2005 REFERENCE DOCUMENT Content
Profile...... 1 Key Figures ...... 2 Corporate Governance and Management ...... 4
1 REPORT OF THE SUPERVISORY BOARD ...... 5 7 STATISTICS ...... 123
2 GROWTH STRATEGY ...... 9 8 CONSOLIDATED FINANCIAL STATEMENTS...... 133 Two marques to drive growth ...... 10 Consolidated Financial Statements...... 134 A long-term vision of the future ...... 10 Notes to the Consolidated Financial Statements ...... 141 Customer-focused R&D ...... 11 Consolidated Companies as at December 31, 2005...... 212 A commitment to people ...... 11 Subsidiaries and Affiliates as of December 31, 2005 ...... 224 Working for sustainable development...... 11 Manufacturing efficiency...... 12 9 ANNUAL STOCKHOLDER’S MEETING ...... 227 A focus on profitability ...... 12 Presentation of the Resolutions ...... 228 Outlook for 2006...... 12 Financial Authorizations in effect ...... 230 Resolutions ...... 232 3 CORPORATE GOVERNANCE ...... 13 The Supervisory Board ...... 14 10 INVESTOR INFORMATION...... 235 The Managing Board and Executive Management ...... 17 Stockholder Relations ...... 236 Internal and External Controls...... 19 Information about the Company’s Capital...... 240 Management and Administration – Stockholder Information ...... 243 Main functions and directorships held during 2005 ...... 23 Management and Administration – 11 REPORT OF THE CHAIRMAN OF THE SUPERVISORY Compensation of Corporate Officers and Executives in 2005 . . . . 32 BOARD ON THE PREPARATION AND ORGANIZATION OF SUPERVISORY BOARD MEETINGS AND ON INTERNAL 4 BUSINESS REVIEW...... 35 CONTROL ...... 245 The Automobile Division...... 36 Banque PSA Finance ...... 43 12 STATUTORY AUDITORS’ REPORT ...... 253 Gefco ...... 45 Statutory Auditors’ Report on the Consolidated Financial Faurecia ...... 47 Statements ...... 254 Other Businesses ...... 49 Statutory Auditors’ Report prepared in accordance with article L. 225-235 of the French Commercial Code 5 CORPORATE POLICIES ...... 51 (Code de commerce), on the report prepared by the Chairman of the Board of Directors of Peugeot S.A. Employee Relations Commitment ...... 52 on the Internal Control procedures relating to the preparation Employee Relations Indicators ...... 65 and processing of financial and accounting information ...... 256 Environmental Stewardship ...... 82 Environmental Indicators – 13 LEGAL AND FINANCIAL INFORMATIONS ...... 257 Automobile fuel consumption and emissions ...... 89 Information about Peugeot S.A...... 258 Environmental Indicators – Organization at December 31, 2005...... 260 Production plant consumption and emissions ...... 91 Persons responsible for the Reference Document Corporate Social Responsibility ...... 97 and the Audit of the Accounts...... 262
6 MANAGEMENT'S DISCUSSION AND ANALYSIS ...... 103 The Vice-Presidents Committee...... 264 Results ...... 104 Cross-Reference Table ...... 266 Group Financing ...... 111 Return on Capital Employed ...... 118 Management of Financial and Operational Risks ...... 119 PSA PEUGEOT CITROËN GROUP
2005 REFERENCE DOCUMENT
PSA Peugeot Citroën is a world-class automobile manufacturer, supported by two broadline marques and the expertise of more than 200,000 employees around the globe.
It is the second largest carmaker in Europe, with 14.3% of the market in 2005. During the year, the Group sold 3.39 million vehicles in more than 140 countries worldwide, generating net sales of €56.3 billion.
PSA Peugeot Citroën also encompasses the Banque PSA Finance group of automotive finance companies, Gefco, a transportation and logistics company, and Faurecia, an automotive equipment manufacturer.
This Reference Document was filed with the Autorité des Marchés Financiers (French Financial Markets Authority) on April 24, 2006, in accordance with the provisions of Article 212-13 of the general regulation of the AMF. It may be used in support of any financial transaction if it is supplemented by a prospectus approved by the Autorité des Marchés Financiers.
PSA Peugeot Citroën – 2005 reference document 1 KEY FIGURES
KEY FIGURES
Worldwide sales Sales and revenue (in units) (in millions of euros) 56,105 56,267
3,375,300 3,390,000 10,866 11,196
45,239 45,071
2004 2005 2004 2005 Automobile Division Other businesses
Return on capital employed Balance sheet structure (after tax) (in millions of euros)
12.9% 14,406 13,703
7.1%
1,347 381 2004 2005 2004 2005
Stockholder’s equity (including minority interests) Net financial position of the manufacturing and sales companies
2 PSA Peugeot Citroën – 2005 reference document KEY FIGURES
Operating margin Net income (in millions of euros) (in millions of euros) 1,646 2,481
1,940 978 1,029
1,024
1,503 916
2004 2005 2004 2005
Automobile Division Other businesses
Working capital provided by operations Capital employed and capital expenditure (in millions of euros) (manufacturing and sales companies) (in millions of euros) 4,171 3,689 14,123
12,403 2,793 2,862 5,912 6,271
6,491 7,852
2004 2005 2004 2005 Automobile Division Working capital provided by operations Other businesses Capital expenditure
Earnings per share/Dividend Workforce at december 31 (in euros) 6.97
207,600 208,500
68,200 69,000 4.47
139,400 139,500
1.35 1.35
2004 2005 2004 2005
Earnings per share Automobile Division Dividend Other businesses
PSA Peugeot Citroën – 2005 reference document 3 CORPORATE GOVERNANCE AND MANAGEMENT
CORPORATE GOVERNANCE AND MANAGEMENT
Supervisory Board Executive Committee Senior Management
Thierry Peugeot Jean-Martin Folz Xavier Fels Chairman Chairman of the Managing Board External Relations
Jean Boillot Yann Delabrière Jean-Louis Grégoire Jean-Philippe Peugeot Finance, Control and Performance Executive Staff Vice-Chairmen Gilles Michel Jean-Claude Hanus Pierre Banzet Platforms, Engineering and Purchasing Legal Affairs Jean-Louis Dumas Jean-Marc Nicolle Liliane Lacourt Marc Friedel Strategy and Group Product Planning Corporate Communications Jean-Louis Masurel François Michelin Robert Peugeot Jean-Paul Parayre Innovation and Quality Statutory Auditors Marie-Hélène Roncoroni Frédéric Saint-Geours PricewaterhouseCoopers Audit Ernest-Antoine Seillière Peugeot Marque Joseph F. Toot Jr. Mazars & Guérard Claude Satinet Roland Peugeot Citroën Marque Bertrand Peugeot Auxiliary Auditors Advisors to the Supervisory Board Roland Vardanega Yves Nicolas Manufacturing and Components Patrick de Cambourg Managing Board Jean-Luc Vergne Jean-Martin Folz Employee Relations and Human Resources Chairman of the Managing Board
Frédéric Saint-Geours Peugeot Marque As of March 1, 2006 Claude Satinet Citroën Marque
4 PSA Peugeot Citroën – 2005 reference document 01 REPORT OF THE SUPERVISORY BOARD
PSA Peugeot Citroën – 2005 reference document 5 01 REPORT OF THE SUPERVISORY BOARD
2005 was a difficult year, when the Group’s results were affected by three factors: more aggressive competition in Europe, higher raw material prices and the cost of compliance with new European Union environmental standards. The two last factors, however, were entirely offset by another significant reduction in production costs. In addition, a fine imposed by the European Commission had to be paid. A total of 3,390,000 vehicles were sold by the Group, representing an increase of 0.4% from 2004. Although sales and revenue edged up slightly to €56.3 billion, operating margin declined 22% to €1,940 million, or 3.4% of sales, compared with 4.4% the year before. Operating margin of the non-automobile divisions – mainly Faurecia, Banque PSA Finance and Gefco – came to €1,024 million, or 53% of the total. Profit attributable to equity holders of the parent contracted by 37% to €1,029 million, representing €4.38 per share. The net financial position of the manufacturing and sales companies, after capital expenditure, ended the year at €381 million due to the adverse impact of adjustments to production and the build-up in inventory. Capital expenditure remained high, at nearly €2.8 billion. Together with Toyota, the Group inaugurated the Kolin factory in the Czech Republic, which is producing the new Peugeot 107 and Citroën C1. The sustained renewal of the two marques’ line-ups was also supported by the launch of the Peugeot 1007 and 407 Coupé and the Citroën C6. For the first time, unit sales outside Western Europe passed the one million mark, rising to 1,029,500 vehicles, or 30.4% of the 2005 total. The situation continued to improve in the Mercosur zone and China where, alongside Citroën, Peugeot made a successful comeback with introduction of the 307 Sedan. In all, unit sales in China expanded by more than 57% in 2005. Despite the decline in earnings in 2005 and the challenging economic environment in early 2006, we agree with the Managing Board’s recommendation to maintain the 2005 dividend unchanged at €1.35 per share. In 2005, Peugeot S.A. bought back company shares in a total amount of €198 million and in November canceled 3.49% of issued capital, under the terms authorized at last year’s Annual Meeting. Today, the company’s issued capital comprises 234,618,266 shares. The Managing Board reported to us regularly during the year about the Group’s performance, and we continued to fulfill our role in accordance with the law and bylaws. The matters examined by the three Committees of the Board are described in the corporate governance section. The November Supervisory Board meeting was held in Sochaux and was preceded by a visit to the local production plant and the Belchamp testing facility. The Board also met with members of the Executive Committee and the Senior Management team, and attended a presentation by Faurecia. The resolutions submitted by the Managing Board to the Stockholders’ Meeting have all been approved or proposed by the Supervisory Board.
6 PSA Peugeot Citroën – 2005 reference document REPORT OF THE SUPERVISORY BOARD 01
The terms of office of François Michelin, Ernest-Antoine Seillière and Joseph Toot all expire at this Annual Meeting. Mr Michelin did not wish to seek another term, but we recommend that Mr Seillière and Mr Toot be re-elected. The Board wishes to thank Mr Michelin for his outstanding contribution all these years. So that we can continue to benefit from his vast knowledge of both the automobile industry and our Group, we will ask him at our next meeting to serve as Advisor to the Board. We also recommend that you elect Jean-Louis Silvant to the Supervisory Board. Born in 1938, Mr Silvant has spent his entire career with the Group. After graduating from the Ecole Nationale Supérieure des Arts et Métiers, he joined Automobiles Peugeot in 1961, where he held a variety of executive positions in production and human resources management. In 1998, he was appointed to the PSA Peugeot Citroën Executive Committee, first as Director, Manufacturing and Components, and then as Director, Platforms, Technical Affairs and Purchasing. As a member of the Board, Mr Silvant, who has been retired since 2002, will contribute his extensive knowledge of the Group and the automobile industry. At its last meeting, the Board regretfully accepted the resignation of Jean-Louis Dumas for personal reasons, effective June 30, 2006. After thanking Mr Dumas for the extensive experience he has shared with the Board, we recommended co-opting a new member at one of our meetings in the second half of the year. You will be asked to approve the co-opted appointment at the next Annual Meeting. The resolutions authorizing the Managing Board to carry out a share buyback program and to grant options to purchase existing shares of the Company simply renew authorizations granted at previous Annual Meetings. The Board therefore invites you to approve them. In 2006, in a business environment still shaped by aggressive competition in Europe, higher raw material prices and the cost of compliance with new European Union environmental standards, the Group is committed to maintaining profitability and returning to growth. The model renewal process will continue apace, with the launch of new Peugeot and Citroën vehicles, including the Peugeot 207, a major new model for both the marque and the Group. Outside Western Europe, Peugeot will introduce the 206 in China and the 307 Sedan in the Mercosur region, while Citroën will launch two new cars in China, including the all-new C-Triomphe. The new plant in Trnava, Slovakia, will be inaugurated and production will be ramped up at the plants in Palomar, Argentina and Porto Real, Brazil. Production capacity will also be increased in China, where output at the Wuhan plant is expected to reach 200,000 units. In early 2006, two diesel hybrid Peugeot 307 and Citroën C4 demonstrators were unveiled, heralding the emergence of a promising new technology. The Group’s return to growth will be driven by expansion outside Western Europe, particularly in Asia. Improving profitability will require a further reduction in costs, sustained improvement in quality and ever-increasing proficiency in automotive skills and capabilities. Successful implementation of the actions now underway will enable the Group to strengthen its position as a leader in the global automotive industry.
PSA Peugeot Citroën – 2005 reference document 7 8 PSA Peugeot Citroën – 2005 reference document 02 GROWTH STRATEGY
Two marques to drive growth 10
A long-term vision of the future 10
Customer-focused R&D 11
A commitment to people 11
Working for sustainable development 11
Manufacturing efficiency 12
A focus on profitability 12
Outlook for 2006 12
PSA Peugeot Citroën - 2005 reference document 9 02 GROWTH STRATEGY
GROWTH STRATEGY
TWO MARQUES TO DRIVE GROWTH
PSA Peugeot Citroën is building its development on two Banque PSA Finance finances new vehicle and replacement strong broadline marques, each with a global presence and part inventory for dealers and offers a comprehensive array a clearly defined personality, as part of coordinated of financing and related services for Peugeot and Citroën international strategies and an aligned product plan. The plan carbuyers. It operates in eighteen countries, corresponding organizes a comprehensive model line up for each marque to the two marques’ leading markets, and plays a key role in and supports the consistency of each one’s conceptual and the Group’s strategic vision. stylistic identity. It also defines a product launch schedule Gefco is France’s second largest transportation and logistics that ensures the steady renewal of the Group’s offer in each company and ranks among the top ten in Europe. Supported market segment. by its activities of supplying Group plants and distributing Both marques enjoy the independence needed to lead Peugeot and Citroën cars and replacement parts, Gefco separate and often competitive strategies in the area of represents a long-term growth business for the Group and marketing, sales and, more generally, customer relations. is actively expanding its base of other customers. On the other hand, the Automobile Division’s technological, PSA Peugeot Citroën is also the majority stockholder of manufacturing, administrative and financial processes have Faurecia, Europe’s second largest original automotive been combined to enhance efficiency and create economies equipment manufacturer and a world leader in each of its of scale. businesses: car seats and interiors, exhaust systems and In addition to its core business of making automobiles, front-end modules. An independently managed company, PSA Peugeot Citroën is involved in three other major activities: Faurecia supplies not only the Group but also most of the financing for the two marques’ dealers and customers, world’s leading carmakers. transportation and logistics, and the design and manufacture of automotive components and systems.
A LONG-TERM VISION OF THE FUTURE
PSA Peugeot Citroën is strategically focused on driving PSA Peugeot Citroën’s strategy is shaped on its ability to sustained, long-term growth, based on satisfying customers, rapidly design and introduce a wide range of vehicles to expanding the model lines, innovating and achieving satisfy an increasingly demanding and diverse customer base. excellence in core automotive technologies, enhancing Our customers expect us to make cars that are irresistible, employee capabilities, demonstrating flexibility, carefully because they’re stylishly designed and deliver great managing costs, and pursuing ambitious quality standards performance; they’re comfortable, innovative and fun to drive; for both products and services. and they’re equipped with the useful technologies most people want. Yet they also want cars that allow them to The Group is firmly engaged in a sustainable growth dynamic, respond as responsible citizens to the challenges of road with the goal of selling four million vehicles and CKD units a safety, air pollution, recycling and the quality of urban life. year. Sales are going to expand both in Western Europe, where the Group will leverage the faster pace of new model introductions and the extensive renewal of its line-ups, and in Central and Eastern Europe, Latin America and China.
10 PSA Peugeot Citroën - 2005 reference document GROWTH STRATEGY 02
CUSTOMER-FOCUSED R&D
In the years to come, success will be driven by the ability to Diesel technology is now recognized as environmentally friendly, innovate and create competitive advantage. That’s why the Group thanks in particular to the Group’s development of high-pressure, is developing innovative products that significantly enhance brand direct-injection engines – for which the HDi engine sets the image and customer appeal, while sustaining its leadership market standard – and its launch of the world’s first diesel positions in critical automotive technologies in the areas of particulate filter. The range of diesel engines using these environmental protection, safety and the driving experience. technologies is being expanded, and recent developments have confirmed the Group’s leadership in this area. In addition, the product plan for the two marques is designed both to quickly renew the model line-ups and to continuously The Group is also developing hybrid vehicle technologies, broaden them, notably by introducing new vehicle concepts. whose first stage was the 2004 introduction of a Stop & Start Since mid-2004, the pace of new model introductions has system on the Citroën C3. In addition, two hybrid technology been stepped up considerably, in a commitment to lowering demonstrators with diesel-electric powertrains were unveiled the average model age to 3.3 years by 2008. in January 2006. An extensive R&D program is underway to lower the cost of these technologies, which will enable broader market sales of HDi hybrids by 2010 and deliver an effective response to environmental concerns.
A COMMITMENT TO PEOPLE
In every host country and at every level of the organization, discrimination, facilitating the management of differences while the Group’s strategic vision demands skilled, motivated teams maintaining social cohesion, and ensuring equal career capable of generating and supporting sustained growth and development for every employee. Another goal is for all international development. employees worldwide to have the opportunity of participating in the Group’s strategy and financial results, in particular through This is why the Group engages in continuous social dialogue, profit-sharing systems. Training to prepare employees in every based on an active commitment to contractual negotiations country for the fast changes in the Group is an important focus, and the recognition of unions in every host country. It is while an absolute priority is to ensure the safety and protection particularly concerned with fighting against all forms of of all employees wherever they work.
WORKING FOR SUSTAINABLE DEVELOPMENT
PSA Peugeot Citroën’s objective is to manufacture vehicles PSA Peugeot Citroën is wholeheartedly committed to whose features and performance help to safeguard the enabling cars to harmoniously interact with the urban environment and improve safety while delivering the styling, environment. As a carmaker, the Group wants to contribute drivability and usage satisfaction customers want. Group to the sustainable development of urban mobility without research primarily focuses on reducing automotive CO2 compromising either the quality of air or the quality of life. emissions. Its findings and their application in series The Group has also embraced the United Nations’ Global production are efficiently helping to attenuate the greenhouse Compact, ensuring that its actions, in every country where effect. The Group is already encouraging the use of biofuels it operates around the world, contribute to sustainable blended in significant proportions with gasoline or diesel fuel, development, in line with good ethical, social and environ- which today’s engines can burn without any technical mental practices. modifications. The Group’s sustainable development committee has So that cars are safe for everyone, major programs are implemented a priority action plan to promote these principles underway to promote responsible driving and to guarantee the across the organization and among suppliers. active and passive safety performance that customers deserve from the Peugeot and Citroën marques. In addition, guidelines in the Global Reporting Initiative are being used to report labor, environmental and social data.
PSA Peugeot Citroën - 2005 reference document 11 02 GROWTH STRATEGY
MANUFACTURING EFFICIENCY
To help control costs, PSA Peugeot Citroën has deployed an involving dedicated, ongoing programs are being implemented ambitious platform strategy. Three new platforms are being in order to share, with other independent carmakers, the develop- gradually deployed across the model base, with common parts ment and production of components or vehicle bases for which accounting for at least 60% of the production cost of vehicles scale economies make sense. In this area, PSA Peugeot Citroën made on the same platform. As well, each assembly plant in has demonstrated the ability to forge strategic cooperative Europe is gradually being organized around a single platform. agreements that respect each partner’s personality and As it helps diversify the model portfolio, this strategy is also independence. It has worked with Renault on V6 engines and substantially reducing development costs, shortening time-to- mid-range automatic transmissions, with Fiat on MPVs and market cycles and cutting process engineering outlays, light commercial vehicles and with the Ford Motor Company a production costs, and purchasing prices for parts and systems. comprehensive line of diesel engines, with Toyota on small In particular, it is allowing the Group to control R&D budgets and entry-level European cars and with BMW on small, high-tech stabilize capital expenditure, while shortening new model gasoline engines. This strategy is continuing with Fiat and Tofas development cycles. In 2005, some 1,600,000 Peugeot and for the joint development and production of a small utility vehicle Citroën cars were assembled in Europe on the three platforms, and with Mitsubishi Motors Corporation in SUVs. a figure that will double by 2008. These agreements let the partners share development costs To further improve the performance of its production facilities, and pool skills and resources. In this way, they deliver the the Group has implemented a plan to drive greater manufact- scale economies a carmaker needs to be competitive, provide uring efficiency, primarily by upgrading production and supply a powerful means of benchmarking and learning industry chain processes, but also by optimizing procurement with a best practices and enable both partners to quickly broaden broader international supplier base and by starting up new their product ranges. For PSA Peugeot Citroën, this type of assembly plants in Central Europe and Turkey. alliance, in which each partner remains independent, is the To speed growth and reduce costs beyond what is being done right response to the challenges and opportunities offered internally with the platforms, innovative cooperation agreements by market globalization and changing customer expectations.
A FOCUS ON PROFITABILITY
Return on capital employed has been selected as the relevant The constant goal is to report an after-tax return of at least indicator for measuring the efficiency of manufacturing and 13.5% and a 6% operating margin. marketing operations.
Regardless of business conditions, the Group is committed to achieving an after-tax return on capital employed of at least 8.5%, covering the cost of such capital.
OUTLOOK FOR 2006
In 2006, the Western European automobile market should Financial performance, however, will be adversely affected remain flat and continue to be shaped by an aggressive by the continued increase in raw material costs, the new round promotional environment. of Euro IV compliance costs and the negative impact of IFRS adjustments. Nevertheless, even as the new launches replace 2006 will see a major new stage in the model renewal a third of its full-year model line-up, the Group expects to see process, starting with the April launch of the Peugeot 207. a further reduction in production costs, continued improvement When combined with the first full-year impact of sales of in margins outside Western Europe and a stable contribution models introduced in 2005 (Citroën C1, Peugeot 107, 1007 and from the non-automotive businesses. The Group estimates that 407 Coupé), the new products should enable the Group to go operating margin will be similar to the second-half 2005 figure back on the marketing offensive and return to unit sales growth in the first half of 2006, before showing an improvement in the in Europe. Sales outside Western Europe are expected to second six months of the year. continue to increase at the same fast pace as in the past two years, led by the launch of new Peugeot and Citroën models in the Mercosur countries and China.
12 PSA Peugeot Citroën - 2005 reference document 03 CORPORATE GOVERNANCE
The Supervisory Board 14
The Managing Board and Executive Management 17
Internal and External Controls 19
Management and Administration – Main functions and directorships held during 2005 23
Management and Administration – Compensation of Corporate Officers and Executives in 2005 32
PSA Peugeot Citroën - 2005 reference document 13 03 CORPORATE GOVERNANCE The Supervisory Board
Since 1972, Peugeot S.A. has had a two-tier management structure, comprising a Managing Board, responsible for strategic and operational management, and a Supervisory Board, responsible for oversight and control. This separation is especially effective in addressing the concern for a balance of power between the executive and oversight functions, as reflected in the principles of good Corporate Governance.
THE SUPERVISORY BOARD
ROLE OF THE SUPERVISORY BOARD François Michelin, former legal manager of Compagnie Générale des Établissements Michelin, contributes his According to the law, the Supervisory Board is responsible experience in international development. for overseeing the Managing Board’s management of the business. The Company’s bylaws also attribute to the Ernest-Antoine Seillière, Chairman of Wendel Investissements, Supervisory Board sole authority to approve corporate contributes his extensive knowledge of the manufacturing sector. actions, bond issues, the signature or termination of Jean-Paul Parayre, former Chairman of the Peugeot S.A. agreements with other companies operating in the same Managing Board and Chairman of the Supervisory Board of industry that will have a decisive impact on the Group’s future Vallourec, contributes his knowledge of the automobile development, and any major transaction that substantially industry and the Group’s operations. alters the business or financial structure of the Company or the Group. In addition, the Supervisory Board ensures In accordance with the recommendation of the French that the strategy implemented by the Managing Board is securities regulator (AMF) dated January 17, 2003, the Super- consistent with the Group’s long-term vision, as defined by visory Board has reviewed its member-ship and considers that the Supervisory Board. The Supervisory Board meets at least Jean Boillot, Jean-Louis Dumas, Jean-Louis Masurel and once every quarter; the agenda of each meeting is drawn up Joseph F.Toot, Jr. can be qualified as independent directors. by the Chairman. To assess its members’ independence, the Supervisory Board applies the criteria listed in the Medef-Afep report on SUPERVISORY BOARD MEMBERS corporate governance, except that members who have sat The Supervisory Board has twelve members plus two non- on the Board for over twelve years or who have been a voting advisors, all of whom are elected by stockholders for director of another Group company during the last five years six-year terms. The other functions exercised by Supervisory are nevertheless considered to be independent. Board members and advisors are listed on page 23, as The Supervisory Board considers that the experience of the well as the dates when they were elected and when their automobile industry that its members contribute to the Board is terms end. extremely valuable, particularly in a business requiring very good The Supervisory Board believes that its membership medium and long-term vision. The Board also considers that the appropriately reflects the percentage of capital held by the fact of having recently been a director of another Group company Company’s main stockholder, the Peugeot family. does not give rise to any risk of the type of conflict of interest that the Medef-Afep independence rules are designed to avoid. The Board comprises three family members, Thierry Peugeot, Jean-Philippe Peugeot and Marie-Hélène Roncoroni, and two No member of the Board exercises any senior executive relatives, Pierre Banzet and Marc Friedel. responsibilities or is a salaried employee of a Group company.
Jean-Louis Dumas, Jean-Louis Masurel and Joseph F.Toot, Jr. When new members are proposed for election at the have no ties with the Company, its Group or its management Stockholders’ Meeting, the Supervisory Board will select and contribute their international financial and managerial candidates based on the recommendations of the experience to the Board’s deliberations. Compensation and Appointments Committee and the independence criteria referred to above. Jean Boillot was chairman of Automobiles Peugeot until 1990 and has since contributed to the Board his experience in Each member of the Supervisory Board must own at least automotive manufacturing and marketing. 25 shares of Peugeot S.A. stock.
14 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 The Supervisory Board
SUPERVISORY BOARD MEETINGS any borrowings by Peugeot S.A. other than in the form of IN 2005 bonds, involving an amount in excess of €100 million. The Supervisory Board met four times in 2005, three times The internal rules describe the information to be made available at the head office and one time at a group industrial site, with to the Supervisory Board, the process to be followed to an average attendance rate of 94%. determine the issues to be discussed at Supervisory Board meetings, the terms of reference of each Board Committee as During these meetings, the Board reviewed the Managing well as the obligations of Supervisory Board members, especially Board’s periodic reports on the operations and results of those arising from their constant access to insider information. the Group’s various businesses, examined the financial statements of the Company and the Group, reviewed the The first self-assessment of the Board’s procedures was annual budgets of the Group and its divisions, and authorized carried out in 2004. In early 2006, the Supervisory Board sent a commitment. The Committees of the Board reported their out a new questionnaire to members covering the Board’s findings and recommendations to the Supervisory Board procedures, its structure, the organization of its meetings and at regular intervals. the issues included on the agenda, the quality of discussions during each meeting and the steps taken to improve BOARD PROCEDURES members’ knowledge of the Group. The questionnaire also invited comments on the terms of reference of the Board The Supervisory Board’s internal rules set out its stewardship Committees and the reporting of the Committees’ findings and control responsibilities. In particular, the Supervisory and recommendations. Respondents suggested a certain Board is responsible for reviewing the Managing Board’s number of improvements that will be implemented. quarterly reports, as well as the annual financial statements of the Company and the Group and the Managing Board’s report to the Annual Stockholders’ Meeting. SUPERVISORY BOARD COMMITTEES
The internal rules also stipulate that the Supervisory Board The Supervisory Board has created three specialized is required to authorize, in advance, the following actions by committees: the Strategy Committee, the Compensation and the Managing Board as provided for in Article 9 of the bylaws: Appointments Committee and the Finance Committee. - stockholder-approved share issues (whether paid up in cash or by capitalizing retained earnings) and capital reductions; The Strategy Committee - Stockholder-approved issues of ordinary or convertible bonds; Terms of reference: - the drafting of any merger agreements or agreements for the The Strategy Committee, set up in 1998, is responsible for sale of a business; considering the Group’s long-term growth trajectory and - the signature or termination of any manufacturing and strategic direction. It reviews the Managing Board’s long- sales agreements representing a future commitment for term strategic plan and is consulted about proposed major Peugeot S.A., with companies whose corporate purpose is transactions. It also prepares Supervisory Board decisions similar or related to that of Peugeot S.A., and generally the on strategic projects submitted for the Board’s approval execution of any major transaction which substantially alters in accordance with Article 9 of the bylaws. the business or financial structure of the Company or the Group. Members: Certain other actions exceeding financial limits set by the The Committee comprises seven members, appointed in Supervisory Board may be carried out only with the their own name and not as representatives of corporate unanimous backing of all the members of the Managing Supervisory Board members: Board or, failing that, with the prior authorization of the Jean-Philippe Peugeot, Committee Chairman, Supervisory Board. These include the purchase or sale for Jean Boillot, cash or for shares of any building and business rights used by Jean-Louis Dumas, Peugeot S.A., involving an amount in excess of €50 million, François Michelin, the purchase or sale of any equity interest in any other company directly or indirectly representing an immediate or Jean-Paul Parayre, deferred investment, expense, credit guarantee or seller’s Thierry Peugeot, warranty involving an amount in excess of €50 million, and Ernest-Antoine Seillière.
PSA Peugeot Citroën - 2005 reference document 15 03 CORPORATE GOVERNANCE The Supervisory Board
Activities in 2005: transactions and the management reporting schedules. The Strategy Committee met four times in 2005, to review the It also monitors off-balance sheet commitments and data proposed cooperation agreement with Mitsubishi, the long- to assess the Group’s risk exposure. term strategy for the Automobile Division and the challenges The Finance Committee, which enjoys free access to all the and objectives of the Platforms, Engineering and Purchasing information it needs, can meet with the persons responsible Department. for internal control and, like the Chairman of the Supervisory Board, with the auditors, with or without line management The Compensation and Appointments attending. Committee Terms of reference: Members: Set up in 1998, the Compensation and Appointments The Committee comprises three members, appointed in Committee is responsible for preparing Supervisory Board their own name and not as representatives of corporate decisions regarding compensation for members of the Supervisory Board members. Managing Board, the Supervisory Board and the Board Marc Friedel, Committee Chairman, Committees, as well as stock option grants to members of Jean-Louis Masurel, the Managing Board. In 2003, the Committee’s terms of Marie-Hélène Roncoroni. reference were broadened to include preparing Supervisory Board decisions concerning the appointment of new Activities in 2005: members of the Supervisory Board and Managing Board, The Committee met four times in 2005. The first meeting by proposing selection criteria, organizing the selection was devoted to reviewing the 2004 financial statements process and recommending candidates for appointment or published in February 2005, and examining the reconciliation re-appointment. of the French GAAP and IFRS accounts. During the year, the Committee also reviewed the Group’s internal control Members: approach and internal audit plan, Banque PSA Finance’s The Committee comprises three members, appointed in liquidity policy, Group tax planning policy and the valuation their own name and not as representatives of corporate of fixed assets. The meetings held in July 2005 and February Supervisory Board members: 2006 to review the interim and annual financial statements Thierry Peugeot, Committee Chairman, respectively were attended by the external auditors. In François Michelin, addition, the Committee held a meeting in 2005 with the Ernest-Antoine Seillière. external auditors without any members of management being present, to discuss internal control and the content of the Activities in 2005: Group’s financial information. The Committee met three times in 2005 and again in February 2006 to prepare Supervisory Board decisions concerning the fixed salaries and bonuses of Managing Board members, SUPERVISORY BOARD COMPENSATION the number of stock options to be granted to them, and Pursuant to the decision of the Stockholders’ Meeting of the re-election of Supervisory Board members recommended May 26, 2004, Supervisory Board members and advisors to the Annual Stockholders’ Meeting on May 25, 2005. are paid annual attendance fees up to an aggregate amount of €340,000 a year. In 2005, they were paid an aggregate The Finance Committee €318,000 in fees. The fees paid to each individual member for Terms of reference: attending Supervisory Board meetings amount to €17,000. The Finance Committee, set up in 2002, is responsible The Chairmen of Board Committees are paid an additional for informing the Board of its opinion on the interim and €10,000 and the other Committee members are paid €5,000. annual financial statements of the Company and the Group, By decision of the Supervisory Board, the Chairman and and it may also be asked to review any corporate actions Vice-Chairmen of the Board receive an additional fee of and other projects requiring prior approval by the Board. €425,000 and €22,860 respectively. The compensation paid To this end, the Committee reviews in detail the interim to individual Managing Board members and advisors is and annual financial statements, the most significant financial disclosed on page 32.
16 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 The Managing Board and Executive Management
SITUATION OF SUPERVISORY BOARD None of the members of the Supervisory Board or Managing AND MANAGING BOARD MEMBERS Board have service contracts with Peugeot S.A. or any of its subsidiaries, providing for benefits upon termination Thierry Peugeot, Jean-Philippe Peugeot, Marie-Hélène of employment. Roncoroni, Pierre Banzet and Marc Friedel are related. There are no family ties among the other Supervisory Board or To the best of the Company’s knowledge, in the last five years Managing Board members. no member of the Supervisory Board or Managing Board has (i) been convicted of any fraudulent offence, (ii) been a No loans or guarantees have been granted to or on behalf of member of the administrative, management or supervisory any members of the Supervisory Board or Managing Board body of a company that has been declared bankrupt, or placed by the Company or any Group entities. in liquidation or receivership, (iii) been the subject of any No assets required for the operation of the business are official public incrimination and/or sanctions by statutory or owned by any members of the Supervisory Board or regulatory authorities or (iv) been disqualified by a court from Managing Board or their families. acting as a member of the administrative, management or supervisory bodies of an issuer or from acting in the To the best of the Company’s knowledge, there are no management or conduct of the affairs of any issuer. conflicts of interest between the duties of Supervisory Board and Managing Board members to Peugeot S.A. and their private interests or other duties.
THE MANAGING BOARD AND EXECUTIVE MANAGEMENT
THE MANAGING BOARD It is supported by a Senior Management team, whose four members report directly to the Chairman of the Managing The Peugeot S.A. Managing Board has three members: Board. They are Xavier Fels (External Relations), Jean-Louis Jean-Martin Folz, Chairman; Frédéric Saint-Geours, Chief Grégoire (Executive Development), Jean-Claude Hanus (Legal Executive Officer of Automobiles Peugeot; and Claude Affairs) and Liliane Lacourt (Communication). The Executive Satinet, Chief Executive Officer of Automobiles Citroën. Committee and the Senior Management team meet on a weekly basis to discuss issues concerning the day-to-day THE EXECUTIVE COMMITTEE management of the Group and the Automobile Division. The nine-member Executive Committee is responsible for Specific committees have been set up for each of the other the executive management of the PSA Peugeot Citroën businesses, which meet once a month to discuss issues Group. As of January 1, 2006, the members were: related to the management of the business concerned. Jean-Martin Folz, Chairman of the Managing Board, The day-to-day management of the Group is the responsibility Frédéric Saint-Geours, member of the Managing Board of the Vice-Presidents Committee made up of senior (Peugeot marque), line executives. As of March 1, 2006, the Vice-Presidents Claude Satinet, member of the Managing Board (Citroën Committee comprised 51 senior executives, as well as the marque), members of the Executive Committee and the Senior Yann Delabrière (Finance, Control and Performance), Management team. It meets on a monthly basis. Gilles Michel (Platforms, Engineering, Purchasing), Jean-Marc Nicolle (Group Strategy and Products), Robert Peugeot (Innovation and Quality), Roland Vardanega (Manufacturing and Components), Jean-Luc Vergne (Employee Relations and Human Resources).
PSA Peugeot Citroën - 2005 reference document 17 03 CORPORATE GOVERNANCE The Managing Board and Executive Management
MANAGING BOARD COMPENSATION Aggregate compensation awarded to the members of the Executive Committee and the Senior Management team for The compensation paid to each Managing Board member 2005 amounted to €8.4 million, of which the variable bonus is decided by the Supervisory Board after reviewing the accounted for 33.56%. The variable compensation awarded recommendations of the Compensation and Appointments to members of the Vice-Presidents Committee serving as of Committee. December 31, 2005, amounted to 23.74% of the total. It includes both a fixed salary and a variable bonus, based In addition, executives who have served as members of the on the Group’s business and financial results. It reflects not Managing Board, the Executive Committee or the Senior only growth in unit sales, revenue, operating margin and net Management team are covered by a supplementary pension profit, but also the progress made in terms of quality, new plan, provided that they are still employed by the Group when model introductions, international expansion and, more they retire (see note 28.1 to the Consolidated Financial generally, implementation of the Group’s long-term strategy. Statements). The compensation paid to individual Managing Board members for 2005 is disclosed on page 32. STOCK OPTIONS Since 1999, the members of the Managing Board, the COMMITMENTS GIVEN TO MANAGING Executive Committee, the Senior Management team and BOARD MEMBERS the Vice-Presidents Committee have been granted options Concerning the requirement of Article L. 225-90-1 of the each year to purchase existing shares of Peugeot S.A. stock, French Commercial Code to disclose “any and all in accordance with the general principles underlying the commitments given by the company to a member of existing plans. its administrative, management or supervisory bodies”, on April 11, 2006, the Supervisory Board reiterated its The Managing Board, in full agreement with the Supervisory July 26, 2004, decision concerning the employment contracts Board and in compliance with stockholder-approved limits, of Managing Board members which were suspended upon decided that starting in 2002, the benchmark price for options their appointment to the Managing Board, as follows: when to purchase existing shares granted in a given year to they cease to be a member of the Managing Board and their executives or employees of the Company or related employment contract is reinstated, their annual compensation companies would be equal to the average of the opening under the employment contract will be equal to their latest share price during the 20 trading days following the fixed compensation decided by the Supervisory Board plus publication of the Group’s first-half consolidated earnings, the average of the last three years’ variable bonuses, and without any discount. their entire term as member of the Managing Board will be On August 23, 2005, the Managing Board used the taken into account for the purpose of calculating their seniority authorization granted by the Annual Stockholders’ Meeting under the employment contract. of May 26, 2004, to issue 953,000 options to purchase existing shares of Peugeot S.A. stock for €52.37 per share. EXECUTIVE COMPENSATION Details of the options to purchase existing shares of The compensation paid to members of the Executive Peugeot S.A. stock granted to Managing Board members in Committee, the Senior Management team and the Vice- 2005 are presented on page 33. Presidents Committee is determined on a similar basis to that of all Group managers. It includes both a fixed salary and As of December 31, 2005, members of the Managing Board, a variable bonus, based on the achievement of personal the Executive Committee and the Senior Management team objectives and the Group’s operating margin, quality and held 2,144,000 of the 5,774,300 options outstanding at safety targets for the year. that date.
18 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 Internal and External Controls
Details of stock option plans in effect at December 31, 2005, the options may not be granted at a discount to the average share aggregate number of options granted to the eleven employees price used to determine the exercise price. The list of other than corporate officers receiving the largest number of grantees, the number of options granted to each individual stock options under the 2005 plan, and the number of options and the option price – corresponding to the average of the exercised in 2005 are presented on pages 33 and 240. opening share price during the 20 trading days preceding the grant date – are decided in April, at the Board meeting held Faurecia has its own stock option plans. Option grants may to call the Annual Stockholders’ Meeting. On April 19, 2005, be decided only once a year, at the Board meeting held in Faurecia granted 275,000 options to purchase new shares February to approve the annual financial statements and of company stock for €63.70 per share.
INTERNAL AND EXTERNAL CONTROLS
Control is assured both internally, by the Supervisory Board In 2003, the Group issued a Code of Ethics setting out and the internal auditors, and also externally by the Statutory the standards of conduct and behavior to be met by all Auditors and, in the case of Banque PSA Finance, by the employees. The Code is available for consultation on the French Banking Regulator (Commission Bancaire). Group Intranet by all employees and the Managing Board has appointed an Ethics Delegate to advise employees who INTERNAL CONTROL have questions concerning the interpretation or practical application of the Code. Internal control covers all the processes and procedures implemented throughout the organization to provide The Internal Audit department reports directly to the Chairman reasonable assurance that the following three objectives of the Managing Board. The Vice-President, Internal Audit, are met: effectiveness and efficiency of operations, reliability has direct authority over the corporate-level internal auditors of financial reporting, compliance with applicable laws and and has a dotted-line reporting relationship with the internal regulations. Internal control also contributes to achieving auditors working in various departments of the Automobile performance and profitability targets. However, it does not Division and the other Group companies. This organization offer absolute protection from human error. enables the Vice-President, Internal Audit, to ensure that all of the Group’s activities are covered in an efficient manner, Based on the Group’s operating structure, the overall to monitor the quality of internal audits and to track organization of internal control mirrors the chains of command implementation of the action plans recommended by in the divisions and the cross-functional responsibilities the internal auditors. of the corporate technology, manufacturing and finance departments. The Internal Audit department is responsible for: - guaranteeing the implementation of internal controls, The overall structure of delegations of authority down the - verifying compliance with mission-critical processes and chain of command reflects the Group’s internal organization. methods and assessing their effectiveness, Account is taken of each manager’s job as well as of his or her - recommending improvements to enhance the performance position in the chain of command, in order to grant powers of corporate departments and subsidiaries. to individuals who have the necessary authority, resources and competence in the area concerned. Each delegation of The annual internal audit program is submitted to the authority describes the individual’s role and responsibilities, Executive Committee for approval and the Vice-President, the rules and regulations to be complied with and the Internal Audit, reports to the Executive Committee twice a practices to be followed. year on the department’s activities and findings.
PSA Peugeot Citroën - 2005 reference document 19 03 CORPORATE GOVERNANCE Internal and External Controls
Internal control is based first and foremost on a series of quality and delivery times. The purchasing department’s financial and accounting procedures. internal auditors are responsible for assessing the overall level of internal control, as well as the theoretical and practical The consolidated financial statements are prepared by the effectiveness of control procedures, and proposing consolidation department, which is also responsible for improvements. establishing and updating Group accounting policies. The manufacturing and components department oversees Controls over management information are performed at the manufacturing operations at all production sites throughout level of the Group, the divisions and the operating units. the world. Its core objective is to ensure that products are Published financial information is based on the consolidated manufactured in the required quantities, in accordance with financial statements approved by the Managing Board and the applicable technical and quality standards, at the lowest presented to the Supervisory Board, as well as on analyses cost and with an acceptable lead-time. Internal control is of consolidated data. The information is audited or reviewed based on a standard set of specific operating procedures. by the Statutory Auditors prior to being published. It is organized around operational management systems, real- time centralized reporting of physical indicators and a process Financing decisions and banking relations are managed at that drives continuous improvement, as measured by a series Group level, together with cash management transactions of indicators calculated for all production sites. for euro zone subsidiaries, foreign currency cash flows and related transactions on the currency markets, and financial The Peugeot and Citroën marques are responsible for defining market transactions related to interest rates. For entities and marketing their products and services throughout the outside the euro zone, locally managed cash flows and cash world, enhancing their image and building market share. Each balances are closely tracked at Group level. marque’s system of internal control is based on a description of operating processes and procedures at headquarters level, The tax department is responsible for managing the Group’s overall tax position, monitoring compliance with tax laws and as well as at the levels of the importer subsidiaries and regulations and identifying tax-planning opportunities. To this the dealerships. It is organized around the operational manage- end, it manages the tax position of all of the French entities, ment structure – with the same top-down approach – the deals with the tax administration in connection with tax control system and the continuous improvement process. audits, and analyzes the tax implications of major projects The other divisions apply the same standards and principles such as acquisitions, disposals and reorganizations, as well as as the Automobile Division, tailored to their specific of cross-border transactions. It also supervises operations organization structure. carried out locally. Banque PSA Finance is also subject to banking regulations, The procedures put in place by the operating units and the with which it strictly complies. related controls are designed to guarantee proper internal control of all Automobile Division functions. As an independent company, Faurecia has its own system of internal control, described in the company’s registration In the area of research and development, a project-based document. management approach is used for the development of new vehicles and components, so as to clearly define the related The procedures and controls performed by the human return on investment and cost targets. Each project is tracked resources, quality, risk prevention and management, and from start to finish by a specific team. information systems functions, provide background support for Group operations in the drive for business growth and The purchasing department is responsible for defining and improved profitability. implementing global purchasing policies applicable to all automobile businesses. It is organized to encourage supplier Leveraging the high level commitment of all of its managers, participation in the design of products and processes, as well the Group intends to continue taking a pro-active approach as to ensure that bought-in components, machinery and to internal control with the aim of achieving continuous services comply with Group standards in terms of cost, improvement.
20 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 Internal and External Controls
EXTERNAL AUDITORS PricewaterhouseCoopers Audit, as Group Statutory Auditor, also reviews the processes for the preparation of environ- In accordance with French company law, the financial mental and social information published on the Group’s statements of Peugeot S.A. and the consolidated financial sustainable development website. statements are audited by two firms of auditors. The two firms jointly audit all of the accounts and examine the In the case of Faurecia, the two firms of auditors, processes used to prepare the financial statements, as well PricewaterhouseCoopers Audit and Ernst & Young Audit, as the Group’s internal control processes and procedures. were appointed by stockholders at the Annual Meeting on June 1, 2001, for a period expiring at the Annual Meeting The two statutory auditors, PricewaterhouseCoopers Audit to be called to approve the 2006 accounts. and Mazars & Guérard, were appointed by stockholders at the Annual Meeting on May 25, 2005, following a proposal The auditors of joint ventures set up with other automakers, process managed by the Finance Committee of the which are accounted for by the equity method, are appointed Supervisory Board. Their appointment expires at the Annual by the joint venture partners. Stockholders’ Meeting to be called in 2011 to approve the The total fees paid to the auditors in respect of 2005 2010 financial statements. amounted to €12.9 million, including €9.3 million for Through the members of their networks in all the countries PricewaterhouseCoopers, €1.8 million for Mazars & Guérard where the Group operates, PricewaterhouseCoopers Audit and €1.6 million for Ernst & Young. In addition, members and Mazars & Guérard act as contractual auditors of all the of the Ernst & Young network were paid €0.4 million for Group’s fully consolidated subsidiaries, with the exception non-audit services, corresponding mainly to legal and tax of the companies in the Faurecia sub-group. They therefore advice provided outside France. have access to the information required to audit the consoli- New stricter rules have been established concerning dated financial statements of the PSA Peugeot Citroën Group. non-audit work performed by the auditors, as required under Effective from 2003, they perform continuous audits of the the Financial Security Act. main Automobile Division companies and finance companies in France, in order to improve the overall quality of their audit.
PSA Peugeot Citroën - 2005 reference document 21 03 CORPORATE GOVERNANCE Internal and External Controls
FEES PAID TO THE STATUTORY AUDITORS Mazars & Ernst & PricewaterhouseCoopers Guérard Constantin Young Others Total
(in € millions) 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 AUDIT Audit fees 8.6 8.7 1.8 - - 1.2 1.3 1.1 0.1 0.1 11.8 11.1 Audit-related fees 0.7 0.7 - - - - 0.3 - 0.1 0.1 1.1 0.8 Sub-total 9.3 9.4 1.8 - - 1.2 1.6 1.1 0.2 0.2 12.9 11.9 100% 94% 100% - - 100% 80% 76% 97% 65% 97% 92% Other services Legal and tax advice 0.0 0.6 - - - - 0.3 0.3 0.0 0.1 0.3 1.0 Internal audit services 0.0 - - - - - 0.1 0.1 - - 0.1 0.1 Other consulting services 0.0 0.0 - - - - 0.0 0.0 0.0 - 0.0 0.0 Sub-total 0.0 0.6 - - - - 0.4 0.4 0.0 0.1 0.4 1.1 0% 6% - - - - 20% 24% 3% 35% 3% 8% Total 9.3 10.0 1.8 - - 1.2 2.0 1.5 0.2 0.3 13.3 13.0 Of which Faurecia 3.5 3.4 - - - - 1.6 1.4 - - 5.1 4.8 Excluding Faurecia 5.8 6.6 1.8 - - 1.2 0.4 0.1 0.2 0.3 8.2 8.2
22 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 Management and Administration - Main functions and directorships held during 2005
MANAGEMENT AND ADMINISTRATION MAIN FUNCTIONS AND DIRECTORSHIPS HELD DURING 2005
THE MAIN FUNCTIONS AND DIRECTORSHIPS HELD BY CORPORATE OFFICERS AT THE DATE OF FILING WERE AS FOLLOWS:
SUPERVISORY BOARD
Thierry Peugeot Chairman of the Supervisory Board of PSA Peugeot Citroën
First elected to the Supervisory Board: Other directorships as of December 31, 2005: December 19, 2002 Vice-Chairman of Établissements Peugeot Frères. Current term ends: 2010 Member of the Board of Société Foncière, Financière et de Participations – FFP, LFPF – La Française de Participations Financières, Société Anonyme de Born August 19, 1957 Participations – SAPAR, Immeubles et Participations de l’Est, Faurecia, Chairman of the Supervisory Board Compagnie Industrielle de Delle, Air Liquide. Chairman of the Compensation Permanent representative of Compagnie Industrielle de Delle on the Board of LISI. and Appointments Committee Former directorships held in the past five years: Member of the Strategy Committee Chairman of Immeubles et Participation de l’Est. Office address: Member of the Board of AMC Promotion. PSA Peugeot Citroën Legal manager of SCI du Doubs. 75, avenue de la Grande-Armée Related expertise and professional experience: 75016 Paris Thierry Peugeot has served as Chief Executive Officer of a number of automotive companies and has managed companies outside France.
Number of Peugeot S.A. shares owned at December 31, 2005: 600.
Jean Boillot Vice-Chairman of the Supervisory Board of PSA Peugeot Citroën
First elected to the Supervisory Board: No other directorship held as of December 31, 2005. April 18, 1990 Former directorship held in the past five years: Current term ends: 2007 Member of the Board of Peugeot Motor Company Plc. Born February 6, 1926 Related expertise and professional experience: Vice-Chairman of the Supervisory Board Jean Boillot served as Chairman of Automobiles Peugeot until 1990. Member of the Strategy Committee Number of Peugeot S.A. shares owned at December 31, 2005: 150. Office address: PSA Peugeot Citroën 75, avenue de la Grande-Armée 75016 Paris
PSA Peugeot Citroën - 2005 reference document 23 03 CORPORATE GOVERNANCE Management and Administration - Main functions and directorships held during 2005
Jean-Philippe Peugeot Vice-Chairman of the Supervisory Board of PSA Peugeot Citroën Chairman of Établissements Peugeot Frères First elected to the Supervisory Board: May 16, 2001 Other directorships as of December 31, 2005: Current term ends: 2007 Chairman of the Board of Nutrition et Communication. Vice-Chairman of Société Foncière, Financière et de Participations – FFP. Born May 7, 1953 Member of the Board of LFPF – La Française de Participations Financières, Vice-Chairman of the Supervisory Board Immeubles et Participations de l’Est. Chairman of the Strategy Committee Former directorship held in the past five years: none.
Office address: Related expertise and professional experience: Établissements Peugeot Frères Jean-Philippe Peugeot managed an Automobiles Peugeot sales subsidiary for 75, avenue de la Grande-Armée eight years and Peugeot Parc Alliance for four years. 75016 Paris Number of Peugeot S.A. shares owned at December 31, 2005: 150.
Pierre Banzet Honorary professor of medicine Member of the Académie de médecine First elected to the Supervisory Board: June 23, 1994 No other directorship held as of December 31, 2005. Current term ends: 2011 Former directorship held in the past five years: none. Born July 18, 1929 Related expertise and professional experience: Member of the Supervisory Board Pierre Banzet has been a member of the Supervisory Board of PSA Peugeot Citroën since 1994. Office address: 3, rue de la Montagne Sainte Geneviève Number of Peugeot S.A. shares owned at December 31, 2005: 600. 75005 Paris
24 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 Management and Administration - Main functions and directorships held during 2005
Jean-Louis Dumas Managing general partner of Hermès International Other directorships as of December 31, 2005: First elected to the Supervisory Board: Chairman of the Board of Sport Soie, Hermès Greater China, Hermès Japan, May 16, 2001 Hermès Retail (Malaysia), La Montre Hermès. Current term ends: 2007 Vice-Chairman and member of the Supervisory Board of Gaulme. Legal Manager of Berfa, Emile Hermès, SCI Briand Villiers I, SCI Briand Villiers II, Born February 2, 1938 Société Immobilière du Faubourg Saint-Honoré – SIFAH, SCI Auger Hoche. Member of the Board of Compagnie des Cristalleries de Saint-Louis, Hermès Sellier, Member of the Supervisory Board L’Oréal, Hermès Greece, Hermès de Paris. Member of the Strategy Committee Auxiliary member of the Board of Boissy Mexico. Permanent representative of Hermès International in its capacity As Chairman of: Hermès Interactif, Motsch Georges V, Isamyol 8, Isamyol 9, Isamyol Office address: 10, Isamyol 11, Isamyol 12. Hermès International As Chairman of the Management Board of Compagnie Hermès de Participations. 24, rue Faubourg Saint-Honoré As legal manager of: SCI Boissy-les-Mûriers, SCI Boissy Nontron, SCI Edouard VII, Immauger, SCI Les Capucines. 75008 Paris Former directorships held in the past five years: Chairman of the Board of Hermès of Hawaii, Hermès of Paris, Hermtex, Hermès de Paris (Mexico), Hermès Canada, Hermès Suisse, Castille Investissements, Compagnie Hermès de Participations, Ex-Pili, Hermès Holdings US, Hermès Gestion Inc. Chairman and Chief Executive Officer of Castille Investissements, Compagnie Hermès de Participations, Sport-Soie, La Montre Hermès, Hermès Suisse, Ex-Pili, Hermès Holdings US, Hermès Gestion Inc. Chairman and member of the Management Committee of Holding Textile Hermès. Chairman of the Management Board of Compagnie Hermès de Participations. Chairman of the Supervisory Board of Hermès Prague. Legal manager of J.L.& Co, Hermès Ibérica, Hermès Korea, Hermès Korea Travel Retail, Boissy Mexico, John Lobb Japan, Hermès Italia, Saint-Honoré Chile. Member of the Board and legal representative of Hermès Korea, Hermès Korea Travel Retail. Member of the Board of Gaumont, Hermès Ibérica, Hermès Italia, Hermès Benelux, Hermès GB, J.L. & Co, Herlee, Saint-Honoré Chile, Hermès South East Asia, Hermès Australia, John Lobb Japan, Saint-Honoré Chile, Boissy Mexico, Hermès de Paris (Mexico), Saint-Honoré (Bangkok). Permanent representative of Hermès International in its capacity As Chairman of Isamyol 7, Maroquinerie de Belley, Maroquinerie des Ardennes. As member of the Board of Financière Saint-Eloi, John Lobb, Tissages Perrin, Tissages Verel, Héraklion. As legal manager of SCI Boissy Belley, SCI Boissy Bogny, SCI Boissy Saint-Honoré, SCI Les Jonquilles Soleil, SCI Honossy. Permanent representative of Castille Investissements: On the Board of Compagnie des Arts de la Table, Hermès Porcelaine Perigord, Ganterie de Saint-Julien. On the Management Board of Companie des Arts de la Table, Ganterie de Saint-Julien. Permanent representative of Sport Soie: On the Board of Ateliers A.S., Ganterie de Saint-Julien, Sin Rejac, Soficuir International, Manufacture de Seloncourt. On the Management Board of Manufacture de Seloncourt, Ganterie de Saint-Julien. Permanent representative of Holding Textile Hermès on the Board of Impression sur Etoffes du Grand-Lemps. Permanent representative of Compagnie Hermès de Participations: On the Board of Bagages & Cuirs. On the Management Board of Bagages & Cuirs. Member of the Supervisory Board of Hermès Prague, Leica Camera AG. Related expertise and professional experience: After joining Hermès in 1964, Jean-Louis Dumas was appointed Chief Executive Officer in 1971 and Chairman in 1978. Since 1995, he has been Managing general partner of Hermès International, as well as legal manager of Emile Hermès, a company that is another general partner in Hermès International. Number of Peugeot S.A. shares owned at December 31, 2005: 300.
