Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 

A. Results of Operations -- Second Quarter of 2001 Compared With Second Quarter of 2000

     General Electric Company’s earnings for the second quarter of 2001 were $3.897 billion, the highest for any quarter in its history, an increase of 15% over the same period in 2000. Earnings per share increased 15% to $0.39, up from last year’s $0.34. Both earnings per share and earnings were records for the quarter.

     Revenues for the second quarter were $32.0 billion, down 3% from last year’s record $32.9 billion. As expected in this economy, long-cycle industrial revenues increased 22%, short-cycle revenues were down 6% and GE Capital Services (GECS) normalized revenues increased 5% (while GECS reported revenues were down 13%).

     GE’s second-quarter operating margin was 20.6% of sales, up from last year’s record 20.4%. The second-quarter margin growth reflects the increasing benefits from GE’s focus on services, Six Sigma quality and digitization initiatives. Services grew 12% in the quarter, and digitization efforts are on track to save $1.6 billion of cost through digitization.

     GE Capital Services’ second-quarter earnings rose to $1.477 billion, 16% over last year’s $1.277 billion. These record results reflect the globalization and diversity of GECS businesses, with strong double-digit increases in its Consumer Services and Equipment Management activities. Revenues for GECS declined 13%, largely reflecting results in business units engaged in anticipated contractions, principally IT Solutions, Wards and the planned transition of restructured insurance policies from Japanese acquisitions. GECS revenues, excluding these items, increased 5%.

     Cash generated from GE operating activities during the first half was a record $7.8 billion, up 32% from last year’s $5.9 billion. As part of the $22 billion share repurchase program, GE purchased $634 million of its stock during the second quarter to reach $19.1 billion — 986 million shares — purchased since December 1994.

Segment Analysis:

     The comments that follow compare revenues and segment profit by operating segment for the second quarters of 2001 and 2000.

     • Aircraft Engines revenues increased 11% over the second quarter of 2000, reflecting higher volume in commercial engines, services and aeroderivative products. Operating profit was 10% higher primarily as a result of volume growth and productivity.

     • Appliances revenues were 11% lower than last year as the combination of continued price erosion and lower industry volume more than offset market share gains. Operating profit decreased 22% principally as a result of lower selling prices.

     • GE Capital Services second-quarter earnings rose to $1.477 billion, 16% over last year’s $1.277 billion. These record results reflect the globalization and diversity of GECS businesses, with strong double-digit increases in its Consumer Services and Equipment Management activities. The overall improvement in earnings was largely attributable to the effects of continued asset growth.

     • Industrial Products and Systems operating profit decreased by 8% on revenues that were about the same as a year ago. The decrease in operating profit was primarily attributable to lower selling prices across all businesses in the segment.

     • NBC reported a 6% decrease in revenues compared with the second quarter of 2000, primarily reflecting continued softening in the advertising market and a one-time charge related to the shut-down of the XFL. Operating profit decreased 15% reflecting advertising market conditions and the XFL charge, which more than offset savings from cost reduction actions.

     • Plastics revenues were 11% lower than a year ago, reflecting continued softness in the U.S. automotive and business equipment markets which offset the revenue contribution of acquisitions. Operating profit was 15% lower, primarily as a result of lower volume and higher raw material and energy costs.

     • Power Systems revenues increased 38%, primarily as a result of sharply higher volume in gas turbines, growth in services and higher selling prices. Operating profit rose 63%, reflecting the combined effects of higher volume, productivity and improved selling prices.

     • Technical Products & Services revenues increased 13% from the second quarter of 2000, primarily as a result of growth at Medical Systems, which reported higher equipment volume, including acquisitions, and continued growth in services. Operating profit grew 24% in the second quarter, reflecting productivity and volume growth at Medical Systems as well as a gain on disposition of a joint venture at Global eXchange Services.

     Ongoing earnings for the first half rose 16% to $6.914 billion and ongoing earnings per share increased 17% to $.69, up from last year’s $.59. Ongoing earnings exclude the one-time, non-cash impact of adopting new accounting rules (discussed in notes 3 and 4 of this 10-Q report). Both earnings per share and earnings were records for the first half.

