial businesses of the segment. The increase in volume primarily related to Energy, Aviation and Water.

Infrastructure revenues rose 24% to $32.5 billion for the six months ended June 30, 2008, on higher volume ($4.2 billion), higher prices ($0.6 billion) and the weaker U.S. dollar ($0.6 billion) at the industrial businesses of the segment. The increase in volume reflected the effects of acquisitions at Aviation and Oil & Gas; increased sales of thermal and wind equipment and services at Energy; military and commercial engines and services at Aviation; both equipment and chemical sales at Water; and increased equipment sales at Transportation. Price increases were primarily at Energy and Aviation, while the effects of the weaker U.S. dollar were primarily at Energy and Oil & Gas. Revenues for the six months also increased as a result of financial services' acquisitions ($0.9 billion), primarily at Energy Financial Services.

Segment profit for the first six months of 2008 rose 21% to $5.8 billion, compared with $4.8 billion in 2007, as higher volume ($0.8 billion), higher prices ($0.6 billion) and productivity ($0.1 billion) were partially offset by higher material and other costs ($0.5 billion) at the industrial businesses of the segment. Volume increases were primarily at Energy, Aviation and Water. Higher material and other costs were primarily at Aviation and Energy.

Commercial Finance

                 Three months ended       Six months ended
                      June 30                 June 30
(In millions)        2008        2007        2008       2007

Revenues       $    9,259    $  8,138   $  17,825   $ 16,169

Segment profit $    1,390    $  1,304   $   2,548   $  2,744




                                   At
               June 30,      June 30,       December 31,
(In millions)    2008          2007             2007

Total assets   $ 338,546     $ 277,807       $ 310,412




                    Three months ended       Six months ended
                         June 30                 June 30
 (In millions)          2008        2007         2008      2007

Revenues
Capital Solutions $    3,821    $  3,465   $    7,455   $ 6,828
Real Estate            1,964       1,557        3,847     3,172

Segment profit
Capital Solutions $      503    $    463   $      903   $   858
Real Estate              484         476          960     1,040




                                       At
                   June 30,      June 30,       December 31,
(In millions)        2008          2007             2007

Assets
Capital Solutions  $ 124,040     $ 115,167       $ 122,527
Real Estate           90,611        62,057          79,285

Commercial Finance revenues increased 14% and net earnings increased 7% compared with the second quarter of 2007. Revenues for the second quarter of 2008 included $0.5 billion from acquisitions. Revenues for the quarter also increased $0.7 billion compared with the second quarter of 2007 as a result of the weaker U.S. dollar ($0.4 billion) and organic revenue growth ($0.3 billion). Net earnings increased by $0.1 billion in the second quarter of 2008, resulting from acquisitions ($0.1 billion), higher investment income ($0.1 billion) and the weaker U.S. dollar ($0.1 billion), partially offset by core declines ($0.2 billion), including an increase of $0.1 billion in the provision for losses on financing receivables. These results also included a gain on sale of a portion of our investment in Penske Truck Leasing Co., L.P. ($0.1 billion).

Commercial Finance revenues increased 10% and net earnings decreased 7% compared with the first six months of 2007. Revenues for the first six months of 2008 and 2007 included $1.1 billion and $0.2 billion from acquisitions, respectively, and in 2008 were reduced by $0.2 billion as a result of dispositions. Revenues for the first six months also increased $1.0 billion compared with the first six months of 2007 as a result of the weaker U.S. dollar ($0.8 billion) and organic revenue growth ($0.2 billion). Net earnings decreased by $0.2 billion in the first six months of 2008, resulting from core declines ($0.6 billion), including an increase of $0.1 billion in the provision for losses on financing receivables, partially offset by acquisitions ($0.2 billion), the weaker U.S. dollar ($0.1 billion) and higher securitization and investment income ($0.1 billion). Net earnings included the effect of higher mark-to-market losses and other-than-temporary impairments ($0.3 billion), and Genpact mark-to-market gains ($0.5 billion), which were largely offset by the absence of the effects of the 2007 SES transaction ($0.4 billion).

Real Estate assets at June 30, 2008 increased $11.3 billion, or 14%, from December 31, 2007, including $12.1 billion, or 33%, attributable to an increase in real estate loans, slightly offset by a decline in real estate equity investments. During the second quarter of 2008, we sold real estate assets with a book value totaling $1.8 billion, which resulted in net earnings of $0.4 billion. Real estate net earnings were consistent with the second quarter of 2007, as increases in interest income from real estate loans ($0.2 billion) and net rental revenue ($0.1 billion) were partially offset by higher interest expense ($0.3 billion), and net earnings from the sale of real estate investments were slightly higher.