PSA Peugeot Citroën - 2005 reference document 25 03 CORPORATE GOVERNANCE Management and Administration - Main functions and directorships held during 2005
Marc Friedel Consultant
First elected to the Supervisory Board: Other directorship as of December 31, 2005: June 26, 1996 Permanent representative of Sofinaction (CIC Group) on the Board of Société Current term ends: 2008 Nancéienne Varin-Bernier (SNVB).
Born July 21, 1948 Former directorships held in the past five years: Member of the Supervisory Board of Presses Universitaires de France. Member of the Supervisory Board Vice-Chairman of the Board of Librairie Ernest Flammarion. Chairman of the Finance Committee Related expertise and professional experience: Office address: From 1989 to 1999, Marc Friedel served as Chairman and Chief Executive Officer 14, rue Edgar Faure of Berger-Levrault, a company listed on the Paris Bourse. 75015 Paris Number of Peugeot S.A. shares owned at December 31, 2005: 150.
Jean-Louis Masurel Chairman of Arcos Investissement
First elected to the Supervisory Board: Other directorships as of December 31, 2005: August 27, 1987 Chairman of the Board of Sogetel (a subsidiary of Société des Bains de Mer – Current term ends: 2011 Monaco). Vice-Chairman of the Supervisory Board of Oudart S.A. Born September 18, 1940 Member of the Board of Société des Bains de Mer – Monaco, Oudart Gestion S.A., Member of the Supervisory Board Compagnie de Transports Financière et Immobilière – Cotrafi, Gondrand (a Cotrafi Member of the Finance Committee subsidiary), Banque J. Safra – Monaco. Former directorship held in the past five years: none Office address: Arcos Investissement Related expertise and professional experience: 10 A, rue de la Paix From 1983 to 1989, Jean-Louis Masurel served as Vice-Chairman and Chief 75002 Paris Executive Officer of Moët-Hennessy and later LVMH. Since 1995, he had been member of the Board and Chairman of the Finance Committee of Société des Bains de Mer – Monaco.
Number of Peugeot S.A. shares owned at December 31, 2005: 600.
François Michelin Chairman of Participation et Développement Industriels S.A. – Pardevi
First elected to the Supervisory Board: Other directorships as of December 31, 2005: October 21, 1992 Managing partner with unlimited responsibility of Compagnie Financière Current term ends: 2006 Michelin (Switzerland). Vice-Chairman of ANSA. Born June 15, 1926 Former directorships held in the past five years: Member of the Supervisory Board Managing general partner of Compagnie Générale des Établissements Michelin Member of the Strategy Committee (CGEM), Manufacture Française des Pneumatiques Michelin (MFPM). Member of the Compensation Partner with unlimited responsibility of Michelin Reifenwerke (MRW). and Appointments Committee Related expertise and professional experience: Office address: Under François Michelin’s leadership, Michelin rose from the world’s tenth largest Pardevi tire manufacturer to one of the top three. 23, place des Carmes Déchaux 63040 Clermont-Ferrand Number of Peugeot S.A. shares owned at December 31, 2005: 150.
26 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 Management and Administration - Main functions and directorships held during 2005
Jean-Paul Parayre Chairman of the Supervisory Board of Vallourec
First elected to the Supervisory Board: Other directorships as of December 31, 2005: December 11, 1984 Chairman of the Supervisory Board of Stena Maritime. Current term ends: 2011 Member of the Board of Bolloré Investissement, SNEF, Stena International BV. Member of the Steering Committee of V&M do Brasil. Born July 5, 1937 Former directorships held in the past five years: Member of the Supervisory Board Member of the Board of SDV Cameroun, Stena Line, Seabulk, Sea-invest France, Member of the Strategy Committee Carillion plc, Stena UK, SDV Congo. Member of Advisory Board of Candover. Office address: Vallourec Related expertise and professional experience: 130, rue de Silly Jean-Paul Parayre has held executive positions in a number of manufacturing and 92100 Boulogne-Billancourt service companies, including Chairman of the Managing Board of PSA Peugeot Citroën (1977-1984), Chief Executive Officer and later Chairman of Dumez (1984-1990), Vice-Chairman and Chief Executive Officer of Lyonnaise des Eaux Dumez (1990-1992) and Vice-Chairman and Chief Executive Officer of Bolloré Group (1994- 1999). He also served as Chairman and Chief Executive Officer of Saga (1996-1999).
Number of Peugeot S.A. shares owned at December 31, 2005: 11,396.
Marie-Hélène Roncoroni Vice-Chairman of Société Foncière, Financière et de Participations – FFP
First elected to the Supervisory Board: Other directorships as of December 31, 2005: June 2, 1999 Member of the Board of LFPF – La Française de Participations Financières, Current term ends: 2011 Société Anonyme de Participations – SAPAR, Établissements Peugeot Frères, Immeubles et Participations de l’Est. Born November 17, 1960 Permanent representative of Société Anonyme de Participation – Sapar on the Member of the Supervisory Board Board of Société des Immeubles de Franche-Comté, Immeubles de Franche- Member of the Finance Committee Comté on the Board of Société Anonyme Comtoise de Participations. Former directorship held in the past five years: Office address: Permanent representative of Comtoise de Participation on the Board of Sedim. FFP 75, avenue de la Grande-Armée Related expertise and professional experience: 75016 Paris Marie-Hélène Roncoroni began her career in a British/American audit firm, before holding positions in the PSA Peugeot Citroën corporate finance department for seven years.
Number of Peugeot S.A. shares owned at December 31, 2005: 150.
PSA Peugeot Citroën - 2005 reference document 27 03 CORPORATE GOVERNANCE Management and Administration - Main functions and directorships held during 2005
Ernest-Antoine Seillière Chairman of Wendel Investissement
First elected to the Supervisory Board: Other directorships as of December 31, 2005: June 22, 1994 Chairman of Legrand Holding, Société Lorraine de Participations Sidérurgiques – Current term ends: 2006 SLPS. Vice-Chairman of the Board of Cap Gemini. Born December 20, 1937 Chairman of the Supervisory Board of Oranje – Nassau Groep B.V. Member of the Supervisory Board Member of the Supervisory Board of Hermès International S.A. Member of the Strategy Committee Member of the Board of Editis. Chairman of the Compensation and Permanent representative of Sofiservice on the Board of Bureau Veritas. Appointments Committee Former directorships held in the past five years: Chairman and Chief Executive Officer of CGIP, Marine-Wendel. Office address: Wendel Investissement Related expertise and professional experience: 89, rue Taitbout Ernest-Antoine Seillière has held various positions as Chairman and Board member. 75009 Paris Number of Peugeot S.A. shares owned at December 31, 2005: 600.
Joseph F. Toot, Jr. Former Chief Executive Officer of The Timken Company
First elected to the Supervisory Board: Other directorships as of December 31, 2005: May 24, 2000 Member of the Board of Rockwell Automation, Rockwell Collins, The Timken Current term ends: 2006 Company.
Born June 13, 1935 Former directorship held in the past five years: none.
Member of the Supervisory Board Related expertise and professional experience: Joseph F. Toot is the former Chief Executive Officer of The Timken Company. Office address: The Timken Company Number of Peugeot S.A. shares owned at December 31, 2005: 150. 1835 Dueber Ave. SW P.O. Box 6928 Canton, OH 44706-0926 United States
28 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 Management and Administration - Main functions and directorships held during 2005
Bertrand Peugeot Former Vice-Chairman of the Supervisory Board of PSA Peugeot Citroën
First elected as Advisor Other directorship as of December 31, 2005: to the Supervisory Board: June 8, 1999 Member of the Board of Paris Loire. Current term ends: 2011 Former directorships held in the past five years: Born October 30, 1923 Member of the Board of Société Foncière, Financière et de Participations – FFP, Établissements Peugeot Frères, LFPF – La Française de Participations Financières. Advisor to the Supervisory Board Related expertise and professional experience: Office address: Bertrand Peugeot has held various positions as Chairman or member of the Board PSA Peugeot Citroën of PSA Peugeot Citroën subsidiaries, including Chairman of Cycles Peugeot until 75, avenue de la Grande-Armée 1987, Chairman of Peugeot Motocycles until 1989 and Vice-Chairman of the 75016 Paris Supervisory Board of PSA Peugeot Citroën from 1972 to 1999.
Number of Peugeot S.A. shares owned at December 31, 2005: 492.
Roland Peugeot Honorary Chairman of Établissements Peugeot Frères
First elected as Advisor Other directorships as of December 31, 2005: to the Supervisory Board: May 16, 2001 Honorary Chairman of Football Club Sochaux Montbéliard – FSCM. Current term ends: 2007 Permanent representative of Établissements Peugeot Frères on the Board of LFPF – La Française de Participations Financières. Born March 20, 1926 Former directorship held in the past five years: Advisor to the Supervisory Board Member of the Board of Société Foncière, Financière et de Participations – FFP.
Office address: Related expertise and professional experience: Établissements Peugeot Frères Roland Peugeot has held several positions as Chairman in the PSA Peugeot 75, avenue de la Grande-Armée Citroën Group; in particular he served as Chairman of the Supervisory Board 75016 Paris from 1972 to 1998. He was also a member of the Board of Automobiles Peugeot from 1982 to 1996.
Number of Peugeot S.A. shares owned at December 31, 2005: 20,041.
PSA Peugeot Citroën - 2005 reference document 29 03 CORPORATE GOVERNANCE Management and Administration - Main functions and directorships held during 2005
MANAGING BOARD Jean-Martin Folz Chairman of the Managing Board of PSA Peugeot Citroën
First appointed to the Managing Board: Other directorships as of December 31, 2005: May 15, 1997 Chairman of Automobiles Peugeot, Automobiles Citroën. Current term ends: 2008 Member of the Board of Banque PSA Finance, Peugeot Citroën Automobiles, Faurecia, Saint-Gobain, Solvay (Belgium). Born January 11, 1947 Former directorships held in the past five years: Chairman of the Managing Board Chairman of Banque PSA Finance, Peugeot Citroën Automobiles. Chairman of the Supervisory Board of Sommer Allibert. Office address: PSA Peugeot Citroën Related expertise and professional experience: 75, avenue de la Grande-Armée Before joining PSA Peugeot Citroën, Jean-Martin Folz held several management 75016 Paris positions at Rhone-Poulenc and Jeumont-Schneider and served as Chief Executive Officer of Péchiney and later Eridania-Beghin-Say.
Number of Peugeot S.A. shares owned at December 31, 2005: 0.
Frédéric Saint-Geours Member of the Managing Board Chief Executive Officer of Automobiles Peugeot First appointed to the Managing Board: July 1, 1998 Other directorships as of December 31, 2005: Current term ends: 2008 Chairman of the Board of Peugeot Motor Company Plc. Member of the Supervisory Board of Peugeot Deutschland GmbH. Born April 20, 1950 Member of the Board of Peugeot España. Member of the Managing Board Permanent representative of Automobiles Peugeot on the Board of Gefco, Banque PSA Finance.
Office address: Former directorship held in the past five years: none. Automobiles Peugeot 75, avenue de la Grande-Armée Related expertise and professional experience: 75016 Paris Frédéric Saint-Geours was Chief Financial Officer of the PSA Peugeot Citroën Group and, since 1990, Chief Operating Officer, then Chief Executive Officer of Automobiles Peugeot.
Number of Peugeot S.A. shares owned at December 31, 2005: 0.
30 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 Management and Administration - Main functions and directorships held during 2005
Claude Satinet Member of the Managing Board Chief Executive Officer of Automobiles Citroën First appointed to the Managing Board: July 1, 1998 Other directorships as of December 31, 2005: Current term ends: 2008 Chairman of Citer, Citroën Belux. Chairman of the Board of Citroën Danmark A/S, Citroën Italia, Citroën UK Ltd, Born July 19, 1944 Citroën (Suisse) S.A. Member of the Managing Board Chairman of the Board of Commissioners at Citroën Nederland B.V. Member of the Supervisory Board of Citroën Deutschland AG. Member of the Board of Automoviles Citroën España, Autotransporte Turistico Office address: Español S.A., Citroën Sverige AB. Automobiles Citroën Permanent representative of Automobiles Citroën in its capacity Immeuble Colisée III As Chairman of the Board of Automoveis Citroën. 12, rue Fructidor As member of the Board of Gefco, Banque PSA Finance. 75017 Paris Former directorship held in the past five years: none.
Related expertise and professional experience: Claude Satinet joined the PSA Peugeot Citroën Group in 1973 and served in a number of management positions in the Automobiles Citroën IT, finance and sales departments. He was appointed Chief Operating Officer of Automobiles Citroën in 1994 and has been Chief Executive Officer since 1998.
Number of Peugeot S.A. shares owned at December 31, 2005: 21,000.
PSA Peugeot Citroën - 2005 reference document 31 03 CORPORATE GOVERNANCE Management and Administration - Compensation of Corporate Officers and Executives in 2005
MANAGEMENT AND ADMINISTRATION COMPENSATION OF CORPORATE OFFICERS AND EXECUTIVES IN 2005
TOTAL COMPENSATION AND BENEFITS PAID IN 2005 Total direct or indirect compensation and benefits paid in 2005 by Group companies to members of the Supervisory Board and the Advisors was as follows:
Title Thierry Peugeot Chairman of the Supervisory Board €457,000 Jean Boillot Vice-Chairman of the Supervisory Board €44,860 Jean-Philippe Peugeot Vice-Chairman of the Supervisory Board €49,860 Pierre Banzet Member of the Supervisory Board €17,000 Jean-Louis Dumas Member of the Supervisory Board €22,000 Marc Friedel Member of the Supervisory Board €27,000 Jean-Louis Masurel Member of the Supervisory Board €22,000 François Michelin Member of the Supervisory Board €27,000 Jean-Paul Parayre Member of the Supervisory Board €22,000 Marie-Hélène Roncoroni Member of the Supervisory Board €22,000 Ernest-Antoine Seillière Member of the Supervisory Board €27,000 Joseph F. Toot Member of the Supervisory Board €17,000 Roland Peugeot Advisor €17,000 Bertrand Peugeot Advisor €17,000
In addition to the directors’ fees paid to all members of the Supervisory Board, the above compensation and benefits, paid by Peugeot S.A., comprise specific compensation paid to the Board’s Chairman and Vice-Chairmen, as well as to the Chairmen and members of the Strategy, Compensation and Appointments, and Finance Committees.
Thierry Peugeot has the use of a company car. He was paid €13,000 in compensation for his duties as director of Faurecia.
Total direct or indirect compensation and benefits paid in 2005 by Group companies to members of the Managing Board was as follows:
Allocated in respect to the year 2005 Paid during the year 2005 (*) Total Variable Total Variable compensation portion compensation portion Jean-Martin Folz, Chairman €1,650,840 €669,940 €1,769,070 €788,170 Frédéric Saint-Geours €752,560 €244,660 €795,740 €287,840 Claude Satinet €795,740 €287,840 €795,740 €287,840 (*) The variable portion related to the results for a given year is paid in the following quarter.
The above compensation includes the monetary value of a company car assigned to each member of the Managing Board.
In addition, Jean-Martin Folz was paid €21,000 in compensation for his duties as director of Faurecia.
32 PSA Peugeot Citroën - 2005 reference document CORPORATE GOVERNANCE 03 Management and Administration - Compensation of Corporate Officers and Executives in 2005
TRANSACTIONS WITH CORPORATE OFFICERS AND EXECUTIVES As of the date of publication of this Reference Document, no transactions have been undertaken with corporate officers or executives or any stockholder owning more than 5% of the Company’s capital stock. In particular, the Company has granted no loans or guarantees to members of the Supervisory Board or the Managing Board.
TRADING IN COMPANY SECURITIES BY CORPORATE OFFICERS IN 2005 In February, Jean-Paul Parayre, member of the Supervisory Board, purchased 2,300 Peugeot S.A. shares.
In May, Claude Satinet, member of the Managing Board, purchased 21,000 existing shares on the exercise of stock options and still held them at year-end.
Each of these transactions was disclosed to the Autorité des Marchés Financiers, in compliance with its rules and regulations.
OPTIONS TO PURCHASE EXISTING PEUGEOT S.A. SHARES GRANTED AND EXERCISED IN 2005 Options to purchase existing Peugeot S.A. shares granted to and exercised by members of the Managing Board in 2005 were as follows:
Options granted Options exercised Expiry Purchase Expiry Purchase Plan Number date price Plan Number date price Jean-Martin Folz, Chairman Aug. 23, 2005 75,000 Aug. 23, 2013 €52.37 - - - - Frédéric Saint-Geours Aug. 23, 2005 40,000 Aug. 23, 2013 €52.37 - - - - Claude Satinet Aug. 23, 2005 40,000 Aug. 23, 2013 €52.37 March 31, 1999 21,000 March 30, 2007 €20.83
Options to purchase existing Peugeot S.A. shares granted in 2005 by the eleven top employees other than corporate officers were as follows:
Plan Total options Expiry date Purchase price August 23, 2005 300,000 August 23, 2013 €52.37
Options to purchase existing Peugeot S.A. shares granted in prior years and exercised in 2005 by the ten top employees other than corporate officers were as follows:
Plan Total options Expiry date Purchase price Number of employees March 31, 1999 74,100 March 30, 2007 €20.83 11 October 5, 2000 67,800 October 4, 2008 €35.45 12 November 20, 2001 6,700 November 19, 2008 €46.86 3 August 21, 2002 3,000 August 20, 2009 €46.28 1
PSA Peugeot Citroën - 2005 reference document 33 34 PSA Peugeot Citroën - 2005 reference document 04 BUSINESS REVIEW
The Automobile Division 36
Banque PSA Finance 43
Gefco 45
Faurecia 47
Other Businesses 49
PSA Peugeot Citroën - 2005 reference document 35 04 BUSINESS REVIEW The Automobile Division
THE AUTOMOBILE DIVISION
A GLOBAL MARKET UP 3.2% Stable demand in Western Europe. rampant competition and sluggish economic growth. The Regained momentum in China. competitive environment in Europe worsened in the fourth quarter, which saw demand decline by a greater-than- Strong recovery in Latin America. expected 2.9%. In 2005, the global automobile market expanded by 3.2% to 62.8 million passenger cars and light commercial vehicles. In all, markets in Asia expanded 6.4%. Chinese demand regained momentum, growing by an estimated 25.8% over The market in Western Europe grew 0.2% over the year to the year to nearly 3.2 million passenger cars. 16,501,100 cars and light commercial vehicles, sustained by Automobile markets in Latin America recovered strongly, aggressive promotional campaigns across the region. The supported by sustained economic growth. The Brazilian Spanish market rose by a further 3.5% on the back of two market rose 9.5% while demand in Argentina was up 35.2%. years’ strong growth, while the French market was up 2.7%. Europe’s largest automobile market, Germany, held up well After peaking in early 2004, automobile markets in Central in a lackluster economic environment, with total registrations and Eastern Europe contracted sharply, with demand falling rising 1.7%. The United Kingdom market shrank 4.6%, 23.5% in Poland and declining 4.2% in Hungary. The Turkish however, due to lower demand among private buyers. The market remained strong but almost unchanged at nearly Italian market contracted 1.7% in an environment shaped by 700,000 units, 0.6% more than in 2004.
3,390,000 VEHICLES SOLD BY THE GROUP
Worldwide unit sales up 0.4%. Sales by Citroën rose 3.4% to 1,394,500 units, while Peugeot Contrasting performance between sales came to 1,995,500 units versus 2,027,200 in 2004. international markets and Western Europe. At Group level, this performance reflected a strong 8.3% increase in international markets and a 2.7% decline in Global sales by PSA Peugeot Citroën edged up 0.4% to Western European sales. 3,390,000 units from 3,375,300 in 2004.
36 PSA Peugeot Citroën - 2005 reference document BUSINESS REVIEW 04 The Automobile Division
A SLIGHT DECLINE IN MARKET SHARE IN EUROPE
European registrations down slightly. In all, PSA Peugeot Citroën remained Europe’s second largest An aggressive marketplace. manufacturer of cars and leading producer of light commercial vehicles. A commitment to favoring margins over volumes. In France, the Group’s car and light commercial vehicle Sustained pace of model replacements. registrations rose 1.7% to 785,000 for a 31.6% market share.
In Western Europe, Peugeot and Citroën car and light In Spain, the Group maintained its leadership position in cars commercial vehicle registrations totaled 2,355,000 units, with a market share of 20.6% and a slight increase in down 2.1%. This gave the Group a market share across the registrations, to 394,400 units. 18 European countries of 14.3% versus 14.6% in 2004. The decline reflected the Group’s commitment to favoring In the United Kingdom, the Group’s third largest market in margins over volumes in an aggressive marketplace, by volume, Peugeot and Citroën had a combined market share limiting sales in low-margin segments such as rental car of 10.2%. The two marques’ registrations contracted 9.4% to companies and corporate fleets. 283,300 units, tracking the decline in demand among private buyers, a segment targeted in preference to the lower-margin Market share exceeded 15% in six of the 17 Western fleet segment. European countries and stood between 8.4% and 13% in ten others. In Germany, market share edged up to 5.7%. In an Italian market shaped by a 1.7% fall-off in demand and fierce competition in the small car segment, the Group’s The Group remained Europe’s leading manufacturer of registrations contracted 11.1% to 240,500 units, representing light commercial vehicles, with 370,400 registrations and a market share of 9.9%. 18.5% of the market. In the passenger car segment, a total of 1,984,600 Peugeot and Citroën units were registered Sales in Germany returned to growth, rising 4.7% to 202,100 during the year, for a market share of 13.7%, versus 14.0% units and helping to widen market share to 5.7% from 5.6% in 2004. in 2004.
STRONG GROWTH IN SALES OUTSIDE WESTERN EUROPE
More than 1,000,000 units and 30% of sales Sales in Central and Eastern Europe contracted 4.8% to outside Western Europe. 209,700 units. In the six main Central European countries Significant increase in Latin America. (Poland, Hungary, the Czech Republic, Slovenia, Croatia and Slovakia) plus Turkey, the Group’s market share stood at 9.5% Strong growth in China. with 150,700 vehicles registered. Outside Western Europe, unit sales topped one million for the first time, as 1,029,500 vehicles were sold Sales in Russia rose 12.7% to 16,500 units. (738,000 Peugeots and 291,500 Citroëns). This represented In China, Dongfeng Peugeot Citroën Automobile returned an 8.3% increase for the year and 30.4% of total Group sales, to growth on the rising success of the Peugeot marque versus 28.2% in 2004 and 24.9% in 2004. (introduced with the July 2004 launch of the Peugeot 307 In Latin America, the recent launch of the Peugeot 307 and sedan) and the solid sales performance by Citroën models. Peugeot 206 SW and the introduction of new flexfuel engine Sales increased by a sharp 57.2% to 141,000 units from options helped drive a 28.3% increase in combined Peugeot 89,700 in 2004. and Citroën sales to 182,900 units. Lastly, CKD sales to the Group’s industrial partners in Iran In Brazil, sales were up 27.0% to 81,900 units, resulting in rose to 304,300 units from 292,500 the year before. a market share of 4.9%, versus 4.3% in 2004. In Argentina, sales expanded 47.5% to 52,800 units, giving the Group a 13.8% share of the market.
PSA Peugeot Citroën - 2005 reference document 37 04 BUSINESS REVIEW The Automobile Division
SUCCESSFUL MODELS AND TECHNOLOGIES
Successful launches of the Peugeot 107, The Citroën C2 Peugeot 407 Coupé and Citroën C1. Marketed since September 2003, the Citroën C2 sold Growth in Peugeot 407 and Citroën C4 sales. 126,200 units in 2005, and nearly 338,000 since launch. Firm resilience of the Peugeot 206 and Citroën The Citroën C3 Xsara Picasso. The Citroën C3 line-up was broadened with the introduction Widely recognized technologies. of an HDi version with a particulate filter and another Sustained worldwide sales in 2005 confirmed the recognized equipped with Stop&Start technology. A total of 306,300 appeal of the Group’s models and technologies. units were sold during the year. At the same time, the C3’s interior was restyled and the exterior was upgraded The Peugeot 107, Citroën C1, restyled Peugeot 307 and with a more expressive front end. Peugeot 407 Coupé were successfully introduced, meeting all their launch milestones and sales volumes targets. The Citroën C4 The Peugeot 1007 For Citroën, last year saw the successful rollout of the Citroën C4, which sold 237,100 units and helped to double the The innovative Peugeot 1007 compact MPV sold 53,800 units marque’s sales in the lower-medium sedan segment. after its launch in April. The Citroën Xsara Picasso The Peugeot 206 In a segment shaped by extensive renewals of competing Introduced in September 1998, the Peugeot 206 demons- models, the Citroën Xsara Picasso showed good resilience trated considerable resilience during the year, with sales with sales of 186,000 units. declining by only 15.3% to 676,500 units. It remained by far Europe’s best-selling compact. The Citroën C5 The Peugeot 307 Citroën C5 sales declined 9.3% to 88,800 units. Sales of the Peugeot 307 held up well, sustained by the The Citroën C1 and Peugeot 107 launch of the 307 Sedan in China, the start-up of production Introduced in June, the Peugeot 107 and Citroën C1 met their at the Buenos Aires plant for the Mercosur region and first-year targets, selling respectively 31,700 and 30,100 units. last June’s unveiling of the restyled “New 307”. A total of Full-year sales targets are 100,000 units each. 520,400 units were sold, down 10.5% on 2004. The Citroën Berlingo and Peugeot Partner The Peugeot 407 With combined sales of 313,800, the Citroën Berlingo Already available in sedan and SW versions, the Peugeot 407 and Peugeot Partner equaled the previous year’s record line was expanded by the year-end launch of the Coupé. performance. A total of 241,400 units were sold, making it Europe’s third best-selling car in its category. The Peugeot 807 and Citroën C8 Combined sales of the Peugeot 807 and Citroën C8 came The Peugeot 607 to 51,100 units versus 57,500 in 2004. Sales of the Peugeot 607 were up 12.1% for the year, to 19,100 registrations, thanks to restyling and the late-2004 launch of a new model equipped with a V6 HDi engine and particulate filter. Nearly 150,000 607s have been sold since the model was unveiled in 2000.
38 PSA Peugeot Citroën - 2005 reference document BUSINESS REVIEW 04 The Automobile Division
Light commercial vehicles of the European market for diesel-powered passenger cars.
In all, light commercial vehicle sales contracted by 6.2% to PSA Peugeot Citroën also remained the uncontested world 407,100 units, including 201,600 Peugeots, down 11.8%, and leader in diesel particulate filters (PF), which have already 205,500 Citroëns, up 0.1%. The decline was led by lower been fitted to 1,318,000 vehicles. Introduced as a world’s sales of the commercial version of the Peugeot 206 ahead first in May 2000 on the Peugeot 607, the PF has been of the Peugeot 207 launch and a slowdown in sales of the gradually extended across the Peugeot and Citroën model Peugeot Boxer and Citroën Jumper, scheduled to be replaced ranges. All are now equipped with the Octosquare version in 2006. introduced in 2004, which is entirely service-free. Diesel engines and the particulate filter The lane departure warning system European demand for diesel-powered vehicles rose by Introduced in 2004 on the Citroën C4 and C5, the lane another 2% in 2005, when diesels accounted for 49.3% of departure warning system is designed to avoid expressway all passenger cars sold in the region, compared with 48.3% accidents due to a lack of driver attention. in 2004 and 43.7% in 2003. If the system detects any drift across lane markings when The Group’s range of HDi high-pressure direct-injection the turn signal has not been activated, it alerts the driver by engines continued to be widely recognized as the market causing the seat to vibrate on the side the lane was crossed. benchmark. After being extended with the 1.6-liter 110hp HDi and the 2.0-liter 136hp HDi introduced in 2004, the diesel Emergency call system engine line-up was further enhanced with the 2.7-liter 200hp Introduced in France in 2003 and Germany in 2004, the HDi V6 launched on the Peugeot 607 and 407 Coupé. This emergency call system is now offered on almost every leadership in diesel powerplants was strengthened in late Peugeot and Citroën model equipped with the RT3 navigation 2005, when the Group unveiled two new energy-efficient and hands-free telephone package. PSA Peugeot Citroën is HDi 2.2-liter engines, one for upper mid-range passenger the only volume carmaker to offer, as standard, an emergency cars and the other for light commercial vehicles, which will be call service throughout the life of the car. The system launched in 2006. continued to be deployed in 2005, with service extended to Italy, Spain and the Benelux countries. More than In all, 1,710,600 diesel-powered vehicles were sold in 2005, 120,000 Peugeot and Citroën cars equipped with the system of which 1,528,300 were equipped with HDi engines. Diesels have been sold in the seven European countries where the accounted for 50.5% of the Group’s unit sales, versus 51.2% service is up and running. in 2004, while Peugeot and Citroën held a combined 15.8%
PSA Peugeot Citroën - 2005 reference document 39 04 BUSINESS REVIEW The Automobile Division
REDUCING COSTS
Sustained cost reduction: The cooperation strategy • continued implementation of the platform The cooperation strategy involves agreements with other strategy; carmakers to develop and manufacture shared products. • further ramp-up of the cooperation strategy; The agreements enable the partners to share R&D costs and capital expenditure and to leverage additional economies • improved competitiveness. of scale in production costs, while remaining independent. The platform strategy The cooperation strategy was actively pursued in 2005.
Since 2001, PSA Peugeot Citroën has introduced three In May, PSA Peugeot Citroën and Toyota Motor Corporation platforms corresponding to its small, lower mid-range and officially inaugurated their joint production facility in Kolin, uppermid-range/executive models. Czech Republic. Dedicated to producing the Citroën C1, The Group continued to implement the shared platform Peugeot 107 and Toyota Aygo on a shared platform, the new strategy in 2005. After the launch of the Peugeot 407 sedan plant resulted from successful cooperation that enabled the partners to combine their design, styling, manufacturing and and SW and the new Citroën C5 sedan and SW, the Rennes supplier relationship management capabilities, while plant, dedicated to platform 3, rolled out the Peugeot 407 supporting the cross-fertilization of their different corporate Coupé and the Citroën C6, introduced in early 2006. cultures, technologies and industrial practices. The Peugeot 1007 was launched on platform 1 at the Poissy Nearly 100,000 cars were rolled out after start-up of plant, which is preparing for the spring 2006 introduction of production in 2005, with nearly 300,000 expected to be the Peugeot 207. assembled in 2006 for both partners. Application of the platform concept is streamlining process In June, PSA Peugeot Citroën and BMW Group presented engineering by supporting a high percentage of shared parts the manufacturing details of their cooperative venture formed and sub-assemblies and the reuse of proven technological in 2002 to produce a new family of small gasoline engines solutions. Standardization of shared components forms for Peugeot, Citroën and Mini models. The major components the basis of a more rational manufacturing organization that will be machined for both partners at the Française de is having an impact on purchasing, the supply chain, Mécanique plant in Douvrin, France, then assembled at maintenance and assembly line capacity utilization. In this Douvrin for PSA Peugeot Citroën and at Hans Hall, England way, the platform strategy is helping to reduce production for BMW Group. The first production module, capable of costs, assembly times and capital expenditure, while making 2,500 engines a day, has been up and running since improving manufacturing flexibility in response to demand the end of 2005, with total output eventually rising to around for the models concerned. one million units a year. The product plan will continue to leverage this strategy, which In October, Ford Motor Company and PSA Peugeot Citroën reduces the diversity of parts and sub-assemblies, thereby strengthened their cooperation by announcing a fourth phase, enabling the Group to develop a wider range of vehicles faster involving the joint production of two new light, clean and and at lower cost. The Peugeot 207, developed on the same efficient 2.2-litre diesel engines for their light commercial platform 1 as the Citroën C3 and C2 and the Peugeot 1007, vehicle and executive car lines. The two engines feature a represents a significant step forward in this process. variety of technological innovations, including computer- In all, nearly 1,600,000 vehicles were built on the shared controlled adjustments for maximum efficiency during platforms last year. This figure is expected almost to double the life of the engine and a new Extreme Conventional by 2008, further driving down costs as economies of scale are Combustion System (ECCS), which reduces emissions at generated in shared parts and components. source while improving performance and running noise.
40 PSA Peugeot Citroën - 2005 reference document BUSINESS REVIEW 04 The Automobile Division
In addition, a large number of new cooperative agreements In July, an agreement was signed with Mitsubishi Motors were announced in 2005. concerning all-new SUVs. The agreement calls for the annual production in Japan of 30,000 units for PSA Peugeot Citroën’s In March, a cooperation agreement was signed with Fiat and needs, based on a new Mitsubishi platform. Unveiled at the Tofas to develop and manufacture small entry-level light 2007 Geneva Motor Show, the new SUVs will be distinctively commercial vehicles for the European market. styled for the Peugeot and Citroën versions and powered by To be produced at the Tofas plant in Bursa, Turkey, the new the Group’s latest generation HDi diesels with particulate vehicles will extend the current Fiat, Peugeot and Citroën filters. product ranges.
CAPITAL EXPENDITURE
Capital expenditure maintained The Group also invested in process engineering programs under €3 billion. for the DW12 HDi engine, whose output has been raised Preparing production start-ups. to 170hp from 136hp, and completed the final phase of investment for the new electronically controlled mechanical Sustained improvement in manufacturing gearbox at the Valenciennes plant. efficiency and completion of the new Slovakian plant. Expanding and optimizing the manufacturing base 2005 capital expenditure PSA Peugeot Citroën takes a measured approach to capital In 2005, the Group maintained its commitment to carefully expenditure and is beginning to reap the benefits of managing the capital outlays required in its carmaking rationalization programs undertaken in recent years. business, with gross capital expenditure in the Automobile Division totaling €2,370 million for the year, compared with In 2005, a portion of capital expenditure was dedicated to €2,314 million in 2004. pursuing actions to develop, renovate and upgrade manufacturing facilities. Vehicle, engine and gearbox production start-ups During the year, another €399 million was invested in the construction of the new plant in Trnava, Slovakia, which is Capital outlays in 2005 were primarily committed to preparing now in the start-up phase. The plant’s capacity, which is production start-ups of new models scheduled for launch in currently 300,000 units a year, will be increased to 450,000 2006, such as the Citroën C6 in Rennes, the Peugeot 207 in by a new extension scheduled to come on stream in 2010. Poissy, Madrid and Trnava, a new Citroën model and two new This new investment comes in addition to prior-year spending light commercial vehicles. Outside Western Europe, capital on the plant. With the Kolin plant inaugurated in May 2005 projects concerned the forthcoming launch of the Peugeot and operated in collaboration with Toyota, the Trnava facility 307 5-door sedan in the Mercosur region. will enable the Group to significantly improve manufacturing Most of the programs undertaken to develop and upgrade performance. Both plants have been designed for optimal mechanical sub-assembly production are nearly complete, efficiency and will help to enhance supply chain processes so that the Group is now equipped with modern, efficient across the Group in an enlarged Europe. manufacturing facilities for both diesel and gasoline engines. PSA Peugeot Citroën continued to implement programs At the Douvrin plant, capital work was completed on the new to upgrade the manufacturing base, with completion of production unit dedicated to the small gasoline engines being renovation work on the Poissy assembly line and start-up of built in cooperation with BMW. the new cutting and stamping lines in Mulhouse and Poissy.
PSA Peugeot Citroën - 2005 reference document 41 04 BUSINESS REVIEW The Automobile Division
The program to improve manufacturing productivity by €210 million was committed to Dong Feng Peugeot Citroën extending internal best practices across the organization was Automobiles, primarily to finance the start-up of local actively pursued in 2005, enabling the Group to close the gap production of the Peugeot 206 and the forthcoming launch with industry best practices in the area of production costs. of the Citroën C-Triomphe and another Citroën model. A Already, the program has cut average vehicle assembly time further €233 million was invested in joint ventures with Fiat, in the European plants by 24% between 2001 and 2005. The to prepare for the start-up of production of new light Group is also investing to improve working conditions, commercial vehicles. ergonomics and safety performance. Lastly, increasingly High capacity utilization wider use of the Hoshin process is driving major productivity gains by making operator tasks more efficient. According to the Harbour index, which measures a plant’s utilization based on hourly capacity, an average 16-hour Investments in joint ventures workday, and 235 workdays a year, assembly capacity In 2005, PSA Peugeot Citroën invested €486 million in joint utilization in the Group’s Western European plants was 102% ventures accounted for by the equity method. Of this amount, in 2005.
2006 SALES OUTLOOK An aggressive marketplace in Western Europe. During the year, PSA Peugeot Citroën will make further A more favorable outlook in the rest significant progress in renewing its model line-up, starting of the world. with launches of the Peugeot 207 in April and the Citroën C6 in May. When combined with the full-year impact of models A sustained Peugeot and Citroën model introduced in 2005 (Citroën C1, Peugeot 107, 1007 and offensive. 407 Coupé), the new products should enable the Group to Continued selective marketing to maintain go back in the marketing offensive and return to unit sales margin integrity. growth in Europe. Sales outside Western Europe are In 2006, the Western European automobile market should expected to continue to increase at the same fast pace as in remain flat and continue to be shaped by an aggressive the past two years, led by the launch of new Peugeot and promotional environment. Citroën models in the Mercosur countries and China.
42 PSA Peugeot Citroën - 2005 reference document BUSINESS REVIEW 04 Banque PSA Finance
BANQUE PSA FINANCE
2005 was another year of business growth, with outstanding - In Spain, the decision to abandon certain low-margin market loans and new lending to Peugeot and Citroën customers segments led to an expected reduction in volumes. both increasing by some 6%. The Bank’s robust performance During the year, the Bank continued to grow its international in last year’s favorable refinancing environment reflected business base, recording strong gains in Central Europe and its ongoing international expansion, the effectiveness of Latin America. its marketing strategy and a significant improvement in credit quality. - In Brazil and Argentina, the Bank leveraged the rapid growth in Peugeot and Citroën registrations, recording a sharp rise in new lending. BUSINESS REVIEW - In Central Europe, operations in Poland and the Czech In 2005, the Bank financed 848,300 new and used Peugeots Republic continued to grow, while in Hungary, the extremely and Citroëns, an increase of 2.0% over the previous year. competitive automobile market dampened the performance Retail loan originations rose 5.7% to €9,150 million. Growth of the Bank’s local subsidiary. was driven by an increase in average loan size due to enhancements to the Peugeot and Citroën model ranges and ONGOING INTERNATIONAL GROWTH by the development of combined financing and service offerings that generally include financing for a larger proportion While expanding the business base of existing subsidiaries, of the sticker price. the Bank also extended its international operations: - in Mexico, the local subsidiary celebrated its first full year In a year of slow growth in European automobile markets of operation by launching a wholesale financing offer for and aggressive competition, the Bank crossed a new Peugeot dealers; milestone in the drive to improve marketing performance, lifting its penetration of Peugeot and Citroën sales to 27.1% - in China, a company was set up with Bank of China to offer from 26.3% in 2004. financing for Peugeot and Citroën sales.
A total of 188,700 used vehicles were financed during the AN EFFECTIVE MARKETING STRATEGY year, down 1.9% compared with 2004. In 2005, the Bank continued to support the two marques’ Wholesale financing volume dipped 0.6% to 2,103,721 vehi- marketing strategies, in line with its strategic vision. As part cles; however, the higher vehicle prices resulting from of this commitment, it further broadened its range of finance enhancements to Peugeot and Citroën model ranges led products and services, so that carbuyers can choose just the to a 3.5% increase in the value of new wholesale lending. right solution, either in the dealership or from each marque’s Replacement parts financing continue to grow strongly, specialized organizations. rising 14%. Sales of service contracts expanded by a very satisfactory In Western Europe, the Bank held onto the strong positions 16.3%, including a strong showing in auto insurance, a market acquired in its various host countries and enjoyed sharply in which the Bank is aiming to gradually become a significant improved performance in the European countries where its player. The number of auto insurance policies sold during the position had eroded somewhat in 2004. year rose to over 171,000 from 37,200 in 2004. - The strongest gain was in the United Kingdom, where the integration of the Bank’s financing offers with those of the Peugeot and Citroën marques helped to lift the penetration IMPROVED CREDIT QUALITY OF THE LOAN rate to 28.6% from 22.2%. BOOK - In France, new lending continued to grow, attesting to the Cost of risk expressed as a percentage of average net loans, effectiveness of the Bank’s assertive marketing strategies stood at 0.12% in 2005 (0.25% based on a comparable and extensive range of solutions. calculation method), attesting to the Bank’s ability to reconcile - In Germany, targeted marketing initiatives led to market the competing demands of business growth and control over share gains. credit risks.
PSA Peugeot Citroën - 2005 reference document 43 04 BUSINESS REVIEW Banque PSA Finance
Overall, credit losses in the various countries remained at a The extension of the Bank’s geographic reach beyond its very satisfactory level, providing clear evidence of the quality traditional European markets helped to drive last year’s of risk selection processes and the effectiveness of collection growth in the loan book and should provide a sound base for procedures tailored to the situation of each individual debtor. future international growth.
FURTHER GROWTH IN THE LOAN BOOK BASEL II Outstanding loans rose by a strong 5.8% to €22,420 million, The Bank is preparing for implementation of the Basel II primarily reflecting last year’s increase in new lending. revised international capital framework, which will highlight even more than in the past the quality of its loan book and The retail loan book amounted to €16,853 million at the end its system of internal control. The Basel II project, which is of 2005, an increase of 6.9% over the year. This robust being overseen by a steering committee, involves setting up growth, which was similar to the previous year’s, was driven an internal rating system for the measurement of credit risks by the recent increase in loan originations, and particularly and deploying a Basel II-compliant operational risk tracking, the new gains enjoyed in 2005. measurement and management system. Outstanding wholesale financing at December 31, 2005 amounted to €5,564 million, an increase of 2.6% over the year-earlier figure.
44 PSA Peugeot Citroën - 2005 reference document BUSINESS REVIEW 04 Gefco
GEFCO
Gefco continued to grow its business in 2005, driving a 3.7% Citroën Automobile (TPCA) plant and operating the increase in revenue to €3,000 million. automotive parts hub in Kolin, Czech Republic. Following a call for bids, the new plant in Trnava, Slovakia selected Gefco Expansion was led by sustained implementation of a growth to manage its cross-dock facility, whose lean logistics strategy focused on industrial supply chain integration and systems decant inbound shipments into very small quantities international development. For manufacturers, Gefco delivers for delivery to workstations just as they are needed, thereby comprehensive inbound and outbound logistics solutions, eliminating parts storage on the assembly line. In addition to with a constant focus on optimizing domestic and cross- these developments, the year also saw advances by the new border flows. For the auto industry, these solutions include subsidiaries in Romania and Hungary, as well as the dedicated services, such as delayed differentiation, assembly, signing of new contracts in the region, in particular with just-in-sequence deliveries, new vehicle preparation and General Motors in Russia. Overall, sales and revenue in special inspections. Central and Eastern Europe was up 85% for the year. Looking forward, Gefco is committed to meeting three key In Latin America, revenue rose by around 60%, led by challenges by 2008: building its portfolio of customers outside increased business with large accounts in the automotive the Group, increasing its contribution to the Group’s and health industries and sharp growth in the automobile performance and expanding its international coverage. logistics business.
In China, a line was opened to provide daily service between FAST-GROWING INTERNATIONAL TRADE Shanghai and Wuhan to supply the Dongfeng Peugeot Citroën In 2005, Gefco’s business was shaped by the fast growth Automobile (DPCA) plant. The forward supplier facility already in international trade, especially between Asia, Europe, delivers 80% of locally sourced parts to the DPCA assembly and North and South America. In Europe, mergers and line. Following a competitive tender, Gefco was chosen acquisitions picked up in the logistics industry, even though to supply urgently needed spare parts to DPCA’s dealers euro-zone economies continued to suffer from sluggish in China. domestic demand.
Against this backdrop, Gefco saw further growth in its SHARP GROWTH IN SALES TO businesses. COMPANIES OUTSIDE THE GROUP Sales to manufacturing companies outside the Group AN INCREASINGLY INTERNATIONAL rose for the second straight year, increasing nearly 9% to REVENUE STREAM €1,157 million. Expansion is being focused on the automotive industry (carmakers, OEMs and motorcycle and motorbike In 2005, 60% of revenue growth was generated in new manufacturers), as well as the health and beauty care, high- geographic markets. tech, chemicals and consumer products sectors. The year’s In Central and Eastern Europe, Gefco supported the major successes with companies in the leading target development of PSA Peugeot Citroën manufacturing facilities, industries included a contract to supply 15 BMW plants in providing outbound logistics for the new Toyota Peugeot Germany, the United Kingdom and Austria.
PSA Peugeot Citroën - 2005 reference document 45 04 BUSINESS REVIEW Gefco
GLOBALIZING THE LOGISTICS A NEW CROSS-BUSINESS OPERATING AND TRANSPORT BUSINESSES STRUCTURE Despite a slowdown in 2005, the logistics platform business, To support the organization by core business, a customer- which accounts for around 20% of sales and revenue, focused cross-business structure was created in 2005 continued to expand faster than the transport business. with four units in charge of developing strategic markets: Outbound Automotive Logistics, Inbound Automotive The year saw ongoing initiatives to extend global coverage Logistics, PSA Production Logistics and Industrial Customer with the creation of new logistics platforms in Poland, Logistics. The new organization is supported by a company- Slovakia, the United Kingdom and France, the opening of new wide, integrated information system shared by all the units, automotive centers and the creation of a washing facility for businesses and host countries, which will be fully operational auto parts shipping containers. A number of major projects by the end of 2006. were launched, such as the start-up of platforms for Yamaha, for Plastic Omnium in Poissy (France) and for Visteon in Onnaing (France). Lastly, total logistics surface area was increased by 10 million square meters for automobile distribution and by 600,000 square meters for merchandise shipping.
In the transport business, the number of international lines was increased, with 40 lines added in Europe (raising the total to more than 500) and 20 short-sea automotive transport lines representing total capacity of 950,000 cars. The company continued to develop alternatives to overland transport during the year, with the opening of a second sea highway from Toulon to Rome. Lastly, the international network was strengthened with the creation of 15 new agencies worldwide.
46 PSA Peugeot Citroën - 2005 reference document BUSINESS REVIEW 04 Faurecia
FAURECIA
Faurecia confronted a particularly difficult business OTHER INTERIOR MODULES environment in 2005, shaped by higher steel and plastics In other interior modules, sales returned to growth in the prices and lower automobile production, especially in Europe, second half but were virtually flat for the full year, as the where output contracted 1% overall with a steeper decline decline in sales to French carmakers was offset by the launch among French carmakers at year-end. of other models such as the Ford Focus, the Mercedes-Benz Revenue increased slightly during the year, however, as the S-Class, the Volkswagen Passat and, in North America, the development of the manufacturing base in North America Chrysler PT Cruiser and the Volkswagen Jetta. Full-year sales and Asia helped to drive higher sales outside Europe. and revenue were also boosted by production start-ups in Europe of the Audi A6, the Citroën C4 and the Peugeot 407.
CAR SEATS The business’ margins reflected the major impact of higher In car seats, full-year sales and revenue were down a slight plastics prices, the late-year contraction in French demand, the 0.7%, reflecting a 2.4% increase in the first half and a 4.1% lagging profitability of growth drivers outside Europe that decline in the second. have yet to reach full ramp-up, the difficulty in passing on higher development costs generated by increasing The second-half decline was due to a significant drop in sales model fragmentation, and a number of production start-up to French carmakers, partially offset by the ramp-up in challenges related to the deployment of new technologies. BMW 3-Series output and the increase in business in North America, led by sales to General Motors for the The year saw the start-up of cockpit assembly for the Pontiac G6 and the start-up of sales to Chrysler. BMW 3-Series at the new plant in Leipzig, Germany, of new door panel and instrument panel production units in Over the full year, sales were also lifted by several other Changchun and Wuhan, China, and of a plant in Hlohovec, model launches and ramp-ups, including the Citroën C4, the Slovakia, that will also produce instrument panels. Opel Astra, the Peugeot 407 and the Renault Grand Scenic.
Business expansion was supported by the start-up of new EXHAUST SYSTEMS production plants. In Germany, the Leipzig plant is building Faurecia is the world’s second-largest supplier of exhaust seat modules for the BMW 3-Series, while in the United systems and the market leader in Europe. Sales and revenue States, a new plant in Cleveland is manufacturing seat frames. (excluding monoliths) increased by 14.4% in 2005 at constant Plants are also scheduled to come on stream in Anting, China, exchange rates and scope of consolidation. Business rose to produce seat frames and in Lozorno, Slovakia to assemble steadily throughout the year, impelled by a number of seats for Audi. Lastly, two new plants in Jelcz and Walbrzych, successful projects in Europe (launch of the Ford Focus and Poland, will produce foam and car seat components. ramp-up of Mercedes A-Class production) and major start- ups in North America (the Chevrolet Cobalt and the Ford Fusion, Freestyle and Explorer).
PSA Peugeot Citroën - 2005 reference document 47 04 BUSINESS REVIEW Faurecia
FRONT-ENDS INNOVATION Faurecia also confirmed its European leadership in automobile Gross research and development expenditure rose 5.6% to front-ends in 2005. Business remained firm throughout the €628 million, or 5.7% of sales and revenue, in 2005, primarily year, thanks to higher sales to BMW and Audi and production as a result of spending to support expansion outside Western start-up of the new Renault Clio. In addition, the new plant in Europe. Hlohovec, Slovakia, came on stream during the year to Additional resources were also allocated to the three research produce fascia. facilities in France, which comprise the worldwide seat frame R&D center, the worldwide complete seat R&D center and PRODUCTION EFFICIENCY the seat foam R&D center. These innovation capabilities To improve competitiveness, Faurecia continued to expand helped secure a contract with Chrysler in the United States its manufacturing base in 2005, with the start-up of nine for the production of door modules using the Faurecia- production facilities during the year. It also continued to patented integrated module concept. strengthen its innovation resources. Cost-reduction programs focused on improving industrial OUTLOOK FOR 2006 productivity, transferring a number of plants from Western Faurecia expects sales to continue expanding in the global Europe to low-cost countries and streamlining the organization. marketplace in 2006, while remaining sluggish in Europe. As part of this process, the company announced it would As a result, operating margin should improve from the low close the plant in Beaugency, France, employment and reached in second-half 2005. The company will also pursue redundancy plan at plants in Marles and Auchel, France, its programs to redeploy the production base at roughly the and Madrid, Spain, and reorganize its seat frame plants in same pace as in 2005. France.
48 PSA Peugeot Citroën - 2005 reference document BUSINESS REVIEW 04 Other Businesses
OTHER BUSINESSES
PEUGEOT MOTOCYCLES PROCESS CONCEPTION INGÉNIERIE (PCI) After contracting for three years in a row, the European Process Conception Ingénierie (PCI), which designs and scooter market expanded by 8.5% in 2005. Growth was led manufactures industrial equipment for assembly, stamping, by 125cc-and-over motorbikes, a segment in which Peugeot body-in-white and machining processes, reported sales and Motocycles’ presence was relatively modest before the revenue of €367 million in 2005, an increase of 17% over launch of the new Satelis range. the previous year.
Peugeot Motocycles reported sales of 131,100 units, a 16% Order intake amounted to €340 million. decline over the previous year. In the European market for under-50cc motorbikes, it retained its third place ranking, PEUGEOT CITROËN MOTEURS (PCM) with 19% of the market, compared to 21% in 2004. The decline, which was also felt by the company’s traditional Business slowed at Peugeot Citroën Moteurs in 2005, € competitors, was due to the arrival of new low-price scooters with sales and revenue totaling 57 million on sales of € manufactured in Asia. In the large-engine segment, market 14,518 engines, compared with 170 million on 64,607 engines share was unchanged at 2%. in 2004.
Following completion of the production facility upgrade Sales volumes are expected to increase beginning in 2007. program, 2006 will see major new advances in the renewal of the product portfolio, led by a family of new 125cc, 250cc and 500cc scooters currently in the launch phase. The first, the Satelis 125, will be rolled out in March, with the others to follow at a rapid pace throughout 2006 and 2007. These products will position Peugeot Motocycles in a more promising market segment, with scooters featuring such major innovations as ABS across the model line-up, a supercharger on the 125cc, and an automobile-style trunk.
Consolidated revenue totaled €206 million for the year.
PSA Peugeot Citroën - 2005 reference document 49 50 PSA Peugeot Citroën - 2005 reference document 05 CORPORATE POLICIES
Employee Relations Commitment 52
Employee Relations Indicators 65
Environmental Stewardship 82
Environmental Indicators – Automobile fuel consumption and emissions 89
Environmental Indicators – Production plant consumption and emissions 91
Corporate Social Responsibility 97
PSA Peugeot Citroën - 2005 reference document 51 05 CORPORATE POLICIES Employee Relations Commitment
EMPLOYEE RELATIONS COMMITMENT
PSA Peugeot Citroën employee relations and human in the area of corporate social responsibility. The year’s resources policies seek to align business performance and achievements reflected the sustained implementation of personal growth by fostering a sense of community built on policies shaped by four major principles: the strong shared values of open dialogue, solidarity and - ongoing, revitalized social dialogue in every country, involving respect for people in all their diversity. employees and employee representatives in their company’s The Group is committed to growth founded on socially- progress, responsible principles and practices, consistently applied in - active hiring policies to attract the finest talent and skills, every host country and business around the world. - a total compensation policy linked to corporate earnings, In recent years, this commitment has been the source of - flexible organizations adapted to the company’s challenges innovative employee relations practices in all of the host and a commitment to continuously improving working countries. 2005 was especially rich in this regard, notably conditions.