     Consolidated revenues for the first six months of 2001 aggregated $62.5 billion, down 1% from last year. GE sales of goods and services were 9% higher, with improvements led by double-digit increases at Power Systems, Medical Systems and Aircraft Engines. Operating profit of GE’s industrial operating segments increased to $7.4 billion up from $6.6 billion in the first half of 2000, as double-digit growth in long-cycle businesses offset continued weaknesses in short-cycle businesses.

     Operating margin in the first half of 2001 was 19.2% of sales, compared with last year’s 18.9%. The improvement in operating margin reflects the increasing benefits from GE’s focus on product services, Six Sigma quality and e-Business initiatives.

Segment Analysis:

     The following comments compare revenues and segment profit by industry segment for the first half of 2001 with the same period of 2000.

     • Aircraft Engines revenues increased 12% over the first half of 2000, reflecting higher volume in commercial engines, services and aeroderivative products. Operating profit was 8% higher primarily as a result of volume growth and productivity.

     Appliances revenues were 8% lower than last year as the combination of continued price erosion and lower industry volume more than offset market share gains. Operating profit decreased 14% principally as a result of lower selling prices and increased program spending on new products.

     • GE Capital Services ongoing earnings for the first six months of 2001 rose to $2.878 billion, up 16% from last year’s $2.487 billion, reflecting double-digit increases in Consumer Services and Equipment Management activities. The overall improvement in earnings was largely attributable to the effects of continued asset growth.

     • Industrial Products and Systems revenues were 2% higher than a year ago, as volume increases across all businesses in the segment offset lower selling prices. Operating profit decreased 12% primarily as a result of the decline in selling prices and cost inflation.

     • NBC reported a 5% decrease in revenues compared with the first half of 2000, primarily reflecting continued softening in the advertising market and a one-time charge related to the shut-down of the XFL. Operating profit decreased 14% reflecting advertising market conditions and the XFL charge, which more than offset savings from cost reduction actions.

     • Plastics revenues were 6% below the first half of 2000, reflecting continued softness in the U.S. automotive and business equipment markets which offset the revenue contribution of acquired companies. Operating profit was 8% lower, primarily as a result of lower volume and higher raw material and energy costs.

     • Power Systems revenues increased 35%, reflecting sharply higher volume in gas turbines and continued growth in services and higher selling prices. Operating profit increased 81%, primarily as a result of the increase in volume coupled with higher selling prices.

     • Technical Products & Services revenues increased 13% from the first half of 2000, principally as a result of growth at Medical Systems, which reported higher equipment volume, including acquisitions, and continued growth in services. Operating profit grew 23% reflecting the growth at Medical Systems as well as a gain on disposition of a joint venture at Global eXchange Services.

C. Financial Condition

     With respect to the Condensed Statement of Financial Position, consolidated assets of $445.3 billion at June 30, 2001, were $8.3 billion higher than at December 31, 2000.

     GE assets were $102.9 billion at June 30, 2001, an increase of $6.2 billion from December 31, 2000. The increase was primarily attributable to increases in cash and all other assets. The change in all other assets resulted primarily from an increase in the prepaid pension asset.

     GECS assets increased by $5.7 billion from the end of 2000. Investment securities increase of $3.2 billion to $93.5 billion at the end of the second quarter, primarily reflecting investment of premiums received. Financing receivables, net of the allowance for losses, aggregated $145.9 billion at June 30, 2001, an increase of $2.6 billion. The increase resulted principally from increased originations and acquisition growth, partially offset by the effects of securitizations, the continued run-off of the liquidating Auto Financial Services portfolio and currency translation on Japanese and European financing receivables. GECS’ allowance for losses of $4.0 billion at June 30, 2001, reflects management’s best estimate of probable losses inherent in the portfolio.

     Consolidated liabilities of $388.2 billion at June 30, 2001, were $6.6 billion higher than the year-end 2000 balance of $381.6 billion. GE liabilities increased $4.4 billion; GECS liabilities increased $4.9 billion.