During the first six months of 2008, we sold real estate assets with a book value totaling $3.5 billion, which resulted in net earnings of $0.9 billion. Real Estate net earnings declined $0.1 billion compared to the first six months of 2007, as increases in interest income from real estate loans ($0.4 billion) and net rental revenue ($0.3 billion) were offset by higher interest expense ($0.6 billion) and provisions for losses ($0.1 billion). Net earnings from the sale of real estate investments were slightly lower as a result of increasingly difficult market conditions experienced in the first six months of 2008. In the normal course of our business operations, we sell certain real estate equity investments when it is economically advantageous for us to do so. However, as real estate values are affected by certain forces beyond our control (e.g. market fundamentals and demographic conditions), it is difficult to predict with certainty the level of future sales or sales prices.

GE Money

                 Three months ended       Six months ended
                      June 30                 June 30
(In millions)        2008        2007        2008       2007

Revenues       $    6,629    $  6,276   $  13,037   $ 12,234

Segment profit $    1,056    $  1,158   $   2,051   $  2,381




                                   At
               June 30,      June 30,       December 31,
(In millions)    2008          2007             2007

Total assets   $ 221,192     $ 189,258       $ 209,174

GE Money revenues increased 6% and net earnings decreased 9% compared with the second quarter of 2007. Revenues for the second quarter of 2008 included $0.1 billion from acquisitions and were reduced by $0.1 billion as a result of dispositions. Revenues for the quarter also increased $0.3 billion compared with the second quarter of 2007 as a result of the weaker U.S. dollar ($0.5 billion), partially offset by organic revenue declines ($0.1 billion), primarily as a result of lower securitization activity. The decrease in net earnings resulted primarily from core declines ($0.2 billion) (including the effects of higher delinquencies of $0.1 billion) and lower securitization income ($0.1 billion), partially offset by growth in lower-taxed earnings from global operations ($0.2 billion).

GE Money revenues increased 7% and net earnings decreased 14% compared with the first six months of 2007. Revenues for the first six months of 2008 included $0.2 billion from acquisitions and $0.4 billion from the sale of our CPS business and were reduced by $0.1 billion from dispositions. Revenues for the first six months also increased $0.3 billion compared with the first six months of 2007 as a result of the weaker U.S. dollar ($0.8 billion) and organic revenue declines ($0.5 billion), primarily as a result of lower securitization activity. The decrease in net earnings resulted primarily from core declines ($0.5 billion) (including lower results in the U.S. reflecting the effects of higher delinquencies of $0.2 billion) and lower securitization income ($0.4 billion) (including declines in the fair value of retained interest in securitizations of $0.1 billion). These decreases were partially offset by growth in lower-taxed earnings from global operations ($0.3 billion), the gain on the sale of our CPS business ($0.2 billion) and as a result of the weaker dollar ($0.1 billion).

Healthcare revenues of $4.5 billion in the second quarter of 2008 increased 11%, or $0.4 billion, compared with the second quarter of 2007, as higher volume ($0.3 billion) and the weaker U.S. dollar ($0.2 billion), were partially offset by lower prices ($0.1 billion). Volume increased as a result of increased sales in the international diagnostic imaging, clinical systems and life sciences businesses, as well as surgical imaging equipment resulting from the partial release of the regulatory suspension in April 2008. This was partially offset by price pressures, effects of the Deficit Reduction Act on U.S. equipment sales and continued industry pressure in the U.S. on capital spending. Operating profit of $0.7 billion in the second quarter of 2008 was up 8% compared with the second quarter of 2007, as productivity ($0.2 billion) was partially offset by lower prices ($0.1 billion) and higher labor and other costs ($0.1 billion).

Healthcare revenues of $8.4 billion increased 6%, or $0.4 billion, in the first six months of 2008 compared with the first six months of 2007 as the effects of the weaker U.S. dollar ($0.4 billion) and higher volume ($0.3 billion), were partially offset by lower prices ($0.2 billion). Volume increased as a result of increased sales in the international diagnostic imaging, clinical systems and life sciences businesses, as well as surgical imaging equipment. Segment profit of $1.3 billion in the first six months of 2008 was 4% lower than in the first six months of 2007 as the effects of productivity ($0.2 billion) were more than offset by lower prices ($0.2 billion) and higher labor and other costs ($0.1 billion).

NBC Universal revenues of $3.9 billion increased 7%, or $0.3 billion, in the second quarter of 2008, on higher revenues in cable ($0.2 billion) and gains from other actions ($0.1 billion), partially offset by lower revenues in broadcast television ($0.1 billion). Segment profit of $0.9 billion increased 1% as higher earnings from cable ($0.1 billion) and higher gains from other actions were partially offset by lower earnings from film ($0.1 billion).

NBC Universal reported revenues of $7.5 billion in the first six months of 2008, an increase of $0.4 billion or 5% from 2007, reflecting higher revenues in cable ($0.4 billion) and film ($0.1 billion), partially offset by lower revenues in broadcast television ($0.1 billion) and lower gains from other actions ($0.1 billion). Segment profit of $1.6 billion increased 2% as higher earnings from cable ($0.2 billion) were partially offset by lower earnings from film ($0.1 billion) and lower gains from other actions ($0.1 billion).