SUSTAINABLE INNOVATIONS IN EMPLOYEE RELATIONS PRACTICES
The Group’s commitment to respecting fundamental human Among the key objectives of the agreement are the following: rights and socially-responsible practices that conform to - Support and respect for human rights, in particular ethical standards and address the broader challenges of freedom of association, the right of workers to form and modern society has been formalized and embraced at the join the labor unions of their choice, the elimination of all highest levels of the organization. forms of forced and compulsory labor and the abolition of child labor. While the agreement sets the minimum age for A GLOBAL COMMITMENT TO SOCIAL access to employment at 18, it lowers this age to 16 in RESPONSIBILITY countries whose education systems have not achieved sufficient levels of development and calls for different types In 2005, negotiations were initiated concerning the Group’s of employment contracts to support young people with worldwide corporate social responsibility commitments. On vocational training while they are still in school. March 1, 2006, a global framework agreement on social - Avoid complicity in human rights abuses. responsibility was signed with the International Metalworkers’ PSA Peugeot Citroën condemns all infringements of respect Federation (IMF) and the European Metalworkers’ Federation for individual rights and dignity, verbal or physical abuse and (EMF), covering their nearly 85 member organizations. It will harassment. This type of behavior is liable to sanctions and also be signed by unions in the major host countries. specific measures have been drawn up in every country to Given the increasing globalization of the Group’s business base, prevent it. this initiative underscores a commitment to deploying best - Apply and promote best practices in human resources, human resources management practices in every subsidiary especially in the areas of social dialogue, safety, working around the world. The agreement also expresses the Group’s conditions and health, compensation, training, employment commitment to fundamental human rights and to requiring of women, recognition of skills and social protection. In similar commitments from suppliers. It further covers particular, the agreement calls for efforts to ensure that PSA Peugeot Citroën’s contribution to economic and social working conditions meet the highest international standards development wherever the Group does business by using local in every host country. A profit-sharing system linked to human resources to fill vacant positions whenever possible. company performance has also been set up and includes And lastly, under the terms of the agreement, the European all employees. Works Council will be expanded to become a Global Council, which will monitor the effective application of these measures.
52 PSA Peugeot Citroën - 2005 reference document CORPORATE POLICIES 05 Employee Relations Commitment
- Apply equal opportunity practices on a global scale. Internal and external control procedures have been This is an area where PSA Peugeot Citroën has been a implemented to ensure efficient application of these principles. pioneer in several countries in Western Europe, especially in promoting jobs for women and developing a diversity of SUPPORTING DIVERSITY AND EQUAL skills, with the signature of agreements with all of the labor OPPORTUNITY organizations in 2003 and 2004. In 2005, the Group demonstrated its commitment to diversity - Make respect for human rights a decisive criterion in and equal opportunity with a series of practical initiatives with the selection of suppliers. Suppliers, subcontractors, measurable results. All the measures called for in agreements industrial partners and dealers will be informed of the on diversity and social cohesion signed in 2004 in France and agreement’s human rights principles to ensure compliance. Argentina were implemented. These agreements were - Fight against all forms of corruption.The Group has agreed expanded in 2005 with the signature of agreements in Spain to raise employee awareness of this issue through various to protect women who are victims of spousal abuse and in communications campaigns and/or training programs. France to develop career opportunities for the disabled. - Expand the European Works Council to include labor union representatives from all subsidiaries with over In addition to complying with legislation, PSA Peugeot Citroën 500 employees worldwide.This Council, which includes applies and promotes best practices in the fight against the Group Works Council as provided for by French racism, xenophobia, homophobia and, more generally, any legislation, was extended in 2003 to all the countries in the and all forms of intolerance towards people who are different. European economic space and in 2006 to the Mercosur region, with representatives from Argentina and Brazil. The Ensuring equal opportunity and treatment expanded European Works Council will provide a forum for in hiring and career development dialogue and discussion concerning the Group’s international More than a year after the signature of the agreement in strategy and development. France, results in every area are in line with objectives and commitments. Immediately applicable to the entire consolidated Automobile Division, the framework agreement is being extended to the Of the 932 engineers and managers hired in 2005, 232 were finance, transportation and logistics divisions in all the Group’s women, 61 were non-French nationals, 63 were visible host countries. It will be implemented through national action minorities and 15 came from underprivileged urban areas. plans defined in cooperation with labor organizations and These results reflect extensive programs to heighten reviewed every three years to monitor effective application. awareness and initiatives in the area of hiring, including These commitments are an extension of the Group’s support simulation-based hiring procedures, a new best practices for the United Nations Global Compact. On April 9, 2003, it guide for recruiters, testing by France’s anti-discrimination pledged to adhere to and promote the Compact’s ten oversight agency and trials using anonymous résumés. principles, which are based on the Universal Declaration of In line with the commitments made in the agreement, Human Rights, the International Labor Organization’s a system was introduced to statistically track career Declaration on Fundamental Principles and Rights at Work, development and compensation. The resulting data provide the Rio Declaration on Environment and Development and efficient indicators both for managers and for the equal the United Nations Convention Against Corruption. opportunity and diversity committees set up on the sites and These commitments are also in line with the Group’s Ethics at corporate level. For operators and supervisors, statistics Charter, which has been distributed to all employees in show that at the end of 2005, individual raises and promotions French, English, Spanish, Portuguese, German and Chinese were awarded in at least the same proportions as the different versions. It provides a common set of fundamental reference categories tracked across the organization, e.g. women, non- points that every executive, manager and employee must French nationals, employees over 50, disabled people, etc. refer to and comply with in all circumstances. Every new For the second year in a row, women managers received employee attends a course on the Charter as part of his or more raises than their male counterparts, with 57.3% of her orientation program. Training in human rights issues is women managers receiving above-average raises, compared also provided for employee representatives, managers and with 49.5% of male managers. security officers as part of the diversity and equal opportunity agreements.
PSA Peugeot Citroën - 2005 reference document 53 05 CORPORATE POLICIES Employee Relations Commitment
The joint labor-management diversity and equality research concluded agreements in 2005 to promote the employment group, comprising representatives of the six signature unions, of women and improve equal opportunity. met on April 27 and October 14, 2005. It is tasked with overseeing effective application of the principles and Offering the disabled fulfilling employment measures defined in the agreement and ensuring that opportunities objectives are achieved. It can also make further proposals In France, an agreement on the social and professional for actions and is supported, on each site, by local equality integration of disabled persons was signed with five labor and diversity committees. organizations on September 22, 2005.
The agreement also included major provisions concerning It extended prior agreements that supported the development communication and training to prevent discrimination and of policies to help disabled employees retain their jobs, improve management of diversity. Nearly 8,000 hours of prevent disabilities and enable the disabled to play a training were provided in 2005 and 50,000 copies of the first productive role in the workplace. The new agreement is also brochure addressing these issues were distributed to part of broader initiatives to promote diversity and equal employees. opportunity within the organization.
Making gender equality a corporate strength In particular, it is focused on the following objectives: Two years after the signature of the French agreement on - Encourage the integration and recognition of disabled people the employment of women and gender equality, the tracking in the Group, with the aim of having a percentage of disabled committee met several times to review the continuous employees that exceeds legal obligations. progress being made in this area. - Enable disabled employees to retain their jobs by adapting workstations and the way work is organized. The percentage of women employees continues to rise, - Provide support and guarantees to beneficiaries of the reaching 41,000 across the Group, or 19.8% of the workforce, agreement, concerning career development, training compared with 17.6% in 2002. The steady gains are being driven opportunities, access to facilities and work areas and the by affirmative action policies for women, who now represent organization of working hours. 25% of new hires worldwide. In France, women accounted for - Pursue initiatives to support disabled people who are not Group 25.6% of new hires in 2005, compared with just 11.5% in 1999. employees by offering internships and work-study programs Another essential component of the Group’s human and by pursing partnerships with sheltered workshops. resources strategy is a commitment to equal pay and - Prevent disabilities on the job by guaranteeing workplace identical career paths for both men and women, so that raises safety, continuing to improve workstation ergonomics and are awarded in the same proportions as the percentage of pursuing workplace health initiatives. men and women in the workforce and promotions are offered in the same proportions as the percentage of men and These policies are being consistently and uniformly applied women in a given job category. As in 2003 and 2004, in every host country, and today, nearly 6,300 people with in 2005, the average monthly salary in every job category disabilities are using their skills and dedication to drive the was the same for men and women with the same grade or Group’s performance around the world. job classification. In the Automobile Division in France, including sheltered In addition, a number of innovative employee services have workers under contract, 9.5% of employees are classified been introduced or tested to assist employees in achieving as handicapped, compared with the 6% national rate that a better work-life balance, such as flexible working hours, businesses are encouraged to reach. on-site daycare centers and guides to maternity benefits. On December 22, 2005, a partnership agreement was signed In January 2005, the Group’s commitment to gender equality with Argentina’s Labor Ministry to ensure that the Group’s earned it France’s first “Equal Opportunity Employer” label, recent-year advances in integrating disabled people will be created by the Ministry of Gender and Professional Equality. sustainable. The Ministry also presented PSA Peugeot Citroën These Automobile Division practices have been extended to Argentina with a special award, officially recognizing the Banque PSA Finance and Peugeot Motocycles, both of which Company’s commitment to workplace diversity.
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A FURTHER IMPROVEMENT FULFILLING CAREER DEVELOPMENT IN WORKPLACE SAFETY IN 2005 ASPIRATIONS WITH A NEW APPROACH PSA Peugeot Citroën believes that the only acceptable target TO MANAGING SKILLS is an accident-free workplace in every host country and that The in-depth, global study on “Human Resources Perfor- one of its most fundamental responsibilities is to guarantee mance” conducted in 2004 by the Human Resources and the physical health and safety of its employees. This is why Employee Relations Department led to the introduction in the Group nurtures a strong safety culture across the 2005 of a career management process based on job tracks, organization, with a number of strict safety programs designed to identify the skills required for the Group’s undertaken in recent years. development and to meet employee expectations for more personalized career management. This forward-looking skills The lost-time incident frequency rate stood at 3.11 in 2005, mapping system enables the Group to anticipate the for a target of 3.70. The rate covers manufacturing, service and expertise required as markets, technologies and the R&D operations worldwide, as well as, for the first time, competitive landscape change. dealerships in France. It marks a significant improvement for the third year in a row, with a 24% decline in 2005 alone. Job tracks are “skills communities” characterized by the methods, tools and languages common to each job in a given These excellent results reflect a focused process underpinned track. They are designed to be cross-functional and global, by safety policies that are clearly articulated by senior stretching horizontally across operations and countries. There management and designed to encourage active involvement are three fundamental advantages to this approach: of stakeholders across the organization and to shift workplace - The Group is able to prevent any shortfall in skills and ensure safety management towards preventive measures. All an optimum match between employees and jobs, while of these initiatives are being implemented as part of an sustaining employee motivation and encouraging the integrated Workplace Safety Management System. emergence of leadership. In 2005, prevention and safety improvement actions were - Managers are able to propose clear career paths to their extended to most Peugeot and Citroën sales subsidiaries in teams, train them using the right resources, plan for future France as well as to all of the international sites, driving a needs, and ensure the availability of skilled people to fill key 50% decline in the number of accidents at the French sales positions at their units. units during the year. - Employees are able to take control of their personal career Most of the host countries also reported improvements, with itineraries thanks to better visibility of the skills required by the Buenos Aires facility, for example, turning in the best the Group and their ability to offer or acquire them. performance of any assembly plant, with a 56% decline in 22 job tracks have been identified, each overseen by high- the lost-time frequency rate to a record 1.30. level line managers. Of these, 18 were launched in 2005, Prevention initiatives in the Gefco logistics division are being with the others set to come on stream in first-quarter 2006. deployed by a two-tiered organization: Another development in 2005 was the signature in France of - the corporate organization is dedicated to improving working an innovative agreement on career development for production conditions, health and safety and to introducing prevention operators, so that their job opportunities are also based on standards, their skills and expertise. The agreement is intended to adapt - country organizations are responsible for applying corporate management principles to changing production processes prevention policies. Safety officers have also been appointed and organizations, while clarifying the conditions and criteria in the agencies. for career advancement. It also provides a framework for the In 2005, PSA Peugeot Citroën achieved one of the best safety Group to support the development of the 21,000 operators records in the metalworking industry, whose lost-time hired in France over the past five years, in particular by frequency rate stood at 27.7 in 2004. addressing the expectations of younger employees.
The 2006 lost-time incident frequency rate target has been The agreement encourages career development by setting set at 3.7, including all of the marketing subsidiaries clear and objective rules. The skills that must be mastered worldwide. for each grade are described in reference guidelines for each job and validated individually by the employee’s manager in actual working situations.
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Initiatives in 2006 will examine possible broadening of this curriculum was created for experienced managers, orientation approach to include skilled workers, clerical staff, technicians and programs for new managers were revamped and supervisor supervisors, as well as its extension to operations outside France. training was expanded. Management training helps to develop an outward-facing mindset and instill the skills A MORE EXTENSIVE TRAINING POLICY needed to steward change and demonstrate leadership at every level of the organization. At a time of fast-paced change in the skills required by the automobile industry, the Group is revamping its training process with the goal of maintaining each employee’s NEW INITIATIVES TO TRAIN YOUNG employability and increasing the training budget. This fresh PEOPLE AND BRING THEM INTO momentum is strengthening the Group’s role in addressing THE WORKFORCE its social responsibilities and promoting diversity. Bringing young people into the workplace is a serious social issue in all of the Group’s host countries. Because it Average hours of training per employee in 2005 is keenly aware of the need to offer young people (Consolidated Group, excluding Faurecia) job opportunities to help them gain work experience, Rest of Outside Average PSA Peugeot Citroën has created orientation courses France Europe Europe worldwide and work/study programs leading to certification.
21.7 40.2 69.7 28.7 In France, after ratifying a new apprenticeship charter applicable to large companies, on September 29, 2005, the Agreement on career-long learning Group signed a national framework agreement with the On April 15, 2005, PSA Peugeot Citroën management signed National Employment Agency and the Ministry of Labor covering an agreement with all of its trade unions concerning career-long the hiring of young people under a special skills acquisition career training opportunities, with five main objectives: contract. Nearly 2,300 young people participated in Group - help young people in their initial job experience, work/study programs during the year, while 3,000 apprentices - help employees adjust to changing techniques, job skills worked in the two marques’ dealerships and customer service and organizations, centers. The goal is to double the number of apprentices in - enable employees to directly shape their career itineraries, the Automobile Division in France between 2004 and 2009. At the same time, more than 140 integration programs were - encourage the transfer of knowledge between generations, implemented in 2005 for disadvantaged people who are often - ensure equal opportunity access to training. excluded from the workplace.
A revitalized training program in 2005 Work/study programs encompass all levels of training, The training program has been revised to respond to integrating young people with or without prior qualifications. employee needs under the new organization by job tracks In 2005, 44% of the apprentices were working towards and skills clusters. The new curricula enable employees to high-school level vocational degrees. acquire the capabilities needed for their work, with access Regardless of their level, however, the work/study programs to all the courses related to their job track. Starting in 2006, enable apprentices to accelerate their skills development. they will also be able to attend programs to acquire related Based on mentoring, they offer young people a practical skills from other job tracks. pathway to acquiring both classroom knowledge and the Some 4.4 million hours of training were provided in 2005, skills they need for job proficiency. a nearly 13% increase from 3.9 million in 2004. In the In addition to training programs, PSA Peugeot Citroën Automobile Division (excluding marketing subsidiaries), emphasizes formal recognition of skills through professional 451 employees earned professional certification in metal- certification. working during the year. Wherever feasible, the Group works with local institutions Outward-facing management training to develop curricula to teach the skills required by the PSA Peugeot Citroën fosters a management culture aligned automobile industry. A good example is Algeria, where with its business environment that is a source of competitive Peugeot has teamed with the Vocational Training Ministry advantage in the global marketplace. The importance of and France’s Ministry of Education to lay the groundwork this culture was reaffirmed in 2005, when a new training for a national automotive vocational degree.
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In Poland, Gefco has signed a large number of agreements In Brazil, Peugeot Citroën Brazil and the National Education with higher education establishments, such as the Warsaw System for Industry (SENAI) renewed a training cooperation and Wroclaw Technical Academies, the Universities of agreement first signed in 1999, extending it through May Warsaw and Poznan, and the International School of Transport 2009. With support from PSA Peugeot Citroën, SENAI and Logistics in Wroclaw. facilities will be used to provide training in automotive skills for employees of the Porto Real production center.
EMPLOYEE RELATIONS POLICIES INSPIRED BY FOUR STRATEGIC PRINCIPLES
Throughout 2005, the Group pursued its long-standing The global corporate social responsibility agreement signed commitment to the four strategic principles that underpin on March 1, 2006, reiterates these fundamental principles – positive employee relations. that PSA Peugeot Citroën is open to union activities; that it recognizes, everywhere in the world, the legitimacy of unions SOCIAL DIALOGUE CAPABLE OF DRIVING and the right of employees to form the labor organizations of their LASTING INNOVATION choice; and that it is committed to respecting the independence and pluralism of trade unions (ILO Agreement no. 87). Supporting open dialogue with employee Recognizing unions and collective bargaining, promoting equal representatives opportunity, nurturing human capital and making workplace Each year, negotiations cover a wide variety of issues, leading safety and working conditions a top priority are all fundamental to formal agreements with employee representatives. components in PSA Peugeot Citroën’s strategy to secure its More than 50 agreements were signed worldwide in sustainable growth and enhance its competitiveness. the Automobile Division in 2005, including 12 in France. European employees are represented by the European Works They primarily concerned compensation, skills and career Council set up in 1996, whose role, resources and European development for production workers, payment of short-time membership were expanded by the October 23, 2003, work and its determination on a multi-annual basis, career- agreement. PSA Peugeot Citroën’s global framework long training, introduction of a new defined contribution agreement on corporate social responsibility calls for further retirement plan, healthcare coverage, social and professional expansion of the European Works Council to include labor integration of disabled people, accounting of actual hours representatives from Argentina and Brazil. worked, organization of working hours and vacation leave.
Social dialogue policies are based on relations with inde- Informing and listening to employees pendent labor organizations. In every country, employees Employees are provided with a wide variety of detailed who work in production facilities, service units and major information through corporate newsletters, posters, intranet dealerships are represented by unions or by representatives sites and other media. Brochures are regularly distributed to elected by employees. employees to keep them informed of the Group’s human resources policies. Examples include a brochure to raise Agreements on the exercise of union rights define specific awareness of the importance of respecting diversity and measures to guarantee the absence of any anti-union differences, and another on the integration of disabled people. discrimination. They provide unions with the resources to carry out their role in complete independence. The Internal opinion surveys have been carried out in the Automobile basic principles of social dialogue were established in France Division in France every year since 1998. In 2005, when by a June 2001 agreement on union rights that was signed by 2,800 employees were interviewed by the TNS Sofrès public all the labor organizations. An agreement on the exercise of opinion firm, the findings highlighted the Group’s good working union activities and worker representation was signed in Spain environment, with employees responding positively to questions in January 2004 by all the unions. Several agreements have about their work, social dialogue, diversity policy and the Group also been signed in Argentina on the structuring of the relations in general. They also felt that their management was aligned between the company and the union (notably agreements with their concerns. In recent years, the level of satisfaction on union rights dated March 30, 2001, and July 18, 2002). has been higher than the Sofrès global and French benchmarks.
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Encouraging employee participation - team efforts, such as improvement groups and 5S initiatives, PSA Peugeot Citroën believes that employees are an - cross-functional projects, such as improvement-sharing invaluable source of potential expertise, experience, initiative, agreements and partnership contracts. progress, innovative ideas and just plain common sense. All operators, including those with fixed-term or temporary A number of participatory management programs are contracts, are actively encouraged to submit comments and therefore in place to encourage individuals and teams to ideas for improvement as part of the Déclic system, which contribute to the continuous improvement in the Group’s seeks to remedy a defined issue with solutions that can be working conditions and organizational practices. efficiently replicated to drive sustainable progress. In 2005, As part of this commitment, production sites worldwide are in the Automobile Division plants in France, more than organized into Basic Production Units, in order to drive 240,000 Déclic suggestions were submitted and 85% of efficiency gains by: the total average production workforce submitted at least - stimulating and leveraging every team member’s full one idea. Implementation of suggestions resulted in over € potential, 5.8 million in awards to participating employees. - enabling people to understand the purpose of their jobs, their team’s mission and their contribution to objectives, ACTIVE HIRING POLICIES TO ATTRACT - enhancing individual and team capabilities, to improve the THE FINEST TALENT AND SKILLS BPU’s ability to carry out its mission, Dynamic job creation - consistently expressing, on the job, every day, PSA Peugeot Citroën’s strategic vision for its manufacturing PSA Peugeot Citroën’s growth and innovation strategy operations. has led to the creation of many new jobs around the world.
The BPU is a team with a single manager, a mission and a The Group currently has 208,500 employees worldwide. mode of operation based on structured participative Growth in the workforce has meant the hiring of nearly management practices and direct interchange with partners. 100,000 people under permanent contracts over the past six years. Close to 15,700 new employees were hired in 2005, To meet its objectives, the BPU prepares a List of resulting in the net creation of nearly 1,500 new jobs Improvement Actions whenever difficulties are encountered. worldwide. These actions can take a variety of forms: - individual initiatives, like the “Déclic” suggestion system or a personal project,
Employees by Business and Region at December 31, 2005 France Rest of Europe Outside Europe Total Automobile Division 99,490 33,885 6,680 140,055 Banque PSA Finance 880 1,415 75 2,370 Gefco 5,285 3,625 460 9,370 Faurecia 18,800 25,225 10,930 54,955 Other businesses 1,605 40 105 1,750 Total 126,060 64,190 18,250 208,500
An almost 26% increase in the workforce The educational background of people hired is extremely over the last six years diverse, since the Group offers job opportunities both to The total number of employees has increased by nearly 26% people with considerable educational qualifications (18.9% in the past six years. have completed five years of higher education) and to those who have little or no professional qualifications. In 2005 The workforce is increasingly international, with more than in France, for example, the Automobile Division recruited 82,440 people, or 40% of the total, working outside France nearly 640 people without degrees, representing 21.4% of at the end of 2005. This represents a 190% increase from new hires under permanent contracts. just 28,400 in 1998. There are now employees of 100 different nationalities.
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Net jobs created, 2001-2005 Excluding acquisitions and disposals, close to 30,000 jobs have been created over the past six years, of which nearly 15,500 in the Automobile Division.
Net jobs created, 2001-2005 Workforce at Net jobs added through Workforce at December 31, 1999 acquisitions, less disposals Net jobs created December 31, 2005 Worldwide except France 50,330 11,405 20,710 82,445 France 115,465 1,800 8,790 126,055 Worldwide 165,795 13,205 29,500 208,500
An evolving job category structure the hiring of temporary workers in France. Regular audits The job category structure has changed over the past six are carried out to ensure compliance across the organization. years. Although the aggregate number of operators has Continuously enhancing skills and nurturing remained stable, the percentage of operators in the workforce human capital has declined from 61.2% in 1999 to 56.7% in 2005, while the proportion of managers has risen from 11.3% to 16.5%. In 2005, the Employee Relations and Human Resources The percentage of technicians and administrative staff has Department implemented a new approach to individual career remained stable at 27%. management, to deliver more efficient responses to the expectations of its internal customers. Human resources Responsibly managing fixed-term contracts managers have been replaced by “career advisors”, to to meet temporary surges in demand underscore their dual role in advising both management, in Average number of temporary workers managing their teams, and employees, in pursuing their per month Automobile Division France personal and professional growth. This initiative has also led to the introduction of a career management process based 10,459 10,499 on job tracks that makes it possible to identify needs within each of the main skills clusters and meet employee expectations for more individualized career management. 7,205 6,677 Actively-managed, open-ended careers 4,631 The vast array of jobs available within the Group provides employees with attractive paths to career advancement. More than 5,000 managers – nearly one in four – changed jobs in 2005. This type of mobility encourages the development of new capabilities and offers employees the opportunity to Dec. 2001 Dec. 2002 Dec. 2003 Dec. 2004 Dec. 2005 advance in new positions. Around 17% of employees are promoted or change job categories every year, while 30% of Fixed-term employment contracts are used to adjust the managers have come up through the ranks. workforce to meet fluctuations in demand, manage new In 2005, access to job openings posted on the Intranet by product launches, prepare for capital programs and the related the Employee Relations and Human Resources Department productivity gains, replace employees taking unexpected was extended to all employees across the Group, in particular leave, and respond to industrial events, like the start-up of by setting up terminals in several Automobile Division a new workshop. production units for employees without computer access. Over the past four years, however, the Group has undertaken This wider access to job openings is contributing to equal to reduce the use of temporary workers. In 2003, a charter was opportunity in job mobility, thereby opening channels to signed with seven temporary employment agencies to govern personal advancement.
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“Careers committees” have also been set up to identify COMPENSATION BASED ON individual skills and potential for development and to help PERFORMANCE AND FAIRNESS optimize career itineraries and future staffing needs across the In every host country, compensation policies are based on organization. offering compensation that is competitive with market practices Managing skills and human resources and giving employees a stake in the value they help to create. internationally Compensation policy is guided by five principles: The Group focuses on developing local skills first, assigning - offer compensation that is competitive in terms of market expatriates only on an as-needed basis to contribute expertise practices and consistent with corporate earnings, or serve in management positions. In 2005, 695 employees - differentiate between individual achievement and reward took up foreign postings and 3,000 had a long-term assign- performance, ment outside their country of origin. - redistribute the gains from growth and value creation to employees, Preparing and developing tomorrow’s - develop employee savings, capabilities through career-long training - strengthen health care and benefit coverage and meet The training priorities defined by the Group’s strategic plan employee retirement expectations. focus on safety, quality and workstation skills, with the goal of meeting the following key objectives: Wage agreements in host countries - maintain and enhance skills required for a position or around the world function, with an emphasis on skills deemed critical to The Group’s wage policy led to the signing of a large number the organization, of agreements in most countries to maintain employee - ensure the constant employability of employees, purchasing power, with specific measures applicable to the - prepare employees for promotions, transfers or retraining lowest wage categories and recently hired employees. and support them during the process, In Argentina, for example, compensation is carefully set to be - facilitate certification of new job skills and enable employees fair within the company while reflecting changes in market to broaden their job capabilities, factors, which are regularly analyzed and the findings - encourage and support the emergence of new management submitted to employee representatives. In Spain, wage practices, adjustments are systematically negotiated, generally as part - leverage training to ensure the success of priority projects of multiyear collective bargaining agreements. Negotiations and, more generally, to contribute to the Group’s performance. on compensation were also held in the United Kingdom and Brazil. In 2006, the Automobile Division in France signed a Addressing the career development wage agreement for the seventh consecutive year with five expectations of young employees and sustain of the six trade unions (CFDT, CFE/CGC, CFTC, FO and GSEA). the motivation of older employees Extensive hiring in recent years means that one of the Guaranteeing equal treatment priorities of the skills and career management process is to Through the agreement on gender equality and employment lay the foundations for career advancement by young for women and the agreement on diversity and social employees. At the same time, the Group has begun cohesion, the Group is committed to guaranteeing equal pay discussions and implemented programs on employing and for equal work, as well as equal access to promotions and motivating older employees, in a commitment to guaranteeing individual wage increases. equal opportunity and treatment, regardless of age. The distribution of individual raises is regularly monitored to In particular, programs are underway to manage the needs of identify and correct any inequalities. In addition, the process older employees in terms of training, working conditions and of harmonizing compensation under different workweek working hours. To ensure a balance between generations and systems, initiated in 2004, was completed in 2005. The related enrich the skills base, the Group is also recruiting experienced negotiations effectively dealt with the issue of legacy employees without any age discrimination. All of these differences that were no longer aligned with the current actions are helping to recognize the important contribution organization, while maintaining compensation levels for the that older employees make to the organization. employees concerned.
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Limiting the impact of fluctuations in demand Preparing satisfactory retirement benefits on employee compensation In every host country, supplemental defined contribution In most countries, multi-annual systems are in place to retirement plans are gradually being set up to offset the balance compensation levels over a given year, despite expected drop in replacement rates under compulsory plans. fluctuations in demand. In France, a new supplemental defined contribution In France, the March 8, 2005 agreement concerning retirement plan was introduced in 2002 following negotiations payment of short-time work defines how working hours are and the signature of an agreement with employee determined on a multi-annual basis so that working hours representatives. All employees of the main French can vary in response to changes in demand, while subsidiaries in the automobile, logistics, transport and finance guaranteeing the same compensation. divisions are eligible for this plan. Contributions are based on the percentage of compensation that exceeds the French Aligning employees with Group objectives social security system ceiling, regardless of the employee’s and earnings job category. All employees around the world are paid an incentive bonus This defined contribution plan is funded two-thirds by the based on operating margin. Group and one-third by employees, with the savings invested Some €140 million with regard to 2005 earnings was in mutual funds supervised by a joint labor-management allocated to employees under this program (excluding commission. Faurecia). In France, application of the Group agreement Since 2005, employees who are part of the supplemental resulted in total allocations to employees of €113 million defined contribution retirement plan are also eligible for a under incentive and profit-sharing programs. new “PERE” corporate pension savings scheme. This allows employees to make voluntary contributions to supplement EMPLOYEE SAVINGS, SUPPLEMENTAL retirement savings under attractive terms regarding taxation, RETIREMENT PLANS AND INSURANCE insurance premiums and management fees. COVERAGE TO MEET INDIVIDUAL NEEDS In Spain, the system of end-of-service awards for manager Diversified employee savings plans was transformed into a company-funded defined contribution To provide more effective support for employees’ personal plan in 2002. A similar plan was set up in 2004 for new hires projects, a variety of savings plans have been put into place, and non-management employees. offering employees a broad range of options in terms of In the United Kingdom, defined contribution “stakeholder investment horizon and risk profile. plans” were set up for all new employees in 2002. To harmonize compensation policies across the Group, an In Brazil, all employees are eligible for a voluntary defined international employee savings plan was introduced in Spain contribution plan created in 2003. in 2002 and in the United Kingdom and Germany in 2003. On January 1, 2004, the foundation that manages pension A growing percentage of employee shareholders plans for employees in Switzerland was transformed in order Through these various savings plans, employee share to harmonize services and contributions for local Group ownership has risen steadily over the last five years, with the companies. percentage of issued capital held by employees increasing In Japan, a defined contribution plan was set up in 2005 from 0.75% in 2000 to 2.53% at December 31, 2005. to provide coverage for employees of certain Automobile To enable employees in non-French subsidiaries to take part Division companies. in this process, the international employee savings plan is These plans are managed or overseen by joint labor- being gradually deployed, with such systems now up and management commissions, in line with local practices. running in Germany, the United Kingdom and Spain. They are not designed to replace pay-as-you-go schemes in In all, more than 52,000 employees are shareholders of countries where these schemes are available. Rather, they Peugeot S.A., including more than 4,700 in non-French have been created to provide beneficiaries with supplemental companies. retirement income to offset the expected drop in replacement
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rates, as well as to harmonize retirement benefits across COMPETITIVENESS-DRIVEN WORKPLACE subsidiaries in each country. PRACTICES AND ORGANIZATIONS Such plans complement existing long-term employee savings FOCUSED ON EMPLOYEE SAFETY plans set up as part of the broader employee relations and human AND WORKING CONDITIONS resources policy, while enabling the Group to more effectively Adjusting working hours while staying manage the related challenges and financial exposure. competitive Providing a strong social safety net In most countries, wherever the law permits, working hours are organized on a pluri-annual basis. In exchange for this In every host country, insurance plans have been gradually flexible organization, the Group applies working hours that introduced to provide at least death and disability cover, plus are consistently equal to or less than the legal workweek and supplementary healthcare coverage to reflect changes in industry practices. compulsory healthcare systems. Implementation of these schemes is guided by an in-depth analysis of local practices. Agreements on working hours and schedules are continuously improved and adjusted through collective In France, compulsory health care coverage was introduced bargaining and social dialogue processes. for management staff in the Paris region through an agreement signed by all the unions in 2001. In France, an agreement concerning the reduction and organization of working hours was signed with five of the six Employer-funded healthcare plans have also been put in place trade unions on March 4, 1999. On December 21, 2005, a rider in several countries, including Spain, the United Kingdom and concerning vacation days earned by accumulating credit for a Brazil. shorter workweek was signed by four of the six trade unions. In Brazil, all employees are covered by a compulsory plan To make it easier for employees to take the additional vacation entirely funded by the company. Coverage varies by job time to which they are entitled under this system, these days category, but major medical care and maternity expenses off will be spread over the entire year, at the employee’s initiative. are fully covered. In Brazil, an agreement annualizing working hours was signed In Argentina, Peugeot Citroën Argentina has set up a voluntary at the Porto Real mechanical components plant. In addition, health care plan for non-union employees. Union employees agreements on the organization of working hours were signed are covered by “Obras Sociales” compulsory private plans. at the Ryton and Tille Hill plans in the United Kingdom, along with an agreement on flexi-time at Ryton enabling a smoother Employee benefits handover between shifts. Depending on national and local needs and conditions, all of the Group’s companies and plants contribute to social and Managing the labor impact of a changing cultural activities and help to improve the quality of work-life, business with food services, transportation and employee welfare In the event of a decline in business activity, employee benefits. representatives are informed and consulted far in advance.
Worldwide, €221 million, or nearly 3% of consolidated payroll, PSA Peugeot Citroën is committed to supporting employees was paid out in employee benefits in 2005. affected by any changes in business operations and job levels and to identifying an optimal solution for each person concerned. This amount encompasses 1) employer payments and opera- ting and investment costs for housing, transportation, food Successfully managing the employee-relations impact of these services, health and social services, healthcare and personal changes requires advance planning and adequate prior notice. protection insurance, and 2) subsidies paid to works councils Proactive response and manpower planning avoided the need and employee representative committees in France, as well for any dismissals in 2005. However, when reductions in the as comparable organizations in other European countries and workforce are required in certain sectors or at certain facilities, the rest of the world. they are accompanied by inplacement and employee support programs. For example, when weaker demand forced the Rennes, France plant to eliminate the weekend shift, employees were reassigned to other shifts and support measures were introduced for temporary workers.
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Demanding contractor compliance with Making safety everybody’s business the Group’s employee relations practices Preventing accidents and reducing work-related risks is a The labor and safety requirements for suppliers and their sub- process that involves all stakeholders – employees, contractors were strengthened in 2004. In particular, suppliers management, technical and engineering departments and are expected to comply with the commitments of the UN Global employee representatives – led by safety committees in every Compact and ILO international agreements on worker protection, host country. non-discrimination and the prohibition of child and forced labor. Proactive initiatives to make safety everyone’s business have In 2006, PSA Peugeot Citroën will inform its suppliers, resulted in a 50% reduction in total lost-time incidents subcontractors, production partners and dealership networks worldwide over the past three years. of the provisions of the global framework agreement on corporate social responsibility signed in March. Under the The Workplace Safety Management System terms of this agreement, PSA Peugeot Citroën is committed Continuous, sustainable improvements in workplace safety to making respect for human rights a critical factor in selecting and risk prevention are being driven by application of suppliers. After an initial warning from the Group, suppliers the Group-wide Workplace Safety Management System. who fail to respect these rights will be expected to respond Implemented across the production organization beginning with corrective action plans. Continued violations of human in 2004, the system is now being applied in offices and rights will lead to sanctions, including exclusion from the R&D facilities as well as in the dealership networks. Group’s list of approved suppliers. The Workplace Safety Management System, which centra- Labor and safety rules for contractors working lizes all of the safety and prevention practices applicable on Group sites in the Group, defines the principles that govern the management of both workplace risks and on-site safety Workplace organization takes into account the significant on- procedures. It is applied on every site, with adjustments to site presence of people employed by service providers, local operations and the regulatory environment in each facilities maintenance companies, construction companies, country. In particular, a separate version has been developed suppliers and other outside contractors. for the dealerships. Without taking on their legal responsibility, the Group ensures The Workplace Safety Management System also integrates that these companies comply with labor and safety practices by best management practices to nurture expertise and a deploying more extensive coordination and control measures. commitment to safety among managers, who play a critical Action plans have been implemented to oversee application role in continuously improving accident prevention and of these practices, in line with the more exacting labor and developing a strong safety culture across the organization. safety standards stipulated in supplier contracts. During the Application of the Workplace Safety Management System is August 2005 maintenance turnaround, the number of lost- based on three principles: time incidents among contractor employees declined by 20% - each person is accountable for his or her safety practices, compared with the year-earlier period. and is expected to set an example, respond proactively and A total commitment to workplace safety maintain constant vigilance, in every host country - workplace risks must be clearly identified and systematically addressed by prevention action plans, which should be PSA Peugeot Citroën believes that one of its most managed and successfully implemented within a set fundamental responsibilities is to guarantee the physical timeframe, health and safety of its employees, and workplace safety is an absolute priority in every host country. - all incidents and accidents are analyzed. Efficiency requires diligent follow-up of operational actions plans by manag- ement, assisted by prevention experts.
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Constantly improving working conditions An active commitment to health, a critical and ergonomics driver of individual and business performance The aim of the ambitious process of improving working PSA Peugeot Citroën actively encourages good health among conditions is to ensure that every employee works in conditions its employees, a policy that is essential to sustaining the and an environment meeting the highest international standards performance of both its human resources and its business and to respond to the aging workforce by implementing operations. solutions that enable older employees to keep their jobs. In 2005, the on-site occupational medicine units implemented This process of improving working conditions and ergo- a health care plan to encourage good health and hygiene nomics, which is designed into vehicle development and practices, with a focus on job-related diseases and health issues. capital projects from inception, also facilitates the hiring of The plan is designed to meet the following objectives: women, especially for shop floor positions. - help employees maintain their health throughout their In the Automobile Division, the focus is on reducing the career, number of workstations rated as “heavy”, the proportion of - prevent problems that negatively impact working capability, which has been cut to 18% in 2005 from 35% in 1999. such as back problems, Paralleling this trend, the number of “light” workstations - find solutions to allow employees with health problems to that can be operated by any employee rose to 37% in 2005 work in another capacity within the organization. from 26% in 1999. This process will be pursued until In every host country, occupational medicine units are light workstations account for 60% of the total. pursuing prevention campaigns, in particular concerning the dangers of smoking, alcoholism, drug abuse, AIDS and poor eating habits.
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EMPLOYEE RELATIONS INDICATORS
The following employee-relations indicators comply with company 72%-owned by Peugeot S.A., Faurecia manages French decree no. 2002-221 of February 20, 2002. With the its business independently of the Group and therefore exception of tables concerning employment, the indicators prepares and publishes its own indicators in its annual report. have been prepared on the basis of data from all the companies fully consolidated by PSA Peugeot Citroën, other In addition, employees of the Peugeot S.A. holding company than Faurecia, the automotive equipment division. A listed are included in data for the Automobile Division.
HIRING POLICIES DESIGNED TO INTERNATIONALIZE TEAMS AND DIVERSIFY EMPLOYEE SKILL SETS
AN INCREASE OF NEARLY 26% IN THE WORKFORCE OVER THE LAST SIX YEARS
Number of employees by division (As of December 31 of each year)
1999 2000 2001 2002 2003 2004 2005 Automobile Division 127,060 128,510 130,640 133,880 135,180 139,480 140,050 Banque PSA Finance 2,040 2,070 2,140 2,160 2,150 2,360 2,370 Gefco 6,715 7,490 7,680 8,050 8,360 8,840 9,370 Other businesses 2,460 2,500 2,300 2,280 2,360 2,140 1,750 Faurecia 27,525 31,870 49,690 52,230 51,860 54,430 54,960 Total 165,800 172,440 192,450 198,600 199,910 207,250 208,500
Number of employees by region (As of December 31 of each year)
2000 2005 % change 2000/2005 France 117,855 126,055 7.0% Rest of Western Europe 44,420 54,860 23.5% Central Europe 2,370 9,335 294.0% Africa 65 1,225 1,786.0% South America 4,425 8,570 93.5% North and Central America 3,175 6,445 103.0% Asia 130 2,010 1,443.0% Total 172,440 208,500 21.0%
The Group’s extended geographic reach has led to a steady rise in the international workforce. A total of 82,440 employees currently work outside France, versus 28,400 in 1996.
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Globalization of the workforce 2005 workforce by nationality (employees based outside France) More than 42.6% of employees are non-French. The workforce includes 100 different nationalities. 82,440 The top 10 nationalities represented +190% in the Group (excluding French nationality)
Moroccan 3.6% 50,330 Czech 2.9% American 5.1% Argentinian 5.4% Spanish 33.2% Polish 6% 28,400 Brazilian 6.6%
Portuguese 7.5%
German 18.4% British 11.2% 1996 1999 2005
Nearly 40% of employees worked outside France in 2005.
Number of employees by category France Rest of Europe Outside Europe Total Opera- Super- Mana- Opera- Super- Mana- Opera- Super- Mana- Opera- Super- Mana- tors visors gers tors visors gers tors visors gers tors visors gers Automobile Division 56,940 24,220 18,325 17,915 12,145 3,825 3,980 1,895 805 78,835 38,260 22,955 Banque PSA Finance 0 550 330 0 1,185 230 0 55 20 0 1,790 580 Gefco 2,020 2,435 835 1,040 2,365 220 140 285 35 3,200 5,085 1,090 Faurecia 11,400 3,505 3,890 16,600 5,055 3,575 7,200 1,730 1,995 35,200 10,290 9,460 Other businesses 910 465 230 0 30 10 10 90 10 920 585 250 Total 71,270 31,175 23,610 35,555 20,780 7,860 11,330 4,055 2,865 118,155 56,010 34,335
The “manager” category includes engineers and managers with a job description similar to managers in France.
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Employees by job category (%)
Managers 16.5%
Operators 56.7%
Supervisors 26.8%
A ROBUST HIRING DYNAMIC
Employees hired under permanent contracts in 2005 and total hires, 2000-2005
Total hires, France Rest of Europe Outside Europe Total 2000/2005 Automobile Division 4,080 2,585 785 7,450 55,365 2004 6,770 2,270 730 9,770 2003 5,690 2,480 515 8,685 Banque PSA Finance 50 110 5 165 1,320 2004 40 260 10 310 2003 45 80 10 135 Gefco 340 700 190 1,230 7,295 2004 610 440 110 1,160 2003 500 455 60 1,015 Faurecia 980 2,205 3,630 6,815 34,740 2004 1,640 2,860 2,710 7,210 2003 1,770 2,590 970 5,330 Other businesses 5 _ 10 15 485 2004 40 _ 10 50 2003 55 5 5 65 2005 total 5,455 5,600 4,620 15,675 99,205 2004 9,100 5,830 3,570 18,500 2003 8,060 5,610 1,560 15,230 Total hires, 2000/2005 50,275 31,770 17,160 99,205
The Group’s growth strategy has been supported by the hiring of more than 99,200 employees under permanent contracts over the last six years. New employees hired under permanent contracts represented 7.5% of the total workforce in 2005, versus 8.9% in 2004 and 7.6% in 2003.
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Total permanent employees over the last six Percentage of female employees in the worldwide years, by region workforce over the last four years (%) 2002 2003 2004 2005 18,490 17,410 17.6 18.2 19.8 19.8 16,740 15,660 15,670 15,230 In 2005, women accounted for 25% of the total number of new employees hired by the various divisions worldwide. The proportion was 22.4% for engineers and managers, 32% for supervisors and 22.1% for operators.
REFRESHING THE AGE PYRAMID
Employees by age group
20002001 2002 2003 2004 2005 48,965
France 40,130 Rest of Europe 37,115 38,920 Outside Europe
PROMOTING JOBS FOR WOMEN 12,695 AND DEVELOPING DIVERSITY 10,330 10,015 7,825 Percentage of female employees hired under 1,975 530 permanent contracts by the Automobile Division manufacturing companies in France Under 20 20 to 29 30 to 39 40 to 49 50 and over Men Women 28.7 27.4
22.5 The large number of people hired since the late 1990s have 21.3 25.8 25.6 refreshed the Group’s age pyramid. 21.6 16.3 20.0 11.7
9.0 4.7 2000 2001 2002 2003 2004 2005 Operators Total
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FIXED-TERM CONTRACTS
Number of employees working under fixed-term contracts (annual average) Outside France France Rest of Europe Outside Europe Total Automobile Division 2005 4,425 3,700 1,075 9,200 2004 3,515 4,295 465 8,275 2003 1,615 4,750 310 6,675 Banque PSA Finance 2005 30 95 0 125 2004 15 105 - 120 2003 10 110 - 120 Gefco 2005 140 250 0 390 2004 135 180 - 315 2003 140 155 5 300 Other businesses 2005 40 0 85 125 2004 65 - 90 155 2003 45 5 5 55 Total 2005 4,635 4,045 1,160 9,840 2004 3,730 4,580 555 8,865 2003 1,810 5,020 320 7,150
In addition, 6,140 people work for Faurecia under fixed-term contracts.
In 2005, nearly 2,270 employees worldwide (excluding Faurecia) were hired under permanent contracts following a fixed-term assignment.
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Number of temporary employees (annual average) Outside France France Rest of Europe Outside Europe Total Automobile Division 2005 6,700 325 120 7,145 2004 8,840 355 130 9,325 2003 9,600 1,020 95 10,715 Banque PSA Finance 2005 20 10 5 35 2004 25 35 - 60 2003 15 40 - 55 Gefco 2005 845 590 95 1,530 2004 900 390 60 1,350 2003 920 400 35 1,355 Other businesses 2005 225 - 40 265 2004 120 - 25 145 2003 325 - 325 Total 2005 7,790 925 260 8,975 2004 9,885 780 215 10,880 2003 10,860 1,460 130 12,450
Over the past three years, the Group has undertaken to reduce the use of temporary workers.
In 2005, 688 people were hired under permanent contracts following a temporary assignment.
The above table does not include the 7,730 people working on temporary assignments at Faurecia.
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OTHER EMPLOYMENT INDICATORS
Resignations* in 2005 Outside France France Rest of Europe Outside Europe Total Automobile Division 1,270 865 175 2,310 2004 1,175 675 120 1,970 2003 1,335 535 105 1,975 Banque PSA Finance 25 90 _ 115 2004 20 80 5 105 2003 20 70 5 95 Gefco 140 280 60 480 2004 125 265 25 415 2003 120 290 30 440 Other businesses 15 5 0 20 2004 20 _ _ 20 2003 20 5 5 30 Total 1,450 1,240 235 2,925 2004 1,340 1,020 150 2,510 2003 1,495 900 145 2,540
* Of employees under permanent contracts.
The number of resignations remained unchanged in 2005, at 2.0% of total employees under permanent contract (excluding Faurecia). The above table does not include the 2,560 resignations at Faurecia during the year.
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Premature terminations or dismissals Outside France France Rest of Europe Outside Europe Total Automobile Division 2005 825 570 300 1,695 2004 695 680 270 1,645 2003 775 385 210 1,370 Banque PSA Finance 2005 20 35 - 55 2004 10 15 5 30 2003 10 15 5 30 Gefco 2005 85 105 10 200 2004 105 95 20 220 2003 85 150 15 250 Other businesses 2005 50 5 0 55 2004 20 - 5 25 2003 20 - - 20 Total 2005 980 715 310 2,005 2004 830 790 300 1,920 2003 890 550 230 1,670
The above figures include premature termination of work contracts for incapacity and disability, and dismissals for personal reasons. The number of premature terminations or dismissals was virtually unchanged from 2004. The 3,532 people who were prematurely terminated or dismissed at Faurecia during the year are not included in the above table.
Redundancies Outside France France Rest of Europe Outside Europe Total Automobile Division 2005 5 760 25 790 2004 30 520 45 595 2003 5 50 20 75 Banque PSA Finance 2005 - - - - 2004 - - - - 2003 5 - - 5 Gefco 2005 5 40 - 45 2004 5 35 - 40 2003 15 - - 15 Total 2005 10 800 25 835 2004 35 555 45 635 2003 25 50 20 95
In the event of a decline in business activity, employee representatives are informed and consulted far in advance. PSA Peugeot Citroën consistently identifies an optimal solution for each person concerned, so that no employee has to find a new job on his or her own.
The number of redundancies in Europe in 2005 stemmed primarily from the elimination of the third shift at the Ryton, UK plant. All of the redundancies were carried out through early retirement, for employees age 55 and over, or voluntary departures to pursue a personal project. Inplacement and job-search support programs were implemented and a job fair was organized for the employees concerned. Today, fewer than 1% of the redundant employees have still not found a new job.
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CONTINUOUSLY ENHANCING SKILLS AND NURTURING HUMAN CAPITAL
MANAGING SKILLS AND HUMAN RESOURCES INTERNATIONALLY In 2005, more than 750 employees were involved in foreign postings, including 695 in the Automobile Division. At the Automobile Division, this represents an increase of nearly 16%.
In addition, nearly 3,000 Automobile Division employees in France had a long-term assignment (20 days or longer) outside their country of origin, up 19.4% from 2,510 in 2004.
PREPARING AND DEVELOPING TOMORROW’S CAPABILITIES THROUGH SUSTAINED TRAINING
Average hours of training by employee category (Automobile Division manufacturing companies worldwide)
Administrative employees, Engineers and Operators technicians and supervisors managers Average 2004 24 41 39 30 2005 30 43 36 33
Hours of training by region* Total hours of training Average hours of training (in thousands) per employee 2003 2004 2005 2003 2004 2005 France 2,784 2,645 2,325 26.5 24.4 21.7 Rest of Europe 810 940 1,567 21.2 24.3 40.2 Outside Europe 277 295 510 59.2 54.2 69.7 Total 3,871 3,880 4,402 26.1 25.4 28.7
* Excluding Faurecia
Each employee received an average of nearly 29 hours training in 2005. The increase in the average number of hours in the rest of Europe is due in part to the opening of the Trnava plant.
The training commitment remained strong in 2005, with the 4.4 million hours of training offered across the Group representing a budget of €174 million for the year.
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Training expenditure by business process Nearly 2,040 employees around the world regularly help to train other Group employees. Corporate support 11.7% Manufacturing During the year, 6,900 students served in Group units around 51.7% the world under internship programs. Of these, 30% were Design and engineering women, in line with Group targets. In addition, more than 22% 2,300 students, 20.9% of whom were women, took part in work-study and apprenticeship programs. In France, Marketing 1,230 young people, of whom 18% were women, worked and sales 14.6% under apprenticeship contracts.
NEW AGREEMENTS WITH EMPLOYEES IN 2005
More than 50 agreements were signed worldwide in - Agreement concerning effective working hours, the the Automobile Division in 2005. organization of working hours and vacation time, signed on December 16, 2005. In France, 12 company agreements were signed during the - Amendment to the March 4, 1999, agreement on effective year - seven with five of the six unions and two with all the use of reduced workweek days (RTT), signed on December unions. 21, 2005. All employees are represented by independent unions or other elected representatives and are covered by collective SPAIN bargaining agreements. - Agreement concerning domestic violence, signed on March 11, Examples in 2005 include: 2005. - Agreement on maternity benefits, signed on October 19, FRANCE 2005. - Wage agreement, signed on February 4, 2005. - Agreement concerning production workers’ professional BRAZIL development and growth, signed on March 8, 2005. - Profit-sharing agreement, signed on May 18, 2005. - Agreement concerning payment of short-time work and its - Renewal of the partnership agreement with SENAI (remedial determination on a multi-annual basis, signed on March 8, 2005. training for new employees), signed on May 3, 2005. - Agreement on lifelong learning, signed on April 15, 2005. - Amendment to the agreement on implementing a new ARGENTINA defined contribution pension plan, signed on June 1, 2005. - Wage agreement signed on June 25, 2005, in Jeppener, - Amendment to the 2003 agreements on profit–sharing and and productivity agreement signed on July 21, 2005, incentive-based bonus programs, signed on June 27, 2005. in Palomar. - Agreement concerning harmonization of bonuses and - Agreement on hourly wages, signed on December 30, 2005. overtime pay for weekend work, signed on July 5, 2005. - Agreement concerning the benefits plan, signed on July 21, 2005. SLOVAKIA - Agreement on social integration and job opportunities for - Agreement on employee-management relations, signed on the disabled, signed on September 22, 2005. July 21, 2005. - Agreement concerning exceptional early use of 2004 profit- shares, signed on October 14, 2005.
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UNITED KINGDOM GERMANY - Pay and conditions 2005/2006 agreement, signed on - Wage agreements, signed on September 1 and April 21, 2005, and May 17, 2005. December 1, 2005. - Flexibility agreement, signed on September 21, 2005. - Working hours agreements, signed on January 1 and August 1, 2005. - Agreements on storage of personal data, signed in April and September 2005.
FAIR, PERFORMANCE-BASED COMPENSATION POLICIES
In 2005, total payroll costs (excluding Faurecia) came to €6,790,555,000, including wages and salaries of €4,860,905,000 and payroll taxes of €1,929,650,000. Breakdown of total payroll France Rest of Europe Outside Europe 2002 €4,662,481,000 €1,415,349,000 €80,110,000 2003 €4,824,888,000 €1,462,711,000 €66,401,000 2004 €5,107,033,000 €1,502,183,000 €77,303,000 2005 €5,181,133,000 €1,505,043,000 €104,379,000
ALIGNING EMPLOYEES WITH GROUP OBJECTIVES AND EARNINGS Profit-sharing and incentive bonuses
(in € millions) 2003 2004 2005 Total France - Profit-sharing and incentive bonuses (Group agreement) 140 135 113 Incentive or profit-sharing programs in other French subsidiaries 10 10 9 Incentive programs in foreign subsidiaries 22 21 18 Total 172 166 140
EMPLOYEE SAVINGS AND BENEFITS PROGRAMS Employee Savings Plans (PEAG, PEE and PEP) Employee contributions Employer contributions Number of employees Jan. 1-Dec. 31 Jan. 1-Dec. 31 investing (in € millions) (in € millions) Jan. 1-Dec.31* 2004 2005 2004 2005 2004 2005 Automobile Division 96.82 98.01 12.55 13 122,681 138,185 Banque PSA Finance 1.57 1.35 0.34 0.25 1,320 1,513 Gefco 1.45 1.74 0.60 0.66 1,225 1,766 Other businesses 0.3 0.55 0.12 0.05 106 675 Total 100.14 101.65 13.61 13.96 125,332 142,139
* Reinvestment of profit-shares, incentive bonuses and voluntary contributions.
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International employee savings plan Number Matching company of participants Contributions contribution (in € millions) (in € millions) 2004 2005 2004 2005 2004 2005 United Kingdom 1,629 1,527 2.01 1.49 0.65 0.50 Spain 2,136 2,379 0.69 0.66 0.25 0.24 Germany 573 791 0.56 0.63 0.18 0.20 Total 4,338 4,697 3.26 2.78 1.08 0.94
DEFINED CONTRIBUTION SUPPLEMENTARY PENSION PLANS Supplementary pension plans Employer contributions Employee contributions Number Jan. 1-Dec. 31 Jan. 1-Dec. 31 of participating (in € thousands) (in € thousands) employees 2004 2005 2004 2005 2004 2005 France 23,839.4 25,932.8 11,908.2 12,935.9 42,760 51,468 Rest of Europe 11,976.1 17,245.9 3,522.2 3,640 9,255 10,012 Outside Europe 286.1 449.5 367.8 444.7 1,440 1,360 Total 36,101.6 43,628.2 15,798.2 17,020.6 53,455 62,840
New defined contribution pension plans have been set up in France, Spain, the United Kingdom, Germany, Brazil, Switzerland and Japan. These plans supplement the benefits payable under State retirement (social security) systems and offset the forecast decline in the replacement rate.
COMPETITIVENESS-DRIVEN WORKPLACE PRACTICES AND ORGANIZATIONS FOCUSED ON EMPLOYEE SAFETY AND WORKING CONDITIONS
NEW NEGOTIATED WORKPLACE In France, working hours have complied with the country’s PRACTICES TO MANAGE FLEXIBILITY 35-hour workweek legislation since 1999, while in other countries measures have been introduced to reduce working In every host country, working hours are consistently equal hours while making the Group more competitive. to or less than the legal workweek or industry practices.