     GE total borrowings were $1.9 billion ($1.1 billion short-term and $0.8 billion long-term) at June 30, 2001, an increase of $0.1 billion from December 31, 2000. GE’s ratio of debt to total capital at the end of June 2001 was 3.4% compared with 3.3% at the end of last year and 4.0% at June 30, 2000.

     GECS liabilities increased by $4.9 billion reflecting an increase in short-term borrowings of $5.2 billion and a decrease in long-term borrowings of $3.5 billion from year-end 2000. In addition, other liabilities increased $3.1 billion primarily reflecting the recognition of all derivatives at fair value. Other changes in GECS liabilities comprised numerous, relatively small items.

     With respect to cash flows, consolidated cash and equivalents were $8.0 billion at June 30, 2001, a decrease of $0.2 billion during the first half. Cash and equivalents were $12.1 billion at June 30, 2000, an increase of $3.5 billion during last year’s first half.

     GE cash and equivalents increased $2.4 billion during the first half of 2001 to $9.6 billion at June 30, 2001. Cash provided from operating activities was $7.8 billion during the first six months of 2001, compared with $5.9 billion in the first half of 2000, reflecting continuing improvements in earnings as well as higher progress collections during the period. Cash used for investing activities ($1.0 billion) principally resulted from investments in new plant and equipment for a diverse number of projects to lower costs and improve efficiencies as well as investments in business acquisitions. Cash used for financing activities ($4.4 billion) included $1.5 billion for repurchases of the Company’s common stock under the share repurchase program and $3.2 billion for dividends paid to share owners, a 17% increase in the per-share dividend rate compared with the first half of last year.

     GE cash and equivalents increased $1.7 billion during the first half of 2000 to $3.7 billion at June 30, 2000. Cash provided from operating activities was $5.9 billion during the first six months of 2000, compared with $4.7 billion in the first half of 1999, reflecting continuing improvements in earnings as well as higher progress collections and accounts payable during the period. Cash used for investing activities ($1.4 billion) principally resulted from business acquisitions and investments in new plant and equipment for a diverse number of projects to lower costs and improve efficiencies. Cash used for financing activities ($2.8 billion) included $1.1 billion for net reduction of debt, $1.1 billion for repurchases of the Company’s common stock under the share repurchase program and $2.7 billion for dividends paid to share owners, a 17% increase in the per-share dividend rate compared with the first half of last year.

     GECS cash and equivalents decreased by $0.1 billion during the first half of 2001 to $6.0 billion. Cash provided from operating activities was $10.3 billion during the first six months of 2001, compared with $0.8 billion during the first half of 2000. The increase in cash from operating activities compared with last year was largely attributable to insurance policyholder redemptions in 2000 associated with the Toho acquisition. Cash from financing activities totaled $1.5 billion, reflecting net additions of debt. The principal use of GECS cash during the period was for investing activities ($11.9 billion), a majority of which was attributable to additions to property, plant and equipment (including equipment leased to others) and business acquisitions.

     GECS cash and equivalents increased by $3.6 billion during the first half of 2000 to $10.6 billion, principally as a result of cash acquired in connection with the Toho acquisition. Cash provided from operating activities was $0.8 billion during the first six months of 2000, compared with $6.9 billion during the first half of 1999. The decrease in cash from operating activities compared with last year was largely attributable to insurance policyholder redemptions associated with the Toho acquisition and a smaller decrease in mortgages held for resale. Cash from financing activities totaled $13.4 billion, primarily as a result of insurance policyholder liabilities assumed in the Toho acquisition, the effect of which was partially offset by net reductions in debt. The principal use of GECS cash during the period was for investing activities ($10.6 billion), a majority of which was attributable to investments in securities, financing receivables and property, plant and equipment.

Part II. Other Information

(a) The annual meeting of Share Owners of General Electric Company was held on April 25, 2001.

(c) Certain matters voted upon at the meeting and the votes cast with respect to such matters are as follows:

Proposals and Vote Tabulations

Election of Directors

Item 6. Exhibits and Reports on Form 8-K