Industrial Products

                        Three months ended       Six months ended
                             June 30                 June 30
(In millions)               2008        2007         2008      2007

Revenues              $    4,542    $  4,467   $    8,652   $ 8,556

Segment profit        $      300    $    444   $      600   $   802

Revenues
Consumer & Industrial $    3,328    $  3,437   $    6,354   $ 6,502
Enterprise Solutions       1,235       1,031        2,340     2,055

Segment profit
Consumer & Industrial $      138    $    309   $      285   $   533
Enterprise Solutions         162         135          316       269

Industrial Products revenues were up 2%, or $0.1 billion, in the second quarter of 2008 compared with the second quarter of 2007 as the effects of the weaker U.S. dollar ($0.1 billion) and higher prices were partially offset by lower volume ($0.1 billion). The decrease in volume at Consumer & Industrial, reflecting tightened spending in the U.S. appliance market, was partially offset by increases in volume at Enterprise Solutions. The effects of the weaker U.S. dollar were at both Consumer & Industrial and Enterprise Solutions.

Segment profit decreased 32%, or $0.1 billion, in the second quarter of 2008 reflecting higher material and other costs ($0.1 billion), primarily at Consumer & Industrial.

Industrial Products revenues increased 1% for the six months ended June 30, 2008, as the effects of the weaker U.S. dollar ($0.2 billion) and higher prices ($0.1 billion) were partially offset by lower volume ($0.2 billion). The effects of the weaker U.S. dollar were at both Consumer & Industrial and Enterprise Solutions. The decrease in volume at Consumer & Industrial, reflecting tightened spending in the U.S. appliance market, was partially offset by increases in volume at Enterprise Solutions.

Segment profit decreased 25%, or $0.2 billion, for the six months ended June 30, 2008, as higher material and other costs ($0.2 billion) at Consumer & Industrial were partially offset by higher prices ($0.1 billion) at Consumer & Industrial.

Discontinued Operations

                                 Three months ended           Six months ended
                                       June 30                     June 30
(In millions)                       2008           2007          2008        2007

Loss from discontinued $ (322 ) $ (231 ) $ (379 ) $ (588 ) operations, net of taxes

Discontinued operations is comprised of GE Money Japan, WMC, Plastics, Advanced Materials, GE Insurance Solutions, GE Life, and Genworth. Results of these businesses are reported as discontinued operations for all periods presented.

Loss from discontinued operations, net of taxes, for the second quarter and first six months of 2008, primarily reflected the estimated incremental loss on disposal ($0.2 billion) and the loss from operations ($0.1 billion) at GE Money Japan.

Loss from discontinued operations, net of taxes, for the second quarter of 2007, primarily reflected the loss from operations at WMC ($0.2 billion) and GE Money Japan ($0.1 billion), as well as loss on disposal of Plastics ($0.1 billion), which was offset by earnings from operations at Plastics ($0.1 billion).

Loss from discontinued operations, net of taxes, for the first six months of 2007, reflected the loss from operations at WMC ($0.6 billion) and GE Money Japan ($0.1 billion). At Plastics, earnings from operations ($0.2 billion) were offset by loss on disposal ($0.2 billion).

For additional information related to discontinued operations, see Note 3 to the condensed, consolidated financial statements.

Corporate items and eliminations revenues in the second quarter of 2008 decreased $1.4 billion because of the lack of current-year counterparts to gains on dispositions, primarily the sale of a business interest to Hitachi ($0.9 billion), lower revenues of insurance activities ($0.1 billion) and lower revenues from guaranteed investment contract activities ($0.1 billion). Corporate items and eliminations costs increased by $0.3 billion reflecting the lack of current-year counterparts to gains on dispositions ($0.9 billion), partially offset by a decrease in tax provision at GECS ($0.4 billion), and lower restructuring, rationalization and other charges ($0.2 billion).

Corporate items and eliminations revenues for the first six months of 2008 decreased $2.1 billion because of the lack of current-year counterparts to gains on dispositions, primarily the sale of a business interest to Hitachi ($0.9 billion) and sale of Swiss Re common stock ($0.6 billion) and lower revenues of insurance activities ($0.2 billion) and lower revenues from guaranteed investment contract activities ($0.1 billion). Corporate items and eliminations cost for the first six months of 2008 decreased $0.4 billion reflecting the lack of current-year counterparts to gains on dispositions ($0.8 billion) and to the gain on sale of Swiss Re common stock ($0.3 billion), partially offset by a decrease in tax provision at GECS ($0.3 billion), and lower restructuring, rationalization and other charges ($0.4 billion). (GECS amounts on an after-tax basis.)

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. In the second quarter of 2008, these included $0.2 billion at Industrial Products, primarily for restructuring and an extended warranty contract accounting correction, and $0.1 billion at each of Infrastructure and NBC Universal, primarily . . .