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Special work schedules France Rest of Europe Outside Europe Total 2003 2004 2005 2003 2004 2005 2003 2004 2005 2003 2004 2005 Automobile Division Double shift 31,450 33,180 32,500 9,110 8,980 8,965 885 1,010 1,355 41,445 43,170 42,820 Triple or night shifts 15,390 16,115 15,480 3,865 3,450 3,325 50 40 160 19,305 19,605 18,965 Weekend* 2,290 2,670 1,920 1,620 925 55 25 35 30 3,935 3,630 2,005 Banque PSA Finance Double shifts ------Triple or night shifts ------Weekend* ------Gefco Double shifts 1,095 1,300 1,165 145 240 310 10 45 20 1,250 1,585 1,495 Triple or night shifts 195 110 235 385 310 285 - - 40 580 420 560 Weekend* 5 - - 55 40 80 - - 5 60 40 85 Other businesses Double shifts 780 745 620 ------780 745 620 Triple or night shifts 30 15 20 ------30 15 20 Weekend* 5 ------5 - - Total Double shifts 33,325 35,225 34,285 9,255 9,220 9,275 895 1,055 1,375 43,475 45,500 44,935 Triple or night shifts 15,615 16,240 15,735 4,250 3,760 3,610 50 40 200 19,915 20,040 19,545 Weekend* 2,300 2,670 1,920 1,675 965 135 25 35 35 4,000 3,670 2,090
*Weekend shifts (generally Friday, Saturday and Sunday) are shorter than regular shifts.
To meet strong market demand, special work schedules have been introduced, mainly in the production plants.
ENHANCING WORK-LIFE BALANCE Number of part-time employees Outside France France Rest of Europe Outside Europe Total Automobile Division 2005 2,255 3,710 - 5,965 2004 2,300 3,100 - 5,400 2003 2,120 1,650 - 3,770 Banque PSA Finance 2005 40 210 - 250 2004 45 220 - 265 2003 45 145 30 220 Gefco 2005 205 220 - 425 2004 195 120 5 320 2003 95 130 - 225 Other businesses 2005 110 - - 110 2004 115 5 - 120 2003 70 120 - 190 Total 2005 2,610 4,140 - 6,750 2004 2,655 3,445 5 6,105 2003 2,330 2,045 30 4,405
Part-time employees are defined as employees who work fewer hours per week, or fewer average hours over a period of up to one year, than a comparable full-time employee.
In 2005, more than 6,700 employees worked part-time worldwide, of whom 43.6% were women and 56.4% were men. More than 27% of part-time employees work half-time.
The above table does not include Faurecia’s 660 part-time employees.
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OTHER WORKING HOURS INDICATORS
Overtime (extra hours minus special leave) France Rest of Europe Outside Europe Total Automobile Division 2005 2,121,525 484,170 423,180 3,028,875 2004 2,033,990 611,370 430,535 3,075,895 2003 1,123,195 249,450 56,550 1,429,195 Banque PSA Finance 2005 1,525 19,220 - 20,745 2004 20,890 21,405 - 42,295 2003 1,575 1,665 - 3,240 Gefco 2005 247,955 136,460 33,685 418,100 2004 374,920 82,695 30,700 488,315 2003 152,200 13,965 11,155 177,320 Other businesses 2005 12,770 320 3,675 16,765 2004 12,595 160 2,060 14,815 2003 5,655 50 205 5,910 Total 2005 2,383,775 640,170 460,540 3,484,485 2004 2,442,395 715,630 463,295 3,621,320 2003 1,282,625 265,130 67,910 1,615,665
In most countries, working hours are determined on an annual basis.
Some of the hours included in the above figures arise from variable scheduling arrangements (for example, Saturday work or extended working hours). They are offset by special leave, for example during plant closures when business is slow.
In response to increased capacity utilization, a number of structural solutions have been implemented, including the introduction of additional shifts and non-stop operation during vacation periods.
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Short-time working France Rest of Europe Outside Europe Total Automobile Division 2005 742,000 217,395 - 959,395 2004 25 137,070 - 137,095 2003 746,200 53,755 479,005 1,278,960 Banque PSA Finance 2005 - - - - 2004 - - - - 2003 - - - - Gefco 2005 260 5,470 - 5,730 2004 1,745 7,590 - 9,335 2003 - 560 550 1,110 Other businesses 2005 - - - - 2004 265 - - 265 2003 - - - - Total 2005 742,260 222,865 - 965,125 2004 2,035 144,660 - 146,695 2003 746,200 54,315 479,555 1,280,070
The 965,125 hours lost through short-time working correspond to the short-fall in annual hours not offset by collective overtime during the year.
In France, the March 8, 2005, agreement concerning payment of short-time work defines how working hours are determined on a multi-annual basis in order to maintain compensation levels.
Paid absences other than vacation France Rest of Europe Outside Europe Total Sick Other Sick Other Sick Other Sick Other leave paid leave leave paid leave leave paid leave leave paid leave Automobile Division 2005 3,967,120 804,800 1,794,510 615,520 173,965 49,565 5,935,595 1,469,885 2004 3,977,570 452,785 1,470,860 588,170 142,685 417,550 5,591,115 1,458,505 2003 4,317,035 2,099,020 111,770 6,527,825 Banque PSA Finance 2005 26,650 56,010 62,675 43,195 - 1,385 89,325 100,590 2004 36,105 34,405 49,585 17,145 235 10 85,925 51,560 2003 88,360 68,670 510 157,540 Gefco 2005 265,335 98,150 238,780 30,595 1,775 2,035 505,890 130,780 2004 236,945 63,920 177,030 57,815 1,555 235 415,530 121,970 2003 302,790 123,930 4,175 430,895 Other businesses 2005 94,475 8,705 2,615 505 160 80 97,250 9,290 2004 123,980 10,965 3,780 8,025 560 120 128,320 19,110 2003 146,450 6,335 3,285 156,070 Total 2005 4,353,580 967,665 2,098,580 689,815 175,900 53,065 6,628,060 1,710,545 2004 4,374,600 562,075 1,701,255 671,155 145,035 417,915 6,220,890 1,651,145 2003 4,854,635 2,297,955 119,740 7,272,330
Paid absences other than vacation totaled 8,338,605 hours, of which 6,628,060 for sick leave, 746,740 for maternity leave, 431,095 for accident-related absences and 532,710 for other reasons.
Based on just over 270 million hours worked, the overall absenteeism rate stood at around 2.9%, as in 2004.
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OUTSOURCING General purchasing conditions comply fully with sustainable development principles. In particular, suppliers are expected Group purchases consist mainly of automobile parts and to ensure that their operations comply with local laws and components for both the mechanical subassembly plants regulations in every country, as well as the highest and the assembly plants. environmental standards and the provisions of International These purchases, which represent around 70% of vehicle Labour Organisation conventions, especially worker production costs, are made from 850 suppliers. Other protection provisions, the ban on forced labor and the use of purchases concern capital goods and services. child labor, workplace health and safety provisions, and provisions to protect the rights of employees.
A TOTAL COMMITMENT TO WORKPLACE SAFETY Total lost-time incident frequency rate
Manufacturing, service Manufacturing, service and R&D operations worlwide and R&D operations worldwide 27.7 and marketing units in France and international marketing units
6.48
4.97 4.40 Group 4.09 target 3.70 3.11
20022003 2004 2005 2005 2006 Metalworking industry
The lost-time incident frequency rate stood at 3.11 in 2005, In addition, PSA Peugeot Citroën achieved one of the best for a target of 3.7. This rate covers manufacturing, service safety records in the metalworking industry, whose lost-time and R&D operations worldwide, as well as marketing units in frequency rate stood at 27.7 for the year. France. It reveals a significant improvement in safety The severity rate (corresponding to the number of days lost– conditions for Group employees for the third year in a row, time divided by the total number of days worked) also with a 24% decrease in 2005 alone. improved during the year, by 12.5% to 0.21. Performance improved both in France and abroad. The Buenos Aires facility turned in the best performance of all the Group’s assembly plants, with a 56% decline in the lost-time frequency rate to a record 1.30.
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OFFERING THE DISABLED FULFILLING JOB OPPORTUNITIES
Disabled employees Outside France France Rest of Europe Outside Europe Total Automobile Division 2005 5,395 645 35 6,075 2004 5,760 710 5 6,475 2003 6,010 415 5 6,430 Banque PSA Finance 2005 - 15 - 15 2004 - 15 - 15 2003 5 10 - 15 Gefco 2005 110 40 - 150 2004 115 40 - 155 2003 70 40 - 110 Other businesses 2005 45 - - 45 2004 15 - - 15 2003 5 - - 5 Total 2005 5,550 700 35 6,285 2004 5,890 765 5 6,660 2003 6,090 465 5 6,560
Worldwide, the Group directly employs more than 6,285 disabled people, as defined by local legislation. In the Automobile Division manufacturing companies in France, including sheltered workers under contract, nearly 9.5% of employees are classified as handicapped, compared with the 6% national rate that businesses are encouraged to reach.
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ENVIRONMENTAL STEWARDSHIP
PSA Peugeot Citroën’s ambitious environmental policy is seamlessly interact with their environment, the policy is based on the principles of sustainable development and forms focused on protecting the environment and preserving the an integral part of its manufacturing strategy. Covering both quality of life in host communities. production facilities and cars, which are designed to
CARS AND THE ENVIRONMENT
PSA Peugeot Citroën believes that automobiles should be EFFECTIVE SOLUTIONS harmoniously integrated into their environment, which is why WITH REAL-WORLD RELEVANCE it is committed to abating the greenhouse effect by constantly One pathway to progress has been the development of developing new technologies that reduce emissions. In new gasoline engine technology, as illustrated by the addition to focusing its strategy on solutions geared toward mid-size engines being produced in cooperation with BMW. meeting today’s needs – such as developing more efficient More significantly, however, the Group has consolidated internal combustion engines, producing a first-stage hybrid its leadership in diesel engines, which for equivalent vehicle and promoting biofuels and natural gas – the Group performance use considerably less fuel than gasoline engines. is actively developing future technologies like the diesel- electric hybrid and conducting advanced research on highly The second generation of the Group’s common-rail, direct- promising longer-term solutions like the hydrogen fuel cell. injection HDi diesel engines reduces CO2 emissions by 20% But for the Group, a crucial aspect of these different compared with a conventional injection diesel, and by 30% technologies is that they can be applied to high-volume compared with a gasoline powerplant. In addition to their
production, since the only way to have a real impact on CO2 environmental benefits, these engines also deliver remarkable emissions is to sell a large number of suitably equipped cars. drivability and today rank among the most popular in Europe. As part of its commitment to extending its research beyond In fact, the percentage of diesel-powered passengers cars the realm of cars, PSA Peugeot Citroën is also investing in in the European market almost doubled from 1998 to 2005, major environmental and scientific initiatives, such as the when they accounted for half of all cars sold during the year. Peugeot carbon sink project in Brazil conducted in partnership PSA Peugeot Citroën manufactured close to 1.53 million cars with France’s national forest service ONF. While implementing equipped with common-rail HDi diesel engines in 2005, this strategy, the Group is also actively integrating eco-design bringing total output to nearly eight million units since 1998. practices to make its cars highly recyclable. During the year, the Group also pursued its commitment to MEETING THE CHALLENGE OF REDUCING downsizing, to develop smaller, more fuel-efficient engines GREENHOUSE GAS EMISSIONS that deliver equivalent performance as the preceding larger models. This strategy has driven a 10% reduction in fuel After successfully reducing pollutant emissions, consumption while maintaining the same torque and power PSA Peugeot Citroën is now focusing on curbing CO 2 output. The Group sold more than 310,000 vehicles emitting emissions from Peugeot and Citroën vehicles. less than 120 grams of CO2 per kilometer in Europe in 2005 and more than 1,100,000 since 2001. This means that in 2005, the Group accounted for 30% of all European sales of
vehicles emitting less than 120 grams of CO2 per kilometer and more than 60% of those emitting less than 110 grams
of CO2 per kilometer.
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FUEL EFFICIENCY AND LOWER CO2 PROMOTING BIOFUELS EMISSIONS FOR EVERYONE AND NATURAL GAS
When it comes to the environment, PSA Peugeot Citroën Another way to reduce vehicle CO2 emissions is to develop takes a very practical approach based on two factors. First, in the use of alternative energies and new propulsion Europe, where diesel engines are very popular, the gasoline technologies. hybrid has little appeal, since it commands a much higher A pioneer in the field, PSA Peugeot Citroën is strongly price for similar fuel efficiency and CO performance. Second, 2 committed to promoting biofuels that can be used in diesel it is not yet economically feasible to mass produce a diesel or gasoline engines. These include vegetable oil methylesters hybrid, such as the Hybrid HDi unveiled by PSA Peugeot Citroën (VOMEs), which can be blended with automotive diesel fuel, in late January 2006, despite its remarkable fuel efficiency and ethanol or its derivative, ethyl tertiary butyl ether (ETBE), and significant reduction in CO emissions. By leveraging a 2 which can be used in gasoline. research program being conducted in partnership with research laboratories and equipment suppliers, the Group Because they are derived from cereals and sugar beets in plans to launch its first Hybrid HDi vehicles in 2010. Europe (ethanol and ETBE), from sugar cane in Brazil (ethanol), and from oilseeds such as rapeseed (fatty-acid STOP & START SOLUTIONS FOR TODAY’S methyl ester-FAME) or soybeans (B30 biodiesel), biofuels are DRIVER exceptionally well suited to combating the greenhouse effect since the plants from which they are made trap atmospheric Reflecting its practical approach, the Group is focusing on CO2 through photosynthesis. Adding them to fossil fuels highly cost-effective solutions that can be quickly brought to therefore reduces CO2 emissions. The Group estimates that market, like the Stop & Start system currently available on replacing 1,000 liters of diesel fuel with biofuels would reduce the Citroën C2 and C3, and soon the Peugeot 1007. CO2 emissions by 2.5 tons. Biofuels also curb the emission This type of system involves a low-power electrical device of other pollutants, such as particulates, which can be allows the engine to shut down automatically when the reduced by 20 to 30% by adding a mixture of 30% VOME to vehicle is standing still or in neutral – at a red light, for diesel fuel. example, or in a traffic jam – and to start up again instantly and The Group strongly encourages the use of biofuels, which noiselessly when reactivated by the driver. In this way, it can be blended in substantially high proportions in Peugeot reduces fuel consumption and, consequently, CO emissions 2 or Citroën vehicles without any technical modifications. Its by 5 to 8% on the combined European cycle, and by up to own service fleet, for example, is run on Diester® 30, a blend 15% in heavy traffic. The technology is especially efficient of 30% VOME and 70% automotive diesel. when used with downsized engines because it further increases fuel savings. PSA Peugeot Citroën also supports the development of biofuels by validating potential applications under local energy Another important environmental benefit is a very substantial policies. It regularly shares its experience as a carmaker by reduction in noise. Tests conducted in and around Paris taking part in discussions on the technical, business and showed that cars on the road are at a standstill 35% of the political issues raised by biofuels. time, a figure that supports the deployment of Stop & Start technology. In particular, the Group is a member of the Diester Partners association (formerly the Diester City Club), which encourages Since 2005, vehicles equipped with such systems are being the use of Diester® in three ways: gradually introduced across the Group’s model lines, a first in - Forming a network to exchange information about using Europe for this emerging technology. Sales of vehicles fitted Diester® in higher percentages than the standard 5% with this so-called “micro-hybrid” technology are expected (mainly in a 30% blend). to gain momentum in coming years. - Promoting Diester®’s technical and environmental benefits to captive fleet managers. - Acting as a preferred interface with French and European authorities.
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PSA Peugeot Citroën has also initiated a series of trials with A real-world approach to hybrid diesel Ladetel, a Brazilian clean technologies laboratory specialized powertrains in biofuels, to assess the performance of B30 biodiesel based The development of the Hybrid HDi fits seamlessly with the on a blend of 70% automotive diesel and 30% soy ethyl ester, Group’s platform strategy. For example, it relies on extensive a fully-renewable energy source. The Group supplied two carry-over of existing components and sub-assemblies, in cars, a Peugeot 206 with a 1.9-liter diesel engine and a Citroën addition to deploying proven technological solutions optimized Xsara Picasso with a 2.0-liter HDi engine, which were driven for hybrid applications. Nevertheless, hybrids remain more than 100,000 kilometers on endurance runs and intrinsically more expensive than any internal combustion submitted to trials on test benches. The initial results, solution, due to the addition of such cost drivers as high- presented in September 2004, were very encouraging, with voltage batteries, the electric motor/generator, the inverter a significant net reduction in CO emissions. 2 and the regenerative braking system.
In Brazil, the world’s largest producer of ethanol, the Group The Group is committed to meeting the challenge of sells flex-fuel vehicles whose engines automatically adjust significantly reducing this extra cost so as to narrow the price to biofuel blends of up to 100% ethanol. gap between a hybrid and a conventional diesel to a more As another alternative fuel solution, the Group is exploring affordable level, similar to the one currently existing between the possibilities offered by compressed natural gas (CNG) an HDi and a gasoline engine. which, in comparison to conventional fuels, is high calorific, Market launch for the first commercial Hybrid HDi models reduces greenhouse gas and other emissions by 20% could be scheduled in Europe in 2010, with projected sales of compared with an equivalent gasoline engine, and burns very several tens of thousands of units. quietly. To demonstrate its commitment to stepping up the development of CNG vehicles, the Group has signed the third CNG protocol aimed at securing the viability of these vehicles HYDROGEN FUEL CELLS OFFER in France by 2010, and, at the signing event, unveiled the A LONGER-TERM SOLUTION 5-door CNG Citroën C3 intended for the consumer market. The FOR THE ENVIRONMENT Group is also developing a multipurpose CNG engine adapted Over the longer term, another promising technology that will to the requirements of major gas exporting countries, such play a critical role in reducing auto emissions is the hydrogen as Argentina and Iran, where gas is already a viable alternative fuel cell, whose many benefits include a reduction in CO2 to oil. emissions, which helps abate the greenhouse effect, and the elimination of local hydrocarbon (HC) and nitrogen oxide (NOx) PUTTING HYBRID DIESEL TECHNOLOGY emissions. An in-house team of dedicated specialists is ON EUROPEAN ROADS TOMORROW working on different cells and prototypes with the support of expert networks formed in partnership with France’s The presentation of the Citroën C4 and Peugeot 307 Hybrid Scientific Research Center (CNRS) and Atomic Energy HDi demonstrators illustrates the Group’s expertise in hybrid Commission (CEA). One result of their research was recently technology, as well as its foresight in combining the HDi diesel presented to the public when PSA Peugeot Citroën and the engine with a diesel-electric powertrain to deliver truly CEA unveiled GENEPAC, a world-class 80kW modular fuel breakthrough performance in terms of fuel efficiency and cell stack perfectly suited to automotive applications. CO2 emissions. The Hybrid HDi can also run in battery- only, zero-emissions mode. On a compact family car, the These research programs and partnerships are aimed at technology delivers an almost 30% improvement in making the development of automotive fuel cell technology fuel economy compared with a conventional HDi, with both technically and financially feasible. Bringing this consumption falling to a remarkable 3.4 liters per technology to market, however, means meeting a number of challenges, such as lowering fuel cell costs, integrating 100 kilometers (combined cycle) and CO2 emissions dropping to 90 grams per kilometer. fuel cells into vehicles, and storing and distributing hydrogen, which are sometimes beyond the Group’s control. As a result, it will be introduced gradually after around 2020.
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IMPROVING AIR QUALITY disassembly. Fuel removal, for example, has been improved by identifying the fuel tank’s bottom dead center. Over the past 30 years, new vehicle emissions have declined by 95%. The environmental performance of diesel engines Other recyclability techniques include marking plastic parts and has been further enhanced by the particulate filter, the last link elastomers for traceability, using easily recyclable materials, in the emissions control chain. Invented by PSA Peugeot Citroën, reducing the variety of materials to facilitate sorting after particulate filter technology is a clear demonstration of the shredding and using recycled materials in new vehicles. This Group’s commitment to improving the quality of air in urban approach will enable the Group to comply with the environments. The filter, an after-treatment system that forthcoming European Union directive on the recycling and eliminates emissions of particulate matter, is now available on recovery rate required for vehicles to be homologated. the Peugeot 206, 207, 307, 407, 607 and 807 and the Citroën C3, C4, C5, C6, C8 and Xsara Picasso. It will be extended to Today, materials used to make cars have to meet increasingly all other models in the medium-term future. stringent criteria, such as: - Reducing the variety of plastics in a car, to optimize the Introduced in May 2000, the highly popular particulate filter related recovery processes and ensure their profitability. has already been installed on nearly 1,500,000 Peugeot and - Using a single family of plastics per major function, so that Citroën HDi diesel vehicles. an entire sub-assembly can be recycled without prior Today, the Group is already marketing the filter’s third dismantling. generation, which uses an entirely new filter medium - Marking plastic parts with standardized codes, to ensure architecture known as “octosquare” and is designed for identification, sorting and traceability. service-free operation. First offered in 2004, it was deployed - Using recycled materials, to the extent that this is technically across almost the entire model range by the end of 2005. and economically feasible. - Eliminating four heavy metals (Pb, Cd, Cr and Hg) from every ECO-DESIGNING FOR DISASSEMBLY model introduced since July 1, 2003. This major initiative is AND REUSE being carried out jointly with suppliers.
Peugeot and Citroën cars are all designed for recycling. The Since 2002, more than 800 suppliers have agreed to provide Group has embraced the principles of eco-design, which are compliance certificates for all their deliveries or for each part primarily intended to optimize the process of recovering supplied for forthcoming vehicles. end-of-life vehicles (ELV) and to improve recycling by limiting the transfer of waste and encouraging the development of As a participant in the International Dismantling Information recovery and recycling facilities. Waste transfer has been System (IDIS) project, the Group provides scrap yard facilities reduced by the elimination of four heavy metals and the with disassembly instructions for Peugeot and Citroën simplification of decontamination operations during the vehicles. recycling of end-of-life vehicles. At least 95% of the average weight of new Peugeot and To facilitate decontamination, the first major step in the ELV Citroën vehicles is reusable and recoverable, according to recycling process, the Group designs vehicles for simple prevailing ISO standards and the Group’s own calculations.
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AUTOMOBILE DIVISION PRODUCTION PLANTS AND THE ENVIRONMENT
AN EFFECTIVE ORGANIZATION In 2005, the 2004 version of ISO 14001 was deployed at the AND STRONG PRINCIPLES 24 certified plants. At the same time, the Group also developed a new procedure for identifying Significant For many years, PSA Peugeot Citroën has also been engaged Environmental Aspects, adding new aspects to the list and in assertive environmental stewardship in its production analyzing more closely the facilities’ impact on host facilities, in a commitment to ensuring that their operations communities. safeguard the neighboring environment and the quality of life in host communities. To support this commitment, industrial In line with certification requirements, the sites have strategy integrates environmental protection as part of a communicating more transparently with their host continuous improvement process, based on a disciplined communities. Plant self-monitoring data are transmitted to organization, the allocation of significant funding and an the public authorities, for example, while requests for effective reporting system known as the Industrial information from neighbors are systematically answered and, Environment Observatory. Deployed worldwide, this process where necessary, corrective actions are taken. efficiently manages the most significant environmental aspects of the Group’s operations. LIMITING GASEOUS RELEASES The corporate risk prevention and management department Reducing VOC emissions includes an environmental section, which coordinates general activities in this area and has its own capital budget. In In France, automobile plants account for less than 1% of total addition, at each plant, an environmental manager is backed volatile organic compound (VOC) emissions produced by by a dedicated organization and correspondents appointed human activity. in each workshop and facility. The technical department also The Group is leading a proactive, three-pronged policy in this has environmental specialists who provide technical support area by: for the plants, particularly during capital projects. In 2005, - Optimizing paint shops, by introducing equipment with around 500 people were involved in managing the Group’s higher application efficiency to reduce the use of industrial environment. conventional paints and related solvents, selecting low- solvent paints and recycling used solvents. AN ACTIVE CERTIFICATION POLICY - Deploying clean technologies like water-based paints and Every production facility around the world has introduced an powder primers in new facilities. environmental management system based on ISO 14001 - Installing air treatment equipment that incinerates VOCs. certification, the internationally recognized standard for In France, VOC emissions from the Group’s paint shops varied environmental management and organization. The standard between 10 and 13 kilograms per vehicle in 1988, whereas enables a company to express an environmental strategy, in 2005, the average had fallen to 4.28 kilograms per vehicle. describe the procedures used to implement it, guarantee Worldwide, VOC emissions totaled 4.93 kilograms per vehicle. compliance and drive continuous improvement, the foundation of good environmental management. Continued systematic implementation of the best, most cost- effective solutions is enabling the Group to continuously As part of the ISO 14001 process, every employee receives improve its performance, with the ultimate goal of achieving training in environmental skills or awareness tailored to his or around 4.0 kilograms per vehicle. her job and business. At any rate, it will meet the limits set for 2007 in the European Union directive on reducing VOC emissions.
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A steady decline in other regulated emissions These measures helped to reduce water consumption per By gradually substituting low-sulfur fuels for conventional vehicle produced by nearly 50% between 1995 and 2005. high-sulfur fuel oil, worldwide sulfur dioxide (SO2) emissions Production facilities are either connected to the public from the Group’s power plants have been reduced by more wastewater treatment network or equipped with their own than 80% since 1995. integrated treatment plant. They also systematically track Worldwide nitrogen oxide (NOx) emissions have declined by releases using indicators, defined on a case-by-case basis, over 20% since 1995, according to data from the Industrial to estimate, for example, the amount of suspended solids Environment Observatory set up by the Group to track the and the chemical oxygen demand (COD). environmental performance of its facilities. Between 1995 and 2005, worldwide daily releases of suspended solids and COD were reduced by 39% and 30% LOWERING ENERGY CONSUMPTION respectively. Given the nature of effluent from the car plants, the risk of eutrophication and acidification is negligible. All carmaking processes are energy intensive, whether foundry work, the cooling of machine tools, paint drying or heat treatment processes. The Group is committed to REDUCING AND EFFICIENTLY developing action plans to reduce energy consumption at all RECOVERING WASTE FROM AUTOMOBILE its plants. Among the most remarkable initiatives undertaken PLANTS in recent years has been the installation of waste-to-energy For more than ten years, programs have been in place to units at three facilities. reduce the amount of automotive process waste per vehicle produced, and to recover, recycle or reuse any waste that Participation in the CO emissions trading 2 remains. scheme Over the decade from 1995 to 2005, these programs (which Seven plants in France and one in England that produce CO2 from combustion installations rated over 20 MW have been do not cover metallic waste) have reduced waste per vehicle covered since 2005 by the procedures for transposing the produced by 28% and the proportion of landfilled waste from European Union Directive on greenhouse gas emissions 31% to 12%. As a result, the recovery rate rose to 83% in trading for the period from 2005 to 2007. Two plants in Spain 2005, with the remaining 5% incinerated without energy will join the scheme in 2006. recovery or, in the case of certain types of liquid or sludge waste, treated with physical-chemical processes. In France, the allowances for the first phase are calculated based on data for the 1996-2002 period. Nearly all scrap sheet metal, turnings and other metal waste is recovered and reused in steelmaking or in the Group’s Thanks to the initiatives deployed since 1990 to reduce fossil foundries. Managing this category of waste, estimated at fuel consumption, CO2 emissions have been contained overall around 672,000 tons in 2005, is therefore not only since 1996, and even significantly reduced for installations environmentally beneficial, it also makes business sense. rated over 20 MW, despite a sharp increase in the number of vehicles produced at the plants concerned. When this category of waste is taken into account, Group plants reclaim and recycle around 94% of their process waste. REDUCING WATER CONSUMPTION AND RELEASES In 2005, the Group’s iron foundries directly used 104,000 tons of this metal waste, while indirectly recycling Conserving water is a key objective at all plants, in particular around 76,000 tons of scrap iron purchased from outside through the use of metering systems, the display of the least suppliers. water-intensive operating parameters for each workstation and the deployment of recycling systems.
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UNDERSTANDING SOILS TO IMPROVE After in-depth surveys, the experts concluded that the sites PROTECTION required only self-monitoring. Depending on the site, these surveys were supported by a small number of one-time PSA Peugeot Citroën is committed to identifying any soil remediation or prevention programs. contamination pre-existing at its sites. In every case, strict procedures are in place to prevent soil Either at the instigation of public authorities or at the Group’s pollution, in particular through the use of retention basins for initiative, soil contamination has been assessed at a large liquid storage. number of sites in France, in compliance with the procedure developed by France’s Geological and Mining Research Bureau (BRGM).
THE OTHER DIVISIONS AND THE ENVIRONMENT
FAURECIA GEFCO Faurecia is gradually deploying ISO 14001-compliant In 2005, Gefco continued its programs to reduce greenhouse environmental management systems in all its subsidiaries. gas emissions, increasing to 25% the proportion of freight In 2005, 82 units had implemented ISO 14001 systems, carried by alternative modes to road transport. certified by an accredited organization, compared to only In particular, the company has a long tradition of using 50 in 2003 and 17 in 2000. The certification process has maritime transport to ship vehicles in Europe. It was a pioneer helped to improve the management of environmental impacts on the Vigo-Saint Nazaire sea highway, created in 1975 and and risks, in particular through the greater involvement of extended to Sheerness, UK in 2004, and was the first employees, who received more than 18,000 hours of training customer on the new Toulon-Rome sea highway opened in in 2005. spring 2005. In all, maritime shipping now accounts for 14% In addition, Faurecia has taken steps to improve its of Gefco’s transport purchasing, compared with an average environmental reporting process. Since the end of 2003, 8% in Europe. it has performed six-month surveys at all units worldwide to In rail transport, Gefco began using a rail corridor between assess the environmental impact of operations, with reporting France and Central Europe, running Mulhouse-Salzburg data steadily becoming more reliable. eastbound and Kolin-Mulhouse westbound, and is preparing to open a similar system between France and Spain.
In addition, 100 car carriers were purchased during the year, bringing the fleet to 4,345 cars and strengthening the company’s position as the second largest private fleet in Europe.
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ENVIRONMENTAL INDICATORS AUTOMOBILE FUEL CONSUMPTION AND EMISSIONS
The following tables are not exhaustive. The models were selected on the basis of their sales and environmental performance.
For each model, the table shows data for the gasoline and diesel versions offering the lowest CO2 emissions and fuel consumption.
Models in boldface are the best-selling gasoline or diesel version.
In certain cases, the best-selling model is also the most fuel-efficient.
PEUGEOT Fuel Displacement Horsepower Consumption Emissions Noise City Highway Combined
G/D (cc) (kW) (l/100 km) (l/100 km) (l/100 km) CO2 (g/km) (dBa) Peugeot 107 1.0-liter G 998 50 5.5 4.1 4.6 109 72.0 1.4-liters HDi D 1,398 40 5.3 3.4 4.1 109 71.2 Peugeot 1007 1.4-liters G 1,360 55 7.9 5.2 6.2 147 71.5 1.4-liters HDi D 1,398 50 5.3 3.8 4.4 115 73.7 Peugeot 206 1.4-liters G 1,360 55 8.8 5.0 6.4 152 73.6 1.4-liters HDi D 1,398 50 5.7 3.7 4.4 116 70.9 Peugeot 307 1.4-liters G 1,360 65 8.7 5.3 6.5 155 71.7 1.6-liters 16V G 1,587 80 10.0 5.8 7.4 174 72.4 1.6-liters HDi D 1,560 80 6.0 4.2 4.8 126 72.4 Peugeot 407 1.8-liters G 1,749 92 10.5 6.0 7.7 183 72.7 2.0-liter G 1,997 103 11.0 6.4 8.1 192 73.5 1.6-liters HDi D 1,560 80 7.0 4.6 5.5 145 73.9 2.0-liter HDi D 1,997 100 10.1 5.6 7.2 192 73.3 Peugeot 407 Coupé 3.0-liter V6 G 2,946 155 15.0 7.3 10.2 242 73.6 2.7-liters HDi V6 D 2,720 150 11.9 6.5 8.5 226 71.6 Peugeot 607 2.2-liters G 2,230 120 13.0 7.0 9.2 219 73.9 2.2-liters Hdi w/particulate filter D 2,179 125 8.5 5.2 6.4 170 75.0 2.7-liters HDi V6 D 2,720 150 11.6 6.6 8.4 223 72.0 Peugeot 807 2.0-liter G 1,997 100 12.3 7.3 9.1 218 72.9 2.0-liter HDi D 1,997 80 9.2 5.9 7.0 186 72.9 2.2-liters Hdi w/particulate filter D 2,179 94 10.1 5.9 7.4 199 73.1 Partner Combispace 1.6-liters G 1,587 80 9.5 6.2 7.4 175 71.2 2.0-liter HDi D 1,997 66 7.3 5.0 5.8 154 72.9
Bold: the best-selling vehicle in its category (gasoline or diesel version). Light: vehicle emitting the least CO2 in its category (gasoline or diesel version).
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CITROËN Fuel Displacement Horsepower Consumption Emissions Noise City Highway Combined
G/D (cc) (kW) (l/100 km) (l/100 km) (l/100 km) CO2 (g/km) (dBa) Citroën C1 1.0-liter G 998 50 5.5 4.1 4.6 109 72.0 HDi 55 hp D 1,398 40 5.3 3.4 4.1 109 71.2 Citroën C2 1.1-liters G 1,124 44.1 7.5 4.8 5.8 138 72.9 HDi 70 hp D 1,398 50 4.9 3.8 4.2 111 71.9 Citroën C3 Stop&Start G 1,360 65 6.9 4.9 5.7 135 70.8 1.4-liters G 1,360 54 8.2 4.9 6.1 145 71.8 HDi 70 hp D 1,398 50 5.3 3.8 4.4 115 71.9 Citroën C3 Pluriel 1.4-liters G 1,360 54 9.1 5.4 6.8 163 73.8 1.6-liters 16V G 1,587 80 8.6 5.6 6.7 160 71.8 HDi 70 hp D 1,398 50 5.7 4.2 4.7 125 72.6 Citroën Berlingo 1.4-liters G 1,360 55 9.6 6.2 7.4 175 71.1 2.0-liter HDi 90 hp D 1,997 66 7.3 5.0 5.8 154 72.9 1.6-liters HDi 90 hp D 1,560 66 6.7 4.7 5.4 143 73.7 Citroën C4 1.4-liters 16V G 1,360 65 8.7 5.2 6.4 153 71.6 1.6-liters 16V G 1,587 80 9.5 5.7 7.1 169 73.1 1.6-liters HDi 110 hp D 1,560 80 6.0 4.0 4.7 125 73.4 Citroën Xsara Estate 1.6-liters 16V G 1,587 80 9.3 5.5 6.9 160 72.1 2.0-liter HDi 90 hp D 1,997 66 7.5 4.3 5.5 144 72.0 Citroën Xsara Picasso 1.6-liters G 1,587 70 10.0 6.1 7.5 178 74.0 1.6-liters 16V G 1,587 80 9.5 6.0 7.3 172 71.9 HDi 90 hp D 1,997 66 7.0 4.6 5.5 147 72.0 Citroën C5 1.8-liters 16V G 1,749 92 10.4 5.9 7.6 180 73.1 2.0-liter 16V G 1,997 103 11.1 6.3 8.0 190 71.2 1.6-liters HDi 110 hp D 1,560 80 6.8 4.5 5.4 142 73.7 Citroën C6 3.0-liter V6 G 2,946 155 16.3 8.2 11.2 266 72.2 2.7-liters HDi D 2,720 150 12.0 6.8 8.7 230 70.2 Citroën C8 2.0-liter 16V G 1,997 100 12.3 7.3 9.1 218 72.9 2.0-liter 16V G 1,997 103 12.0 7.3 9.0 213 73.5 2.0-liter HDi 110 hp D 1,997 80 9.2 5.9 7.0 186 72.9
Bold: the best-selling vehicle in its category (gasoline or diesel version). Light: vehicle emitting the least CO2 in its category (gasoline or diesel version).
90 PSA Peugeot Citroën - 2005 reference document CORPORATE POLICIES 05 Environmental Indicators - Production plant consumption and emissions
ENVIRONMENTAL INDICATORS PRODUCTION PLANT CONSUMPTION AND EMISSIONS
The following environmental indicators comply with French When used, these resources and process products, such as decree no. 2002-221 of February 20, 2002. The data concern scrap iron in casting, steel and aluminum sheets in stamping, the production plants, the main engineering and design sites or surface treatment products, paints, cutting liquids, glues and the logistics platforms of fully consolidated companies, and sealants, generate by-products that Group plants are except Faurecia, the Group’s automotive equipment division. committed to limiting and effectively managing. The same is Faurecia, a listed company that is 72%-owned by Peugeot S.A., true for their releases into the air, into water and into the soil. manages its business independently of the Group and Note that certain 2004 results have been restated to reflect therefore prepares and publishes its own indicators in its more detailed data reported after last year’s publication date. annual report. The restatements have been explained each time the PSA Peugeot Citroën consumes two main resources for the difference with last year’s published figure exceeded 1%. needs of its manufacturing operations and its employees: Changes in the scope: - water, for machining, washing, cooling and sanitary facilities. - SCMPL was sold at the end of 2004 and was therefore not Depending on local availability, production plants get their included in 2005 data water from public water companies, private wells or nearby rivers, - Faurecia’s production plant in Hérimoncourt was sold to - energy (fossil fuels and electricity) to power a certain number PCA and is now aggregated with PCA data of processes, such as heat treatment, casting and paint - The Belchamp and Carrières technical facilities were also curing, as well as to provide heat, light and air-conditioning included in PCA data in 2005. in buildings and offices. PCA: Peugeot Citroën Automobiles
SCMPL: Société de Constructions Mécaniques Panhard et Levassor
PCI: Process Conception Ingénierie
PMTC: Peugeot Motocycles
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WATER CONSUMPTION
(in cu.m) City water Surface water Underground water Total PCA 2005 3,488,832 7,128,167 9,407,372 20,024,371 2004 3,811,089 7,172,250 10,336,343 21,319,682 2003 4,010,182 8,660,020 11,090,804 23,761,006 SCMPL 2005 - - - - 2004 10,540 - - 10,540 2003 10,500 - - 10,500 PCI 2005 25,304 - - 25,304 2004 21,767 - - 21,767 2003 25,819 - - 25,819 PMTC 2005 15,699 54,081 - 69,780 2004 13,809 32,047 - 45,856 2003 20,798 85,317 - 106,115 Gefco 2005 217,702 29,569 6,540 253,811 2004 264,134 34,250 5,490 303,874 2003 262,020 30,748 12,665 305,433 Total 2005 3,747,537 7,211,817 9,413,912 20,373,266 2004 4,121,339 7,238,547 10,341,833 21,701,719 2003 4,329,319 8,776,085 11,103,469 24,208,873
Gefco 2004 results have been revised upwards by 3% after data from several subsidiaries were corrected.
GROSS EFFLUENT DISCHARGES, EX-WORKS
(in kg/d) COD BOD5 SM PCA 2005 6,444 2,228 1,584 2004 7,931 2,395 1,865 2003 7,969 2,900 2,057 SCMPL 2005 - - - 2004 1 - 0 2003 1 - 0 PCI 2005 n.a. n.a. n.a. 2004 n.a. n.a. n.a. 2003 n.a. n.a. n.a. PMTC 2005 3 1 0 2004 2 1 0 2003 6 0 0 Gefco 2005 n.a. n.a. n.a. 2004 n.a. n.a. n.a. 2003 n.a. n.a. n.a. Total 2005 6,447 2,229 1,584 2004 7,934 2,396 1,866 2003 7,975 2,900 2,058
COD: chemical oxygen demand; BOD5: biochemical oxygen demand after 5 days; SM: suspended matter; n.a.: non applicable. Around 90% of these discharges are further treated in a local plant before release into the environment.
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CONSUMPTION OF ENERGY Consumption of fossil fuel (in MWh ncv) Heavy fuel oil LSFO VLSFO HHO Natural gas Coal Coke PCA 2005 - - 176,911 19,017 2,648,985 26,354 119,475 2004 - - 223,789 20,239 2,714,721 37,678 129,679 2003 - 233,422 68,800 24,981 2,607,990 37,621 162,167 SCMPL 2005 ------2004 - - - - 11,014 - - 2003 - - - - 6,454 - - PCI 2005 - - - - 14,246 - - 2004 - - - - 14,192 - - 2003 - - - - 12,245 - - PMTC 2005 - - - 49 21,511 - - 2004 - - - 14 15,696 - - 2003 - - - 30 17,858 - - Gefco 2005 - - - 25,987 40,702 - - 2004 - - - 43,377 45,581 - - 2003 33 - - 11,012 71,169 - - Total 2005 0 0 176,911 45,053 2,725,444 26,354 119,475 2004 0 0 223,789 63,630 2,801,204 37,678 129,679 2003 33 233,422 68,800 36,023 2,715,716 37,621 162,167
LSFO: low-sulfur fuel oil; VLSFO: very low-sulfur fuel oil; HHO: home heating oil.
Energy indicators are expressed in the same unit of measurement (MWh ncv) by applying officially recognized conversion coefficients.
Gefco’s 2004 consumption of home heating oil has been revised sharply upwards and its consumption of natural gas revised downwards after data from several subsidiaries were corrected.
Consumption of electricity and steam (in MWh) Electricity Steam PCA 2005 2,843,459 319,266 2004 2,962,212 401,738 2003 2,909,900 302,928 SCMPL 2005 -- 2004 4,835 - 2003 4,769 - PCI 2005 12,592 - 2004 12,046 - 2003 10,795 - PMTC 2005 16,236 6,593 2004 15,169 10,157 2003 17,493 12,687 Gefco 2005 54,030 - 2004 51,600 - 2003 47,753 - Total 2005 2,926,317 325,859 2004 3,045,862 411,895 2003 2,990,710 315,615
Gefco’s 2004 electricity consumption has been revised upwards by 3% after data from several subsidiaries were corrected.
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AIR EMISSIONS FROM COMBUSTION PLANTS
Emissions are calculated on the basis of energy consumption in compliance with the ruling of July 28, 2005 in the case of carbon dioxide and the circular of April 15, 2002 for all other gases.
Greenhouse gas emissions
(in tonnes) CO2 N2OCH4 Total CO2 equivalent PCA 2005 647,505 25.4 41.6 656,237 2004 675,004 26.3 43.6 684,083 2003 686,896 25.9 43.0 695,834 SCMPL 2005 - - - - 2004 2,242 0.1 0.2 2,277 2003 1,314 0.1 0.1 1,334 PCI 2005 2,928 0.1 0.2 2,973 2004 2,889 0.1 0.2 2,934 2003 2,493 0.1 0.2 2,531 PMTC 2005 4,435 0.2 0.3 4,500 2004 3,199 0.1 0.2 3,247 2003 3,643 0.2 0.3 3,698 Gefco 2005 15,248 0.5 0.7 15,421 2004 20,899 0.6 0.9 21,117 2003 17,448 0.7 1.1 17,687 Total 2005 670,116 26.2 42.9 679,132 2004 704,234 27.3 45.1 713,657 2003 711,794 27.0 44.6 721,085
CO2 = carbon dioxide ; N2O = nitrous oxide ; CH4 = methane. Gefco’s 2004 greenhouse gas emissions have been recalculated on the basis of updated fuel consumption data (see direct energy consumption).
Other gas emissions
(in tonnes) SO2 NO2 PCA 2005 423.5 706.3 2004 545.6 757.8 2003 1,041.1 784.4 SCMPL 2005 - - 2004 0.0 2.4 2003 0.0 1.4 PCI 2005 0.0 3.1 2004 0.0 3.1 2003 0.0 2.6 PMTC 2005 0.1 4.7 2004 0.0 3.4 2003 0.1 3.4 Gefco 2005 9.0 18.2 2004 15.0 25.5 2003 6.1 19.4 Total 2005 432.6 732.2 2004 560.6 792.1 2003 1,047.2 811.2
SO2 = sulfur dioxide ; NO2 = nitrogen dioxide. Gefco’s 2004 sulfur dioxide and nitrogen dioxide emissions have been recalculated on the basis of updated fuel consumption data (see direct energy consumption).
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PAINTSHOP VOC RELEASES
VOC releases (t) Ratio (kg/veh) PCA 2005 12,998 4.93 2004 14,782 5.34 2003 15,521 5.62 SCMPL 2005 - - 2004 1 - 2003 1 - PMTC 2005 97 - 2004 73 - 2003 171 - Total 2005 13,095 - 2004 14,856 - 2003 15,694 - VOC: volatile organic compounds.
VOLUMES OF WASTE TREATED, BY TYPE AND DISPOSAL PCA (excluding metallic waste, nearly 100% of which is recycled)
Onsite Other (in tonnes) Landfill Recovery recycling treatment Total Foundry waste 2005 14,342 83,468 111,455 381 209,647 2004 15,722 93,884 111,219 387 221,212 2003 29,080 97,649 96,205 413 223,346 Industrial waste 2005 21,543 92,036 6,282 1,297 121,159 2004 26,103 96,639 5,660 972 129,374 2003 28,220 95,551 5,415 866 130,052 Sludge + Effluent + 2005 10,961 39,464 131 19,900 70,455 Hazardous industrial 2004 10,343 36,356 153 29,267 76,119 waste 2003 11,430 33,024 145 31,188 75,787 Total 2005 46,846 214,968 117,868 21,579 401,261 2004 52,168 226,879 117,032 30,626 426,705 2003 68,730 226,224 101,765 32,467 429,186
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PCI + PMTC + SCMPL
Other (in tonnes) Landfill Recovery treatment Total Foundry waste 2005 - - 238 238 2004 - - 242 242 2003 - - 225 225 Industrial waste 2005 643 1,969 43 2,655 2004 632 1,436 100 2,168 2003 780 1,378 156 2,314 Sludge + Effluent + 2005 12 225 918 1,154 Hazardous industrial 2004 31 189 1,118 1,338 waste 2003 8 231 1,316 1,556 Total 2005 654 2,194 1,199 4,047 2004 662 1,625 1,460 3,748 2003 788 1,610 1,697 4,095
2004 waste production has been revised downwards by 2% after data from a subsidiary were corrected.
Gefco
Other (in tonnes) Landfill Recovery treatment Total Industrial waste 2005 7,661 2,338 1,070 11,068 2004 8,585 1,593 467 10,645 2003 n.a. n.a. n.a. 6,969 Sludge + Effluent + 2005 570 319 112 1,001 Hazardous industrial 2004 430 40 237 707 waste 2003 n.a. n.a. n.a. 374 Total 2005 8,230 2,657 1,182 12,069 2004 9,015 1,633 704 11,353 2003 n.a. n.a. n.a. 7,343 n.a.: non available.
Data concerning volumes of waste treated, by disposal, have been reported since 2004.
Gefco’s 2004 waste production has been revised upwards by 13% after data from several subsidiaries were corrected.
OTHER ENVIRONMENTAL ISSUES In compliance with legislation, these prior studies are submitted to public hearing and to the approval of Respecting the biological balance administrative authorities. and managing odors and noise Measures required to preserve the natural environment, flora Amount of penalities paid following a legal and fauna, as well as to ensure the tranquility of neighboring ruling concerning the environment communities are assessed and defined during initial or The Group did not have to pay any penalties in this regard supplemental environmental impact studies before the in 2005. installation of any new plant facilities or equipment.
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CORPORATE SOCIAL RESPONSIBILITY
PSA Peugeot Citroën is implementing an ambitious In addition, the Group is actively developing solutions to environmental strategy, with a deep commitment to enabling enable cars to interact harmoniously and seamlessly with people to use their cars responsibly and to delivering the the urban environment. safety performance customers have a right to expect from the Peugeot and Citroën marques.
BUILDING SAFER CARS FOR EVERYONE
PSA Peugeot Citroën’s overriding concern is to ensure the ACTIVE SAFETY: safety of drivers and other road users. In 2005, nearly 10% A CENTER OF EXCELLENCE of the Automobile Division’s research and development FOR PSA PEUGEOT CITROËN budget was allocated to safety-related programs. Accident avoidance While assertively continuing to develop solutions that help Capitalizing on its recognized expertise in suspensions, to avoid accidents (active safety) and to reduce their impact steering, braking and other chassis systems, PSA Peugeot Citroën when they do occur (passive safety), the Group is also the designs cars that are naturally safe to drive, with technology European leader in post-accident or tertiary safety systems, that compensates, to the extent possible, for bad driving, with the emergency call system to guide rescue crews to faulty infrastructure and adverse weather conditions. accident victims. To attenuate the consequences of certain emergency The Group also addresses road safety by studying human situations, the Group offers such driver assistance technologies factors, which play a decisive role in preventing accidents, as anti-blocking systems (ABS), which are now standard on and by offering efficient driver support systems. It also works every model, emergency braking assist (EBA), and electronic closely with public authorities in charge of road infrastructure, stability programs (ESP), which help drivers maintain control proposing a variety of innovations that enhance safety. even in a skid. ESP technology continued to be extended in For more than 35 years, the accidentology studies conducted 2005 and is now standard on all mid-sized and upper-range by the joint PSA Peugeot Citroën/Renault Laboratory of Peugeots and Citroëns. In addition, certain models come with Accidentology, Biomechanics and the Study of Human such efficient, practical innovations as Xenon dual-function Behavior have been helping to improve understanding both directional headlights or the Group’s exclusive lane departure of accident causes and outcomes and of how people respond warning system, which alerts an inattentive driver by causing in a crash. These studies show that nearly 40% of the victims the seat to vibrate on the side the lane was crossed. of fatal accidents could not have been saved by passive safety Improved knowledge of postural ergonomics is designed into systems alone. This is why the Group’s research focuses on new car projects, in a commitment to delivering exceptional active safety and ways of avoiding accidents altogether. accessibility, visibility and other comfort and safety features, regardless of occupant age or morphology.
Expertise in cognitive ergonomics (i.e. how drivers exchange information with their environment) makes certain that information provided by the vehicle is correctly interpreted by drivers under all conditions, allowing them to focus on safe driving.
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Track Tests Accidentology data show that even today, nearly 20% of PSA Peugeot Citroën operates two test centers capable accident fatalities involve people who were not wearing of reproducing every imaginable set of driving conditions seatbelts. Any means of encouraging people to fasten their and of subjecting cars to maximum constraints to seatbelts therefore leads to a real increase in safety. One ensure extremely high levels of safety. In all these areas, highly effective system consists of driver reminders that a PSA Peugeot Citroën engineers enjoy world-class expertise seatbelt is not fastened. If the driver’s belt is unfastened, he and access to facilities, such as the Belchamp Test Center’s or she is alerted by a warning sound and light for more than multi-grip track and its roadhandling track, used to develop 90 seconds as soon as the vehicle reaches a certain speed. electronic stability program (ESP) and acceleration skid control An unbuckled front passenger belt is signaled by a warning (ASR) systems. These tracks can recreate all types of road but only if someone is in the seat, to avoid bothering the conditions to validate ongoing vehicle improvements. In 2005, driver when no passenger is aboard. Rear seat buckle-up the Belchamp Center made extensive use of the new active reminders also play an important role in passenger safety safety test field that came on stream in 2004. The new facility and are now offered on a growing number of models, like offers a wide range of efficient, compatible equipment and the new Peugeot 1007 and Citroën C6. systems capable of reproducing, safely and under laboratory The need to protect pedestrians is also built into each new conditions, a full array of threatening situations and driver vehicle projects. While active safety systems–which help to responses. avoid hitting a pedestrian–are obviously the most effective, each car’s architecture and styling are carefully designed to PASSIVE SAFETY: attenuate the effects of such an impact. Hoods, bumpers and SETTING THE STANDARD WORLDWIDE lower skirts are tested to make pedestrian contact as harmless as possible. This imposes considerable constraints Platforms and structures on the development process, which must also take other designed for protection potential types of collision into account. Thanks to its new When an accident cannot be avoided, Peugeot and Citroën active hood, which springs open upon collision to cushion cars afford protection that is best-in-class worldwide. From the the impact of the pedestrian’s head, the Citroën C6 was the initial design of the shared platforms throughout the vehicle first car in Europe to earn a record four stars in pedestrian development process, passive safety is an absolute priority. protection tests conducted by the European New Car This ensures that regardless of the type of collision–frontal, Assessment Programme (EuroNCAP), an independent side, rear or even rollovers–structural components resist organization that rates the passive safety performance of impact and absorb energy to provide a high degree motor vehicles. of protection for occupants. In other crash tests, EuroNCAP has awarded the maximum In this way, the passenger compartment acts as a survival five stars to eight Peugeot and Citroën models, placing the cell, fitted with sophisticated restraint devices. Group among the world’s best in passive safety. In 2005, the Peugeot 1007 gained the highest points score in occupant Efficient restraint systems to protect occupants protection of any car in any segment. Vehicle occupants have to enjoy maximum protection, regardless of their age or where they are seated. Isofix TERTIARY SAFETY: attachment points allow easy and efficient installation of child LEADING THE WAY IN EUROPE seats, seatbelt load-limiting retractors are calibrated at 450 kg, and airbags with dual energy levels equip some The emergency call system models. Everything is calculated to maximize protection for The emergency call system is continuing to be deployed everyone in the vehicle. Already fitted on front seatbelts, across the model line-up. In the event of a medical load-limiting retractors are now gradually being installed for emergency or other threatening incident in the car, occupants back seats as well. These systems adjust occupant restraints can alert a dedicated assistance center simply by pressing while limiting pressure on the chest to reduce the frequency the SOS button. In the case of a collision, the same alert is of thoracic and abdominal injuries. In particular, they provide sent automatically. An operator then establishes contact with better protection for elderly persons involved in serious the car and, if necessary, alerts the emergency services. accidents. Thanks to the car’s GPS system and onboard GSM mobile
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phone, assistance personnel can pinpoint the car’s location, European deployment was stepped up in 2005, with access even if the driver is unconscious. The system shortens opened in Italy, Belgium, Luxemburg, the Netherlands response times, thereby considerably enhancing the and Spain, and by year-end, more than 140,000 Peugeots effectiveness of emergency services. According to the and Citroëns equipped with the system were on the road European Commission, equipping every vehicle on the road in Europe. with such a system would save 2,000 lives a year in Europe.
PROMOTING ROAD SAFETY
PSA Peugeot Citroën allocates a major proportion of its Organized in partnership with the Beijing Traffic Engineering research budget to improving active, passive and tertiary Association and the Chinese Center for Disease Control, the safety systems and performance. In addition to these Chinese symposium led to the signing of two agreements, technological advances, however, it is also important to one with the Tongji Medical College in Wuhan concerning a improve people’s behavior behind the wheel. That’s why survey of seatbelt usage and the other with the University the Group supports a variety of initiatives designed to of Tsinghua for the computer modeling of crash tests. The promote safer driving habits. Group also set up six road safety discussion circles.
In Brazil, an agreement was signed with DENATRAN, SUPPORTING RESPONSIBLE Brazil’s national traffic department, to sponsor a nationwide DRIVING INITIATIVES communication campaign to raise parental awareness of child Better road safety through education passenger safety. PSA Peugeot Citroën is partnering the French Ministry of In Argentina, an agreement was signed with National Education in a number of safe driving programs for young Technological University, to investigate and improve high people, which are being implemented by the Group’s plants accident locations in the Buenos Aires conurbation. and regional offices. Helping young people understand the dangers FOSTERING THE ACQUISITION OF GOOD of driving under the influence DRIVING PRACTICES In association with France’s National Road Safety Council, Improving driving skills with the Safe Driving Citroën is supporting a designated driver program aimed at program getting young adults going out for an evening to choose one As part of the Group’s commitment to road safety, safe driving of their party who agrees not to drink alcoholic beverages classes are regularly organized to raise employee awareness and can therefore drive them home safely. and help reduce the number of road accidents, both in commuting and in personal travel. Today offered on around In addition, since 1999, the Group has supported the Voiture ten sites, the classes are covered by the Local Sponsorship & Co. association, which finds rides for party-goers with and Social Responsibility Action Plans implemented at the drivers who have first passed a breathalyzer test. If no drivers Group’s production facilities and offices. are available, people are taken home in Citroën cars. In 2005, they were attended by more than 1,700 employees Raising awareness of road safety in Europe. In Vigo, Spain, the Group sponsored a training In 2005, PSA Peugeot Citroën organized three symposia on program offered by the regional government of Galicia that road safety in China, Brazil and Argentina. The events were has enabled nearly 3,000 people to improve their awareness attended by several hundred people, including government of road safety issues. Several French sites, like Vesoul, representatives, journalists, researchers, academics and Charleville, Metz, Saint-Ouen, Rennes, Caen, Valenciennes, representatives of civil society. Tremery, Poissy, Mulhouse, Sochaux and Aulnay, organized safe driving courses during the country’s Road Safety Week.
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HELPING TO ENHANCE THE QUALITY OF MOBILE LIFE
The mobility of people and goods has become a fundamental traffic, the improvement of public transit services, the driver of economic and social development, and a prerequisite promotion of commuting by train and the possibility of for access to jobs, healthcare and culture, especially in cities attending eco-driving courses to save energy. where most of the world’s population lives. IVM: AN INNOVATION LABORATORY SUPPORTING SUSTAINABLE MOBILITY The City on the Move Institute (IVM) PSA Peugeot Citroën contributes to the development of Created by PSA Peugeot Citroën in June 2000, the City on sustainable mobility not only by designing environmentally the Move Institute (IVM) is supporting the emergence of sensitive cars equipped with superior safety features, but innovative urban mobility solutions. It conducts research and also by taking into account such important issues as the leads joint projects bringing together municipal authorities inalienable right to mobility, the free flow of automobile traffic and business people, researchers and academics, people and the right balance between different modes of transport. involved in society and the arts, and members of associations. The partnership with Voiture & Co., for example, has enabled IVM is committed to testing real-world solutions, enabling the Group to support long-term trials of alternative transit international comparisons and identifying the world’s most solutions and car-pooling by providing technical expertise and innovative urban planning and architectural programs. Backed equipment to implement new ways of using cars. by the multi-disciplinary skills of experts in Asia, the United States and Europe, it is publishing its findings and raising CNG shuttles between Group sites public awareness of the challenges posed by mobility in A shuttle system using vans powered by compressed natural contemporary society. gas (CNG) has been introduced for employees traveling IVM projects are focused on three priority issues: between the Group’s offices in Vélizy and La Garenne. Based 1) facilitating mobility for people or social groups facing on an especially clean technology, the system limits the difficulties or with special needs; 2) enhancing the quality need for individual transportation, helping to preserve the and performance of urban travel, in particular through environment and improve traffic conditions. intermodal and multimodal solutions; and 3) improving our Logistic support for employee car-pooling understanding of mobility, developing a culture of mobility and encouraging civic courtesy. As part of its social responsibility commitment, PSA Peugeot Citroën encourages car-pooling to facilitate A number of public events were held in 2005: employee commutes. Trials have been conducted at the • Launched in 2003, the international “Architecture On The Tremery plant in the Lorraine region, while other programs Move!” exhibition traveled to Guangzhou, Stuttgart, São are in effect at production facilities and offices in the Paris Paulo, Brussels and Grenoble during the year. To date, it area and other regions of France. has been translated into four languages (English, Chinese, A company travel plan for the Sochaux plant Portuguese and Spanish) and presented in 24 cities in 13 countries. When the Group began thinking about alternative transportation systems for the Sochaux plant’s company travel • Edited by François Ascher, Jacques Levy and Sylvain plan, it focused on three key objectives: reducing driver-only Allemand, the proceedings of the symposium held in car use, making employee travel safer and shrinking its Cerisy, France in June 2003 were published under the title environmental footprint. The Senses of Movement and presented to specialists at the Ménagerie de Verre in Paris. The book, along with the The solutions included the introduction of a car-pooling French translation of John Urry’s Sociology Beyond Society: system, the development of on-site convenience services, A New Frontier For Sociology?, was also the subject of the creation of on-site bike lanes, the introduction of shuttle a conference given at the University of Lausanne. services, the reduction of disamenities from downtown truck
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• As part of its China Program, IVM partnered with Revue • In March, IVM organized its first public event in Brazil with Urbanisme for its special issue on “Chinese Cities On The a series of university seminars on “Contemporary Urban Move”. Conferences and workshops were held in Shanghai Mobilities: Challenges, Participants, Actions”. The Spanish for the official inauguration of the IVM Academic Chair at and Portuguese versions of the “Architecture on the Move!” Tongji University. The panel of judges for IVM’s Sustainable exhibition were inaugurated, with additional panels from Cities and Mobilities architectural design competition met the winners of the “Mova São Paulo, Views on Urban in November in Guangzhou to review projects submitted Mobility” student competition. Designed to highlight the by sixty Chinese and European architects for urban locations role of photography in analyzing urban mobility, the contest in Guangzhou, Shanghai and Wuhan. involved 15 or so teams from the São Paulo universities of architecture, urbanism and art. IVM’s activities were also • Relief maps of the Paris metro and a Braille atlas of the presented in Recife, at a convention of Latin American Greater Paris public transit system were unveiled in transportation researchers. In November, a working seminar September, as part of the program to support the mobility in Rio de Janeiro helped develop an initial core of contacts of the blind and visually impaired. and feedback for “The Street Belongs To All of Us”, a new • In October, the “Mobilities for Integration” program led to project that will be a major IVM event in 2006. the organization of a forum attended by elected officials, local authorities, representatives from public transport companies, academics, researchers and leaders of social reintegration associations. At the same time, IVM published Bouger pour s’en sortir, mobilité quotidienne et intégration sociale, a description of the obstacles to mobility encoun- tered by people trying to reintegrate society.
DEEPENING ROOTS IN HOST COMMUNITIES
As part of its social responsibility commitment, • the environment, with programs to preserve or restore PSA Peugeot Citroën is actively involved in its host natural sites, raise people’s awareness or train them in communities, addressing local issues and challenges with environmental issues. effective responses to a wide range of local needs. In 2005, • safe driving, with programs to inform people, raise their fourteen sites prepared a Local Sponsorship and Social awareness and teach correct practices. Responsibility Action Plan to support community outreach initiatives by the Group and its employees. • urban mobility, with programs to support safer, cleaner, more accessible mobility and social assistance programs. IMPLEMENTING LOCAL SPONSORSHIP • local development, with programs to fight against exclusion, AND SOCIAL RESPONSIBILITY ACTION to help the handicapped and provide emergency social PLANS services. A Local Sponsorship and Social Responsibility Action Plan In the Brittany, Lorraine and Franche-Comté regions, the enables a site to present its outreach programs to institutions, Group supports the Performance Bretagne, Performance associations and stakeholders in its host community. By 2010, Partenaires Super Force Lorraine, and Perfo. Est supporting dialogue with both internal and external publics, associations that provide consulting services to help small- and the Plan also enhances employee pride and alignment with medium-sized manufacturers improve their logistics processes. the site’s social responsibility goals. Plan components focus The Group also supports the Fondation de la 2e Chance, on the following areas: a foundation that helps people overcome serious difficulties.
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The Solidarity Trophies COMBATING EXCLUSION WITH THE Developed as part of the Group’s social responsibility process, PARIS EMERGENCY SERVICES AGENCY the Solidarity Trophies are a competition that enables AND CONCERNED ASSOCIATIONS employees to carry out a personal or group project to support For the past five years, PSA Peugeot Citroën has been local or international solidarity in the following areas: supporting the Paris emergency social services agency by Environment, Education, Integration, Mobility and Emergency/ donating and maintaining the organization’s vehicle fleet. The Topical. In 2005, the Rennes, Poissy, Metz, Caen, Paris, vehicles are used day and night by the mobile teams that Mulhouse and Aulnay sites awarded 27 trophies. criss-cross the capital to provide emergency care and assistance to the homeless and other disadvantaged people, PARTNERSHIP PROGRAMS and then, if requested, take them to hospitals or shelters. WITH THE MINISTRY OF EDUCATION In addition, the Group has continued to donate vehicles to PSA Peugeot Citroën has long fostered a close partnership associations that use mobility to alleviate social and economic with France’s Ministry of Education. By conducting plant exclusion or to improve the quality of life for the disabled. visits, participating in information forums and donating These associations work in a variety of areas, such as low- equipment, the Group enables students to discover the cost car rental for people in social reintegration programs, working world and broaden their knowledge of the support services for the seriously disadvantaged and on- automobile industry. The partnership also helps to define demand transportation services. curricula aligned with the industry’s needs and integrating the latest technological developments. Similar partnerships have been developed in China, Brazil, Mexico and Slovakia.
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Results 104
Group Financing 111
Return on Capital Employed 118
Management of Financial and Operational Risks 119
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RESULTS
NET SALES AND REVENUE
Net sales and revenue for 2005 totaled €56,267 million, an increase of 0.3% over the previous year’s €56,105 million.
MANUFACTURING AND SALES COMPANIES Sales by the manufacturing and sales companies broke down as follows:
(in millions of euros) 2005 2004 Automobile Division 45,071 45,239 Gefco 3,000 2,894 Faurecia 10,978 10,719 Other businesses 709 899 Eliminations (4,871) (5,006) Total 54,887 54,745
Automobile Division sales dipped 0.4% to €45,071 million. Automotive revenue amounted to €1,095 million, an increase The 1.6% decline in sales volume of assembled vehicles, of 3.5%. Growth was driven by a sharp rise in external excluding China (operations in China are accounted for by the revenue, boosted by new contracts in Russia and the Czech equity method) and the 0.8% negative effect of changes in Republic. geographic mix (due to the lower contribution of Western Supply (logistics and sea and air freight) revenue rose 10.0% Europe) were largely offset by the 1.5% positive impact of to €378 million, reflecting increased sea and air freight changes in product mix (with increased sales of recent services worldwide. models, mainly the Peugeot 407 and Citroën C4) and the 0.5% favorable currency effect. The net price effect was Faurecia’s sales came to €10,978 million, an increase of 2.4% neutral. over 2004. Sales to other Group companies totaled €2,468 million. Non Group sales rose 4.3% to €8,510 million, led by Gefco revenue totaled €3,000 million, up 3.7% over 2004. sales outside Europe which have grown in parallel with the Revenue from services performed for other Group companies expansion of Faurecia’s manufacturing presence in North rose 0.7% to €1,843 million, while revenue from third partie America and Asia. On a like-for-like basis – excluding the effect increased 8.7% to €1,157 million. of changes in exchange rates, sales of catalytic converters and Network (part load and full transportation) revenue grew 2.7% changes in the scope of consolidation – the increase was 1.4%. to €1,506 million, reflecting optimization of the supply chain Car seat sales totaled €4,794 million, up 0.2% on a reported to Group production units and significantly higher revenues basis but down 0.7% at constant exchange rates. Significantly from services to customers outside the Group. lower sales to French carmakers were partly offset by higher sales to German and North American manufacturers, reflecting production ramp-up of several car models equipped with Faurecia seats.
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Sales of other interior modules came to €3,483 million, down of the Peugeots and Citroëns sold in the bank’s host 0.5% on a reported basis and 0.1% like-for-like. As was the countries, representing a significant increase in penetration case for car seats, lower sales to French carmakers were rate compared with the 2004 rate of 26.3%. Total new vehicle € partly offset by the launch of new Faurecia-equipped models financing extended during the year rose 6.8% to 7, 7 6 4 million, reflecting an increase in average loan size due to by other carmakers in Europe and North America. growth in leasing business and mix enhancements to the Exhaust system sales continued to expand rapidly, rising 14.4% Peugeot and Citroën model ranges. The number of used to €1,961 million. Excluding catalytic converters, the currency vehicles financed contracted 1.9% to 188,700 units. In all, effect and changes in the scope of consolidation, the increase €9,152 million worth of financing was extended in 2005, an was 17%. Growth in North America remained very strong. increase of 5.7%.
Front-end sales totaled €740 million, an increase of 2.9%. As of December 31, 2005, outstanding retail loans stood at €16,853 million. The increase of 6.9% over the year-earlier figure of €15,760 million primarily reflects the growth in BANQUE PSA FINANCE originations in 2005. Outstanding wholesale loans at end- In 2005, new retail financing was provided for 848,300 2005 came to €5,564 million versus €5,421 million one year vehicles, up 2.0% over 2004. The total includes 659,600 new earlier. The total Banque PSA Finance loan book rose 5.8% vehicles, up 3.1%. In all, Banque PSA Finance financed 27.1% over the year, to €22,417 million from €21,181 million.
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 Outstanding loans, including securitized loans - Retail and lease financing 16,853 15,760 - Wholesale financing 5,564 5,421 Total Banque PSA Finance 22,417 21,181
Banque PSA Finance’s revenue corresponds mainly to interest on retail and wholesale loans, including securitized loans not derecognized under IFRS. It also includes interest income earned on the standing cash reserve carried in the balance sheet as part of the bank’s financing strategy, as well as revenue from the sale of financing-related services such as maintenance and insurance, for €125 million versus €115 million in 2004.
Total revenue for 2005 was up 3.4% over the previous year.
The following table provides an analysis of revenue by source:
(in millions of euros) 2005 2004 From third parties 1,380 1,360 Intragroup 276 241 Total Banque PSA Finance 1,656 1,601
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OPERATING MARGIN
In February 2005, the Group announced a consolidated Operating margin operating margin target of 4 to 4.5% of sales and revenue (in millions of euros – as a % of sales and revenue) over the full year. In October, when market forecasts for the 4.4% last quarter pointed to stable volumes in a highly competitive 2,481 environment, the Group made significant adjustments to its 3.4% production programs and scaled back its full-year operating 1,940 margin forecast to around 4% of sales and revenue.
2004 2005
Actual operating margin for the year came to €1,940 million compared with €2,481 million in 2004, representing 3.4% of sales versus 4.4%.
MANUFACTURING AND SALES COMPANIES
(in millions of euros) 2005 2004 Automobile Division 916 1,503 Gefco 145 158 Faurecia 267 283 Other businesses and eliminations 5 19 Total 1,333 1,963
Automobile Division operating margin amounted to margins on CKD sales to the Group’s partners in Iran €916 million compared with €1,503 million in 2004, due to higher local content. Changes in product mix representing 2.0% of sales versus 3.3%. had a negative impact of €50 million, explained by lower sales of the Citroën Picasso and model launches in The net decline in Automobile Division operating margin can the compact segment. Changes in geographic mix had a be explained as follows: €60 million negative impact, reflecting a decline in Western - Overall, changes in sales volumes and mix had a European sales in relation to other geographic markets; €380 million negative impact. Lower volumes had a negative however, significant improvements in margins on sales € € impact of 270 million. This includes 192 million due to a outside Western Europe have eased the impact of these 36,000-unit contraction in sales of assembled vehicles, shifts. excluding China (operations in China are accounted for by the equity method) and a 135,000-unit decrease in vehicle - Higher raw materials costs had an estimated negative output, excluding China and joint ventures with other impact of €340 million, corresponding mainly to increases manufacturers (which are accounted for by the equity in steel and precious metal prices during the year and in method). The other €78 million corresponds to reduced plastic prices at the year-end.
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- Euro IV compliance costs of €97 million were incurred The decline was due to higher transport costs, mainly as a during the year, which could not be passed on to customers. result of the increase in fuel prices, which was far greater than expected and could not be passed on in full to € - The price effect was a negative 80 million. Peugeot and customers. Citroën succeeded in limiting the effects of price competition from promotional offers by continuing to favor margins over However, the effects were largely offset by: volumes in an aggressive marketplace. - the development of international logistics services. Sixty percent of the increase in this business was delivered by - Production cost savings generated a gross gain of Gefco’s new subsidiaries, led by companies in Latin America €614 million. Despite the scaling back of production (60% growth) and in Central and Eastern Europe (85% growth), programs decided in the fall, the results of the cost-cutting - rapid expansion of services to companies outside the Group, program were in line with the Group’s target of annual - scaled up productivity programs, covering together savings in the region of €600 million. Output at the Group’s purchases, supply chair processes and operating expenses. assembly plants in Europe was reduced by 10.3% in the second half compared with the year-earlier period without Faurecia’s operating margin stood at €267 million or 2.4% any material impact on costs, thanks to the plants’ of sales compared with €283 million or 2.6% of sales in 2004 high-level organizational flexibility. (after amortization of Sommer Allibert contractual customer relationship in an amount of €119 million). - Exchange rate changes added €114 million to operating margin. This was largely due to the positive effects of the euro’s The unfavorable change was attributable to several factors: decline against the currencies of Central and Eastern Europe - the steady increase in raw materials costs, which had a and of Latin America which were slightly offset by last year’s material impact even after taking into account the results of 0.8% average gain in the euro against the British pound. price negotiations conducted with customers and suppliers, - Higher salaries had an estimated negative impact of - lower sales to French carmakers at the end of the year, €195 million, after deducting the €26 million decrease in - start-up costs of new production units in the United States, amounts set aside for the statutory profit-sharing and Asia and Eastern Europe. contractual incentive bonus schemes. Total profit-sharing and incentive bonuses for 2005 amounted to €129 million for the RESEARCH AND DEVELOPMENT Automobile Division and €144 million for the entire Group. COSTS – MANUFACTURING - As expected, the effect of differences in accounting AND SALES COMPANIES treatment resulting from the transition to IFRS was Total research and development costs for 2005 came to less significant than in 2004, representing a negative €2,151 million, in line with the previous year’s spend of €159 million. The main differences concerned the €2,183 million. Development costs of €856 million, capitalization and amortization of development costs representing 39.8% of total research and development spend, (net negative impact of €110 million) and the restatement were capitalized in 2005 compared with €885 million (40.5%) of sales with a buyback commitment (net negative impact the previous year. Amortization of development costs of €44 million). amounted to €594 million versus €504 million. In all, the impact on profit was a charge of €1,889 million versus - Operating margin was also charged with a €50 million €1,802 million in 2004. provision set aside to cover penalties levied in October 2005 by the European Commission, for breaches of European Automobile Division research and development spend competition rules that the Commission’s teams claimed to came to €1,816 million compared with €1,832 million have uncovered in the Netherlands. The Group lodged an in 2004. This was in line with the Group’s aim of stabilizing appeal on December 21, 2005. R&D budgets, announced in 2004, after a period of rapid growth starting in 2000. Development costs of €640 million, - Other items had a total negative impact of €14 million. representing 35.2% of total research and development Gefco’s operating margin amounted to €145 million spend, were capitalized in 2005 compared with €676 million compared with €156 million in 2004, representing 4.8% of (36.9%) the previous year. Amortization of development sales versus 5.5%. costs amounted to €443 million versus €369 million.
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The overall effect on Automobile Division profit was a charge BANQUE PSA FINANCE of €1,619 million versus €1,525 million. Banque PSA Finance’s operating margin totaled €607 million, Research and development spend in 2005 represented 4.0% representing a sharp increase compared with €518 million in 2004. of Automobile Division sales. Development costs on existing Business growth added €51 million to operating margin. Operating vehicles – for new versions, new engines and restyles – are expenses increased by only €7 million, a good performance when reported under “Cost of goods“ in order to reflect actual set against the steady expansion of operations. Credit losses production cost more accurately and provide a better measure remained at a satisfactory level compared to the banking of sales margins. Including these costs, aggregate research profession as a whole, with a further improvement having a and development spend by the Automobile Division came to €24 million positive impact on operating margin. €2,271 million compared with €2,263 million in 2004, representing the equivalent of 5.0% of Division sales versus 4.9%. The more detailed analysis of historical credit losses performed in connection with the implementation of Basel II, Faurecia’s gross research and development spend rose 5.5% led to a €27 million reduction in provisions. In all, credit losses to €628 million from €595 million in 2004, representing 5.7% improved to 0.12% of outstanding loans from 0.36% in 2004. of sales versus 5.6%. After deducting costs billed on to Excluding the effects of the above analysis, the 2005 rate customers, the net spend came to €324 million or the would have been 0.25%. equivalent of 3.0% of sales, compared with €338 million or 3.2% in 2004. The operating margin rate continued to improve significantly, rising to 2.9% of average outstanding loans from 2.6% in 2004.
PERSONNEL COSTS Personnel costs break down as follows:
(in millions of euros) 2005 2004 Automobile Division 6,162 5,970 Gefco 368 342 Faurecia 2,002 1,927 Other businesses 140 158 Total manufacturing and sales companies 8,672 8,397 Banque PSA Finance 120 119 Total PSA Peugeot Citroën 8,792 8,516
Personnel costs rose by 3.2% in 2005 to €8,792 million, reflecting the effect of individual pay rises and an increase in the number of employees, as follows:
(number of employees as of December 31) 2005 2004 Automobile Division 139,500 139,400 Gefco 9,400 8,800 Faurecia 55,000 54,400 Other businesses and holding company 2,200 2,600 Total manufacturing and sales companies 206,100 205,200 Banque PSA Finance 2,400 2,400 Total PSA Peugeot Citroën 208,500 207,600
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CONSOLIDATED PROFIT FOR THE YEAR
Profit attributable to equity holders of the parent contracted The interest cost on defined benefit pension obligations by 37.5% to €1,029 million from €1,646 million in 2004, amounted to €187 million compared with€184 million in representing 1.8% of sales versus 2.9%. 2004, while the expected return on external pension funds was €168 million versus €149 million. In all, therefore, the net Earnings per share amounted to €4.47 compared with €6.97. cost of defined benefit plans recorded in “Other income and After taking into account potential ordinary shares expenses, net” came to €19 million in 2005 compared with represented by employee stock options, diluted earnings per €35 million the previous year. share came to €4.46 versus €6.96. No dilutive instruments have been issued on the market. The ineffective portion of the change in fair value of currency hedges represented a charge of €40 million in 2005 versus During 2005, the Group bought back 4,130,162 Peugeot S.A. a €28 million charge in 2004. The amounts for both years shares at an average price of €47.85 per share. The transactions correspond mainly to changes in the fair value of premiums were carried out under the stockholder authorizations given at on British pound and Japanese yen put options purchased the Annual Meetings of May 26, 2004 and May 25, 2005. In by the Automobile Division as a hedge against excessive addition, 257,028 stock options were exercised. These fluctuations in these currencies (see Section 1. Risks – transactions had the net effect of reducing the average number manufacturing and sales companies). of shares used to compute earnings per share to 230,746,746 in 2005 from 236,429,360 the previous year. Other income and expenses consist also of €180 million in impairment losses recognized on the cash-generating units OTHER INCOME AND EXPENSES, NET (CGUs) represented by Faurecia’s Vehicle Interior Systems and Modules businesses. These businesses originated mainly Other income and expenses correspond mainly to from the 2000 acquisition by Faurecia of the Sommer Allibert restructuring and early-termination plan costs, impairment Group’s automotive equipment business. The impairment losses recognized on the assets of Faurecia’s Vehicle Interior losses correspond to the difference between the CGUs’ Systems and Modules businesses, the interest cost on carrying amount and their estimated recoverable amount, pension obligations net of the expected return on external estimated as the present value of future cash flows net of pension funds, and the ineffective portion of the change in debt. The impairment in value resulted from the decline in the fair value of currency and interest rate hedges. businesses’ operating margin observed in 2005, due mainly In 2005, these items represented a net expense of to increased raw materials costs – primarily for plastics – and €352 million for the manufacturing and sales companies and the difficulty experienced by automotive equipment net income of €1 million for Banque PSA Finance. manufacturers in passing on the higher costs to customers. The recognized loss takes into account the margin Restructuring costs came to €160 million compared with improvement plans decided and implemented by Faurecia €92 million in 2004. Costs for 2005 include (i) for the within these businesses. Automobile Division, the €26 million effect of eliminating a € third shift at the Ryton plant in the United Kingdom in March, Of the total impairment loss, 138 million was deducted and (ii) at Faurecia, restructuring plans at various plants located from the goodwill related to the Sommer Allibert automotive € mainly in France and Germany, for €138 million. These costs equipment businesses and 42 million from the businesses’ were partly offset by the €4 million released from provisions property, plant and equipment. for early-termination plans decided in France in 1999 and 2002 in the Automobile Division and in 2001 at Faurecia. As of INTEREST INCOME December 31, 2005, early-termination plan provisions carried AND FINANCE COSTS, NET in the balance sheet amounted to €233 million, including Finance costs, net of interest income from loans and cash €217 million for the Automobile Division and €6 million for and cash equivalents, amounted to €59 million in 2005 Faurecia. As of that date, 9,599 employees were concerned compared with €70 million the previous year. by the plans, including 8,919 in the Automobile Division and 471 at Faurecia. Daily average cash equivalents amounted to €5,991 million.
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Invested mainly in the euro zone at an average interest rate Daily average borrowings amounted to €6,031 million. of 2.25%, these investments generated interest income of The average interest rate was 3.12%, leading to finance costs €135 million over the year. They consist mainly of units in of €188 million over the year. Borrowings include 10-year and money market funds that are managed by leading institutions, 30-year bond issues, financing raised by Faurecia at slightly and investment grade money market securities. The rating requirements for these securities reflect their maturities. higher spreads than those obtained by PSA Peugeot Citroën, Swap contracts are set up to adjust their yield to a money and local currency financing of Automobile Division market level slightly above the interbank overnight rate. subsidiaries outside Europe, mainly in Brazil and Turkey.
INCOME TAXES ON PROFIT OF FULLY-CONSOLIDATED COMPANIES Income taxes on the profit of fully-consolidated companies break down as follows:
(in millions of euros) 2005 2004 Manufacturing and sales companies 278 588 Banque PSA Finance 207 184 Total PSA Peugeot Citroën 485 772
Income tax expense represented 31.7% of pre-tax profit, unchanged compared with 2004.
SHARE IN NET EARNINGS DPCA reported a negative operating margin of CNY 762 million OF COMPANIES AT EQUITY and a net loss of CNY 636 million. In the second half, the company held onto its position in the market and moved back In 2005, the combined contribution of companies at equity into profit. The 67,900 vehicles sold during the period was a net loss of €55 million versus a net profit of €13 million generated a positive operating margin of CNY 169 million and in 2004. net profit of CNY 239 million. This second-half performance The main entities concerned are the Group’s subsidiary in was attributable to a significant reduction in production costs China, Dongfeng Peugeot Citroën Automobile (DPCA), which attributable to productivity gains and improved purchasing is owned on a 50/50 basis by PSA Peugeot Citroën and efficiency, application of a marketing policy that protected China’s Dong Feng Motors, and joint ventures with other margins, and a positive currency effect reflecting the more carmakers (Fiat and Toyota) organized as separate entities. favorable yuan/euro exchange rate.
After taking into account consolidation adjustments and the As a result of these developments, DPCA’s negative elimination of intra-group transactions, DPCA made a negative contribution to Group profit went from €35 million in first- € contribution of 38 million in 2005 versus a negative half 2005 to just €3 million in the second half. €26 million in 2004. Toyota Peugeot Citroën Automobiles (TPCA) made a negative DPCA sold 140,300 vehicles in 2005, representing a strong contribution of €34 million in 2005 compared with a negative 57.4% increase on the previous year’s 89,100 units. The €11 million in 2004. Both years’ results reflect start-up and company’s sales increased 49.5% to CNY 12,647 million. production ramp-up costs at the Kolin assembly plant in the Operating margin was a negative CNY 593 million and DPCA Czech Republic, which assembles three models – the ended the year with a loss of CNY 397 million, which Peugeot 107, the Citroën C1 and the Toyota Aygo – on the nevertheless represented a CNY 173 million improvement same platform. A total of 103,700 vehicles left the assembly on 2004. line in TPCA’s first year of operation. In September, a third In first-half 2005, which saw measures to deal with excess shift was introduced and the plant should be operating at full inventories against a backdrop of price competition, capacity, representing some 300,000 vehicles, in 2006.
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GROUP FINANCING
FINANCING STRATEGY
The PSA Peugeot Citroën Group comprises both BANQUE PSA FINANCE manufacturing and sales companies and finance companies. Banque PSA Finance’s strategy is also designed to ensure Because their financial characteristics are very different, these that the Bank has sufficient financial resources to pursue its companies require the use of dedicated, yet strategically business in all circumstances, whatever the conditions aligned financing policies. on the financial markets. These resources consist primarily of liquidity reserves representing at all times more than MANUFACTURING AND SALES €2,250 million, to cover the Bank’s short-term liquidity risk. COMPANIES As of December 31, 2005, these reserves stood at The financing strategy for the manufacturing and sales €2,585 million. Financing strategies also focus on ensuring companies focuses on consistently generating sufficient cash that retail loans and the related financing are matched in flow from operating activities to finance the capital terms of maturities. The Bank maintains, at all times and expenditure required a) to support the development of these across all maturities, financial resources in excess of the businesses and b) to continuously upgrade their production assets to be financed, thereby covering its longer-term facilities with the goal of achieving world class manufacturing liquidity risk. As of December 31, 2005, Banque PSA Finance efficiency. The businesses also need to generate sufficient had undrawn confirmed lines of credit totaling €6,000 million, free cash flow to finance dividend growth, steadily improve of which €3,300 million expire in July 2010 and €2,700 million the companies' net financial position and fund the Group's in June 2008. share buyback policy. The Bank’s strategy also focuses on achieving the broadest In addition to a net cash position, the strategy is designed to possible spread of financing sources, including the interbank, provide the manufacturing and sales companies with commercial paper, certificate of deposit, bond and medium- substantial cash reserves to enable them to respond to term notes markets. Considerable emphasis is also placed opportunities or events. To this end, the Group raises long- on diversifying the investor base. This strategy of diver- term borrowings, whenever this can be done on attractive sification shelters operations from the effects of any upsets terms, either on the financial markets or from national or on a given financial market. Since early 2001, the Bank has supranational lending institutions dedicated to financing increased the volume of financing raised on the European investments of the type made by the Group. asset-backed securities market. This market is now highly liquid and spreads are comparable to those obtained Faurecia has its own financing, primarily dedicated to paying from other financing sources. In June 2001, July 2002 and for the acquisitions made in recent years. February 2004, pools of automobile loans totaling respectively € € € Reflecting the implementation of the financing strategy, the 1,000 million, 1,500 million and 1,000 million were sold manufacturing and sales companies had cash and cash to a special purpose entity that issued asset-backed securities equivalents, net of bank overdrafts, of €3,568 million as of placed with a broad range of European investors. Another December 31, 2005. securitization transaction is planned for the first half of 2006.
To top up these cash reserves as needed, Peugeot S.A. also Lastly, the Bank’s capital, as determined for capital adequacy has unused confirmed lines of credit, which are regularly purposes, is kept at a high level. As of December 31, 2005, renewed and are available for use by the Company and by it represented 9.61% of outstandings including securitized GIE PSA Trésorerie. These lines amounted to €2,400 million loans. The European capital adequacy ratio stood at 9.3%. as of December 31, 2005. Faurecia has €1,600 million worth of confirmed lines of credit, of which only €200 million had been used at end-2005.
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FINANCIAL COVENANTS RATING To safeguard all the sources of financing available to Peugeot S.A. and Banque PSA Finance have obtained ratings Banque PSA Finance, PSA Peugeot Citroën and Faurecia, from Standard & Poor's and Moody's Investor Service for including undrawn facilities, the Group imposes strict limits their short- and long-term debt issuance programs and the on clauses in loan agreements allowing lenders to require debt issuance programs of subsidiaries backed by their payments to be rescheduled or to modify the financial terms guarantees. of the agreement. None of its loan agreements contain any On June 25, 2002, Standard & Poor's confirmed the A- long- rating triggers and the only agreements containing material term rating and A2 short-term rating attributed to debt issues adverse change clauses are with certain supranational lenders by Peugeot S.A., Banque PSA Finance and their subsidiaries. that are required to insist on this type of protection. Standard & Poor's also changed the Banque PSA finance’s Acceleration clauses required by lenders in line with standard outlook from stable to positive. On July 26, 2005, Standard market practice are drafted in such a way as to limit the & Poor’s changed the Peugeot S.A.‘s outlook back to stable. potential impact. The ratings and outlooks were confirmed for Peugeot S.A. The undrawn line of credit obtained by Peugeot S.A. currently on January 12, 2006 and for Banque PSA Finance on January includes an acceleration clause, which would be triggered if 13, 2006. the net debt of the manufacturing and sales companies were On May 28, 2002, Moody's Investor Service upgraded to rise to above one-and-a-half times stockholders' equity. Banque PSA Finance's long-term rating from A3 to A2 and As of December 31, 2005, these companies' cash and cash its short-term rating from P2 to P1, with a stable outlook for equivalents exceeded their debt by €381 million. Should both. On November 5, 2002, Moody’s confirmed the A3 long- Peugeot S.A. fail to comply with this ratio, the possibility of term rating and P2 short-term rating attributed to debt issues further drawdowns would be suspended, but the company by Peugeot S.A. and its subsidiaries. On July 18, 2005, would not be required to repay outstanding debt. Moody’s changed its outlook for the rating from positive to Faurecia's confirmed line of credit also includes an stable. The ratings and outlooks were confirmed for Peugeot acceleration clause, which would be triggered if adjusted net S.A. on November 7, 2005, and for Banque PSA Finance on debt exceeds 3.5 times EBITDA and if net interest cover falls July 18, 2005. below 4.5. As of December 31, 2005, these ratios stood at 2.19 and 11.58 respectively. Should Faurecia fail to comply with these ratios, each lender has the right individually to demand the early repayment of its share of outstanding debt and to cancel its participation in the facility, which remains in effect.
Banque PSA Finance’s confirmed lines of credit do not carry any financial covenants, other than compliance with the ratios demanded by banking regulations.
In the case of Banque PSA Finance and Faurecia, additional safeguards are provided by the absence of any cross-default clauses between the companies in these divisions and the other divisions of the PSA Peugeot Citroën Group.
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ANALYSIS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES – MANUFACTURING AND SALES COMPANIES Net cash from operating activities of the manufacturing and sales companies totaled €3,278 million in 2005 compared with €5,310 million the previous year.
Working capital provided by operations, capital expenditure and net cash used by investing activities – manufacturing and sales companies (in millions of euros)
4,171 3,918 3,762 3,689
2,862 2,793
2004 2005 Working capital provided by operations Net cash used by investing activities Capital expenditure
Working capital provided by operations of the manufacturing made to significantly scale back production programs in the and sales companies totaled €3,689 million in 2005 second half, particularly the fourth quarter, to avoid an compared with €4,171 million the previous year, representing excessive build-up of new vehicle inventories. 6.7% of sales versus 7.6%. In the fourth quarter, the European automobile market Manufacturing and sales companies’ working capital as a whole contracted by 2.9% to 3,711,000 cars from requirement increased by €411 million in 2005, after falling by 3,821,100 in the last three months of 2004. With aggressive € 1,139 million the previous year. This adverse swing was promotional campaigns remaining a feature of the mainly due to a decline in supplier credit and, to a lesser extent, market, the Group’s European registrations declined by an increase in assembled vehicle inventories, partly offset by 2.8% over this period, reflecting a similar downturn in the favorable changes in receivables and short-term provisions. market as a whole. Sales to dealers were closely monitored, In third quarter 2005, automobile markets in France and to avoid overburdening the network with excessive certain other major European countries suffered a downturn, inventories. As a result, new vehicle sales in Europe were accompanied by a widespread increase in competitive down 5.4% in the fourth quarter. At the end of the year, the pressures. In this environment, PSA Peugeot Citroën decision was made to further reduce production programs, strengthened its focus on the more profitable market without it being possible to avoid an increase in inventories segments in order to protect unit margins. The decision was at end-December.
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As a result of these developments, inventories rose by Total new vehicle inventories as of December 31, 2005, €194 million over the year, primarily reflecting a €187 million including vehicles held by the captive dealer network, were increase in new vehicle inventories in the Automobile Division. up by 13,900 units over the year-earlier figure.
New vehicle inventories (excluding joint ventures)
(in units) Manufacturer Captive dealer network Total December 31, 2003 223,000 48,900 271,900 June 30, 2004 227,600 57,600 285,200 December 31, 2004 236,700 54,200 290,900 June 30, 2005 286,600 61,000 347,600 December 31, 2005 249,800 55,000 304,800
Supplier credit as of December 31, 2005 was down €618 Working capital provided by operations – corresponding million compared with the year-earlier figure, mainly due to a more or less to net profit – amounted to €444 million €622 million decrease in payables to suppliers of mass- versus €390 million in 2004. Changes in operating assets and produced parts for the Automobile Division. Fourth quarter liabilities represented a negative €148 million, corresponding production volumes of fully-consolidated companies (i.e. to the combined effect of changes in outstanding loans, the excluding the joint ventures with Toyota (TPCA) and Fiat (Sevel standby reserve designed to guarantee the Bank’s liquidity, Nord and Sevel Sud) and the 50%-owned subsidiary in China refinancing and other operating receivables and payables. (DPCA) represented 646,400 units, a decrease of 89,100 units or 12.1% compared with the same period of 2004. CASH FLOWS FROM INVESTING The change in short-term provisions was mainly due to higher ACTIVITIES warranty provisions and to the provision set aside to cover the Group gross capital expenditure for 2005 came to €2,873 fine levied in October 2005 by the European Commission, for million, largely unchanged from the previous year’s €2,804 breaches of European competition rules that the Commission’s million. Capital expenditure of the manufacturing and sales teams claimed to have uncovered in the Netherlands. companies totaled €2,862 million in 2005 compared with €2,793 million the previous year. This was in line with the € CASH FLOWS FROM OPERATING Group’s target of capping total capital expenditure at 3,000 ACTIVITIES – FINANCE COMPANIES million, primarily for the development and renewal of product ranges, improvements in manufacturing productivity and Net cash from operating activities of the finance companies ongoing international expansion of the business. amounted to €296 million.
Gross capital expenditure
(in millions of euros) 2005 2004 Automobile Division 2,370 2,314 Gefco 49 75 Faurecia 423 390 Other businesses 20 14 Total manufacturing and sales companies 2,862 2,793 Banque PSA Finance 11 11 Total PSA Peugeot Citroën 2,873 2,804
Proceeds from disposals of property, plant and equipment amounted to €63 million versus €43 million.
Additions to intangible assets amounted to €959 million compared with €1,002 million in 2004. They consisted mainly of new product development costs capitalized in accordance with IFRS 38 (see Research and development costs). Other additions to intangible assets mainly concerned computer software.
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Additions to Intangible Assets 2005 2004 Capitalized development costs - Automobile Division 640 676 - Faurecia 216 209 - Total 856 885 Other 103 117 Total PSA Peugeot Citroën 959 1,002
Acquisitions of shares in consolidated companies amounted to €11 million, corresponding mainly to the buyout of minority interests in subsidiaries of the Faurecia sub-group.
CASH FLOWS FROM FINANCING ACTIVITIES
Including the finance companies, cash flows from financing The total for manufacturing and sales companies includes activities represented a net outflow of €1,417 million. dividends paid to Peugeot S.A. stockholders in the amount of Net cash used by financing activities of the manufacturing €310 million in 2005 versus €321 million the previous year. It and sales companies amounted to €1,643 million. also reflects the buyback of 4,130,192 Peugeot S.A. shares at an average price of €47.85 per share, for a total outlay of €198 million.
CONSOLIDATED FINANCIAL POSITION
EQUITY The portfolio is backed by two confirmed refinancing facilities obtained from leading banks, providing a further guarantee Equity was further strengthened by the inclusion of 2005 net of liquidity. Other financial assets also include loans granted profit, rising to €14,406 million as of December 31, 2005 for the most part to certain joint ventures accounted for by from €13,703 million one year earlier after taking into account the equity method in the consolidated financial statements, dividend payments and last year’s share buybacks. and a portfolio of listed equities, Net assets per share, based on the number of shares outstanding - current and non-current financial liabilities, comprising short- net of treasury stock, rose 6.9% to €62.91 from €58.84, and long-term debt represented mainly by debt securities representing 1.29 times the end-2005 share price of €48.70. issued on the market and borrowings from the Group’s banking partners.
NET FINANCIAL POSITION – As of December 31, 2005, the manufacturing and sales MANUFACTURING AND SALES companies had net cash of €381 million compared with net COMPANIES cash of €1,347 million at end-2004 and €598 million at The net financial position of the manufacturing and sales January 1, 2004. companies, which is described in detail in note 37 to the The decline between the beginning and end of 2005 was due to: consolidated financial statements, represents the best - the €73 million shortfall in working capital provided by indicator of the Group’s financial position with regard to operations compared with net cash used in investing outside sources of financing. activities, Net financial position corresponds to: - the €411 million increase in working capital requirement, - the manufacturing and sales companies’ cash and cash explained above, equivalents, - dividend payments to Peugeot S.A. and Faurecia - current financial assets and other non-current financial assets, stockholders, and Peugeot S.A. share buybacks, less consisting for the most part of marketable securities. Marketable Banque PSA Finance dividends received by Peugeot S.A. securities consist mainly of a portfolio of highly liquid Together, these items represented a net cash outflow money market securities with little or no counterparty risk. of €431 million.
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PENSION AND OTHER POST-RETIREMENT BENEFIT OBLIGATIONS
PSA Peugeot Citroën Group employees in certain countries the Group. The benefit is capped at six months’ salary. are entitled to supplementary pension benefits, payable The Group’s total benefit obligation in France as of December 31, annually, and lump sum termination benefits paid at the time 2005 amounted to €1,821 million, including €963 million for of retirement. pensions and €858 million for termination benefits. Some of these plans are defined benefit plans, under which benefit payments are determined based on a range of criteria The defined benefit plan set up for employees in the United including the employee’s years of service, salary level and Kingdom has been closed to new entrants since May 2002 benefit entitlements under the social security system. Others and replaced by a defined contribution plan. The Group’s are defined contribution plans under which the Group’s only benefit obligation under the former defined benefit plan obligation is to contribute into the plan. amounted to €1,768 million as of December 31, 2005.
Group policy emphasizes defined contribution plans, which are Defined benefit plans have also been set up for employees more effective in guaranteeing future benefits and also avoid in Germany. The Group’s benefit obligation under these plans exposing the Group to financial risks related to benefit amounted to €299 million respectivement as of December 31, obligations. 2005.
The main countries where the Group has defined benefit As of December 31, 2005, the Group’s projected benefit obligations are France, the United Kingdom and, to a lesser obligation under defined benefit plans – corresponding to the extent, Germany. discounted present value of future benefit payments – In France, the Group decided in 2002 to curtail the defined amounted to €4,135 million compared with €3,876 million benefit plan for employees excluding Faurecia and to replace one year earlier. A total of €278 million was added to the it with a defined contribution plan. Under the terms of the obligation during the year for the service cost and interest curtailment, participating employees no longer acquire any cost. An amount of €186 million was deducted in respect further benefit entitlements beyond June 30, 2002, except of benefits paid during the year. Recognition of actuarial gains for those employees who were over 59 years old at that date. and losses added a further €154 million. These resulted The benefit obligation under the plan at the curtailment date mainly from a reduction in the discount rate applied to euro was transferred in full to a leading insurance company, in zone plans (to 4% from 4.5%), for €83 million, an increase in exchange for the payment of a single premium of €384 the United Kingdom inflation rate (to 2.50% from 2.25%), million. Group executives continue to be covered by a for €51 million, and the revaluation of certain obligations in separate defined benefit plan. France, the United Kingdom and Germany. Lastly, changes The specific defined benefit plan set up for former Chrysler in exchange rates had the effect of increasing the total France employees has been maintained, but has been closed obligation, after conversion into euros, by €49 million. to new participants since 1981. The obligations are funded by contributions to external In 2005, Faurecia implemented a significant curtailment of institutions responsible for managing the funds set up to the defined benefit plan for employees of the Exhaust finance future benefit payments. The type of institution Systems and Automotive Seating Divisions and set up a new depends on the applicable legislation in each country defined contribution plan. However, benefits under the concerned. The level of funding is adjusted at regular intervals previous plan have been maintained for employees aged over to take account of changes in the amount of related benefit 53 with at least 10 years’ seniority as of the curtailment date. obligations, in line with the Group’s policy of externally funding Employees in France are also entitled to statutory termination its obligation. Provisions have been booked in the benefits on retirement, based on their years of service with consolidated balance sheet to cover any funding shortfall.
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External funds used to finance benefit payments rose to In 2005, income of €62 million was recognized in operating €3,037 million as of December 31, 2005 from €2,781 million expenses as opposed to an €88 million charge the previous at the previous year-end, reflecting the expected return year. The 2005 amount includes income of €92 million arising on the funds (€168 million), payments made by the Group from the renegotiation of an insurance policy covering the (€88 million) and withdrawals to cover benefit payments for Group’s obligations towards former Chrysler France the year (€178 million), as well as the €136 million excess employees and income of €40 million from the renegotiation of the actual return on the funds over the expected return of the Faurecia pension plan covering employees of and translation adjustments of €37 million. the Exhaust Systems and Automotive Seating Divisions. The cost recognized in “Other income and expenses” amounted As of December 31, 2005, provisions for pensions carried in to €19 million versus €35 million in 2004. the consolidated balance sheet amounted to €1,106 million versus €1,235 million one year earlier. Under the defined benefit plans in France, the Group’s obligation is limited to paying benefits when they fall due. The cost recognized in operating expense corresponds It has no obligation to pay additional contributions to external mainly to: funds. Outside France, the main payments concern plans in - the service cost, representing the additional rights acquired the United Kingdom where, in accordance with local by employees during the year, generally based on their period regulations and minimum funding requirements, based on of service with the Group, the plans’ funded status the Group has an obligation to make - amortization of deferred items resulting from changes in annual payments of €58 million through 2007. certain assumptions underlying each periodic actuarial valuation, and the difference between the actual and expected return on external funds.
The cost recognized in “Other income and expenses” includes: - interest cost, corresponding to adjustments to the present value of the opening vested rights of employees to take account of the fact that the period to the future benefit payment date has been reduced by one year. - the expected return on external funds.
PSA Peugeot Citroën - 2005 reference document 117 06 MANAGEMENT’S DISCUSSION AND ANALYSIS Return on Capital Employed
RETURN ON CAPITAL EMPLOYED
DEFINITION AND METHODS
Return on capital employed (ROCE) has been selected as the The profit used to calculate return on capital employed standard indicator of the Group’s overall financial performance. corresponds to consolidated net profit before: - finance costs, Capital employed includes the value of all operating assets and liabilities used by the Group in its business operations. - interest income from loans and cash equivalents, It corresponds to: - net gains or losses on sales of marketable securities, - all non-financial assets, net of non-financial liabilities, of the - tax on these items, estimated on the basis of the effective manufacturing and sales companies, and tax rate paid by the Group. - the net assets of Banque PSA Finance.
CAPITAL EMPLOYED
Capital employed as of December 31, 2005 totaled recognition of 2005 profit. The increase in Automobile Division €14,123 million, an increase of €1,720 million on the capital employed stemmed from the rise in property, plant year-earlier figure. and equipment attributable to the Division’s capital spending programs, as well as from the higher working capital Banque PSA Finance’s capital employed increased as a result requirement (see Cash flows from operating activities – of the growth in the bank’s equity which in turn reflected the manufacturing and sales companies).
Capital employed
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 Automobile Division 7,852 6,491 Banque PSA Finance 2,420 2,098 Gefco 442 476 Faurecia 3,609 3,655 Other businesses and eliminations (200) (317) Total PSA Peugeot Citroën 14,123 12,403
RETURN ON CAPITAL EMPLOYED (ROCE)
After-tax ROCE declined to 7.1% from 12.9% in 2004, reflecting the fact that operating margin contracted while capital employed increased, mainly as a result of higher working capital. Automobile Division after-tax ROCE stood at 7.4% versus 14.1%
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MANAGEMENT OF FINANCIAL AND OPERATIONAL RISKS
OPERATIONAL RISKS
PSA Peugeot Citroën has created an operational risk control pollution and environmental risks. The corporate Risk prevention and management organization charged with Management and Prevention Department centrally manages implementing appropriate measures to limit the conse- environmental risks related to manufacturing operations and quences of events affecting Group operations and prevent, to regularly reports Group-level environmental data. the extent possible, the risk of project management failures The structures dedicated to managing environmental risks or organizational dysfunctions. at the Automobile Division's production plants and elsewhere The corporate Risk Prevention and Management Department in the organization, comply with ISO 14001 environmental guarantees the consistency of operational risk management management standards. Worldwide, 24 of the main initiatives and their cross-functional implementation. It defines Automobile Division production plants were ISO 14001- risk identification and assessment methods, and helps to certified as of end-2005. define and control risk management plans. It is supported The ISO certification program is supported by annual capital by a network of correspondents or experts working in expenditure budgets for environmental projects. All industrial the Group's various departments and facilities, who are projects are reviewed by the design department, the plant responsible for deploying Group risk prevention policies in concerned, technical department experts and Group environ- their units and monitoring the status of preventive and mental specialists in order to identify the potential risks and corrective action plans. Risks are assessed in detail using a devise appropriate responses. Group-wide method and annual programs are implemented to manage them. This means that potential vulnerabilities are identified early and that protective or preventive measures SUPPLIER RISK are commensurate with the risks involved. Manufacturing processes are dependent on bought-in parts The main operational risks are risks likely to disrupt or halt and components that represent over 70% of vehicle the Group's design, production or distribution activities, or production cost. Risks related to the quality of suppliers and to pose a threat to the Group's employees or its tangible or their financial and commercial viability, as well as to the intangible assets. They include the risk of damage to research reliability of parts and components that they deliver, are facilities, data processing centers, production or distribution closely monitored. units, due to severe weather conditions or human action, as Suppliers are selected according to seven main criteria: price well as incidents affecting the integrity, confidentiality and competitiveness, quality, the ability to develop new products use of Group information systems and computerized data, and manufacture them in large quantities, supply chain effi- and damage to the Group's reputation. ciency, research and development capabilities, geographic reach and long-term viability. MANUFACTURING RISKS Each supplier's viability is assessed from a financial and Systematic prevention programs deal, in particular, with fire strategic standpoint, based on: risks, risks concerning the supply of components and the - Financial position ; protection of vehicle inventories. The Group invests in data - Strategy and growth outlook ; protection and back-up programs, data processing center - Changes in the level of dependence. security programs and training in data control techniques for employees. Special attention is paid to the environmental Procurement strategies are decided by the Executive impact of manufacturing facilities. The design specifications Procurement Committee during monthly procurement policy of plant and equipment include processes and devices to meetings, based on the above criteria.
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INSURANCE POLICY - Liability claims resulting from personal injury or tangible or intangible losses arising from the use of the Group's Group policy in the area of insurance focuses on risk products or otherwise, up to a maximum of €152 million prevention, insuring against all major risks and setting excluding Faurecia, which has taken out specific cover for deductibles at appropriate levels. Taken out with leading these risks. insurers and reinsurers based on the recommendations of top ranking insurance advisors specialized in major risks, the - Theft or damage to new vehicles held on storage lots, up to Group's global insurance programs at January 1, 2006, cover a maximum of €100 million, and to vehicles and components the following main risks: during transport, up to a maximum of €50 million.
- Damage to property and resulting business interruption, up The impact of the Group’s risk prevention processes and the to a maximum of €1,508 million, excluding Faurecia, and competitive bids obtained for several insurance lines in a still €250 million for Faurecia. favorable insurance market helped to drive a significant reduction in premium payments in 2005, which will continue in 2006. LEGAL RISKS
The PSA Peugeot Citroën Group is exposed to legal risks Relations with the networks have been governed by these as an employer and in connection with the design and three types of contracts since October 1, 2003. To date, distribution of vehicles, the purchase of components and the claims arising from their introduction and implementation supply of services. have not been material.
To manage these risks, the Group implements preventive As of December 31, 2005, no Group company was involved policies in the areas of workplace hygiene and safety, the in any claims or litigation that had or were likely to have a manufacturing environment, and industrial and intellectual material impact on the Group's accounts except the European property. Priority is also given to vehicle safety and the quality Commission decision described below. of the Group's products and services. A provision of €50 million has been set aside to cover The Automobile Division may become involved in claims and the fine levied by the European Commission following litigation arising from its dealings with the dealer network verifications performed in 1999 and 2003 by EC inspectors and customers. Motor vehicle distribution and after-sales at Automobiles Peugeot, Peugeot Deutschland GmbH and services in Europe are subject to the new European Union Peugeot Nederland NV. On October 5, 2005, the Commission Block Exemption Regulation 1400/02 dated July 31, 2002, found that in the Netherlands, Automobiles Peugeot and its which came into effect on October 1, 2003. To comply with Dutch subsidiary had engaged in practices aimed at or having the new regulations, the two marques have each abandoned the effect of restricting cross-border automobile sales and their previous policy of selective distribution through dealers fined the two companies €49.5 million. However, the offering both sales and after-sales service, chosen according Commission withdrew its accusations regarding practices it to quantitative criteria. Relations with the dealership network had initially observed in Germany. are now based on three separate contracts: Automobiles Peugeot and Peugeot Nederland NV have - A new vehicle sales contract signed with a fixed number of appealed the decision to the Court of First Instance of the dealers in each country, selected on the basis of qualitative European Communities, considering that there is no legal or and quantitative criteria. factual basis for finding a violation of article 81, paragraph 1 of the Treaty Establishing the European Community. - An accredited vehicle repair shop contract and a replacement part sales contract, awarded based on qualitative criteria.
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FINANCIAL RISKS
LIQUIDITY RISK On the basis of 2005 figures, the Group estimates that a 1% fluctuation in the euro against all of the Group's other Risks arising from the possible unavailability of financing and currencies would have an impact of around €69 million on the measures taken to limit these risks are described in the consolidated operating margin. A 1% change in the pound- section "Financing Strategy". They include the risk related to euro exchange rate would have an impact of around acceleration clauses in the Group's loan agreements and €25 million on consolidated operating margin. These clauses restricting access to loan facilities in certain estimated sensitivities do not take into account the effect of circumstances. exercising the currency options described above.
CURRENCY AND INTEREST RATE RISK The exposure of the Group's manufacturing and sales activities to changes in interest rates is not material. PSA Peugeot Citroën is exposed to financial risks in connection with its automobile business and other Note 36 to the consolidated financial statements describes manufacturing and selling activities, including the risk of the Group’s risk management policies and presents losses due to unfavorable changes in exchange rates affecting quantitative data concerning the manufacturing and sales the currencies of countries where it manufactures products companies and the finance companies. – primarily in the euro zone – and the countries in which these products are sold. The introduction of the euro at the COUNTERPARTY RISK beginning of 1999 has had the effect of reducing these risks, The Group places significant emphasis on guaranteeing the which now primarily concern the British pound and, to a lesser security of payments for the goods and services delivered extent, the Central European currencies, Latin American to customers. Relations with Peugeot and Citroën dealers currencies, the Turkish pound and the Japanese yen. are managed within the framework of the sales financing Currency risks of the Automobile Division are managed system described below. Appropriate mechanisms have been primarily by having the manufacturing companies bill the sales set up to guarantee the security of payments from other companies in the sales companies’ local currency, except in Group customers. Intercompany settlements are systematically those rare cases where the sales company's local currency covered against political risks whenever necessary. is not convertible. In such cases, the euro or the US dollar is The Group is exposed to counterparty risks on transactions used as the billing currency. Currency risks on these carried out on financial markets in connection with the intercompany billings are systematically hedged by means management of currency and interest rate risks, payment of forward contracts maturing on the invoice settlement date, flows and cash and cash equivalents. It keeps these risks to which is determined based on the subsidiaries’ operating a minimum through internal control procedures requiring all cycle. The hedges are set up by a specialized subsidiary based transactions to be carried out solely with leading counterparties. in Geneva, PSA International, or on PSA International's instructions in the case of non-convertible currencies.
Currency risks on future sales are not hedged, with the result that future operating margin may vary depending on exchange rates. To limit the potential losses, however, the Automobile Division holds British pound put options to guarantee a minimum exchange rate for its vehicle sales in the United Kingdom. At year-end 2005, these options concerned a nominal amount of £1,074 million, covering 53% of 2006 sales in the UK. The average strike price is £0.70 per euro. Depending on market conditions, the Group may continue to purchase additional British pound put options in early 2006 to cover all of the sales forecast for the year.
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RISKS ASSOCIATED WITH THE ACTIVITIES interest on the loans to a variable rate based on a 3-month OF THE FINANCE COMPANIES benchmark. In practice, the swaps are purchased at ten-day intervals, covering pools of loans with the same maturity The Group finance companies provide financing for dealer granted in the previous ten days. Wholesale financing is granted vehicle and replacement parts inventories and offer a wide at rates based on short-term market rates, while the liquidity range of loans and lease financing solutions to customers, reserve is invested at the same rates. This means that all of together with related services. the bank’s interest-bearing assets are at short-term rates. As a result, they are exposed to credit risks. Wholesale Concerning liabilities, all new debt is converted into the same financing credit risks are spread across a large number of currency as the underlying assets using appropriate financial dealers and are managed internally by Credit Committees instruments. In addition, debt paying interest at a fixed rate set up in each country as well as by a Group Credit for more than six months is converted to a variable rate based Committee, based on clearly defined, closely monitored credit on a 3-month benchmark. limits. Retail financing credit risks, which are spread across an even larger number of customers, are managed using For operations in emerging countries without a liquid swap credit-scoring procedures. In addition, significant individual market, assets are maintained at fixed rates and are matched credit risks are managed using procedures similar to those by fixed rate financing with the same maturities. applied to manage wholesale financing credit risks. These management techniques serve to neutralize currency Allowances are booked for retail credit risks when at least and interest rate risks on the bank’s balance sheet. one installment is past due, based on historical credit loss and recovery data. In the case of wholesale financing, To cap the refinancing cost of new retail financing in euros allowances are booked on a case-by-case basis for known to be granted in 2006, Banque PSA Finance has purchased credit risks. swaptions (options on interest rate swaps) expiring in the first, second and third quarters, on a total notional amount The finance companies' refinancing needs are covered by of €3,768 million. The maturities of the underlying swaps the equity capital allocated to these companies, the issuance (which range from one to five years) match the forecast of debt securities, bank borrowings and automobile loan maturities of new retail financing expected to be originated securitizations. The finance companies are therefore exposed in these three quarterly periods. Depending on market to the risk of mismatches between assets and liabilities, in opportunities, further swaptions may be purchased in 2006. terms of maturities, currencies and interest rates. The permanent need to have sufficient resources to refinance Group policy aims at neutralizing the effects of changes in the finance business also exposes the Group to liquidity risks. interest and exchange rates on the finance companies’ These risks are covered as part of the financing strategy, by operating margin. The related risks are managed accordingly, extensively diversifying financing sources, matching financing by using appropriate financial instruments to match interest maturities to the maturities of the related assets, maintaining rate structures and currencies between assets and liabilities. cash reserves and unused confirmed lines of credit, and Concerning assets, interest rate swaps are purchased on the ensuring that Banque PSA Finance’s capital ratios are market as soon as new retail financing is granted to convert adequate at all times.
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PSA Peugeot Citroën - 2005 reference document 123 07 STATISTICS
PSA PEUGEOT CITROËN GROUP - WORLDWIDE SALES (passenger cars and light commercial vehicles) 2005 2004 2003 Western Europe France: Peugeot 435,000 440,000 445,100 Citroën 342,100 332,500 343,300 PSA Peugeot Citroën 777,100 772,500 788,400 Other Western European countries: Peugeot 822,500 888,700 907,000 Citroën 760,900 763,500 773,400 PSA Peugeot Citroën 1,583,400 1,652,200 1,680,400 Total Western Europe Peugeot 1,257,500 1,328,700 1,352,100 Citroën 1,103,000 1,096,000 1,116,700 PSA Peugeot Citroën 2,360,500 2,424,700 2,468,800 Rest of the world Central and Eastern Europe and Turkey: Peugeot 130,300 147,100 142,100 Citroën 79,400 73,300 74,800 PSA Peugeot Citroën 209,700 220,400 216,900 Africa: Peugeot 60,100 62,900 56,700 Citroën 23,500 27,100 19,000 PSA Peugeot Citroën 83,600 90,000 75,700 The Americas: Peugeot 143,100 114,000 89,100 Citroën 51,400 40,000 29,800 PSA Peugeot Citroën 194,500 154,000 118,900 Asia-Pacific: Peugeot 378,500 347,500 246,100 Citroën 133,400 107,700 128,900 PSA Peugeot Citroën 511,900 455,200 375,000 Others: Peugeot 26,000 27,000 27,500 Citroën 3,800 4,000 3,300 PSA Peugeot Citroën 29,800 31,000 30,800 Total sales, rest of the world Peugeot 738,000 698,500 561,500 Citroën 291,500 252,100 255,800 PSA Peugeot Citroën 1,029,500 950,600 817,300 Total worldwide sales Peugeot 1,995,500 2,027,200 1,913,600 Citroën 1,394,500 1,348,100 1,372,500 PSA Peugeot Citroën 3,390,000 3,375,300 3,286,100
124 PSA Peugeot Citroën - 2005 reference document STATISTICS 07
PASSENGER CAR REGISTRATIONS IN EUROPE BY COUNTRY 2005 2004 2003 France 2,067,800 2,013,700 2,009,200 Austria 307,900 311,300 300,100 Belgium-Luxemburg 527,500 533,000 502,400 Denmark 146,700 121,500 96,100 Finland 148,000 142,400 147,200 Germany 3,321,100 3,266,800 3,236,900 Greece 269,700 289,700 257,300 Iceland 18,100 12,000 10,000 Ireland 171,700 154,100 145,200 Italy 2,234,200 2,264,700 2,247,000 Netherlands 465,200 483,800 488,900 Norway 109,900 115,700 89,900 Portugal 203,400 197,600 189,800 Spain 1,528,800 1,517,300 1,382,100 Sweden 274,300 264,200 261,200 Switzerland 264,400 269,400 270,300 United Kingdom 2,439,700 2,567,300 2,579,100 Total Western Europe (18 countries) 14,498,400 14,524,500 14,212,700
Source: C.C.F.A.
LIGHT COMMERCIAL VEHICLE REGISTRATIONS IN EUROPE BY COUNTRY 2005 2004 2003 France 420,100 408,500 381,600 Austria 29,000 29,000 25,600 Belgium-Luxemburg 65,600 62,200 55,800 Denmark 57,200 46,300 32,800 Finland 16,000 18,400 15,500 Germany 199,900 195,100 186,400 Greece 23,400 23,000 18,300 Iceland 2,400 1,800 1,200 Ireland 37,100 30,300 30,900 Italy 204,000 215,300 203,700 Netherlands 66,200 87,200 77,500 Norway 36,800 33,900 27,200 Portugal 69,900 71,200 69,200 Spain 387,100 334,300 297,400 Sweden 35,000 31,400 28,500 Switzerland 22,600 21,500 20,200 United Kingdom 330,400 336,000 309,900 Total Western Europe (18 countries) 2,002,700 1,945,400 1,781,700
Source: C.C.F.A.
PSA Peugeot Citroën - 2005 reference document 125 07 STATISTICS
PASSENGER CAR AND LIGHT COMMERCIAL VEHICLE REGISTRATIONS IN EUROPE BY MANUFACTURER 2005 2004 2003 Units Market Units Market Units Market share (%) share (%) share (%) Peugeot Marque 1,254,100 7.6 1,318,000 8.0 1,356,100 8.5 Citroën Marque 1,100,900 6.7 1,086,500 6.6 1,103,800 6.9 PSA Peugeot Citroën Group 2,355,000 14.3 2,404,500 14.6 2,459,900 15.4 Volkswagen Group 2,931,700 17.8 2,786,500 16.9 2,715,700 17.0 Ford Group 1,822,000 11.0 1,862,000 11.3 1,775,000 11.1 Renault 1,715,300 10.4 1,779,700 10.8 1,773,900 11.1 General Motors Group 1,669,400 10.1 1,566,600 9.5 1,518,000 9.5 Fiat Group 1,206,600 7.3 1,308,800 8.0 1,295,600 8.1 Daimler-Chrysler 1,061,000 6.4 1,074,700 6.5 1,074,200 6.7 Toyota Group 859,100 5.2 818,100 5.0 765,700 4.8 BMW 773,000 4.7 705,400 4.3 631,400 4.0 Other Japanese marques 1,352,500 8.2 1,347,000 8.2 1,269,500 7.9 Korean marques 617,700 3.7 619,700 3.8 502,800 3.1 Other marques 137,800 0.8 196,900 1.2 212,700 1.3 Source: C.C.F.A.
PSA PEUGEOT CITROËN GROUP - PASSENGER CAR REGISTRATIONS IN EUROPE BY COUNTRY 2005 2004 2003 Units Market Units Market Units Market share (%) share (%) share (%) France 633,500 30.6 620,000 30.8 650,700 32.4 Austria 29,200 9.5 28,300 9.1 28,800 9.6 Belgium-Luxemburg 108,100 20.5 108,600 20.4 112,000 22.3 Denmark 26,500 18.1 24,600 20.3 24,800 25.8 Finland 15,500 10.5 16,700 11.7 17,700 12.0 Germany 189,400 5.7 181,000 5.5 189,100 5.8 Greece 24,500 9.1 31,700 10.9 31,500 12.3 Iceland 800 4.3 500 3.9 400 3.9 Ireland 13,200 7.7 11,800 7.6 11,700 8.1 Italy 225,100 10.1 252,700 11.2 248,900 11.1 Netherlands 62,200 13.4 68,900 14.2 80,500 16.5 Norway 9,500 8.7 11,000 9.6 10,500 11.7 Portugal 36,100 17.7 35,300 17.9 37,200 19.6 Spain 313,100 20.5 318,200 21.0 303,200 21.9 Sweden 29,200 10.7 27,900 10.6 27,800 10.7 Switzerland 24,800 9.4 25,900 9.6 27,800 10.3 United Kingdom 243,900 10.0 273,400 10.7 302,500 11.7 Total Western Europe (18 countries) 1,984,600 13.7 2,036,500 14.0 2,105,100 14.8
126 PSA Peugeot Citroën - 2005 reference document STATISTICS 07
PSA PEUGEOT CITROËN GROUP - LIGHT COMMERCIAL VEHICLE REGISTRATIONS IN EUROPE BY COUNTRY 2005 2004 2003 Units Market Units Market Units Market share (%) share (%) share (%) France 151,500 36.1 152,100 37.2 142,900 37.5 Austria 2,900 10.0 2,900 10.0 2,600 10.2 Belgium-Luxemburg 14,800 22.6 14,000 22.5 14,500 25.9 Denmark 7,200 12.6 7,300 15.8 6,400 19.5 Finland 2,200 13.8 2,400 13.3 2,500 15.9 Germany 12,700 6.3 12,000 6.2 11,600 6.2 Greece 900 3.7 1,300 5.9 1,400 7.6 Iceland 100 5.7 200 9.3 100 10.3 Ireland 4,200 11.4 3,800 12.7 4,200 13.5 Italy 15,500 7.6 18,000 8.3 16,000 7.9 Netherlands 7,200 10.8 11,500 13.2 12,000 15.5 Norway 5,000 13.7 4,800 14.0 3,600 13.3 Portugal 16,200 23.2 16,400 23.0 15,800 22.8 Spain 81,300 21.0 73,800 22.1 72,600 24.4 Sweden 6,100 17.6 5,500 17.6 5,300 18.5 Switzerland 3,200 14.0 2,900 13.3 2,500 12.0 United Kingdom 39,400 11.9 39,100 11.7 40,800 13.2 Total Western Europe (18 countries) 370,400 18.5 368,000 18.9 354,800 19.9
PSA PEUGEOT CITROËN GROUP - PASSENGER CAR AND LIGHT COMMERCIAL VEHICLE REGISTRATIONS IN EUROPE BY COUNTRY 2005 2004 2003 Units Market Units Market Units Market share (%) share (%) share (%) France 785,000 31.6 772,100 31.9 793,700 33.2 Austria 32,100 9.5 31,200 9.2 31,400 9.6 Belgium-Luxemburg 122,900 20.7 122,500 20.6 126,500 22.7 Denmark 33,700 16.5 32,000 19.1 31,200 24.2 Finland 17,700 10.8 19,100 11.9 20,200 12.4 Germany 202,100 5.7 193,000 5.6 200,600 5.9 Greece 25,400 8.7 33,000 10.6 32,900 12.0 Iceland 900 4.5 600 4.6 500 4.6 Ireland 17,400 8.4 15,600 8.5 15,900 9.0 Italy 240,500 9.9 270,700 10.9 264,900 10.8 Netherlands 69,300 13.0 80,400 14.1 92,500 16.3 Norway 14,600 9.9 15,800 10.6 14,100 12.1 Portugal 52,300 19.1 51,700 19.2 53,000 20.5 Spain 394,400 20.6 392,000 21.2 375,800 22.4 Sweden 35,400 11.4 33,400 11.3 33,100 11.4 Switzerland 28,000 9.8 28,800 9.9 30,200 10.4 United Kingdom 283,300 10.2 312,600 10.8 343,400 11.9 Total Western Europe (18 countries) 2,355,000 14.3 2,404,500 14.6 2,459,900 15.4
PSA Peugeot Citroën - 2005 reference document 127 07 STATISTICS
PEUGEOT MARQUE - PASSENGER CAR AND LIGHT COMMERCIAL VEHICLE REGISTRATIONS IN EUROPE BY COUNTRY 2005 2004 2003 Units Market Units Market Units Market share (%) share (%) share (%) France 436,000 17.5 440,200 18.2 450,700 18.9 Austria 18,100 5.4 19,200 5.7 20,100 6.2 Belgium-Luxemburg 63,300 10.7 63,200 10.6 64,000 11.5 Denmark 18,100 8.9 18,200 10.9 17,700 13.7 Finland 9,800 5.9 11,000 6.8 10,700 6.6 Germany 122,100 3.5 126,400 3.7 128,200 3.7 Greece 11,500 3.9 15,700 5.0 16,700 6.1 Iceland 400 1.9 300 1.9 200 2.3 Ireland 10,900 5.2 10,200 5.5 9,500 5.4 Italy 103,900 4.3 115,100 4.6 125,600 5.1 Netherlands 43,900 8.3 51,500 9.0 59,100 10.4 Norway 9,200 6.3 10,400 6.9 9,500 8.1 Portugal 28,400 10.4 29,000 10.8 29,900 11.6 Spain 181,400 9.5 186,900 10.1 176,400 10.5 Sweden 21,000 6.8 21,100 7.2 19,800 6.8 Switzerland 14,800 5.2 16,100 5.5 17,000 5.9 United Kingdom 161,300 5.8 183,500 6.3 201,000 7.0 Total Western Europe (18 countries) 1,254,100 7.6 1,318,000 8.0 1,356,100 8.5
CITROËN MARQUE - PASSENGER CAR AND LIGHT COMMERCIAL VEHICLE REGISTRATIONS IN EUROPE BY COUNTRY 2005 2004 2003 Units Market Units Market Units Market share (%) share (%) share (%) France 349,000 14.0 331,900 13.7 343,000 14.4 Austria 14,000 4.2 12,000 3.5 11,300 3.5 Belgium-Luxemburg 59,600 10.1 59,400 10.0 62,500 11.2 Denmark 15,600 7.6 13,700 8.2 13,500 10.5 Finland 8,000 4.9 8,100 5.1 9,400 5.8 Germany 79,900 2.3 66,600 1.9 72,500 2.1 Greece 13,800 4.7 17,300 5.5 16,200 5.9 Iceland 500 2.6 400 2.7 300 2.3 Ireland 6,600 3.2 5,400 3.0 6,400 3.7 Italy 13,660 5.6 155,600 6.3 139,300 5.7 Netherlands 25,400 4.8 28,800 5.1 33,400 5.9 Norway 5,400 3.7 5,400 3.7 4,700 4.0 Portugal 23,900 8.7 22,700 8.4 23,100 8.9 Spain 213,000 11.1 205,100 11.1 199,400 11.9 Sweden 14,400 4.6 12,300 4.2 13,300 4.6 Switzerland 13,200 4.6 12,700 4.3 13,200 4.5 United Kingdom 122,000 4.4 129,100 4.5 142,300 4.9 Total Western Europe (18 countries) 1,100,900 6.7 1,086,500 6.6 1,103,800 6.9
128 PSA Peugeot Citroën - 2005 reference document STATISTICS 07
WORLDWIDE SALES OUTSIDE WESTERN EUROPE (passenger cars and light commercial vehicles) 2005 2004 2003 Central and Eastern Europe and Turkey 209,700 220,400 216,900 Turkey 52,400 59,300 40,900 Poland 32,500 36,700 46,900 Hungary 17,400 24,800 29,500 Russia 16,500 14,700 12,200 Romania 15,300 10,700 7,700 Czech Republic 14,300 15,500 17,200 Croatia 13,100 13,700 15,500 Slovenia 10,800 12,600 13,900 Slovakia 10,100 9,100 10,200 Others 27,300 23,300 22,900 Africa 83,600 90,000 75,700 Algeria 19,400 27,800 21,500 South Africa 16,000 14,700 7,500 Morocco 15,900 18,000 15,300 Others 32,300 29,500 31,400 The Americas 194,500 154,000 118,900 Brazil 81,900 64,500 56,100 Argentina 52,800 35,800 17,300 Chile 17,700 16,000 14,500 Mexico 17,100 16,200 13,700 Others 25,000 21,500 17,300 Asia - Pacific 511,900 455,200 375,000 Iran 304,300 292,500 199,200 China 141,000 89,700 104,000 Japan 12,300 14,700 16,400 Israel 11,500 10,900 12,100 Others 42,800 47,400 43,300
WORKFORCE 2005 2004 2003 Automobile Division 139,500 139,400 134,700 Of which: - France 99,000 100,400 98,000 - Other countries 40,500 38,900 36,700 Banque PSA Finance 2,400 2,400 2,200 Gefco 9,400 8,800 8,400 Faurecia 55,000 54,400 51,900 Other businesses and holding company 2,200 2,600 2,700 Total PSA Peugeot Citroën 208,500 207,600 199,900 Of which: - France 126,100 128,300 124,700 - Other countries 82,400 79,300 75,200
PSA Peugeot Citroën - 2005 reference document 129 07 STATISTICS
PSA PEUGEOT CITROËN GROUP - PRODUCTION BY MODEL (passenger cars and light commercial vehicles) 2005 2004 2003 Peugeot Marque 106 - - 35,900 107 34,600 - - 1007 73,800 1,100 - 206 669,900 795,100 816,500 307 515,400 583,700 573,300 405 169,700 209,200 126,100 406 2,600 25,900 101,000 407 259,000 165,000 - 504 - 1,800 3,200 607 18,800 18,100 21,500 807 28,100 31,200 35,100 Expert 33,200 32,600 28,500 Partner 144,800 143,000 135,700 J9 1,500 4,200 3,200 Boxer 44,100 45,200 40,600 Others 900 100 2,000 Total 1,996,400 2,056,200 1,922,600 of which diesel-powered versions 985,200 965,700 911,600 of which passenger cars 1,809,000 1,859,100 1,744,100 of which light commercial vehicles 187,400 197,100 178,500 Citroën Marque Saxo - - 59,900 C1 34,600 - - C2 124,800 149,300 71,000 C3 289,300 375,600 383,100 ZX 97,600 64,800 96,000 C4 244,300 51,700 - Xsara 191,900 293,900 354,100 C5 80,900 100,600 110,700 Xantia 14,000 11,900 3,800 C8 23,000 24,000 27,700 Dispatch 32,100 29,700 29,800 C15 26,600 24,700 29,200 Berlingo 170,100 176,200 179,500 Relay 49,100 46,500 42,100 Others 800-- Total 1,379,100 1,348,900 1,386,900 of which diesel-powered versions 743,200 778,400 740,900 of which passenger cars 1,173,700 1,145,400 1,189,000 of which light commercial vehicles 205,400 203,500 197,900 Total PSA Peugeot Citroën 3,375,500 3,405,100 3,309,500 of which diesel-powered versions 1,728,400 1,744,100 1,652,500 of which passenger cars 2,982,700 3,004,500 2,933,100 of which light commercial vehicles 392,800 400,600 376,400
130 PSA Peugeot Citroën - 2005 reference document STATISTICS 07
PSA PEUGEOT CITROËN GROUP - MANUFACTURING FACILITIES Assembly plant Models produced as of January 1, 2006 2005 Output Manufacturing centers Aulnay (France) C2, C3 283,100 Madrid (Spain) 207, C3, C3 Pluriel 116,900 Mangualde (Portugal) Citroën Berlingo, Peugeot Partner 53,400 Mulhouse (France) 206, 206 CC, 307, C4 405,000 Palomar (Argentina) 206, 307, Citroën Berlingo, Peugeot Partner 66,000 Poissy (France) 207, 1007, 206 329,200 Porto Real (Brazil) 206, 206 SW, C3, Xsara Picasso 93,500 Rennes (France) C5, C5 Estate, C6, 407, 407 SW, 407 Coupé 340,700 Ryton (United Kingdom) 206, 206 SW 130,200 Sochaux (France) 307, 307 Estate, 307 SW, 307 CC, 607 413,300 Vigo (Spain) Xsara Picasso, Citroën Berlingo, Peugeot Partner 441,400 Mechanical component plants and foundries Asnières (France) Free-cutting, hydraulic systems - Caen (France) Wheels, axles suspension systems, transmissions - Charleville (France) Aluminum and iron castings - Melun-Sénart (France) Replacement parts - Metz (France) Gear boxes 1,750,000 Saint-Ouen (France) Stamping - Sept-Fons (France) Iron castings - Trémery (France) EW gasoline engines and DV, DW diesel engines 1,903,300 Valenciennes (France) Gear boxes 1,574,800 Vesoul (France) CKD shipments, replacement parts -
PSA Peugeot Citroën - 2005 reference document 131 07 STATISTICS
JOINT PLANTS WITH OTHER MANUFACTURERS (as at December 31, 2005) Facility Production 2005 Output France Française de Mécanique 50% Peugeot Citroën Automobiles Iron castings 50% Renault Engines: - TU + TUF 895,400 - DV 515,300 - D (Renault) 354,000 - ES/L 13,000 Sevelnord 50% Peugeot Citroën Automobiles Peugeot 807 28,100 50% Fiat Peugeot Expert 33,200 Citroën C8 23,000 Citroën Dispatch 32,100 Fiat Ulysse - Fiat Scudo - Lancia Phedra - Total output 151,100 Other countries Società Europea Veicoli Leggeri (Italy) 50% Peugeot Citroën Automobiles Peugeot Boxer 42,700 50% Fiat Citroën Relay 47,900 Fiat Ducato - Total output 200,600 Toyota Peugeot Citroën Automobiles - TPCA (Czech Republic) 50% Peugeot Citroën Automobiles Peugeot 107 34,600 50% Toyota Motor Corporation Citroën C1 34,600 Toyot a Aygo - Total output 103,700
132 PSA Peugeot Citroën - 2005 reference document 08 CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements 134
Notes to the Consolidated Financial Statements 141
Consolidated Companies as at December 31, 2005 212
Subsidiaries and Affiliates as of December 31, 2005 224
PSA Peugeot Citroën – 2005 reference document 133 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Income
CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31, 2005 Manufacturing and Finance (in millions of euros) sales companies companies Eliminations Total Sales and revenue (note 4) 54,887 1,656 (276) 56,267 Cost of goods and services sold (43,803) (739) 276 (44,266) Selling, general and administrative expenses (7,862) (310) - (8,172) Research and development costs (note 7) (1,889) - - (1,889) Operating margin 1,333 607 - 1,940 Other income and (expenses), net (note 8) (352) 1 - (351) Interest income, net (note 9) 355 - - 355 Finance costs (note 10) (414) - - (414) Income before tax of fully consolidated companies 922 608 - 1,530 Current taxes (189) (178) - (367) Deferred taxes (89) (29) - (118) Income tax expense (note 11) (278) (207) - (485) Share in net earnings of companies at equity (note 15) (55) - - (55) Consolidated profit for the year 589 401 - 990 Attributable to equity holders of the parent 631 398 - 1,029 Attributable to minority interests (42) 3 - (39)
(in euros) Basic earnings per €1 par value share (note 12) 4.47 Diluted earnings per €1 par value share (note 12) 4.46
The notes on pages 141 to 211 are an integral part of the consolidated financial statements.
134 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Consolidated Statements of Income
Year ended December 31, 2004 Manufacturing and Finance (in millions of euros) sales companies companies Eliminations Total Sales and revenue (note 4) 54,745 1,601 (241) 56,105 Cost of goods and services sold (43,374) (784) 241 (43,917) Selling, general and administrative expenses (7,606) (299) - (7,905) Research and development costs (note 7) (1,802) - - (1,802) Operating margin 1,963 518 - 2,481 Other income and (expenses), net (note 8) 32 (4) - 28 Interest income, net (note 9) 319 - - 319 Finance costs (note 10) (389) - - (389) Income before tax of fully consolidated companies 1,925 514 - 2,439 Current taxes (347) (120) - (467) Deferred taxes (241) (64) - (305) Income tax expense (note 11) (588) (184) - (772) Share in net earnings of companies at equity (note 15) 13 - - 13 Consolidated profit for the year 1,350 330 - 1,680 Attributable to equity holders of the parent 1,320 326 - 1,646 Attributable to minority interests 30 4 - 34
(in euros) Basic earnings per €1 par value share (note 12) 6.97 Diluted earnings per €1 par value share (note 12) 6.96
The notes on pages 141 to 211 are an integral part of the consolidated financial statements.
PSA Peugeot Citroën – 2005 reference document 135 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, 2005 Manufacturing and Finance (in millions of euros) sales companies companies Eliminations Total Goodwill (note 13) 1,677 75 - 1,752 Intangible assets (note 13) 3,886 78 - 3,964 Property, plant and equipment (note 14) 14,909 48 - 14,957 Investments in companies at equity (note 15) 596 - - 596 Investments in non-consolidated companies (note 16) 45 1 - 46 Other non-current financial assets (note 17) 1,940 46 - 1,986 Other non-current assets (note 18) 95 - - 95 Deferred tax assets (note 11) 579 31 - 610 Total non-current assets 23,727 279 - 24,006 Operating assets Loans and receivables - finance companies (note 19) - 22,400 (162) 22,238 Short-term investments - finance companies (note 20) - 2,709 - 2,709 Inventories (note 21) 6,889 - - 6,889 Trade receivables - manufacturing and sales companies (note 22) 3,097 - (166) 2,931 Current taxes (note 11) 180 18 (42) 156 Other receivables (note 23) 1,694 642 (60) 2,276 11,860 25,769 (430) 37,199 Current financial assets (note 24) 1,214 - - 1,214 Cash and cash equivalents (note 25) 6,351 635 (230) 6,756 Total current assets 19,425 26,404 (660) 45,169 Total assets 43,152 26,683 (660) 69,175
EQUITY AND LIABILITIES December 31, 2005 Manufacturing and Finance (in millions of euros) sales companies companies Eliminations Total Equity (note 26) Share capital 235 Treasury stock (220) Retained earnings and other accumulated equity, excluding minority interests 13,849 Minority interests 542 Total equity 14,406 Non-current financial liabilities (note 30) 3,826 - - 3,826 Other non-current liabilities (note 31) 2,352 2 - 2,354 Non-current provisions (note 27) 1,417 17 - 1,434 Deferred tax liabilities (note 11) 2,086 281 - 2,367 Total non-current liabilities 9,681 300 - 9,981 Operating liabilities - finance companies Financing liabilities (note 32) - 22,987 (230) 22,757 Current provisions (note 27) 1,692 53 - 1,745 Trade payables 10,240 - (30) 10,210 Current tax payable (note 11) 100 79 (42) 137 Other payables (note 33) 4,155 844 (226) 4,773 16,187 23,963 (528) 39,622 Current financial liabilities (note 30) 5,298 - (132) 5,166 Total current liabilities 21,485 23,963 (660) 44,788 Total equity and liabilities 69,175
The notes on pages 141 to 211 are an integral part of the consolidated financial statements.
136 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Consolidated Balance Sheets
December 31, 2004 January 1, 2004 Manufacturing and Finance Manufacturing and Finance sales companies companies Eliminations Total sales companies companies Eliminations Total 1,798 75 - 1,873 1,743 75 - 1,818 3,602 62 - 3,664 3,301 42 - 3,343 14,168 50 - 14,218 13,619 51 - 13,670 614 - - 614 548 - - 548 65 1 - 66 63 13 - 76 2,329 49 - 2,378 881 53 - 934 96 2 - 98 90 1 - 91 502 30 - 532 539 34 - 573 23,174 269 - 23,443 20,784 269 - 21,053
- 21,243 (199) 21,044 - 19,719 (138) 19,581 - 2,717 - 2,717 - 2,494 - 2,494 6,546 - - 6,546 6,211 - - 6,211
3,296 - (242) 3,054 3,659 - (205) 3,454 110 35 (17) 128 138 47 (24) 161 1,756 655 (49) 2,362 2,140 699 (61) 2,778 11,708 24,650 (507) 35,851 12,148 22,959 (428) 34,679 712 - - 712 1,310 - - 1,310 5,158 610 (205) 5,563 5,082 804 (205) 5,681 17,578 25,260 (712) 42,126 18,540 23,763 (633) 41,670 40,752 25,529 (712) 65,569 39,324 24,032 (633) 62,723
December 31, 2004 January 1, 2004 Manufacturing and Finance Manufacturing and Finance sales companies companies Eliminations Total sales companies companies Eliminations Total
243 243 (431) (149)
13,306 12,133 585 599 13,703 12,826 3,791 - - 3,791 3,891 - - 3,891 2,279 7 - 2,286 2,236 64 - 2,300 1,639 19 - 1,658 1,909 19 - 1,928 1,968 250 - 2,218 1,785 200 - 1,985 9,677 276 - 9,953 9,821 283 - 10,104
- 22,070 (205) 21,865 - 20,743 (205) 20,538 1,454 54 - 1,508 1,434 44 - 1,478 10,773 - (41) 10,732 10,036 - (16) 10,020 114 39 (17) 136 112 28 (24) 116 4,068 992 (291) 4,769 4,114 1,131 (266) 4,979 16,409 23,155 (554) 39,010 15,696 21,946 (511) 37,131 3,061 - (158) 2,903 2,784 - (122) 2,662 19,470 23,155 (712) 41,913 18,480 21,946 (633) 39,793 65,569 62,723
PSA Peugeot Citroën – 2005 reference document 137 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Cash Flows
CONSOLIDATED STATEMENTS OF CASH FLOWS
2005 Manufacturing and Finance (in millions of euros) sales companies companies Eliminations Total Consolidated profit for the year 589 401 - 990 Adjustments for: - Depreciation and amortization 3,187 12 - 3,199 - Non-current provisions (246) 2 - (244) - Changes in deferred tax 96 30 - 126 - (Gains) losses on disposals and other 6 (1) - 5 Share in net earnings of companies at equity, net of dividends received 59 - - 59 Revaluation adjustments taken to equity and hedges of debt (2) - - (2) Working capital provided by operations 3,689 444 - 4,133 Changes in operating assets and liabilities (note 34.1) (411) (148) (48) (607) Net cash from (used in) operating activities 3,278 296 (48) 3,526 Proceeds from disposals of shares in consolidated companies 23 - - 23 Proceeds from disposals of investments in non-consolidated companies 2 - - 2 Acquisitions of shares in consolidated companies (8) - - (8) Investments in non-consolidated companies (2) (1) - (3) Proceeds from disposals of property, plant and equipment 54 9 - 63 Proceeds from disposals of intangible assets 5 - - 5 Purchases of property, plant and equipment (2,862) (11) - (2,873) Purchases of intangible assets (939) (20) - (959) Other (35) - - (35) Net cash used in investing activities (3,762) (23) - (3,785) Dividends paid: - To Peugeot S.A. shareholders (310) - - (310) - Intragroup 96 (96) - - - To minority shareholders of subsidiaries (19) (5) - (24) Purchases of treasury stock (198) - - (198) Changes in other financial assets and liabilities (note 34.3) 2,074 (150) 25 1,949 Other - - - - Net cash from (used in) financing activities 1,643 (251) 25 1,417 Effect of changes in exchange rates 34 3 (2) 35 Net increase (decrease) in cash and cash equivalents 1,193 25 (25) 1,193 Cash and cash equivalents at beginning of period 5,158 610 (205) 5,563 Cash and cash equivalents at end of period 6,351 635 (230) 6,756
The notes on pages 141 to 211 are an integral part of the consolidated financial statements.
138 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Consolidated Statements of Cash Flows
2004 Manufacturing and Finance (in millions of euros) sales companies companies Eliminations Total Consolidated profit for the year 1,350 330 - 1,680 Adjustments for: - Depreciation and amortization 3,056 12 - 3,068 - Non-current provisions (263) - - (263) - Changes in deferred tax 251 50 - 301 - (Gains) losses on disposals and other (182) (2) - (184) Share in net earnings of companies at equity, net of dividends received (7) - - (7) Revaluation adjustments taken to equity and hedges of debt (34) - - (34) Working capital provided by operations 4,171 390 - 4,561 Changes in operating assets and liabilities (note 34.1) 1,139 (465) 36 710 Net cash from (used in) operating activities 5,310 (75) 36 5,271 Proceeds from disposals of shares in consolidated companies 28 - - 28 Proceeds from disposals of investments in non-consolidated companies 2 - - 2 Acquisitions of shares in consolidated companies (166) - - (166) Investments in non-consolidated companies (11) (1) - (12) Proceeds from disposals of property, plant and equipment 37 6 - 43 Proceeds from disposals of intangible assets 3 - - 3 Purchases of property, plant and equipment (2,793) (11) - (2,804) Purchases of intangible assets (977) (25) - (1,002) Other (41) 6 - (35) Net cash used in investing activities (3,918) (25) - (3,943) Dividends paid: - To Peugeot S.A. shareholders (321) - - (321) - Intragroup 8 (8) - - - To minority shareholders of subsidiaries (10) (29) - (39) Purchases of treasury stock (282) - - (282) Changes in other financial assets and liabilities (note 34.3) (714) (53) (36) (803) Other - (5) - (5) Net cash from (used in) financing activities (1,319) (95) (36) (1,450) Effect of changes in exchange rates 3 1 - 4 Net increase (decrease) in cash and cash equivalents 76 (194) - (118) Cash and cash equivalents at beginning of period 5,082 804 (205) 5,681 Cash and cash equivalents at end of period 5,158 610 (205) 5,563
The notes on pages 141 to 211 are an integral part of the consolidated financial statements.
PSA Peugeot Citroën – 2005 reference document 139 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Changes in Equity
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Retained earnings, and other Revaluations - accumulated Retained excluding minority interests equity earnings, excluding excluding “Available for Minority Share Treasury minority minority Cash Flow sale” Translation (in millions of euros) Equity interests capital stock interests interests hedges securities adjustment At January 1, 2004 12,826 599 243 (149) 12,133 11,831 49 253 - Consolidated profit for the year 1,680 34 - - 1,646 1,646 - - - Revaluations taken to profit or loss (184) - - - (184) - (39) (145) - Revaluations taken to equity 25 - - - 25 - 19 19 (13) Stock options 7 - - - 7 7 - - - Comprehensive income* 1,494 Effect of changes in scope of consolidation (9) (9) ------Treasury stock (note 26.3) (282) - - (282) - - - - - Dividends paid (€1.35 per €1 par value share) (360) (39) - - (321) (321) - - - At December 31, 2004 13,703 585 243 (431) 13,306 13,163 29 127 (13) Consolidated profit for the year 990 (39) - - 1,029 1,029 - - - Revaluations taken to profit or loss (59) - - - (59) - (29) (30) - Revaluations taken to equity 292 20 - - 272 - 5 77 190 Stock options 12 - - - 12 12 - - - Comprehensive income* 1,254 Effect of changes in scope of consolidation ------Treasury stock (note 26.3) (198) - (8) 211 (401) (401) - - - Dividends paid (€1.35 per €1 par value share) (334) (24) - - (310) (310) - - - At December 31, 2005 14,406 542 235 (220) 13,849 13,493 5 174 177
* Comprehensive income includes all changes in equity resulting from transactions with non-shareholder third parties.
The notes on pages 141 to 211 are an integral part of the consolidated financial statements.
140 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS for the years ended December 31, 2005 and 2004
GENERAL INFORMATION Note 1 - Accounting policies ...... 142 Note 2 - Scope of consolidation ...... 151 Note 3 - Segment information ...... 152
STATEMENT OF INCOME Note 4 - Sales and revenue ...... 154 Note 5 - Personnel costs ...... 154 Note 6 - Depreciation and amortization expense ...... 154 Note 7 - Research and development expenditure ...... 155 Note 8 - Other income and (expenses), net ...... 155 Note 9 - Interest income, net ...... 157 Note 10 - Finance costs ...... 157 Note 11 - Income taxes ...... 158 Note 12 - Earnings per share ...... 161
BALANCE SHEET - ASSETS Note 13 - Goodwill and intangible assets ...... 161 Note 14 - Property, plant and equipment ...... 163 Note 15 - Investments in companies at equity ...... 164 Note 16 - Investments in non-consolidated companies ...... 167 Note 17 - Other non-current financial assets ...... 168 Note 18 - Other non-current assets ...... 169 Note 19 - Loans and receivables - finance companies ...... 169 Note 20 - Short-term investments - finance companies ...... 171 Note 21 - Inventories ...... 172 Note 22 - Trade receivables - manufacturing and sales companies ...... 172 Note 23 - Other receivables ...... 172 Note 24 - Current financial assets ...... 173 Note 25 - Cash and cash equivalents ...... 174
BALANCE SHEET - Note 26 - Equity ...... 174 EQUITY AND LIABILITIES Note 27 - Current and non-current provisions ...... 178 Note 28 - Pensions and other post-retirement benefits ...... 180 Note 29 - Early-termination plan ...... 184 Note 30 - Current and non-current financial liabilities - manufacturing and sales companies ...... 185 Note 31 - Other non-current liabilities ...... 187 Note 32 - Financing liabilities - finance companies ...... 188 Note 33 - Other payables ...... 189
ADDITIONAL INFORMATION Note 34 - Notes to the consolidated statements of cash flows ...... 190 Note 35 - Financial instruments ...... 191 Note 36 - Management of market risks ...... 192 Note 37 - Net financial position of manufacturing and sales companies ...... 198 Note 38 - Return on capital employed ...... 199 Note 39 - Off-balance sheet commitments ...... 201 Note 40 - Contingent liabilities ...... 202 Note 41 - Related party transactions ...... 202 Note 42 - Directors’ compensation ...... 203 Note 43 - Subsequent events ...... 203 Note 44 - Impacts of the first-time adoption of IFRS ...... 203
PSA Peugeot Citroën – 2005 reference document 141 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
NOTE 1 – ACCOUNTING POLICIES
The Group’s consolidated financial statements for 2005 have relation to the Group as a whole because they do not meet been prepared in accordance with International Financial any of the following criteria: Reporting Standards (IFRS) adopted for use in the European Sales or revenues: €50 million Union. International Financial Reporting Standards include Total assets: €20 million standards “IFRS” and “IAS” (International Accounting Standards) Net debt: €5 million and the related interpretations as prepared by the International Investments in these companies are recorded under Financial Reporting Interpretations Committee (IFRIC). “Investments in non-consolidated companies”. Their The standards and interpretations applied to prepare the 2005 consolidation would not have a material impact on the financial statements and the 2004 comparative financial consolidated financial statements. statements are those published by the Official Journal of the All significant intragroup transactions are eliminated in European Union at December 31, 2005, and applicable as of consolidation. that date.
The PSA Peugeot Citroën Group has also opted for the early 1.2.TRANSLATION OF THE FINANCIAL application of the Revised IAS 39 Fair Value Option (EC regulation STATEMENTS OF FOREIGN 1864/2005 published on November 16, 2005), whereby certain SUBSIDIARIES liabilities may be recognized at fair value. The impacts of such early application are set out in note 44. The Group has not opted A. Standard method for early application of any other standards issued by the Official The functional currency of most subsidiaries is their local Journal of the European Union. currency, corresponding to the currency in which the majority The principles applied to prepare the opening IFRS balance of their transactions are denominated. The balance sheets of sheet at January 1, 2004 and the differences compared with these subsidiaries are translated at the year-end exchange French generally accepted accounting principles applied rate and their income statements are translated on a monthly previously, including full details of their impact on the opening basis at the average exchange rate for each month. Gains and balance sheet and on 2004 profit, are set out in note 44. This losses resulting from the translation of financial statements of note also discloses the changes made to the 2004 IFRS foreign subsidiaries are recorded in equity under “Translation accounts published in February 2005. adjustment”. Goodwill arising on acquisition of these subsidiaries is measured in their functional currency. The consolidated financial statements for 2005 and explanatory notes were approved for issue by the Managing B. Specific method Board of Peugeot S.A. on February 1, 2006. The functional currency of some subsidiaries outside the euro zone is considered to be the euro because the majority of 1.1. CONSOLIDATION their transactions are denominated in this currency. Non- The generic name PSA Peugeot Citroën refers to the group monetary items in these subsidiaries’ accounts are translated of companies of which Peugeot S.A. is the parent. at the historical exchange rate and monetary items at the year-end rate. The resulting translation gains and losses are The financial statements of Peugeot S.A. and subsidiaries in recognized directly in profit or loss. which Peugeot S.A. directly or indirectly holds a majority interest are fully consolidated. 1.3.TRANSLATION OF TRANSACTIONS IN Companies in which Peugeot S.A. directly or indirectly holds FOREIGN CURRENCIES an interest of 20% to 50% and exercises significant influence Transactions in foreign currencies are measured and recognized over operating and financial policies are included in the in accordance with IAS 21 – The Effects of Changes in Foreign consolidated financial statements on an equity basis. Exchange Rates. In compliance with this standard, transactions Certain companies meeting the above principles have not in foreign currencies are translated into the subsidiary’s functional been consolidated, as they are not considered material in currency at the exchange rate ruling on the transaction date.
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At each balance sheet date, monetary items are translated at vehicles are made available to non-group dealers or the the closing rate and the resulting exchange difference is delivery date, in the case of direct sales. recognized in profit or loss, as follows: New vehicle sales with a buyback commitment are not - in operating margin, for commercial transactions carried out recognized at the time of delivery but accounted for as by all Group companies and for financing transactions carried operating leases when it is probable that the vehicle will be out by the Banque PSA Finance group; bought back. This principle applies: - in interest income or finance costs for financial transactions - whatever the duration of the buyback commitment; carried out by the manufacturing and sales companies. - for both direct sales and sales financed by Banque PSA Finance group. Derivative instruments are measured and recognized in accordance with the general principles described in note 1.14. D. The difference between the sale price and the buyback price is Derivative instruments designated as hedges of currency recognized as rental revenue on a straight-line basis over the risks on foreign currency transactions are recognized in the duration of the buyback commitment. The vehicle is initially balance sheet and remeasured at fair value at each balance recognized at production cost in property, plant and equipment. sheet date. Depreciation expense is calculated by the straight-line method, on the basis of the vehicle’s cost less its estimated residual The gain or loss from remeasuring derivative instruments at value, corresponding to the anticipated resale price on the used fair value is recognized as follows: vehicle market. Any additional gain made on the final sale of - in operating margin, for hedges of commercial transactions the vehicle is recognized in the period when the vehicle is sold carried out by all Group companies and of financing on the used car market. If the total difference is a loss, an transactions carried out by the Banque PSA Finance group; allowance is booked when the buyback contract is signed. - in interest income or finance costs for hedges of financial transactions carried out by the manufacturing and sales (b) Automotive Equipment Division companies; The Automotive Equipment Division performs development - in equity, for hedges of future transactions (for the effective work and manufactures or purchases specific toolings to portion of the gain or loss on the hedging instrument). The manufacture parts or modules for programs covered by amount recognized in equity is reclassified into profit or loss specific customer orders. when the hedged item affects profit or loss. The ineffective portion of the gain or loss is recognized in the income The revenue recognition criteria provided for in IAS 18 are not statement under “Other income and expenses, net”. met in cases where development costs are paid in proportion to parts delivered to the customer, with their full recovery being 1.4. USE OF ESTIMATES subject to an unguaranteed minimum level of orders placed by the customer. Development work cannot be considered as The preparation of financial statements in accordance with having being sold under such circumstances. The development the IFRS conceptual framework requires management to costs are recognized in intangible assets (see note 1.11.A) and make estimates and assumptions that affect the amounts tooling in property, plant and equipment (see note 1.12.A). reported therein. If the contract includes a payment guarantee, the 1.5. SALES AND REVENUE development costs are recognized in inventories and work- in-progress. The corresponding revenue is recognized when A. Manufacturing and sales companies the customer signs off on each technical phase (a) Automobile Division B. Finance companies Sales and revenue of the Automobile Division include revenues The activity of finance companies is to provide wholesale from the sale and leasing of vehicles and the sale of other financing to Group dealer networks and to finance sales of goods and services. vehicles to customers. Financing may take the form of In accordance with IAS 18 – Revenue, new vehicle sales are conventional loans, finance leases, buyback contracts or long- recognized on the date of transfer of the risks and rewards of term leasing. The different forms of financing are treated as ownership. This corresponds generally to the date when the lending transactions and are recognized in the balance sheet
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in the amount of the Banque PSA Finance group’s net • profits and losses and movements on provisions covering financial commitment (see note 1.14.A). Sales financing highly unusual events, revenues are recorded by yield-to-maturity method, so as to - interest income including the impact of interest and currency recognize a constant rate of interest over the life of the loan. hedges; - finance costs including the impact of interest and currency 1.6. SALES INCENTIVES hedges; - current and deferred taxes; The cost of current and future sales incentive programs is - share in net earnings of companies at equity. accrued on the basis of historical costs for the previous three months, determined country per country, and charged against profit for the period in which the corresponding sales were 1.10. GOODWILL recognized. In cases where the cost of the program varies Goodwill is the excess of the cost of shares in a consolidated according to sales volume, it is deducted from sales. company, including transaction expenses, over the Group’s equity in the fair value at the acquisition date of the identifiable The Group’s incentive programs include the granting of retail assets and liabilities acquired. financing at a significant discount to market interest rates. The corresponding cost is recognized at the time of the sale. In accordance with IFRS 3 – Business Combinations, goodwill is no longer amortized, but is tested for impairment annually 1.7. PRODUCT WARRANTY COSTS or more frequently if events or changes in circumstances indicate that it might be impaired. Impairment tests are based A provision is recorded to cover the estimated cost of vehicle on the recoverable amount of the corresponding cash and spare parts warranties at the time of sale to dealer generating unit (CGU), defined as the smallest identifiable networks or to the end customer. Revenues from the sale group of assets that generates cash inflows that are largely of extended warranties or maintenance contracts are independent of the cash inflows from other assets or groups recognized over the period during which the service is to be of assets. The method used to measure the recoverable provided. amount of CGUs is described in note 1.13. Impairment losses are deducted from consolidated profit for the year. 1.8. RESEARCH AND DEVELOPMENT COSTS 1.11. INTANGIBLE ASSETS Under IAS 38 – Intangible Assets, research expenditure is A. Research and development expenditure recognized as an expense, while development expenditure may be recognized as an intangible asset when certain Under IAS 38 – Intangible Assets, development expenditure conditions are met (described in note 1.11.A). is recognized as an intangible asset if, and only if, the enterprise can demonstrate in particular: In accordance with this standard, all research costs and all - its intention to complete the intangible asset and use or sell development costs other than those described in note 1.11.A it, as well as the availability of adequate technical, financial are recognized as an expense for the period in which they and other resources for this purpose; are incurred. - that it is probable that the future economic benefits attributable to the development expenditure will flow to the enterprise; 1.9. OPERATING MARGIN - that the cost of the asset can be measured reliably. Operating margin, which represents the main performance Automobile Division development expenditure on vehicles indicator used by the Group, corresponds to profit before: and mechanical parts (engines and gearboxes) incurred - other income and expenses, which consist mainly of: between the styling decision (project launch for mechanical • restructuring and early-termination plan costs, parts) and the start-up of pre-series production is recognized • interest cost related to pension obligations and the return in intangible assets. It is amortized from the Start of on the related external funds, Production date over the useful lives of the related assets, • the ineffective portion of the change in fair value on up to seven years for vehicles and over ten years for mechanical currency hedges of forecast commercial transactions to parts. The capitalized amount includes payroll costs of be carried out by the manufacturing and sales companies, personnel directly assigned to the project, the cost of
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prototypes and the cost of external services related to the production cost excluding borrowing costs, and are not project. These costs do not include any overhead or indirect revalued. expense, such as rent, building depreciation and information Investment grants are recognized as a reduction in the cost system utilization costs. The capitalized costs also include of the corresponding assets. the portion of qualifying development expenditure incurred by PSA Peugeot Citroën under a cooperation agreement that Maintenance costs are recognized as an expense. is not billed to the partner. All development expenditure billed Leased assets include vehicles leased to retail customers by to PSA Peugeot Citroën by its partners under cooperation the Group’s leasing companies and vehicles sold with a agreements is also capitalized. buyback commitment, which are recognized according to the The Automotive Equipment Division performs development method described in note 1.5.A. work for all programs covered by specific customer orders. Assets acquired under finance leases, as defined in IAS 17 – Where development costs are paid in proportion to parts Leases, are recognized at an amount equal to the fair value delivered to the customer, with their full recovery being subject of the leased property or, if lower, the present value of the to an unguaranteed minimum level of orders placed by the minimum lease payments. A financial liability is recognized in customer, the costs incurred during the period between the the same amount. The assets are depreciated by the method customer’s acceptance of the commercial offer and the Start of and at the rates indicated below. Production date of the parts or modules are recognized in intangible assets. The intangible asset is amortized based on B. Depreciation the quantity of parts delivered to the customer, provided that (a) Standard method accumulated amortization at each year-end does not represent less than the amount that would be recognized if the asset Depreciation is calculated on a straight-line basis to write off were amortized on a straight-line basis over five years. If the the acquisition or production cost of the assets, less any contract includes a payment guarantee, the development costs residual value, over their estimated useful lives. Property, are recognized in inventories and work-in-progress. plant and equipment generally have no residual value, except for rental vehicles. The main useful lives of property, plant Other research and developments expenditure is recognized as and equipment are as follows: an expense for the period in which it is incurred (see note 1.8). Useful lives, in number of years B. Other internally-developed or purchased Buildings 20 - 30 intangible assets Plant and equipment 4 - 16 Computer equipment 3 - 4 The portion of development costs of software for internal Vehicles and handling equipment 4 - 7 use that corresponds to directly attributable internal or Fixtures and fittings 10 - 20 external costs necessary to create the software or improve its performance is recognized as an intangible asset when it is probable that these costs will generate future economic (b) Specific toolings benefits. The capitalized costs are amortized over the In the Automobile Division, specific toolings are depreciated estimated useful life of the software, ranging from four to over the estimated lives of the corresponding models, which twelve years. Other software acquisition and development are generally shorter than the useful lives of the toolings costs are expensed as incurred. concerned, due to the frequency of model changes.
Other intangible assets (consisting principally of patents and In the Automotive Equipment Division, specific toolings are trademarks) are amortized on a straight-line basis over the depreciated based on the quantity of parts delivered to the estimated period of benefit, not to exceed twenty years. customer, provided that accumulated depreciation at each year-end does not represent less than the amount that would be recognized if the asset were depreciated on a straight- 1.12. PROPERTY, PLANT AND EQUIPMENT line basis over three years.
A. Cost The estimated useful lives of property, plant and equipment In accordance with IAS 16 – “Property, Plant and Equipment”, are reviewed periodically, including when the decision is made property, plant and equipment are stated at acquisition or to halt production of a vehicle or mechanical part.
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1.13. IMPAIRMENT OF LONG-LIVED investments in non-consolidated companies (note 16), other ASSETS non-current financial assets (note 17), loans and receivables – finance companies (note 19), short-term investments – In accordance with IAS 36 – Impairment of Assets, property, finance companies (note 20), trade receivables – plant and equipment and intangible assets are tested for manufacturing and sales companies (note 22), current impairment annually, or more frequently if events or changes financial assets (note 24), and cash and cash equivalents in circumstances indicate that they might be impaired. Assets (note 25). with indefinite useful lives must be tested for impairment at least once a year. Goodwill is the only indefinite-lived asset Financial liabilities as defined by IAS 39 comprise financial carried in the Group accounts. liabilities at amortized cost and financial liabilities accounted for using the fair value option. On the balance sheet, these Impairment tests are performed at the level of cash categories correspond to current and non-current financial generating units (CGUs), which are defined as the smallest liabilities (note 30), financing liabilities (note 32) and trade identifiable group of assets that generates cash inflows that payables. are largely independent of the cash inflows from other assets or groups of assets. The value in use of CGUs is measured as Financial assets and liabilities with maturities of more than the net present value of estimated future cash flows. If this one year at the balance sheet date are classified as non- value is less than the CGU’s net book value, an impairment current. All other assets and liabilities are reported as current. loss is recognized in net income for the year. The impairment Financial assets and liabilities are recognized and measured loss is first recorded as an adjustment to the carrying amount in accordance with IAS 39, which was endorsed in part of any goodwill allocated to the CGU and the remainder of by the European Commission on November 19, 2004. the loss is allocated to the other assets of the unit. EC regulation 1864/2005 published on November 16, 2005 The Automobile Division comprises a number of Vehicle allows certain liabilities to be recorded at fair value, with early CGUs, each corresponding to a vehicle model. The assets application at January 1, 2005 and for the 2004 comparative financial statements). included in a Vehicle CGU consist of toolings and other specific plant and equipment used to manufacture the model The PSA Peugeot Citroën Group is not affected by the and capitalized model development costs (see note 1.11.A). provisions of IAS 39 dealing with the application of hedge The Vehicle CGUs and all other fixed assets, including accounting to customer deposits in the accounts of retail goodwill, together make up the Automobile Division CGU. banks, which have been rejected in their present form by the European Commission. The Banque PSA Finance group and Gefco group are separate CGUs, comprising their respective property, plant and B. Recognition and measurement equipment and intangible assets, including goodwill. of financial assets In the Automotive Equipment Division, each CGU (a) Investments in non-consolidated companies corresponds to a program and comprises all customer These represent the Group’s shares in non-consolidated contract-related intangible assets (corresponding to capitalized companies, which are shown on the balance sheet at development costs) and property, plant and equipment. These historical cost, which the Group considers is representative CGUs are combined in business units (Automotive Seating, of the fair value in the absence of an active market for the Vehicle Interior Systems and Modules, Exhaust Systems, Front shares. An impairment loss is recognized when there is Ends) to which support assets and goodwill are allocated. objective evidence of a permanent impairment in value. Fair value is determined by applying the most appropriate 1.14. FINANCIAL ASSETS AND LIABILITIES financial criteria, considering the specific situation of the company concerned. The most commonly applied criteria are A. Definitions equity in the underlying net assets and earnings outlook. Under IAS 39, financial assets include loans and receivables, available-for-sale securities, financial assets held for trading and (b) Loans and receivables financial assets accounted for using the fair value option. On These include advances to non-consolidated companies, loans the balance sheet, these categories correspond to under the French government housing scheme, and other loans
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and receivables. They are stated at amortized cost, measured Interest income is allocated by the effective interest method, by the effective interest method. Their carrying value includes with the effective interest rate being the rate that exactly the outstanding principal plus unamortized transaction costs, discounts estimated future cash receipts through the premiums or discounts. Their recoverable amount is tested for expected life of the loan. impairment annually, or more frequently if events or changes Finance loans and receivables are generally hedged against in circumstances indicate that it might be impaired. Any interest rate risks. The hedged portion of the loan is impairment losses are recorded in the income statement. remeasured at fair value in accordance with hedge accounting principles. The gains and losses arising from remeasurement (c) Short-term investments at fair value are recognized in profit or loss and are offset by Short-term investments are classified as available-for-sale or the effective portion of the symmetrical loss or gain arising as accounted for using the fair value option. from remeasurement at fair value of the hedging instrument (see note 1.14.D – Derivative instruments). (c1) Short-term investments classified as “available-for- sale” Finance receivables are tested for impairment when a loss event occurs, corresponding in practice to default on a single These include listed securities that the Group intends to hold installment. Impairment is measured by comparing the on a lasting basis or that can be sold in the short-term. receivables’ net book value to the present value of estimated They are stated at market value, which the Group considers future cash flows discounted at the effective interest rate. is representative of fair value. Gains and losses arising from remeasurement at fair value are recognized in equity. When For retail finance receivables: remeasurement at fair value results in the recognition of a - an impairment loss is recognized on sound loans when the loss in equity, if there is objective evidence that the asset is borrower defaults on a single installment. Impairment is permanently impaired, the cumulative loss is written off to assessed based on the probability of the outstanding loan the income statement. being classified as non-performing and on the discounted average loss rate; (c2) Short-term investments accounted for using the - impairment losses on non-performing loans are determined fair value option based on the discounted average loss rate, which is used to calculate provisions for credit losses on non-performing and Assets recorded in this category comprise fixed income doubtful loans. securities hedged by interest rate swaps or unhedged variable income securities. Any changes in the fair value of these For wholesale finance receivables, provisions for known credit securities are recognized directly in profit or loss, together risks are determined on a case-by-case basis. with the offsetting change in fair value of the swaps. (e) Cash and cash equivalents (d) Loans and receivables – finance companies Cash and cash equivalents include cash at bank, units in Loans and receivables reported in the balance sheet money market funds and other money market securities that correspond to Banque PSA Finance’s net financial are convertible into cash at very short notice and are not commitment in respect of the loans and receivables. exposed to any material risk of impairment in the case of an Consequently, their carrying value includes the outstanding increase in interest rates. All cash and cash equivalents are principal and accrued interest plus the following items (before measured at fair value. the effect of hedge accounting): - commissions paid to referral agents, which are added to C. Recognition and measurement of financial the outstanding principal; liabilities - contributions received from the marques, which are (a) Financial liabilities at amortized cost deducted from the outstanding principal; Borrowings and other financial liabilities are stated at - unamortized loan set-up costs, which are deducted from amortized cost measured using the effective interest method. the outstanding principal; Items hedged by interest rate swaps qualify for fair value - deposits received at the inception of finance leases, which hedge accounting, i.e. the hedged portion of the instrument are deducted from the amount financed. is remeasured at fair value, with changes in fair value due to
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fluctuations in interest rates taken to profit or loss and offset - For cash flow hedges, the effective portion of the gain or by the loss or gain arising from remeasurement at fair value loss arising from remeasurement at fair value of the hedging of the hedging instrument. instrument is recognized in equity, since the gain or loss arising from remeasurement at fair value of the hedged (b) Financial liabilities accounted for using the fair portion of the hedged item is not recognized in the balance value option sheet; the ineffective portion is recognized in other income Exceptionally, the fair value option has been applied when it and expenses. The cumulative gains and losses recognized allows for a clearer presentation of the financial statements, in equity are included in profit or loss when the hedged item namely because changes in the fair value of liabilities are affects profit or loss. accounted for symmetrically with any changes in the fair value of the derivatives hedging the interest rate risk on such 1.15. INVENTORIES liabilities. In such cases, the fair value of these liabilities Inventories are stated at the lower of cost and net realizable reflects the credit risk specific to the issuer. value, in accordance with IAS 2 – Inventories. Cost is determined by the first in-first out (FIFO) method and includes D. Recognition and measurement of derivative direct and indirect production costs based on normal instruments production levels.
(a) Standard method The cost of inventories does not include any borrowing costs. Derivative instruments are stated at fair value. Except as The Automotive Equipment Division performs development explained below, gains and losses arising from work and manufactures or purchases specific toolings to remeasurement at fair value are recognized in profit or loss. manufacture parts or modules for programs covered by specific customer orders. When the contract includes a payment (b) Hedging instruments guarantee, the development costs are recognized in inventories Derivative instruments may be designated hedging and work-in-progress and the corresponding revenue is instruments in one of two types of hedging relationships: recognized when the customer signs off on each technical phase. - fair value hedge, corresponding to a hedge of the exposure to changes in fair value of an asset or liability; - cash flow hedge, corresponding to a hedge of the exposure 1.16. DEFERRED TAXES to variability in cash flows from existing or future assets or In accordance with IAS 12 – Income Taxes, deferred taxes liabilities. are calculated for all temporary differences between the tax base of assets and liabilities and their carrying amount. Derivative instruments qualify for hedge accounting when: Deferred tax liabilities are systematically recognized, while - at the inception of the hedge there is formal designation deferred tax assets are only recognized when there is a and documentation of the hedging relationship; reasonable expectation that they will materialize. - the hedge is expected to be highly effective, its effectiveness can be reliably measured and it is determined A deferred tax liability is recognized for all taxable temporary actually to have been highly effective throughout the financial differences associated with investments in subsidiaries and reporting periods for which the hedge was designated. companies at equity, except to the extent that both of the following conditions are satisfied: The effects of hedge accounting are as follows: - the Group is able to control the timing of the reversal of the - For fair value hedges of existing assets and liabilities, the temporary difference; hedged portion of the asset or liability is recognized in the - it is probable that the temporary difference will not reverse balance sheet and measured at fair value. Gains and losses in the foreseeable future. arising from remeasurement at fair value are recognized in profit or loss, and are offset by the effective portion of the In practice: loss or gain arising from remeasurement at fair value of the - for subsidiaries, a deferred tax liability is recognized only in hedging instrument. respect of distribution taxes on dividends that will be paid
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by the subsidiary in the following year by decision of the over the minimum period required to qualify for a full pension Group; under the government-sponsored scheme; - for companies at equity, deferred tax liabilities are recognized - an appropriate discount rate; for all differences between the tax base of the shares and - an inflation rate; their carrying amount; - assumptions concerning future salary levels and staff - current tax benefits generated by intragroup provisions and turnover rates. sales are not cancelled by recognizing deferred tax liabilities, The projected benefit obligation is measured every year for except when the difference is considered to be temporary, the main plans and every three years for the other plans, e.g., when the Group plans to divest the subsidiary. except where more frequent valuations are necessary to take In accordance with IAS 2, deferred tax assets and liabilities into account changes in actuarial assumptions or significant are not discounted. changes in demographic statistics.
Changes in actuarial assumptions and experience adjustments – 1.17. PROVISIONS corresponding to the effects of differences between the previous In accordance with IAS 37 – Provisions, Contingent Liabilities and actuarial assumptions and what has actually occurred – give rise Contingent Assets, a provision is recognized when, at the to actuarial gains and losses. These gains and losses are recognized balance sheet date, the Group has a present obligation towards in the income statement by the corridor method, which consists a third party; it is probable that an outflow of resources of recognizing a specified portion of the net cumulative actuarial embodying economic benefits will be required to settle the gains and losses that exceed the greater of 10% of the present obligation; and no inflow of resources of an equivalent amount value of the defined benefit obligation (before deducting plan is expected. Provisions for restructuring costs are recognized assets) and 10% of the fair value of any plan assets. only when the restructuring has been announced and the External funds aim to cover the total projected benefit Group has drawn up or has started to implement a detailed obligation, including the portion not recognized due to the formal plan. deferral of actuarial gains and losses. Because of the deferral of actuarial gains and losses, in some cases the amount of these external funds exceeds the recognized portion of the 1.18. EMPLOYEE BENEFITS projected benefit obligation, leading to the recognition of an In addition to pension benefits paid in accordance with the asset in “Other non-current assets” in an amount not laws and regulations of the countries in which they operate, exceeding the sum of net actuarial losses and unrecognized Group companies are liable for the payment of supplementary past service costs. pensions and retirement benefits (see note 28.1). These Other employee benefit obligations recognized in the balance benefits are paid under defined contribution and defined sheet concern: benefit plans. - long-service awards payable by French and foreign The payments made under defined contribution plans are in subsidiaries (note 28.2); full discharge of the Group’s liability and are recognized as - healthcare costs paid by certain subsidiaries mainly in the an expense. United States of America (note 28.3).
In accordance with IAS 19 – Employee Benefits, obligations under defined benefit plans are measured by independent 1.19. OPTIONS TO PURCHASE EXISTING actuaries using the projected unit credit method. This method OR NEWLY-ISSUED SHARES AT AN sees each period of service as giving rise to an additional unit AGREED PRICE of benefit entitlement and measures each unit separately to Stock options are granted to management and certain build up the final obligation, which is then discounted to employees. These options are measured at the grant date in present value. The calculations mainly take into account: accordance with IFRS 2 – Share-based Payment, using the - retirement age assumptions, generally based on retirement Black & Scholes option-pricing model. Changes in the fair at the age of 60 for employees in France or after 60 in the value of options after the grant date have no impact on the case of employees who have not paid pension contributions initial valuation.
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The fair value of stock options depends in part on their No compensation expense has therefore been recognized expected life, which the Group considers as corresponding to for stock options granted prior to November 7, 2002. the lock-up period for tax purposes. The compensation expense corresponding to the options’ fair value is recognized 1.20.TREASURY STOCK in personnel costs on a straight-line basis over the period from the grant date to the starting date of the exercise period, All Peugeot S.A. shares held by the Group are recorded as a with the offsetting credit recognized directly in equity. deduction from equity, at cost. Proceeds from sales of treasury stock are taken to equity, so that any disposal gains In accordance with IFRS 2, all stock options granted after or losses have no impact on profit. November 7, 2002 but not yet vested at January 1, 2005, have been measured and recognized in personnel costs.
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NOTE 2 – SCOPE OF CONSOLIDATION
2.1. NUMBER OF CONSOLIDATED COMPANIES
A. At year-end 2005 2004 2003 Subsidiaries Manufacturing and sales companies 310 307 306 Finance companies 33 33 28 343 340 334 Companies at equity Manufacturing and sales companies 32 31 31 32 31 31 Consolidated companies at December 31 375 371 365
B. Changes during the year 2005 Consolidated companies at January 1 371 Newly consolidated companies - Automobile importers 1 - Automobile dealers 3 - Transportation and logistics companies 4 - Other manufacturing and sales companies 2 Deconsolidated companies (4) Merged companies and other (2) Consolidated companies at December 31 375
2.2. MAIN CHANGES IN THE SCOPE 2.3. IMPACT OF CHANGES IN SCOPE OF CONSOLIDATION IN 2005 OF CONSOLIDATION ON CONSOLIDATED DATA Sale of Panhard The impact of changes in the scope of consolidation on On April 4, 2005, the Group sold its stake in Société de consolidated data is not material. Constructions Mécaniques Panhard et Levassor (Panhard) to the Auverland group.
Panhard, a formerly wholly-owned subsidiary of Peugeot S.A., designs and manufactures light-armored vehicles and is a major supplier to the French army, as well as to 45 other armies worldwide. At December 31, 2004, Panhard had 261 employees and reported sales of €56 million for 2004.
In view of the conditions applicable to the sale, Panhard was deconsolidated with effect from January 1, 2005,
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NOTE 3 – SEGMENT INFORMATION
In accordance with IAS 14 - Segment Information, the Group’s - the Finance Division, corresponding to the Banque PSA primary reporting format is organized by business segment, Finance group, which provides retail financing to the in line with its organizational and management structure. customers of the Peugeot and Citroën marques and wholesale financing to the two marques’ dealer networks; - Other Businesses, which include the activities of the holding 3.1. BUSINESS SEGMENTS company, Peugeot S.A., Peugeot Motocycles and Process The Group’s operations are organized around five main Conception Ingénierie, a specialist in plant and equipment segments: design. - the Automobile Division, covering the design, manufacture and sale of passenger cars and light commercial vehicles Balances for each segment, as shown in the table below, are under the Peugeot and Citroën marques; on a stand-alone basis. All intersegment balance sheet items - the Automotive Equipment Division, corresponding to the and transactions are eliminated under the heading “Eliminations”. Faurecia group, which specializes in the vehicle interior, automobile seating, front-end and exhaust systems businesses; All intersegment commercial transactions are carried out on - the Transportation and Logistics Division, corresponding to an arm’s length basis on the same terms and conditions as the Gefco group, which specializes in logistics and vehicle those applicable to the supply of goods and services to third and goods transportation; parties.
December 31, 2005 Automotive Transportation (in millions of euros) Automobile Equipment and Logistics Finance Other Eliminations Total Sales and revenue - to third parties 44,940 8,510 1,157 1,380 280 - 56,267 - intragroup, intersegment 131 2,468 1,843 276 429 (5,147) - Total 45,071 10,978 3,000 1,656 709 (5,147) 56,267 Operating margin 916 267 145 607 1 4 1,940 Segment profit 911 (47) 148 609 (17) 3 1,607 Share in net earnings (losses) of companies at equity (61) 6 - - - - (55) Other financial income and (expenses), net ------(18) Net financial income (expense) ------(59) Income taxes ------(485) Profit 990 Segment assets 25,360 6,694 1,182 25,998 297 (1,674) 57,857 Investments in companies at equity 558 35 3 - - - 596 Investments in non-consolidated companies ------46 Financial assets ------9,910 Tax assets ------766 Total segment assets 69,175 Segment equity and liabilities 16,873 3,146 741 23,904 381 (1,772) 43,273 Long-term debt ------8,992 Tax liabilities ------2,504 Equity ------14,406 Total segment equity and liabilities 69,175 Capital expenditure (excluding sales with a buyback commitment) 3,061 656 63 31 21 - 3,832 Depreciation and amortization 2,422 684 51 12 30 - 3,199 Capital employed 7,854 3,609 442 2,419 (299) 98 14,123
152 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
December 31, 2004 Automotive Transportation (in millions of euros) Automobile Equipment and Logistics Finance Other Eliminations Total Sales and revenue - to third parties 44,999 8,157 1,064 1,360 525 - 56,105 - intragroup, intersegment 240 2,562 1,830 241 374 (5,247) - Total 45,239 10,719 2,894 1,601 899 (5,247) 56,105 Operating margin 1,503 283 158 518 26 (7) 2,481 Segment profit 1,505 223 154 514 16 (7) 2,405 Share in net earnings of companies at equity 5 8 - - - - 13 Other financial income and (expenses), net ------104 Net financial income (expense) ------(70) Taxes ------(772) Profit 1,680 Segment assets 24,495 6,574 1,120 24,853 514 (1,931) 55,625 Investments in companies at equity 581 33 - - - - 614 Investments in non-consolidated companies ------66 Financial assets ------8,604 Tax assets ------660 Total segment assets 65,569 Segment equity and liabilities 17,407 2,996 654 23,142 596 (1,977) 42,818 Long-term debt ------6,694 Tax liabilities ------2,354 Equity ------13,703 Total segment equity and liabilities 65,569 Capital expenditure (excluding sales with a buyback commitment) 3,126 538 91 36 15 - 3,806 Depreciation and amortization 2,356 617 55 12 28 - 3,068 Capital employed 6,489 3,658 476 2,098 (364) 46 12,403
3.2. GEOGRAPHICAL SEGMENTS In the table below, sales and revenue are presented by destination of products sold and investments by geographic location of the subsidiary concerned.
2005 Western Rest of Latin Rest of the (in millions of euros) Europe Europe America world Total Sales and revenue 46,083 2,712 2,150 5,322 56,267 Capital expenditure (intangible assets and property, plant and equipment) 3,105 484 83 160 3,832
2004 Western Rest of Latin Rest of the (in millions of euros) Europe Europe America world Total Sales and revenue 46,529 2,550 1,409 5,617 56,105 Capital expenditure (intangible assets and property, plant and equipment) 3,407 255 83 61 3,806
PSA Peugeot Citroën – 2005 reference document 153 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
NOTE 4 – SALES AND REVENUE
(in millions of euros) 2005 20052004 Vehicles and other goods 51,278 51,131 Services 3,609 3,614 Finance companies’ revenue 1,380 1,360 Total 56,267 56,105
NOTE 5 – PERSONNEL COSTS
Group personnel costs are as follows:
(in millions of euros) 2005 2004 Automobile Division 6,162 5,970 Automotive Equipment Division 2,002 1,927 Transportation and Logistics Division 368 342 Finance companies 120 119 Other 140 158 Total 8,792 8,516
Stock option expense detail is disclosed in note 26.2.C, and pension expense is detailed in note 28.1.F.
NOTE 6 – DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense included in operating expense breaks down as follows:
(in millions of euros) 2005 2004 Capitalized development expenditure 594 504 Other intangible assets 65 187 Specific toolings 670 615 Other property, plant and equipment 1,677 1,755 Impairment losses on intangible assets 138 - Impairment losses on property, plant and equipment 55 7 Total 3,199 3,068
154 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
NOTE 7 – RESEARCH AND DEVELOPMENT EXPENDITURE
7.1. IMPACT OF CAPITALIZATION ON THE STATEMENT OF INCOME
(in millions of euros) 2005 2004 Total expenditure (2,151) (2,183) Capitalized development expenditure (note 13.1) 856 885 Non-capitalized expenditure (1,295) (1,298) Amortization of capitalized development expenditure (note 13.1) (594) (504) Total (1,889) (1,802)
7.2. IMPACT OF CAPITALIZATION ON THE STATEMENT OF CASH FLOWS
(in millions of euros) 2005 2004 Impact on profit 262 381 Impact on amortization (594) (504) Impact on working capital provided by operations 856 885 Impact on net cash used in investing activities (856) (885) Total 00
NOTE 8 – OTHER INCOME AND (EXPENSES), NET
Other income and expenses include the following amounts:
(in millions of euros) 2005 2004 Impairment loss taken on Faurecia group CGU (note 8.1) (180) - Restructuring costs (note 8.2) (160) (92) Interest cost on pension obligations (note 28.1.E) (187) (184) Expected return on external pension funds (note 28.1.E) 168 149 Change in the ineffective portion of foreign currency options (40) (28) Net gains on disposals of available-for-sale securities and investments 51 188 Net gains on disposals of property 6 6 Other financial income and (expense) (6) (7) Other (3) (4) Total (351) 28
PSA Peugeot Citroën – 2005 reference document 155 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
8.1. IMPAIRMENT LOSS TAKEN companies and six US-based companies). Using these ON FAURECIA GROUP CGUS parameters and a risk premium of 5%, the average cost of capital used to discount future cash flows was set at 7.9%, In accordance with the principle set out in note 1.13, the book as in 2004. value of each group of assets was compared with its value in use. Value in use is defined as the amount exactly discounts At end-2005, the impairment tests led to the recognition of € estimated future cash flows expected to be generated by a 180 million write-down in “other income and (expenses), € the assets based on management’s latest projections for net”, including 42 million on property, plant and equipment € each cash-generating unit (2006-2009 Medium-Term Plan). (note 14) and 138 million on the goodwill generated in 2001 at the time of the purchase of the Sommer Allibert group’s The calculation was performed by extrapolating to perpetuity Systems on Vehicle Interior Systems and Modules business projected cash flows for the last year of the medium-term (note 13). This write-down reflects a fall in the operating plan (2009) using a growth rate of 1.5% based on estimated profitability of the Vehicle Interior Systems and Modules trends developed by analysts for the automobile market. This business mainly caused by the raw materials price increase, was also the rate applied in the impairment tests carried out timing discrepancies regarding the profitability improvement in fiscal 2004. plan, and the impact on forecast sales and revenue of a more selective commercial policy. An independent expert was consulted to determine the weighted average cost of capital to be used to discount future The sensitivity of the impairment test to changes in the cash flows. The market parameters used by the expert for assumptions used to determine the value in use of the the calculation were based on a sample of 12 companies Vehicle Interior Systems and Modules business is illustrated from the automotive equipment sector (six European below:
Sensitivity (in millions of euros) +1% -1% Discount rate (169) 231 Growth rate 181 (132)
8.2. RESTRUCTURING COSTS
A. Analysis by type
(in millions of euros) 2005 2004 Early-termination plan costs (note 29) 4 (24) Workforce reductions (152) (66) Discontinued production operations (12) (2) Total (160) (92)
In 2005, restructuring costs include the Faurecia workforce reductions in an amount of €124 million, and the costs of phasing out the third team at the Ryton assembly plant, in an amount of €26 million.
156 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
B. Number of employees affected 2005 2004 France 1,111 460 Spain 245 15 United Kingdom 932 710 Rest of Europe 942 541 United States 6132 Rest of world (excluding Europe) 252 17 Total 3,488 1,875
NOTE 9 – INTEREST INCOME, NET
Interest income on loans relates to interest accrued according to the method set out in note 1.14.B (b).
(in millions of euros) 2005 2004 Interest income on loans 28 17 Interest income on cash equivalents 324 303 Remeasurement of available-for-sale investments accounted for using the fair value option (1) 5 Net gain (loss) on interest rate instruments designated as hedges of investments 4 (6) Total 355 319
NOTE 10 – FINANCE COSTS
Net gains (losses) on hedges of borrowings relate to the revaluation of loans linked to interest rates and the remeasurement of hedging instruments at fair value, as described in note 1.14.C (a).
(in millions of euros) 2005 2004 Interest on other borrowings (206) (214) Interest on bank overdrafts (175) (147) Interest on finance lease liabilities (8) (9) Foreign exchange gain (loss) on financial transactions (3) (5) Net gain (loss) on hedges of borrowings (5) 1 Other (17) (15) Total (414) (389)
PSA Peugeot Citroën – 2005 reference document 157 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
NOTE 11 – INCOME TAXES
11.1. CHANGE IN BALANCE SHEET ITEMS
2005 Opening Other Closing (in millions of euros) balance Expense Equity Payment change balance Current taxes Assets 128 156 Liabilities (136) (137) Total (8) (367) - 395 (1) 19 Deferred taxes Assets 532 610 Liabilities (2,218) (2,367) Total (1,686) (118) 29 - 18 (1,757)
2004 Opening Closing (in millions of euros) balance Expense Equity Payment Change balance Current taxes Assets 161 128 Liabilities (116) (136) Total 45 (467) - 418 (4) (8) Deferred taxes Assets 573 532 Liabilities (1,985) (2,218) Total (1,412) (305) 45 - (14) (1,686)
11.2. INCOME TAXES OF FULLY CONSOLIDATED COMPANIES
(in millions of euros) 2005 2004 Current taxes (note 11.2.A) Corporate income taxes (362) (459) Tax on intragroup dividends (5) (8) Deferred taxes Deferred taxes arising in the period (74) (291) Impairment loss (76) (30) Effect of change in the French tax rate (note 11.2.B) 32 16 Total (485) (772)
158 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
A. Current taxes The December 30, 2004 Amended Finance Act (Act no. 2004- Income taxes currently payable represent the amounts paid 1485) provided for: or currently due to the tax authorities for the year, calculated - a reduction in the tax rate on all long-term capital gains from in accordance with the tax regulations and rates in effect 19% to 15% as of 2005; in the various countries. Effective from January 1, 2005, - the gradual phasing out of taxation of long-term capital gains Peugeot S.A. and its French subsidiaries that are at least realized on the sale of equity investments. This tax is to be 95%-owned renewed their election to determine French reduced to 8% in 2006 and abolished from 2007. income taxes on a consolidated basis according to Article Net deferred taxes have been reduced to take into account 223 A of the French Tax Code. these new tax rates.
B. Deferred taxes In addition, in accordance with the Amended Finance Act, € Deferred taxes are determined as described in note 1.16. the Group had to transfer 200 million from the special long-term capital gains reserve to an ordinary reserve account The French statutory income tax rate is 33.33%. in 2005. No additional tax is now due if the reserve is distributed, following to payment of an exit tax of 2.5%. Act no. 99-1140 of December 29, 1999 dealing with the A corresponding €6 million tax charge was recorded in financing of the social security system provided for the the 2004 financial statements, relating to all of the Group introduction of a surtax equal to 3.3% of the corporate income entities concerned. tax liability of French companies. This surtax had the effect of raising the French corporate income tax rate by 1.1 percentage points.
The December 30, 2004 Finance Act (Act no. 2004-1484) provided for the phasing out of the “contribution additionnelle” surtax, applicable at a rate of 3% of the corporate income tax liability of French companies since 2002. This surtax was reduced to 1.5% from January 1, 2005 and will be abolished in 2006.
PSA Peugeot Citroën – 2005 reference document 159 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
11.3. RECONCILIATION OF THE STATUTORY TAX RATE IN FRANCE TO THE EFFECTIVE RATE OF TAX BORNE BY THE GROUP
(in percent) 2005 2004 French statutory income tax rate (34.9) (35.4) Change in French tax rates 2.1 0.6 Permanent differences (2.0) (0.2) Income taxable at reduced rates (France) 1.8 2.0 Tax credits 2.5 1.0 Effect of differences in foreign tax rates and other 3.7 1.6 Unrecognized deferred tax assets (note 11.4) (4.9) (1.3) Effective rate of the tax borne (31.7) (31.7)
In 2005, the effect of “differences in foreign tax rates and other” includes the impairment loss taken on goodwill relating to Faurecia group CGUs, which has no impact on taxes.
11.4. DEFERRED TAX ASSETS ON TAX LOSSES
2005 Tax loss carryforwards Utilization of Opening generated tax loss Other Closing (in millions of euros) balance in the year carryforwards changes balance Deferred tax assets on tax loss carryforwards 458 89 (61) 21 507 Unrecognized at inception (231) (79) 17 (15) (308) Impairment (62) N/A N/A (8) (70) Total 165 10 (44) (2) 129
2004 Tax loss carryforwards Utilization of Opening generated tax loss Other Closing (in millions of euros) balance in the year carryforwards changes balance Deferred tax assets on tax loss carryforwards 459 23 (24) - 458 Unrecognized at inception (228) (7) N/A 4 (231) Impairment (39) N/A N/A (23) (62) Total 192 16 (24) (19) 165
160 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
NOTE 12 – EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted average number of shares outstanding during the year.
The average number of shares is calculated by taking into account the number of shares issued and canceled during the period and the number of shares held in treasury stock.
The dilutive effect of stock options is calculated using the “treasury stock” method, as follows:
2005 2004 Average number of €1 par value shares outstanding 230,211,537 236,093,169 Effect of dilutive potential ordinary shares (stock options), calculated using the “treasury stock” method (note 26.2) 535,209 336,191 Diluted weighted average number of shares 230,746,746 236,429,360
In view of the terms of the stock option plans (note 26.2) and Peugeot S.A.’s average share price, only plans implemented between 1999 through 2003 have a dilutive impact in 2005 (2004: 1999 and 2000 plans).
NOTE 13 – GOODWILL AND INTANGIBLE ASSETS
13.1. CHANGE IN NET BOOK VALUE
2005 Software Development and other (in millions of euros) Goodwill expenditure intangible assets Total Cost At January 1, 2005 1,873 4,965 1,158 7,996 Additions 7 856 104 967 Disposals - - (5) (5) Impairment losses (1) (138) - - (138) Change in scope of consolidation and other - - 3 3 Translation adjustment 10 3 5 18 At December 31, 2005 1,752 5,824 1,265 8,841 Amortization At January 1, 2005 N/A (1,572) (887) (2,459) Charge for the year N/A (594) (65) (659) Disposals N/A - 3 3 Change in scope of consolidation and other N/A - (1) (1) Translation adjustment N/A (7) (2) (9) At December 31, 2005 - (2,173) (952) (3,125) Net book value at January 1, 2005 1,873 3,393 271 5,537 Net book value at December 31, 2005 1,752 3,651 313 5,716
(1) Impairment losses taken in the year relate to Faurecia (note 8.1).
PSA Peugeot Citroën – 2005 reference document 161 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
2004 Software Development and other (in millions of euros) Goodwill expenditure intangible assets Total Cost At January 1, 2004 1,818 4,072 1,054 6,944 Additions 72 885 117 1,074 Disposals - - (14) (14) Change in scope of consolidation and other - (1) 2 1 Translation adjustment (17) 9 (1) (9) At December 31, 2004 1,873 4,965 1,158 7,996 Amortization At January 1, 2004 N/A (1,073) (710) (1,783) Charge for the year N/A (504) (187) (691) Disposals N/A - 10 10 Change in scope of consolidation and other N/A 4 - 4 Translation adjustment N/A 1 - 1 At December 31, 2004 - (1,572) (887) (2,459) Net book value at January 1, 2004 1,818 2,999 344 5,161 Net book value at December 31, 2004 1,873 3,393 271 5,537
13.2. BREAKDOWN OF GOODWILL
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Faurecia 187 187 187 Faurecia businesses - Automotive Seating 793 792 790 - Vehicle Interior Systems and Modules 364 503 489 - Front-End 96 96 96 - Exhaust Systems 162 155 157 Dongfeng Peugeot Citroën Automobile 63 53 12 Peugeot Automotiv Pazarlama AS (Popas) 12 12 12 Crédipar 75 75 75 Total 1,752 1,873 1,818
162 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
NOTE 14 – PROPERTY, PLANT AND EQUIPMENT
2005 Vehicles and Fixtures, Assets Land Plant and Leased handling fittings and under (in millions of euros) and buildings equipment vehicles equipment other construction Total Cost At January 1, 2005 5,618 22,668 2,254 494 966 1,556 33,556 Additions (1) 329 1,356 - 42 67 1,133 2,927 Disposals (137) (937) - (27) (32) - (1,133) Change in scope of consolidation and other 228 208 55 (134) (49) (314) (6) Translation adjustment 60 162 - 2 11 18 253 At December 31, 2005 6,098 23,457 2,309 377 963 2,393 35,597 Depreciation At January 1, 2005 (2,601) (15,462) (305) (371) (599) - (19,338) Charge for the year (239) (1,929) (60) (33) (86) - (2,347) Disposals 127 902 - 18 30 - 1,077 Impairment loss (2) - (55) - - - - (55) Change in scope of consolidation and other (187) 65 68 133 54 - 133 Translation adjustment (14) (89) - (1) (6) - (110) At December 31, 2005 (2,914) (16,568) (297) (254) (607) - (20,640) Net book value at January 1, 2005 3,017 7,206 1,949 123 367 1,556 14,218 Net book value at December 31, 2005 3,184 6,889 2,012 123 356 2,393 14,957
(1) Including property, plant and equipment acquired under finance leases. (2) €42 million in impairment losses recognized in the year relate to Faurecia group CGUs (note 8.1).
2004 Vehicles and Fixtures, Assets Land Plant and Leased handling fittings and under (in millions of euros) and buildings equipment vehicles equipment other construction Total Cost At January 1, 2004 5,125 21,301 2,232 501 878 1,983 32,020 Additions (1) 560 2,555 - 49 142 (473) 2,833 Disposals (71) (1,157) - (54) (44) - (1,326) Change in scope of consolidation and other 2 (22) 22 (2) (10) 35 25 Translation adjustment 2 (9) - - - 11 4 At December 31, 2004 5,618 22,668 2,254 494 966 1,556 33,556 Depreciation At January 1, 2004 (2,405) (14,719) (311) (363) (552) - (18,350) Additions (264) (1,895) (57) (57) (97) - (2,370) Disposals 63 1,140 - 47 41 - 1,291 Impairment losses - (7) - - - - (7) Change in scope of consolidation and other 2 14 63 2 10 - 91 Translation adjustment 3 5 - - (1) - 7 At December 31, 2004 (2,601) (15,462) (305) (371) (599) - (19,338) Net book value at January 1, 2004 2,720 6,582 1,921 138 326 1,983 13,670 Net book value at December 31, 2004 3,017 7,206 1,949 123 367 1,556 14,218
(1) Including property, plant and equipment acquired under finance leases.
PSA Peugeot Citroën – 2005 reference document 163 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
Leased vehicles include vehicles leased to private individuals by the Group’s car rental companies, as well as vehicles sold subject to a buyback commitments, restated in accordance with the principles set out in note 1.5.A.
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Vehicles subject to a buyback commitment 2,044 1,996 1,938 Vehicles under short-term leases 265 258 294 Total 2,309 2,254 2,232
NOTE 15 – INVESTMENTS IN COMPANIES AT EQUITY
Most companies accounted for by the equity method are manufacturing and sales companies that manufacture automotive parts and components or complete vehicles.
15.1. CHANGES IN THE CARRYING VALUE OF INVESTMENTS IN COMPANIES AT EQUITY
(in millions of euros) 2005 2004 At January 1 614 548 Dividends and profit transfers (4) (6) Share of net earnings (55) 13 Newly consolidated companies - Stafim -5 - Gefco China 2- Buyout of minority interests in Dongfeng Peugeot Citroën Automobile - 79 Acquisitions -3 Disposals - (20) Translation adjustment 39 (8) At December 31 596 614
164 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
15.2. SHARE IN NET ASSETS
(in millions of euros) Latest % interest Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Renault cooperation agreement Française de Mécanique 50% 58 68 72 Société des Transmissions Automatiques 20% 3 3 3 Fiat cooperation agreement Sevelnord 50% 62 63 47 Giesevel 50% 12 11 8 Sevelind 50% 6 (19) (41) Sevel SpA 50% 107 111 106 Toyota cooperation agreement Toyota Peugeot Citroën Automobiles 50% 113 142 144 Dongfeng Peugeot Citroën Automobile 50% 190 194 158 Other Siemens Automotiv Hydraulics 48% 2 3 3 Stafim 34% 6 5 - Gefco Tunisia 50% - - - Gefco China 50% 2 - - Faurecia group companies 35 33 48 Total 596 614 548
15.3. SHARE IN NET EARNINGS
(in millions of euros) Latest % interest Dec. 31, 2005 Dec. 31, 2004 Renault cooperation agreement Française de Mécanique 50% (10) (4) Société de Transmissions Automatiques 20% - - Fiat cooperation agreement Sevelnord 50% (1) 16 Giesevel 50% 1 3 Sevelind 50% 25 22 Sevel SpA 50% (4) 5 Toyota cooperation agreement Toyota Peugeot Citroën Automobiles 50% (34) (11) Dongfeng Peugeot Citroën Automobile 50% (38) (26) Other Siemens Automotiv Hydraulics 48% (1) - Stafim 34% 1 1 Gefco Tunisia 50% - - Gefco China 50% - - Faurecia group companies 67 Total (55) 13
PSA Peugeot Citroën – 2005 reference document 165 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
15.4. KEY FINANCIAL DATA
A. Aggregate data
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Capital employed Property, plant and equipment 1,500 1,160 885 Working capital (42) 287 282 Other capital employed (1) 3 (4) (47) Total 1,461 1,443 1,120 Capital expenditure 486 365 233 Net financial position Long and medium term debt (644) (592) (323) Other financial items (221) (237) (249) Total (865) (829) (572)
(1) The main balance sheet items included in other capital employed at December 31, 2005 relate to provisions (€79 million), intangible assets (€46 million), and deferred tax assets net of deferred tax liabilities, amounting to €28 million, including €23 million concerning Toyota Peugeot Citroën Automobiles.
B. Key financial data by company
(a) Total capital employed
(in millions of euros) Latest % interest Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Renault cooperation agreement Française de Mécanique 50% 153 182 188 Société de Transmissions Automatiques 20% 8 9 6 Fiat cooperation agreement Sevelnord 50% 144 121 133 Giesevel 50% 32 37 40 Sevelind 50% 29 34 41 Sevel SpA 50% 237 200 203 Toyota cooperation agreement Toyota Peugeot Citroën Automobiles 50% 294 311 146 Dongfeng Peugeot Citroën Automobile 50% 490 475 316 Other Siemens Automotiv Hydraulics 48% 5 6 4 Stafim 34% (2) (1) - Gefco Tunisia 50% - - - Gefco China 50% 2 - - Faurecia group companies 69 69 43 Total 1,461 1,443 1,120
166 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
(b) Net financial position
(in millions of euros) Latest % interest Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Renault cooperation agreement Française de Mécanique 50% (95) (114) (116) Société de Transmissions Automatiques 20% (5) (6) (3) Fiat cooperation agreement Sevelnord 50% (82) (58) (86) Giesevel 50% (20) (26) (32) Sevelind 50% (23) (53) (82) Sevel SpA 50% (131) (90) (97) Toyota cooperation agreement Toyota Peugeot Citroën Automobiles 50% (181) (169) (2) Dongfeng Peugeot Citroën Automobile 50% (300) (280) (159) Other Siemens Automotiv Hydraulics 48% (3) (3) (1) Stafim 34% 8 6 - Gefco Tunisia 50% - - - Gefco China 50% 1 - - Faurecia group companies (34) (36) 6 Total (865) (829) (572)
NOTE 16 – INVESTMENTS IN NON-CONSOLIDATED COMPANIES
The recognition and measurement principles applicable to investments in non-consolidated companies are set out in note 1.14.B (b).
16.1. ANALYSIS BY COMPANY
(in millions of euros) Latest % interest Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Football Club de Sochaux Montbéliard 100% 14 14 14 Peugeot Rus Avto (consolidated as from Jan. 1, 2005) -5- Peugeot Automobile Nigéria 40% 8 8 8 Non-consolidated dealers 13 14 16 Faurecia group portfolio 2 1 6 PSA Finance Ceska Republika (consolidated as from March 1, 2004) --12 Other 92420 Total 46 66 76
PSA Peugeot Citroën – 2005 reference document 167 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
16.2. MOVEMENTS FOR THE YEAR
(in millions of euros) 2005 2004 Cost At January 1 109 119 Acquisitions 213 Disposals (4) (5) Change in scope of consolidation and other (19) (17) Translation adjustment - (1) At December 31 88 109 Allowances At January 1 (43) (43) Charges (1) (3) Disposals 32 Change in scope of consolidation and other - 1 Translation adjustment (1) At December 31 (42) (43) Net book value at January 1 66 76 Net book value at December 31 46 66
NOTE 17 – OTHER NON-CURRENT FINANCIAL ASSETS
The recognition and measurement principles applicable to other non-current financial assets are described in note 1.14.B (b) for loans and receivables, (c1) for investments classified as “available for sale”, (c2) for investments “accounted for using the fair value option”, and note 1.14.D for derivatives.
2005 Investments classified as “accounted for Loans and "available for using the fair Derivative (in millions of euros) receivables sale” value option” instruments (2) Tot al Cost At January 1, 2005 237 204 1,699 322 2,462 Purchases/additions 21 5 435 - 461 Disposals (13) - (25) - (38) Remeasurement - 54 (71) 88 71 Transfers to current financial assets (1) (18) (863) - (881) Translation adjustment and changes in scope of consolidation (7) - (1) - (8) At December 31, 2005 220 263 1,174 410 2,067 Allowances At January 1, 2005 (84) - - - (84) Net charge for the year 3 - - - 3 At December 31, 2005 (81) - - - (81) Net book value at January 1, 2005 153 204 1,699 322 2,378 Net book value at December 31, 2005 139 263 1,174 410 1,986
The book value of available-for-sale securities includes an unrealized gain of €172 million at December 31, 2005 (€117 million at January 1, 2005). (1) Investments accounted for using the fair value option transferred to current financial assets correspond to money market securities with maturities of more than one year at December 31, 2004. (2) Details of hedging instruments are given in note 36.
168 PSA Peugeot Citroën – 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
2004 Investments classified as “accounted for Loans and “available for using the fair Derivative (in millions of euros) receivables sale” value option” instruments (1) Tot al Cost At January 1, 2004 234 191 408 183 1,016 Purchases/additions 27 1 1,344 - 1,372 Disposals (9) - (54) - (63) Remeasurement - 12 1 139 152 Transfers to current financial assets (15) - - - (15) Translation adjustment and change in scope of consolidation - - - - - At December 31, 2004 237 204 1,699 322 2,462 Allowance At January 1, 2004 (82) - - - (82) Charges (2) - - - (2) At December 31, 2004 (84) - - - (84) Net book value at January 1, 2004 152 191 408 183 934 Net book value at December 31, 2004 153 204 1,699 322 2,378
(1) Details of hedging instruments are given in note 36.
NOTE 18 – OTHER NON-CURRENT ASSETS
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Excess of payments to external funds over pension obligations (note 28) 3 7 3 Guarantee deposits and other 92 91 88 Total 95 98 91
NOTE 19 – LOANS AND RECEIVABLES - FINANCE COMPANIES
The recognition and measurement principles for loans and receivables relating to finance companies are defined in note 1.14.B (d).
19.1. ANALYSIS
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Retail and lease finance receivables 18,840 17,782 17,081 Wholesale finance receivables 5,582 5,458 4,550 Other customer loans 115 83 96 Remeasurement at fair value of the hedged portion of finance receivables (19) 44 63 Total 24,518 23,367 21,790 Deferred revenues (1,790) (1,791) (1,773) Allowances for credit losses (277) (277) (234) Allowances for sound loans (51) (56) (64) Total 22,400 21,243 19,719 Eliminations (162) (199) (138) Total 22,238 21,044 19,581
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Retail and lease finance receivables represent loans made by finance companies to Peugeot and Citroën customers for the purchase or lease of cars.
Wholesale finance receivables represent amounts due to Peugeot and Citroën by their dealer networks which have been transferred to the Group finance companies, and working capital loans made by the finance companies to the dealer networks.
19.2. FINANCING COSTS BORNE BY THE AUTOMOBILE DIVISION The Automobile Division bears the financing costs on the following amounts due by its dealer networks, which have been transferred to the Group finance companies:
(in millions of euros) Dec. 31,2005 Dec. 31, 2004 3,345 3,198
The corresponding financing costs are included in “Cost of goods and services sold“ in the accounts of the manufacturing and sales companies, as follows:
(in millions of euros) 2005 2004 149 132
19.3. MATURITIES OF FINANCE RECEIVABLES At December 31, 2005 Subsequent (in millions of euros) 2006 2007 2008 years Total Retail and lease finance receivables 7,603 4,923 3,862 2,452 18,840 Wholesale finance receivables 5,582 - - - 5,582 Total 13,185 4,923 3,862 2,452 24,422
At December 31, 2004 Subsequent (in millions of euros) 2005 2006 2007 years Total Retail and lease finance receivables 6,554 5,975 2,927 2,326 17,782 Wholesale finance receivables 5,405 26 15 12 5,458 Total 11,959 6,001 2,942 2,338 23,240
At January 1, 2004 Subsequent (in millions of euros) 2004 2005 2006 years Total Retail and lease finance receivables 6,816 5,151 2,503 2,611 17,081 Wholesale finance receivables 4,531 8 5 6 4,550 Total 11,347 5,159 2,508 2,617 21,631
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19.4. ALLOWANCES FOR CREDIT LOSSES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Retail and lease finance receivables Receivables 429 393 357 Allowances (264) (264) (214) Net 165 129 143 Wholesale finance receivables Receivables 21 23 28 Allowances (13) (13) (20) Net 8108 All receivables Receivables 450 416 385 Allowances (277) (277) (234) Net 173 139 151
19.5. OTHER CUSTOMER LOANS All other customer loans are due within one year and amount to €115 million at December 31, 2005.
NOTE 20 – SHORT-TERM INVESTMENTS – FINANCE COMPANIES
The recognition and measurement principles applicable to short-term investments of the finance companies are described in note 1.14.B (c2).
This item includes standby reserves held by the Banque PSA Finance group in connection with its financing strategy. The reserves are invested in mutual funds and money market securities.
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Banque PSA Finance standby reserves 2,262 2,260 2,269 Other 447 457 225 Total 2,709 2,717 2,494
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NOTE 21 – INVENTORIES
December 31, 2005 December 31, 2004
(in millions of euros) Cost Allowance Net Cost Allowance Net Raw materials and supplies 876 (142) 734 883 (146) 737 Semi-finished products and work-in-progress 752 (34) 718 821 (55) 766 Goods for resale and used vehicles 1,401 (121) 1,280 1,378 (116) 1,262 Finished products and replacement parts 4,315 (158) 4,157 3,943 (162) 3,781 Total 7,344 (455) 6,889 7,025 (479) 6,546
Details of changes in inventories are given in note 34.
NOTE 22 – TRADE RECEIVABLES – MANUFACTURING AND SALES COMPANIES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Trade receivables 3,218 3,412 3,782 Allowances (121) (116) (123) Total - manufacturing and sales companies 3,097 3,296 3,659 Elimination of transactions with the finance companies (166) (242) (205) Total 2,931 3,054 3,454
This item does not include receivables from dealers transferred to the finance companies, which are reported in the consolidated balance sheet under “Loans and receivables - finance companies” (note 19.2).
Trade receivables include credit notes deducted from sales, corresponding to confirmed or estimated sales incentives on new vehicles held in inventory in the independent dealer network, as well as credit notes and accrued credit notes for sales incentives on vehicles sold to customers that have not yet been settled by the Group.
Changes in this item are analyzed in note 34.
NOTE 23 – OTHER RECEIVABLES
23.1. MANUFACTURING AND SALES COMPANIES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Prepaid and recoverable taxes other than income tax 1,017 981 1,275 Employee-related receivables 128 135 183 Due from suppliers 177 132 165 Derivative instruments (1) 29 114 148 Prepaid expenses 86 92 97 Miscellaneous other receivables 257 302 272 Total 1,694 1,756 2,140
(1) This item corresponds to the fair value of instruments purchased by the Group to hedge the currency risks on current or forecast receivables and payables and to hedge interest rate risks on operating receivables and liabilities. These instruments are analyzed by maturity in note 36, “Management of market risks”.
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23.2. FINANCE COMPANIES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Prepaid and recoverable taxes other than income tax 75 70 78 Derivative instruments (1) 194 238 166 Prepaid expenses 189 204 250 Miscellaneous other receivables 184 143 205 Total 642 655 699
(1) This item corresponds to the fair value of instruments purchased by the Group to hedge currency risks on current or forecast receivables and payables and to hedge against interest rate risks on finance receivables and financing liabilities. These instruments are analyzed by maturity in note 36, "Management of market risks".
NOTE 24 – CURRENT FINANCIAL ASSETS
The recognition and measurement principles applicable to current financial assets are described in note 1.14.B (b) for loans and receivables, (c1) for investments classified as “available for sale“, (c2) for investments “accounted for using the fair value option”, and note 1.14.D for derivatives.
2005 Investments classified Investments “accounted for Derivative (in millions of euros) Loans as“available for sale“ using the fair value option” instruments Total At January 1, 2005 240 103 358 11 712 Purchases/additions 18 - 149 - 167 Disposals (94) (39) (405) - (538) Remeasurement at fair value - (23) 6 16 (1) Transfers (1) 18 - 863 - 881 Translation adjustment and changes in scope of consolidation (6) - - (1) (7) At December 31, 2005 176 41 971 26 1,214
(1) Investments accounted for using the fair value option transferred to current financial assets correspond to money market securities with maturities of more than one year at December 31, 2004.
2004 Investments classified Investments “accounted for Derivative (in millions of euros) Loans as“available for sale“ using the fair value option” instruments Total At January 1, 2004 301 346 655 8 1,310 Purchases/additions 241 - - - 241 Disposals (314) (256) (294) - (864) Remeasurement at fair value - 13 (3) 3 13 Transfers 12 - - - 12 Translation adjustment and changes in scope of consolidation - - - - - At December 31, 2004 240 103 358 11 712
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NOTE 25 – CASH AND CASH EQUIVALENTS
Cash and cash equivalents, which are defined in note 1.14.B (e), include:
25.1. MANUFACTURING AND SALES COMPANIES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Mutual fund units and money market securities 5,164 4,363 4,408 Cash and current account balances 1,187 795 674 Total - manufacturing and sales companies 6,351 5,158 5,082 Deposits with finance companies (230) (205) (205) Total 6,121 4,953 4,877
25.2. FINANCE COMPANIES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Due from credit institutions 625 530 642 Central bank current account balances and items received for collection 10 80 162 Total 635 610 804
NOTE 26 – EQUITY
26.1. SHARE CAPITAL In accordance with the authorizations granted by the Shareholders’ Meeting of May 25, 2005, the Managing Board of Peugeot S.A. held on November 17, 2005, decided to cancel 8,490,880 shares.
At December 31, 2005, the Group’s share capital amounted to €234,618,266, represented by ordinary shares with a par value of €1, all fully paid. The shares may be held in bearer or registered form, at the discretion of the shareholder. Shares registered in the name of the same holder for at least four years carry double voting rights (Article 38 of the bylaws).
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26.2. EMPLOYEE STOCK OPTIONS
A. Plan characteristics Each year since 1999, the Managing Board of Peugeot S.A. has granted options to certain employees, directors and officers of the Company and its subsidiaries allowing them to purchase existing shares, at a specified price. Following the 2001 stock split, the current terms of these plans are as follows:
2005 Plan 2004 Plan 2003 Plan 2002 Plan 2001 Plan 2000 Plan 1999 Plan Date of Managing Board decision Aug. 23, 2005 Aug. 24, 2004 Aug. 21, 2003 Aug. 20, 2002 Nov. 20, 2001 Oct. 5, 2000 March 31, 1999 Vesting date Aug. 23, 2008 Aug. 24, 2007 Aug. 21, 2006 Aug. 20, 2005 Nov. 20, 2004 Oct. 5, 2002 March 31, 2001 Expiry date of exercise period Aug. 22, 2013 Aug. 23, 2012 Aug. 20, 2011 Aug. 20, 2009 Nov. 19, 2008 Oct. 4, 2008 March 31, 2007 Number of initial grantees 169 182 184 178 147 154 97 Exercise price (in euros) 52.37 47.59 39.09 46.28 46.86 35.46 20.83 Number of options granted 953,000 1,004,000 996,500 860,100 798,600 709,200 462,900
B. Change in the number of options outstanding Changes in the number of options outstanding under these plans (exercisable for €1 par value shares) are shown below:
(number of options) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Total at January 1 4,615,753 3,763,200 2,783,200 Options distributed 953,000 1,004,000 996,500 Options exercised (257,028) (151,447) (16,500) Options cancelled (37,000) - - Total at December 31 5,274,725 4,615,753 3,763,200 Of which options exercisable 2,334,225 1,755,153 1,108,000
Options outstanding at year-end are as follows:
(number of options) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 1999 Plan 144,247 272,415 401,800 2000 Plan 561,978 684,138 706,200 2001 Plan 776,900 798,600 798,600 2002 Plan 851,100 860,100 860,100 2003 Plan 992,500 996,500 996,500 2004 Plan 995,000 1,004,000 - 2005 Plan 953,000 - -
PSA Peugeot Citroën - 2005 reference document 175 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
C.Valuation In accordance with the principles described in note 1.19, stock options granted after November 7, 2002 have been valued as follows:
(in millions of euros) 2005 Plan 2004 Plan 2003 Plan 2002 Plan Total Valuation at the grant date Peugeot S.A. 9 14 12 - 35 Faurecia - 5 - 4 9 Total 9 19 12 4 44 Charge for the year Peugeot S.A. 1 5 4 - 10 Faurecia - 1 - 1 2 Total 1 6 4 1 12 Assumptions Peugeot S.A. Share price at the grant date (in euros) 51.80 48.70 41.60 - Volatility 25% 39% 39% - Interest rate (zero coupon bonds) 2.76% 3.12% 3.12% - Exercise price (in euros) 52.37 47.59 39.09 - Life of the options (1) 444- Dividend payout rate 2.75% 2.75% 2.75% - Faurecia Share price at the grant date (in euros) - 58.4 - 41.82 Volatility - 41% - 41% Interest rate (zero coupon bonds) - 3.21% - 3.75% Exercise price (in euros) - 58.18 - 41.71 Life of the options (1) -4 -4 Dividend payout rate - 1.90% - 2.75% (1) Tax lock-up period.
176 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
26.3.TREASURY STOCK Transactions under shareholder-approved buyback programs can be analyzed as follows:
A. Number of shares held Authorizations Transactions
(in number of shares) Dec. 31, 2005 Dec. 31, 2004 Opening balance 10,230,439 4,086,884 Share buybacks AGM of May 28, 2003 25,000,000 - 1,615,000 AGM of May 26, 2004 24,000,000 2,957,895 4,680,002 AGM of May 25, 2005 24,000,000 1,172,267 - Share cancellations AGM of May 25, 2005 10% of capital (8,490,880) - Share sales On exercise of stock options (257,028) (151,447) Closing balance 5,612,693 10,230,439 Shares held for allocation on exercise of stock options 5,274,725 4,615,753 Shares for cancellation 337,968 5,614,686
B. Change in value
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 At January 1 (431) (149) Acquired (198) (287) Cancelled 401 - Exercised 85 At December 31 (220) (431)
26.4 RETAINED EARNINGS AND OTHER ACCUMULATED EQUITY, EXCLUDING MINORITY INTERESTS This item can be analyzed as follows:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Peugeot S.A. legal reserve 28 28 28 Other Peugeot S.A. statutory reserves and retained earnings 6,250 6,051 5,342 Retained earnings and other accumulated equity of consolidated companies, excluding minority interests 7,571 7,227 6,763 Total 13,849 13,306 12,133
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Other Peugeot S.A. statutory reserves and retained earnings are as follows:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Reserves available for distribution Without taxation 5,182 2,033 2,144 Subject to exit tax (1) -200- Subject to payment of additional tax(2) 1,068 1,068 1,056 Subject to payment of the précompte equalization tax - - 2,142 Subject to payment of a surtax (3) - 2,750 - Total 6,250 6,051 5,342 Taxes payable in the case of distribution (other than the “précompte” equalization tax) 169 213 229
(1) As indicated in note 11.2.B, in 2005 an amount of €200 million has been transferred from the special long-term capital gains reserve to an ordinary distributable reserve account, subject to payment of a 2.5% exit tax. A €5 million tax charge was recorded in the 2004 financial statements relating to Peugeot S.A. (2) Corresponding to the portion of the long-term capital gains reserve that the Group has not yet decided to transfer to an ordinary reserve account, and still subject to a potential tax liability. (3) In the 2004 Finance Act, the “précompte” equalization tax provided for in Article 223 sexies of the French Tax Code was abolished and a temporary 25% surtax was introduced on dividends paid in 2005 (the surtax is deductible in three equal installments from income taxes payable in the next three years).
NOTE 27 – CURRENT AND NON-CURRENT PROVISIONS
27.1. NON-CURRENT PROVISIONS
A. Analysis by type
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Pensions and other post-retirement benefit obligations (note 28) 1,106 1,235 1,415 Early-termination plan (note 29) 233 345 423 End-of-life vehicles 55 53 39 Other 40 25 51 Total 1,434 1,658 1,928
B. Movements for the period
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 At January 1 1,658 1,928 Movements taken to profit or loss - Charges 193 150 - Releases (utilizations) (274) (415) - Releases (surplus provisions) (150) (6) (231) (271) Other movements Translation adjustment 19 - Change in scope of consolidation and other (12) 1 Total at December 31 1,434 1,658
Provisions released in 2005 - mainly relating to pensions and other post-retirement benefits - reflect the impact of the amended insurance contract with AGF and the change in Faurecia’s supplementary pension plan (note 28.1.F).
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27.2. CURRENT PROVISIONS
A. Analysis by type
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Warranties (1) 1,073 896 868 Other employee benefit obligations 153 148 131 Claims and litigation 98 105 73 Restructuring plans 93 67 65 Fine imposed by the European Commission (2) 50 - - Long-term contract losses 29 26 46 Operations in Argentina 9 20 31 Other 240 246 264 Total 1,745 1,508 1,478
(1) The provision for warranty costs particularly concerns new vehicle sales, where the contractual obligation lasts generally two years. (2The provision for warranty costs corresponds to the expected cost of warranty claims. The amount expected to be recovered from suppliers is recognized as an asset, under "Miscellaneous other receivables" (see note 23). (2) This item corresponds to the fine handed down by the European Commission against Automobiles Peugeot and its Dutch subsidiary. (2) Further to an investigation of Automobiles Peugeot, Peugeot Deutschland GmbH and Peugeot Nederland NV by the European Commission in 1999 and 2003, in its decision of October 5, 2005, the Commission found Automobiles Peugeot and its Dutch subsidiary guilty of restrictive business practices which aimed to, or had the effect of, restricting vehicle export sales. The Commission ordered the companies to pay a joint and several fine of €49.5 million. The Commission withdrew its initial claims against similar practices in the german subsidiary. (2) Automobiles Peugeot and Peugeot Nederland NV have filed an appeal against this decision with the Court of First Instance of the European Communities, on the grounds that there is insufficient evidence to support their alleged violation of Article 81, paragraph 1, of the Treaty establishing the European Community.
B. Movements for the period
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 At January 1 1,508 1,478 Movements taken to profit or loss Charges 678 423 Releases (utilizations) (405) (335) Releases (surplus provisions) (64) (60) 209 28 Other movements Translation adjustment 24 (2) Change in scope of consolidation and other 4 4 At December 31 1,745 1,508
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NOTE 28 – PENSIONS AND OTHER POST-RETIREMENT BENEFITS
28.1. SUPPLEMENTARY PENSIONS AND subsidiary of the Chrysler group in France (Talbot), which RETIREMENT BONUSES was closed in 1981 and covers 4,400 serving employees and 14,700 beneficiaries at end-2005. Members of managing bodies A. Description of plans who have sat on the Managing Board, Executive Committee Group employees in certain countries are entitled to or other senior management body for more than five years are supplementary pension benefits, payable annually, or retirement also entitled to supplementary pension benefits, providing that bonuses representing one-off payments made at the time of they end their career with the Group. This plan guarantees a retirement. These benefits are paid under defined contribution defined level of pension benefit for all plans (statutory and and defined benefit plans. The payments made under defined supplementary) equal to 50% of a defined reference salary, contribution plans are in full discharge of the Group’s liability and taken as the three best annual salaries received over the last are recognized as an expense. Payments under defined benefit five years of employment. Under this plan, benefits may be paid plans concern primarily France and the United Kingdom. over to the employee’s spouse. In France, the existing defined benefit plans concern the Four defined benefit plans are managed in the United Kingdom retirement bonuses provided for by collective bargaining agreements, the internally-managed portion of the supplementary as part of trusts. These plans are not open to employees recruited pension scheme for engineers and executive personnel after May 2002. At December 31, 2005, 28,000 people were (cadres) that was not externalized in 2002, which guarantees eligible for these plans: 4,000 serving employees, 13,000 former a defined level of pension benefit for all plans of up to 60% employees and 11,000 other beneficiaries. The plans guarantee of the employee’s last salary (500 serving employees and a defined level of pension benefit representing up to 66% of 2,600 beneficiaries), and the pension plan set up by the former the employee’s last salary.
B. Assumptions The assumptions used to calculate the Group’s projected benefit obligation are as follows:
Euro zone United Kingdom Discount rate 2005 4.00% 5.00% 2004 4.50% 5.00% 2003 4.50% 5.00% Inflation rate 2005 2.00% 2.50% 2004 2.00% 2.25% 2003 2.00% 2.25% Expected return on external funds 2005 6.00% 7.00% 2004 6.00% 7.00% 2003 6.00% 7.00%
The assumptions regarding future salary increases take into to an increase or decrease in the projected benefit obligation account inflation and forecast pay rises in each country. of 2.4% for French plans and 4.4% for UK plans.
Mortality and staff turnover assumptions are based on the The expected return is estimated based on asset allocation, specific economic conditions of each Group company or the the period remaining before the benefits become payable country in which they operate. and experience-based yield projections that take into account discount rate assumptions. Sensitivity of assumptions: a 0.25-point increase or decrease in the actuarial rate (discount rate - inflation rate) would lead
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C. External funds External funds intended to cover these obligations break down as follows:
Dec. 31, 2005 Dec. 31, 2004 January 1, 2004
(in millions of euros) Equities Bonds Equities Bonds Equities Bonds France 30% 70% 16% 84% 25% 75% United Kingdom 65% 35% 63% 37% 65% 35%
The actual return on external funds in 2005 was 7.3% for French plans and 17.2% for UK plans.
As of the year-end, PSA Peugeot Citröen Group had not decided the amount of contributions to be made to external funds in 2006 in excess of the Minimum Funding Requirement existing in the United Kingdom. As consequence, the Group has an obligation to make annual payments of € 58 million through 2007.
D. Reconciliation of pension assets and liabilities shown in the balance sheet
Dec. 31, 2005 Dec. 31, 2004 Foreign Foreign (in millions of euros) France companies Total France companies Total Present value of projected benefit obligation (1,821) (2,314) (4,135) (1,882) (1,994) (3,876) Fair value of external funds 1,502 1,535 3,037 1,502 1,279 2,781 Funding surplus or (shortfall) (319) (779) (1,098) (380) (715) (1,095) Unrecognized net actuarial gains and losses 48 (53) (5) (1) (132) (133) Net provision (asset) recognized in the balance sheet (271) (832) (1,103) (381) (847) (1,228) o/w provisions (272) (834) (1,106) (385) (850) (1,235) o/w assets 1 2 3 4 3 7
At December 31, 2005, pension obligations under unfunded plans represent 3% of total pension obligations.
The present value of the projected benefit obligation of French companies reflects commitments entered into with members of the managing bodies (described in note 42), in an amount of €21.5 million.
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E. Movement for the year
2005 2004 Foreign Foreign (in millions of euros) France companies Total France companies Total Present value of projected benefit obligation At January 1 (1,882) (1,994) (3,876) (1,808) (1,999) (3,807) Service cost (45) (46) (91) (41) (54) (95) Interest cost (84) (103) (187) (82) (102) (184) Benefit payments for the year 124 62 186 74 59 133 Actuarial gains and losses: - amount 20 (174) (154) (38) 102 64 - as a % of projected benefit obligation - 1.06% 8.73% 3.97% 2% - 5% - 2% Translation adjustment - (49) (49) - 2 2 Effect of changes in scope of consolidation 2 - 2 3 (2) 1 Effect of curtailments and settlements 44 (10) 34 10 - 10 As of December 31 (1,821) (2,314) (4,135) (1,882) (1,994) (3,876) External funds At January 1 1,502 1,279 2,781 1,240 1,155 2,395 Expected return on external funds 78 90 168 69 80 149 Actuarial gains and losses: - amount 27 109 136 36 34 70 - as a % of projected benefit obligation - 1.86% - 8.52% - 4.93% - 3% - 3% - 3% Translation adjustment - 37 37 - (6) (6) Employer contributions 17 71 88 219 65 284 Benefit paid (122) (56) (178) (62) (49) (111) Effect of curtailments and settlements - 5 5 - - - As of December 31 1,502 1,535 3,037 1,502 1,279 2,781 Deferred items At January 1 (1) (132) (133) - - - New deferred items 45 66 111 2 (137) (135) Amortization of deferred items (2) 9 7 - - - Translation adjustment and other - (3) (3) - 5 5 Effect of curtailments and settlements 6 7 13 (3) - (3) As of December 31 48 (53) (5) (1) (132) (133)
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F.Pension expense recognized in the income statement These expenses are recorded as follows: - under “Selling, general and administrative expenses” for the service cost, amortization of deferred items, and the gain generated by the amendment to the insurance contract described below; - under “Other income and (expenses), net” for the interest cost and the expected return on external funds.
Pension expense breaks down as follows:
2005 2004 Foreign Foreign (in millions of euros) France companies Total France companies Total Service cost (45) (46) (91) (41) (54) (95) Amortization of deferred items (2) 9 7 - - - Interest cost (84) (103) (187) (82) (102) (184) Expected return on external funds 78 90 168 69 80 149 Amendment to AGF insurance contract(1) 92 - 92 - - - Effect of curtailments and settlements(2) 52 2 54 7 - 7 Total 91 (48) 43 (47) (76) (123)
(1) Pension obligations relating to former employees of Chrysler in France (Talbot) are covered by an insurance contract taken out with AGF. At December 31, 2004, the amount of the provisions raised under this contract were in excess of the pension obligation calculated in accordance with IAS 19. However, pursuant to the contract, these surplus funds could not be used. (1) Under the terms of a supplemental agreement signed in early 2005 between PSA Peugeot Citroën and AGF, these surplus funds have become available to pay pension benefits to employees on retirement. The surplus, for which the associated payment had been recognized in expenses in previous accounting periods, gave rise to a gain of €92 million in 2005. (2) The defined benefit plan for executives (cadres) and employees eligible for “ETAM” status (administrative and technical supervisory staff) of certain companies in the Faurecia group in France has been abolished and a new supplementary pension scheme introduced for all Faurecia group executives in France. The new scheme comprises: (1) - a defined contribution plan for salary tranches A and B, for which the contribution rate varies according to the seniority of the employee within Faurecia; (1) - a defined benefit plan for salary tranche C. (1) Executives over 53 years of age and with more than 10 years’ service at December 31, 2005 and qualifying “ETAM” employees remain eligible for the previous pension plan. These adjustments lead to a significant curtailment and/or reduction in future pension entitlement. The fall in the pension liability (€17 million), together with the immediate recognition of the corresponding actuarial gains and losses (€23 million) led to a gain of €40 million posted to operating margin in accordance with IAS 19.
G. Projected 2006 benefit payments Pension benefits payable in 2006 are estimated at €180 million.
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28.2. LONG-SERVICE AWARDS The Group estimates its liability for long-service awards payable to employees who fulfill certain seniority criteria. The calculations are performed using the same method and assumptions as for supplementary pension benefits and retirement bonuses (note 28.1.A above). The estimated liability is provided for in full in the accounts and amounts to:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 French companies 44 39 33 Foreign companies 16 13 12 Total 60 52 45
28.3. OTHER POST-RETIREMENT BENEFITS In addition to the retirement obligations described above, some Faurecia group companies, mainly in the US, pay the healthcare costs of retired employees. The related obligation is provided for in full in the consolidated financial statements and amounts to:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 31 25 27
NOTE 29 – EARLY-TERMINATION PLAN
29.1. INTERNAL AGREEMENTS
Internal agreements have been signed between the Group agreement dated March 4, 1999 and an industry-wide and employee representatives in France, concerning the agreement signed on July 26, 1999 by UIMM (the industry implementation of early-termination plans. The plans in federation) with the support of the majority of trade unions question fulfill the criteria laid down in Decree no. 2000-105 represented within the Group. dated February 9, 2000 related to the early termination of certain employees over 55 years of age and qualify for B. Automotive Equipment Division government financing covering part of the cost. Following further negotiations between UIMM and the trade unions in March 2001, the plan was extended to additional A. Automobile Division companies, including the Faurecia group. An early-termination plan has been set up for Automobile Division employees in France, in application of an internal
29.2. ESTIMATED LIABILITY
A. Calculation method The estimated cost to be financed by the Group corresponds to the total benefits payable to the employees concerned, net of government funding. The present value of the liability has been calculated by applying a discount rate of 3% and an inflation rate of 2%.
B. Change in estimated liability
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 At January 1 345 423 Early-termination costs for the year (108) (102) Change in the number of employees concerned (6) (8) Discounting adjustment 232 At December 31 233 345
184 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
The €4 million net gain reflects the cumulative effects of C. Number of employees concerned headcount restructuring, amounting to €6 million, and a At December 31, 2005, 9,599 employees were concerned discounting charge of €2 million. The €108 million release by the plans, including 471 Faurecia group employees. from the provision in respect of early-termination costs for the year is offset by a charge corresponding to the Group’s 29.3. PROJECTED 2006 BENEFIT PAYMENTS contribution to the UNEDIC Fund responsible for paying Benefits payable to employees who are expected to leave benefits, less the sums received from the State to help the Group in 2006 under the early-termination plan are finance early-termination measures. estimated at €87 million.
NOTE 30 – CURRENT AND NON-CURRENT FINANCIAL LIABILITIES – MANUFACTURING AND SALES COMPANIES
The recognition and measurement principles applicable to borrowings and other financial liabilities, excluding derivatives, are described in note 1.14.C. Derivatives are accounted for as set out in note 1.14.D.
Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 At amortized cost At amortized cost At amortized cost or fair value or fair value or fair value (in millions of euros) Non-current Current Non-current Current Non-current Current Bonds 2,719 144 2,486 - 2,347 - Employee profit-sharing fund 108 30 131 20 254 9 Finance lease liabilities 230 49 253 27 264 29 Other long-term debt 752 70 920 73 978 237 Other short-term debt - 4,858 - 2,754 - 2,371 Derivative instruments(1) 17 15 1 29 48 16 Total financial liabilities 3,826 5,166 3,791 2,903 3,891 2,662
(1) Hedging instruments are described in note 36.
30.1. FINANCIAL LIABILITIES BY MATURITY At Dec. 31, 2005 Maturities (nominal amount) At amortized cost Nominal 1 to 5 Beyond 5 (in millions of euros) or fair value amount years years Bonds 2,719 2,392 300 2,092 Employee profit-sharing fund 108 108 108 - Finance lease liabilities 230 218 138 80 Other long-term debt 752 745 598 147 Derivative instruments (1) 17 - - - Total financial liabilities 3,826
(1) Hedging instruments are described in note 36.
PSA Peugeot Citroën - 2005 reference document 185 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
Maturities At Dec. 31, 2004 (nominal amount) At amortized cost Nominal 1 to 5 Beyond 5 (in millions of euros) or fair value amount years years Bonds 2,486 2,160 69 2,091 Employee profit-sharing fund 131 131 126 5 Finance lease liabilities 253 253 212 41 Other long-term debt 920 925 791 134 Derivative instruments(1) 1- - - Total financial liabilities 3,791 - - -
(1) Hedging instruments are described in note 36.
Maturities At January 1, 2004 (nominal amount) At amortized cost Nominal 1 to 5 Beyond 5 (in millions of euros) or fair value amount years years Bonds 2,347 2,159 69 2,090 Employee profit-sharing fund 254 254 254 - Finance lease liabilities 264 264 196 68 Other long-term debt 978 1,027 855 172 Derivative instruments(1) 48 - - - Total financial liabilities 3,891 - - -
(1) Hedging instruments are described in note 36.
30.2. CHARACTERISTICS OF BONDS AND OTHER BORROWINGS At Dec. 31, 2005 Issuing Original Hedging (in millions of euros) Non-current Current currency Due interest rate rate GIE PSA Trésorerie 2001 bond issue 1,673 EUR 2011 5.88% Eonia 2003 bond issue 746 EUR 2033 6.00% Eonia Peugeot S.A. 1998 bond issue 144 EUR 2006 Indexed to PSA Eonia share price Faurecia 2005 bond issue 300 EUR 2010 3.63% 3.63% Total 2,719 144 Peugeot Citroën Automobiles BEI loan - GBP 73m 120 GPB 2009 libor 3M Eonia BEI loan - GBP 120m 181 GPB 2007 6.14% Eonia FDES zero coupon debt 24 EUR 2020 Other borrowings 38 Faurecia 252 38 EUR 2009 Variable Variable/Fixed Peugeot Citroën do Brasil Automoveis 81 28 BRL 2009 Variable Variable Other companies 56 4 Total 752 70
186 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
30.3. CHARACTERISTICS OF OTHER SHORT-TERM FINANCING AND OVERDRAFT FACILITIES Issuing (in millions of euros) currency Dec. 31, 2005 Dec. 31, 2004 Commercial paper EUR 850 850 Short-term loans N/A 1,225 1,203 Bank overdrafts N/A 2,783 701 Total 4,858 2,754
30.4. FINANCE LEASE LIABILITIES The discounted present value of future lease payments under finance leases reported in “Other borrowings” can be analyzed as follows by maturity:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 2005 -27 2006 68 57 2007 59 48 2008 54 33 2009 50 33 Subsequent years 79 117 310 315 Less interest portion (31) (35) Discounted present value of future lease payments 279 280
NOTE 31 – OTHER NON-CURRENT LIABILITIES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Liabilities related to vehicles with a buyback commitment 2,335 2,262 2,221 Other 19 24 79 Total 2,354 2,286 2,300
PSA Peugeot Citroën - 2005 reference document 187 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
NOTE 32 – FINANCING LIABILITIES – FINANCE COMPANIES
Financing liabilities are accounted for as described in note 1.14.C.
32.1. ANALYSIS BY TYPE
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Bonds 91 91 91 Other debt securities 14,722 14,399 14,191 Bank borrowings 7,778 7,150 6,060 22,591 21,640 20,342 Customer deposits 396 430 401 22,987 22,070 20,743 Amounts due to Group manufacturing and sales companies (230) (205) (205) Total 22,757 21,865 20,538
32.2. ANALYSIS BY MATURITY December 31, 2005 Other debt Bank (in millions of euros) Bonds securities borrowings Total Less than 3 months - 3,690 4,267 7,957 3 months to 1 year 91 3,146 1,536 4,773 1 to 5 years - 7,777 1,975 9,752 More than 5 years - 109 - 109 Total 91 14,722 7,778 22,591
December 31, 2004 Other debt Bank (in millions of euros) Bonds securities borrowings Total Less than 3 months - 4,382 3,937 8,319 3 months to 1 year - 2,730 994 3,724 1 to 5 years 91 6,987 1,994 9,072 More than 5 years - 300 225 525 Total 91 14,399 7,150 21,640
January 1, 2004 Other debt Bank (in millions of euros) Bonds securities borrowings Total Less than 3 months - 4,396 1,211 5,607 3 months to 1 year - 2,675 2,064 4,739 1 to 5 years 91 6,815 2,730 9,636 More than 5 years - 305 55 360 Total 91 14,191 6,060 20,342
188 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
32.3. ANALYSIS BY REPAYMENT CURRENCY Long-term debt (excluding current maturities) can be analyzed as follows by repayment currency:
Dec. 31, 2005 Dec. 31, 2004 Other debt Bank Other debt Bank (in millions of euros) Bonds securities borrowings Bonds securities borrowings EUR 91 14,181 6,192 91 13,767 5,796 GBP - 277 1,210 - 234 1,151 USD - 17 - - 162 - JPY - 161 - - 175 - BRL - 24 190 - 2 78 CHF - - 50 - - 49 CZK - 62 74 - 59 52 Other - - 62 - - 24 Total 91 14,722 7,778 91 14,399 7,150
NOTE 33 – OTHER PAYABLES
33.1. MANUFACTURING AND SALES COMPANIES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Accrued taxes (other than income taxes) 938 942 955 Accrued personnel costs 1,063 1,045 964 Accrued payroll taxes 608 545 506 Due to suppliers of fixed assets 529 639 568 Customer prepayments 370 345 486 Derivative instrument (1) 7169 Prepaid income 320 282 244 Miscellaneous other payables 320 254 382 Total 4,155 4,068 4,114
(1) This item corresponds to the fair value of instruments purchased by the Group to hedge currency risks on current or forecast operating receivables and payables. These instruments are analyzed by maturity in note 36, "Management of market risks".
33.2. FINANCE COMPANIES
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Personnel costs and payroll taxes 73 76 58 Derivative instruments (1) 175 285 218 Deferred income and accrued expenses - finance companies 492 458 629 Miscellaneous other payables 104 173 226 Total 844 992 1,131
(1) This item corresponds to the fair value of instruments purchased by the Group to hedge interest rate risks on finance receivables and financing liabilities. These instruments are analyzed by maturity in note 36, "Management of market risks".
PSA Peugeot Citroën - 2005 reference document 189 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
NOTE 34 – NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
34.1. CHANGE IN OPERATING ASSETS AND LIABILITIES AS REPORTED IN THE CONSOLIDATED STATEMENTS OF CASH FLOWS A. Manufacturing and sales companies
(in millions of euros) 2005 2004 Increase in inventories (194) (336) Decrease in trade receivables 241 161 Increase (decrease) in trade payables (618) 803 Net increase in current allowances and provisions 214 30 Change in income taxes (85) 44 Other changes 31 437 (411) 1,139 Net flows with Group finance companies (24) 47 Total (435) 1,186
B. Finance companies
(in millions of euros) 2005 2004 Increase in finance receivables (1,136) (1,554) Increase in short-term investments (353) (219) Increase in financing liabilities 1,293 1,475 Net increase in current allowances and provisions (1) 11 Change in income taxes 56 24 Other changes (7) (202) (148) (465) Net flows with Group manufacturing and sales companies (24) (11) Total (172) (476)
34.2. DETAILED ANALYSIS OF CHANGE IN OPERATING ASSETS AND LIABILITIES – MANUFACTURING AND SALES COMPANIES
2005 Cash flows Change in scope from operating of consolidation Translation (in millions of euros) Jan. 1, 2005 activities and other adjustment Revaluation Dec. 31, 2005 Inventories (6,546) (194) (14) (135) - (6,889) Trade receivables (3,296) 241 34 (76) - (3,097) Trade payables 10,773 (618) (16) 101 - 10,240 Income taxes 4 (85) (1) 2 - (80) Current provisions 1,454 214 - 24 - 1,692 Other receivables (1,756) 53 7 (41) 43 (1,694) Other payables 4,068 36 (11) 62 - 4,155 4,701 (353) (1) (63) 43 4,327 Net flows with Group finance companies 160 (22) (2) 1 - 137 Total 4,861 (375) (3) (62) 43 4,464
190 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
34.3. CHANGE IN OTHER FINANCIAL ASSETS AND LIABILITIES – MANUFACTURING AND SALES COMPANIES
(in millions of euros) 2005 2004 Increase in borrowings 410 491 Repayment of borrowings (389) (907) Increase in long-term loans and receivables (271) (1,241) Decrease in short-term investments 327 551 Increase in short-term borrowings 1,997 392 2,074 (714) Net flows with Group finance companies 25 (36) Total 2,099 (750)
34.4. CHANGE IN OTHER FINANCIAL ASSETS AND LIABILITIES – FINANCE COMPANIES
This item corresponds to the repayment of subordinated debt.
NOTE 35 – FINANCIAL INSTRUMENTS
Dec. 31, 2005 Dec. 31, 2004
(in millions of euros) Book value Fair value Book value Fair value Assets Investments in non-consolidated companies 1,986 1,986 2,378 2,378 Loans and receivables - finance companies 22,238 22,372 21,044 21,101 Short-term investments - finance companies 2,709 2,709 2,717 2,717 Trade receivables - manufacturing and sales companies 2,931 2,931 3,054 3,054 Other receivables 2,276 2,276 2,362 2,362 Current financial assets 1,214 1,214 712 712 Cash and cash equivalents 6,756 6,756 5,563 5,563
Dec. 31, 2005 Dec. 31, 2004
(in millions of euros) Book value Fair value Book value Fair value Liabilities Non-current financial liabilities 3,826 4,005 3,791 3,808 Financing liabilities - finance companies 22,757 22,778 21,865 21,887 Trade payables 10,210 10,210 10,732 10,732 Other payables 4,773 4,773 4,769 4,769 Current financial liabilities 5,166 5,166 2,903 2,903
PSA Peugeot Citroën - 2005 reference document 191 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
The fair value of financial instruments held by the Group is at the rate applicable to similar loans granted at the balance determinated in all cases where information is available on sheet date. the financial markets to reliably measure their fair value considering that they are not intended to be sold. The financing liabilities of finance companies are stated at amortized cost, determined by the effective interest method. The main valuation methods applied are as follows: In this case, financial liabilities hedged by interest rate swaps Investments in non-consolidated companies, current and qualify for hedge accounting and are remeasured at fair value, other non-current financial assets are stated at fair value, in taking into account changes in interest rates. The fair value accordance with IAS 39. presented above has been estimated by also taking into account Finance receivables are stated at amortized cost. However, PSA Peugeot Citröen Group’s credit risk. Exceptionally, financial when they are hedged against interest rate risks - as is liabilities have been accounted for using the fair value option; generally the case - hedge accounting principles apply and their book value therefore reflects credit risk. the hedged portion of the finance receivables is remeasured at fair value. This means that the margin on the receivables The fair value of the manufacturing and sales companies’ is excluded from the remeasurement. The fair value presented trade receivables and payables is considered as being above has been estimated by discounting future cash flows equivalent to book value, due to their very short maturities.
NOTE 36 – MANAGEMENT OF MARKET RISKS
36.1. RISK MANAGEMENT POLICY zone are granted intercompany loans in their functional currency. As such loans are refinanced in euros, exchange A. Currency risk rate risk is hedged through swaps. The manufacturing and sales companies manage their foreign exchange positions on transactions denominated in foreign B. Interest rate risk currencies with the objective of hedging the risk of Cash surpluses and short-term financing needs of fluctuations in exchange rates. These risks primarily concern manufacturing and sales companies - except for automotive the Automobile Division. Automobile Division positions are equipment companies - are mainly centralized at the level of managed primarily by entering into forward currency GIE PSA Trésorerie, which invests net cash reserves on the contracts, as soon as the foreign currency invoice is financial markets, mainly in short-term instruments indexed accounted for, through the PSA Peugeot Citröen Group's to variable rates. specialized company, PSA International S.A. (PSAI). PSAI also hedges currency risks on planned transactions to be carried The gross borrowings of manufacturing and sales companies out by the Automobile Division in Japanese yen and pound - except automotive equipment companies - consist mainly sterling. of fixed and adjustable rate long-term loans. The entire debt is converted to variable rate by means of derivatives, in order In addition, PSAI carries out proprietary transactions involving currency instruments. These transactions, which are subject to match interest rates on cash surpluses. to very strict exposure limits, are closely monitored on a Faurecia uses caps and other options in euros and US dollars continuous basis. They are the only non-hedging transactions to hedge interest rates on borrowings payable between carried out by companies in the PSA Peugeot Citroën Group January 2006 and December 2009. Faurecia has also taken and have a very limited impact on consolidated profit. out variable rate/fixed rate swaps in euros and US dollars to Faurecia manages the currency risks incurred by its hedge interest payable over the same period. Fixed rate subsidiaries on commercial transactions, principally by borrowings of €8 million with initial maturities of more than forward purchase and sale contracts and options, and foreign one year, have been swapped for variable interest rate debt currency financing. Subsidiaries located outside the euro with the same maturity.
192 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
Banque PSA Finance, which grants fixed-rate loans to C. Counterparty risks customers of the Automobile Division, mainly refinances The Group minimizes counterparty risks through internal control these loans through adjustable borrowings rates. The impact procedures which ensure that transactions are carried out only of changes in interest rates is hedged by entering into swaps with major banks and financial institutions. Exposure limits are that match interest rates on outstanding loans and the related set by counterparty, based primarily on their credit rating. Internal refinancing. control procedures include daily verification of compliance with Since 2004, Banque PSA Finance also hedges interest rate these exposure limits. The Group’s exposure to concentration risks on future fixed rate lending in euros (note 36.3). of counterparty risks is not material.
36.2. MANUFACTURING AND SALES COMPANIES A. Details of the nominal amounts of hedging instruments Dec. 31, 2005 Maturities Beyond (in millions of euros) Nominal Within 1 year 1 to 5 years 5 years Currency risk Hedges of commercial transactions - Forward contracts 969 969 - - - Currency options 187 187 - - Total 1,156 1,156 - - Hedges of forecast commercial transactions - Currency options 1,727 1,727 - - Total 1,727 1,727 - - Hedges of financial transactions - Forward contracts 555 550 5 - Currency swaps 561 - 561 - Total 1,116 550 566 - Interest rate risk Hedges of financial transactions - Interest rate swaps 7,872 4,142 1,579 2,151 - Purchased caps 6,708 2,592 4,116 - - Other 0 - - - Total 14,580 6,734 5,695 2,151
PSA Peugeot Citroën - 2005 reference document 193 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
Dec. 31, 2004 Maturities Beyond (in millions of euros) Nominal Within 1 year 1 to 5 years 5 years Currency risk Hedges of commercial transactions - Forward contracts 1,322 1,322 - - - Currency options 368 368 - - Total 1,690 1,690 - - Hedges of forecast commercial transactions - Currency options (note 38.2.D) 2,330 2,280 50 - Total 2,330 2,280 50 - Hedges of financial transactions - Forward contracts 642 642 - - - Currency swaps 474 264 119 91 Total 1,116 906 119 91 Interest rate risk Hedges of financial transactions - Interest rate swaps 7,832 2,395 3,246 2,191 - Purchased caps 2,970 1,770 1,200 - - Other 562 141 421 - Total 11,364 4,306 4,867 2,191
B. Details of the balance sheet value of hedging instruments Dec. 31, 2005 Other Non-current Current Other Non-current Current receivables financial assets financial assets payables financial assets financial assets (in millions of euros) Total (note 23.1) (note 17) (note 24) (note 33.1) (note 30) (note 30) Currency risk Hedges of commercial transactions - Fair value hedge (1) 6 - - (7) - - - Cash flow hedge 23 23 - - - - - Hedges of forecast commercial transactions - Fair value hedge 3 -20--(17)- Interest rate risk Hedges of financial transactions - borrowings - Fair value hedge 381 - 390 2 - - (11) - Trading(1) 12 --12--- Hedges of financial transactions - investments - Trading(1) 8 --12--(4) Total 426 29 410 26 (7) (17) (15)
(1) Corresponding to the fair value of forward financial instruments designated as economic hedges of debt or investments accounted for using the fair value option.
194 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
36.3. FINANCE COMPANIES A. Details of nominal values of hedging instruments Maturities Dec. 31, 2005 Beyond (in millions of euros) Nominal Within 1 year 1 to 5 years 5 years Currency risk Hedges of commercial transactions - Currency swaps (asset leg) 524 68 456 - - Currency forward contracts (currency receivable) 1,074 1,074 - - Total 1,598 1,142 456 - Interest rate risk Hedges of financial transactions - Interest rate swaps 27,212 12,927 11,824 2,461 - Futures - - - - - Swaptions - - - - - Caps 36 - 36 - Total 27,248 12,927 11,860 2,461 Hedges of forecast financial transactions - Swaptions 3,768 3,768 - - Total 3,768 3,768 - -
Maturities Dec. 31, 2004 Beyond (in millions of euros) Nominal Within 1 year 1 to 5 years 5 years Currency risk Hedges of commercial transactions - Currency swaps 663 210 453 - - Currency forward contracts 1,018 1,018 - - Total 1,681 1,228 453 - Interest rate risk Hedges of financial transactions - Interest rate swaps 24,851 10,660 12,539 1,652 - Futures 13 13 - - - Swaptions 255 255 - - Total 25,119 10,928 12,539 1,652 Hedges of forecast financial transactions - Swaptions 3,662 3,662 - Total 3,662 3,662 - -
PSA Peugeot Citroën - 2005 reference document 195 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
B. Details of balance sheet values of hedging instruments Dec. 31, 2005 Assets Liabilities (in millions of euros) Total (note 23.2) (note 33.2) Firm instruments purchased (1) 11 11 - Currency swaps 4 9 (5) Accrued income and expenses on swaps designated at hedges (81) 29 (110) Hedges of outstanding customer loans 23 35 (12) Hedges of borrowings (2) 1 (3) Hedges of EMTN and BMTN 20 39 (19) Hedges of bonds 37 37 - Hedges of trading securities (2) 7 33 (26) Total 19 194 (175)
(1) Corresponding to swaptions hedging future lending. (2) Corresponding to the fair value of forward financial instruments designated as economic hedges of debt or investments accounted for using the fair value option. Swaps classified as trading are netted against each other within the corresponding portfolios and primarily concern symmetrical swaps arranged at the time of securitization transactions. These swaps do not generate material gains or losses.
36.4. CURRENCY RISK – NET POSITION BEFORE AND AFTER HEDGING
The net position of the manufacturing and sales companies in the main foreign currencies is as follows:
Dec. 31, 2005 (in millions of euros) GBP YEN USD PLN CHF BRL Other Total assets 83 111 429 95 26 14 567 Total liabilities (534) - - (3) - (8) (126) Net position before hedging (451) 111 429 92 26 6 441 Financial derivative instruments 463 (127) (422) (95) (26) (7) (431) Net position after hedging 12 (16) 7 (3) - (1) 10
The above table shows the Group position arising from all operations recognized in the balance sheet at December 31, 2005.
The Group has also purchased yen put options hedging future vehicle sales in Japan and British pound put options for all its transactions in that currency.
The net position of the finance companies in the main foreign currencies is as follows:
Dec. 31, 2005 (in millions of euros) GBP YEN USD CHF Other Total assets 765 - - 289 179 Total liabilities - (161) (51) - (111) Net position before hedging 765 (161) (51) 289 68 Financial derivative instruments (765) 161 51 (289) (68) Net position after hedging - - - - -
196 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
36.5. INTEREST RATE RISK – NET POSITION BEFORE AND AFTER HEDGING
The net interest rate position of the manufacturing and sales companies is as follows:
Dec. 31, 2005 Intraday to Beyond (in millions of euros) 1 year 1 to 5 years 5 years Total Total assets 8,552 85 76 8,713 Total liabilities (5,693) (699) (2,446) (8,838) Net position before hedging 2,859 (614) (2,370) (125) Financial derivative instruments (2,604) 185 2,419 - Net position after hedging 255 (429) 49 (125)
Fixed-rate debt maturing in more than one year relates primarily to the Faurecia bond maturing in 2010, and to employee profit- sharing.
This table analyzes borrowings and financial assets before and after hedging at December 31, 2005. The maturity of adjustable rate borrowings and assets is considered to be the next rate adjustment date.
The net interest rate position of finance companies is as follows:
Dec. 31, 2005 Intraday to Beyond (in millions of euros) 1 year 1 to 5 years 5 years Total Total assets 16,407 9,347 - 25,754 Total liabilities (19,721) (2,585) (261) (22,567) Net position before hedging (3,314) 6,762 (261) 3,187 Financial derivative instruments 4,271 (4,532) 261 - Net position after hedging 957 2,230 - 3,187
The net position after hedging maturing in one to five years corresponds to the net assets covered by Banque PSA Finance regulatory capital.
36.6. EQUITY RISK
Equity risk corresponds to the price risk arising from a 10% unfavorable change in the price of equities held by the Group.
Dec. 31, 2005 Investments classified as Investments “accounted for using (in millions of euros) “available for sale” the fair value option” Balance sheet position 275 49 Sensitivity of earnings - (5) Sensitivity of equity (27) N/A
PSA Peugeot Citroën - 2005 reference document 197 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
NOTE 37 – NET FINANCIAL POSITION OF MANUFACTURING AND SALES COMPANIES
37.1. ANALYSIS
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Financial assets and liabilities with third parties Cash and cash equivalents 6,351 5,158 5,082 Other non-current financial assets 1,940 2,329 881 Current financial assets 1,214 712 1,310 Non-current financial liabilities (3,826) (3,791) (3,891) Current financial liabilities (5,298) (3,061) (2,784) Net financial position with third parties 381 1,347 598 o/w external loans and borrowings 283 1,300 515 o/w financial assets and liabilities with finance companies 98 47 83
37.2. LINES OF CREDIT
The PSA Peugeot Citroën Group has access to revolving lines of credit expiring at various dates through 2010. The amounts available under these lines of credit are as follows:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Peugeot S.A. and GIE PSA Trésorerie 2,400 2,400 2,400 Faurecia 1,600 1,778 1,545 Banque PSA Finance group 6,000 6,000 5,700 Confirmed lines of credit 10,000 10,178 9,645
Peugeot S.A., GIE PSA Trésorerie and Banque PSA Finance group have not drawn down these lines of credit.
Faurecia has drawn down the following amounts: (in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Faurecia drawdowns 200 447 450
198 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
NOTE 38 – RETURN ON CAPITAL EMPLOYED
38.1. CAPITAL EMPLOYED
Capital employed corresponds to the operating assets or liabilities employed by the Group.
Capital employed is defined as representing: - all non-financial assets, net of non-financial liabilities, of the manufacturing and sales companies, as reported in the consolidated balance sheet; - the net assets of Banque PSA Finance.
Based on this new definition, capital employed breaks down as follows:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Goodwill 1,677 1,798 1,743 Intangible assets 3,886 3,602 3,301 Property, plant and equipment 14,909 14,168 13,619 Investments in companies at equity 596 614 548 Investments in non-consolidated companies 45 65 63 Other non-current assets 95 96 90 Deferred tax assets 579 502 539 Inventories 6,889 6,546 6,211 Trade receivables - manufacturing and sales companies 3,097 3,296 3,659 Current tax assets 180 110 138 Other receivables 1,694 1,756 2,140 Other non-current liabilities (2,352) (2,279) (2,236) Non-current provisions (1,417) (1,639) (1,909) Deferred tax liabilities (2,086) (1,968) (1,785) Current provisions (1,692) (1,454) (1,434) Trade payables (10,240) (10,773) (10,036) Current taxes payable (100) (114) (112) Other payables (4,155) (4,068) (4,114) Net assets of the finance companies 2,420 2,098 1,803 Accounts between the manufacturing and sales companies and the finance companies 98 47 83 Total 14,123 12,403 12,311
PSA Peugeot Citroën - 2005 reference document 199 08 CONSOLIDATED FINANCIAL STATEMENTS Notes to the Consolidated Financial Statements
38.2. ECONOMIC PROFIT
Economic profit consists of profit before finance costs, interest income, net gains and losses on disposal of current investments and tax.
A tax rate corresponding to the Group’s effective rate is then applied, to calculate after-tax economic profit used to determine return on capital employed.
Based on this definition, economic profit is as follows:
(in millions of euros) 2005 2004 Consolidated profit 990 1,680 Finance costs 414 389 Interest income, net (355) (319) Net gains on disposals of available-for-sale securities (33) (188) Tax on interest income and finance costs (8) 37 Economic profit after tax 1,008 1,599
38.3. RETURN ON CAPITAL EMPLOYED
The immediate return on capital employed, corresponding to economic profit expressed as a percentage of total capital employed at December 31, is as follows:
2005 2004 7.1% 12.9%
200 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
NOTE 39 – OFF-BALANCE SHEET COMMITMENTS
39.1. SPECIFIC COMMITMENTS
Off-balance sheet pension obligations relate to deferred items not recognized during the year in accordance with the corridor method (note 28.1.E).
39.2. ROUTINE COMMITMENTS Routine commitments at December 31, 2005 represented the following amounts:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Manufacturing and sales companies Capital commitments for the acquisition of property, plant and equipment 1,729 2,059 1,750 Orders for research and development work 7 27 37 Non-cancelable lease commitments 836 636 670 Share purchase commitment (1) --131 Total 2,572 2,722 2,588 Finance companies Financing commitments to customers 1,020 899 1,045 Guarantees given on behalf of customers and financial institutions 127 122 101 Total 1,147 1,021 1,146 Other guarantees given 551 559 246 Pledged or mortgaged assets 236 426 498 (1) The 2004 commitment to purchase shares related to the Chinese joint venture Dongfeng Peugeot Citroën Automobile - DPCA.
The PSA Peugeot Citroën Group has also given and received commitments as part of its industrial cooperation policy with its partners.
39.3. PLEDGED OR MORTGAGED ASSETS
Pledged and mortgaged assets can be analyzed as follows by maturity:
(in millions of euros) Maturity Dec. 31, 2005 Dec. 31, 2004 Intangible assets N/A N/A N/A Property, plant and equipment Indefinite 20 23 Non-current financial assets 2005 - 31 2006 9 4 2007 48 125 2008 70 73 2009 76 78 Beyond 2009 13 92 216 403 Total 236 426 Total assets 69,175 65,569 Percent 0.3% 0.6%
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NOTE 40 – CONTINGENT LIABILITIES
40.1. INDIVIDUAL RIGHT TO TRAINING 120 hours. On April 15, 2005, Peugeot Citroën Automobiles FOR EMPLOYEES entered into a lifelong professional training agreement with all of the trade unions represented in the Group. In In accordance with Act no. 2004-391 of May 4, 2004 relating accordance with the law, each employee is entitled to to professional training in France, all Group subsidiaries 20 training hours per annum. Training rights vested since 1999 operating in France offer their employees an individual training under previous training schemes have been maintained and allowance set at a minimum of 20 training hours per annum. the cumulative total capped at 150 hours. Employees may These hours can be accumulated over a maximum of six use their entitlement during working hours, as and when years, at the end of which the total entitlement is capped at appropriate.
NOTE 41 – RELATED PARTY TRANSACTIONS
41.1. COMPANIES AT EQUITY Most are manufacturing and sales companies that manufacture automotive parts and components or complete vehicles. These are companies that are between 20%- and 50%- owned, over which PSA Peugeot Citroën exercises significant Transactions with companies at equity are billed on arm's influence. They are accounted for by the equity method. length terms.
Receivables and payables with companies at equity are as follows:
(in millions of euros) Dec. 31, 2005 Dec. 31, 2004 January 1, 2004 Loans - long-term portion 16 26 36 Loans - current portion 48 57 98 Trade receivables 319 318 275 Trade payables (1,116) (1,121) (1,134) Short-term loans (320) (241) (81)
41.2. RELATED PARTIES THAT EXERCISE SIGNIFICANT INFLUENCE OVER THE GROUP
No material transactions have been carried out with any directors or officers or any shareholder owning more than 5% of Peugeot S.A.’s capital.
202 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
NOTE 42 – DIRECTORS’ COMPENSATION
(in millions of euros) 2005 2004 Compensation allocated to: - members of the management bodies 8.4 8.2 - members of the Supervisory Board 0.8 0.8 Total 9.2 9.0
Members of management bodies include members of the Managing Board, the Executive Committee and Senior Management. The variable portion of the compensation shown in the table above is subject to the approval of the Supervisory Board to be held on February 7, 2006.
At December 31, 2005, the following options to purchase Peugeot S.A. shares granted under the plans set up since 1999 were held by members of the Group’s management bodies:
(number of options) 2005 2004 2003 2002 Stock options 2,144,000 1,764,500 1,373,600 977,600
Members of the Group’s management bodies are eligible for the supplementary pension plan described in note 28.
NOTE 43 – SUBSEQUENT EVENTS
No events have occurred since December 31, 2005 that could have a material impact on the 2005 accounts.
NOTE 44 – IMPACTS OF THE FIRST-TIME ADOPTION OF IFRS
44.1. CHANGES TO THE “2004 IFRS A. Changes in valuations RESULTS” BROCHURE PUBLISHED (a) Automobile Division development expenditure IN FEBRUARY 2005 Based on an analysis of the treatment of development In 2005, the Group continued to implement methods and expenditure under IAS 38 by other European carmakers and tools for processing transactions in accordance with IFRS, in line with market practices, PSA Peugeot Citroën Group and carried out a number of fine-tuned analyses. extended the useful lives of its vehicle projects to a maximum of seven years (previously five years). The resulting changes made to the opening balance sheet at January 1, 2004, leading to a €227 million increase in The resulting impact on intangible assets at January 1, 2004, consolidated equity at January 1, 2004, are described below. net of the tax effect, is €252 million, with the contra-entry recorded in equity. The positive impact on 2004 operating For 2004, these adjustments reduce operating margin by margin amounted to €58 million. €53 million, profit for the year by €35 million, and earnings per share (basic and diluted) by €0.15. (b) Sales with a buyback commitment Thanks to a new information system designed to account for sales with a buyback commitment, the impact of this restatement can be calculated more accurately.
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This has a positive €118 million pre-tax impact on opening equity (b) Balance sheet at January 1, 2004, with the adjustment recorded in other non- Customer guarantee deposits relating to the leasing operations current liabilities for €(300) million, property, plant and equipment of Banque PSA Finance, previously included in “Other payables”, for €(178) million and current provisions for €(5) million. have been reclassified as a deduction from assets under € The impact on 2004 operating margin is €(38) million. “Finance receivables”, and amounted to 116 million at January 1, 2004. (c) Provisions for warranty costs Provisions are now split according to the current/non-current The method used to estimate this provision has been distinction (see note 27): € reviewed, leading to an increase of 2 million in the carrying - “Non-current provisions” mainly include the provision for € amount of the provision at January 1, 2004 and of 68 million pension obligations, the provision for early termination, and in the provision charge for 2004. the provision for end-of-life vehicles. - “Current provisions” mainly include the provision for (d) Other adjustments with no material impact on warranty costs, employee-related provisions (excluding the previously published financial statements pension obligations), provisions for claims and litigation and € - A deferred tax liability of 16 million was recognized at provisions for restructuring costs. January 1, 2004 on assets held by a subsidiary of Banque PSA Finance, whose tax basis is less than its restated book (c) Statement of cash flows value. The current/non-current breakdown of provisions has a - In accordance with the revised IAS 39, PSA Peugeot Citroën positive impact of €27 million on working capital provided Group has chosen to account for a €150 million liability using by operations and a negative impact for the same amount the fair value option. In this way, any changes in the fair on “Changes in operating assets and liabilities”. value of the liability will be offset against changes in the fair In 2004, a portion of changes in financing liabilities relating value of the associated hedging instrument. This has a to Banque PSA Finance was shown in “Changes in other negative impact of €5 million on 2004 operating margin for financial assets and liabilities”. For consistency with the the finance companies. “Financing liabilities” line carried in the balance sheet, the corresponding amounts were reclassified to “Changes in B. Reclassifications operating assets and liabilities”, in an amount of €194 million The classification of certain items has changed since the for 2004. publication of the 2004 IFRS consolidated financial statements. The reclassifications do not have a material Changes in Faurecia development expenditure have been € impact on key financial indicators. reclassified, leading to a positive 8 million impact on “Working capital provided by operations”, a positive (a) Statement of income €78 million impact on “Changes in operating assets and liabilities” and a negative €86 million impact on “Purchases Net charges to allowances for credit losses relating to of property, plant and equipment". Banque PSA Finance have been reclassified from “Finance companies - Selling, general and administrative expenses” C. Financial data relating to companies at to the “Cost of goods and services sold” line. This item equity represented €71 million in 2004. The definition of capital employed applicable to fully To ensure consistency between the net financial position and consolidated companies has now been extended to the “Finance costs” and “Interest income” lines, several companies accounted for by the equity method: items were reclassified between these captions and “Other - Capital employed now includes provisions charged to the income and (expenses), net”. The main reclassifications income statement below operating margin and deferred concern interest on the employee profit-sharing fund, taxes (negative impact of €60 million at January 1, 2004) reported in “Other income and (expenses), net” under - Net financial position now includes other long-term debt previous GAAP and reclassified within “Finance costs” for (negative impact of €5 million at January 1, 2004) an amount of €10 million.
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44.2. FIRST-TIME ADOPTION OF IFRS The impact of these adjustments is recognized directly in equity. By exception, the effect of identifying or eliminating A. General principle intangible assets acquired in a business combination is The Group is required to retrospectively apply to all periods recognized in goodwill. presented and to the opening IFRS balance sheet the B. Optional exemptions adopted by the Group accounting standards in force at the reporting date for its first IFRS financial statements. Therefore, the opening IFRS Pension obligations: cumulative actuarial gains and losses that balance sheet at January 1, 2004 reflects the following existed at January 1, 2004 have been recognized in the balance differences compared to the statutory French GAAP balance sheet and the corresponding adjustment has been taken to sheet prepared at December 31, 2003 in accordance with equity. Actuarial gains and losses arising after January 1, 2004 CRC Standard 99-02: are recognized prospectively. - all assets and liabilities recognized under French GAAP that Translation of the financial statements of foreign subsidiaries: do not qualify for recognition under IFRS have been cumulative translation differences that existed at January 1, eliminated; 2004 are no longer recognized as a separate component of - all assets and liabilities qualifying for recognition under IFRS, equity and will not be written off to profit or loss on subsequent including assets and liabilities that were not recognized disposal of the foreign subsidiary. under French GAAP, have been recognized and measured in accordance with IFRS; Business combinations: business combinations that have - certain balance sheet items have been reclassified in occurred since 2001 have been restated in accordance with accordance with IFRS. IFRS 3 - Business Combinations.
44.3 RECONCILIATION OF EQUITY AT JANUARY 1, 2004
Attributable to equity (in millions of euros) Total holders of the parent Minority interests Equity under CRC 99-02 12,551 11,864 687 Adjustments 51 51 - Adjusted equity under CRC 99-02 12,602 11,915 687 A - Development costs 2,577 2,576 1 B - Pension obligations - cumulative actuarial gains and losses (1,242) (1,221) (21) C - Vehicle sales with a buyback commitment (279) (279) - D - Goodwill (98) (51) (47) E - Property, plant and equipment (292) (292) - F - Treasury stock (150) (146) (4) G - Available-for-sale financial assets 316 316 - H - Foreign currency hedges 46 46 - I - Interest rate hedges (12) (10) (2) M - Investments in companies at equity (2) (2) - N - Deferred tax liabilities on Argentinean investments (151) (151) - Other (11) (8) (3) Translation adjustments 2 2 - Deferred taxes (480) (468) (12) Equity under IAS/IFRS 12,826 12,227 599
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44.4. IMPACTS ON THE BALANCE SHEET AT JANUARY 1, 2004
ASSETS Balance sheet (in millions of euros) under CRC99-02 Adjustments Reclassifications Revaluations Total Balance sheet under IAS/IFRS Goodwill 2,039 - - (221) D 1,818 Goodwill Intangible assets 224 - - 3,119 3,343 Intangible assets 3,000 A 119 D Property, plant and equipment 12,209 - 357 1,104 13,670 Property, plant and equipment 439 a 1,259 C (82) b (194) E 26 A 13 Investments in companies at equity 550 - - (2) 548 Investments in companies 6 A at equity (7) E (1) Loans, receivables and short-term investments 591 - (591) c -- Investments in Investments in non- non-consolidated companies 76 - - - 76 consolidated companies (15) 660 289 934 Other non-current 591 c 106 G financial assets 231 d 184 I (25) e (1) (137) f 244 (153) 91 Other non-current assets 284 r (145) B (40) d (8) Investment securities 185 - (185) d -- Other 284 - (284) r -- Long-term deferred taxes 455 - (533) 651 573 Deferred tax assets (883) g 350 h Operating assets Current assets Finance receivables 17,185 73 26 2,209 19,493 Loans and receivables - finance 142 i 2,144 K companies (116) t 65 I Other loans and receivables 112 26 (50) 88 Loans and receivables - finance (50) K companies 2,293 201 K 2,494 Short-term investments - finance companies 2,268 j 25 e Inventories 6,660 - - (449) A 6,211 Inventories Accounts and notes receivable 3,363 - - 91 3,454 Trade receivables - manufacturing and sales 119 K companies (28) H Short-term income taxes 785 - (624) - 161 Current tax assets (274) k (350) n Other receivables 3,589 (1) (779) (31) 2,778 Other receivables (439) a (207) K (324) i 83 I (16) l 80 H 13 Current financial assets 3,506 - (2,418) 222 1,310 Current financial assets (150) m 210 G (2,268) j 12 I Cash and cash equivalents 5,618 - (6) d 69 5,681 Cash and cash equivalents 71 K (2) I Total assets 57,431 83 (1,840) 7,049 62,723
206 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Notes to the Consolidated Financial Statements
EQUITY AND LIABILITIES Balance (in millions of euros) sheet under CRC99-02 Adjustments Reclassifications Revaluations Total Balance sheet under IAS/IFRS Common stock 243 - - - 243 Share capital Retained earnings 12,364 63 (890) 596 12,133 Retained earnings and other (13) m accumulated equity, excluding (877) minority interests Treasury stock (16) - (133) m - (149) Treasury stock Cumulative translation adjustment (727) (12) 877 (138) - (151) N 13 Minority interests 687 - (4) m (84) 599 Minority interests Stockholders' equity 12,551 51 (150) m 374 12,826 Equity Long-term debt 3,609 - 282 3,891 Non-current financial liabilities 199 I 93 E (10) 638 1,662 C 2,300 Other non-current liabilities (82) b 720 o Other long-term liabilities 160 - (160) o -- Reserves for contingencies and liabilities 1,676 1 (747) 998 1,928 Non current provisions 729 p 1,097 B (1,476) s (123) C (4) D (2) I 30 Long-term deferred income tax 1,500 30 (831) 1,286 1,985 Deferred tax liabilities liabilities (884) g 151 N 53 n 1,135 Operating liabilities Current liabilities Bank borrowings 5,887 - 12,216 2,435 20,538 Financing liabilities 12,369 q 2,361 K (16) l 74 I (137) f Other borrowings 12,009 - (12,009) q -- Bank overdrafts 169 - (169) q -- Customer deposits 191 - (191) q -- 1,476 s 2 1,478 Current provisions Accounts and notes payable 10,021 - - (1) 10,020 Trade payables Income tax liabilities 443 - (327) 116 Current tax payable (274) k (53) n Other payables 6,595 1 (1,586) (31) 4,979 Other payables (559) o (101) K (729) p 64 I (182) i 6 H (116) t Current portion of long-term debt 270 - - 5 275 Current financial liabilities 5 E
Short-term financing 2,350 - - 37 2,387 Current financial liabilities 18 K 19 I Total liabilities and stockholders’ equity 57,431 83 (1,840) 7,049 62,723 Detailed reconciling differences have been rounded up in the above table, leading to possible variances in figures.
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44.5. RECONCILIATION OF 2004 PROFIT Profit under (in millions of euros) CRC99-02 Adjustements Reclassifications Revaluations Total Profit under IAS/IFRS Net sales 56,797 (692) 56,105 Sales and revenue (551) C 133 K (274) J Cost of goods (44,329) - (29) 441 (43,917) Cost of goods and services sold and services sold (3) 2 (7) L 36 B 82 B (1) 1 (119) D 10 33 E (71) 567 C (127) K (4) A 6 I 10 Selling, general (8,168) (68) 61 270 (7,905) Selling, general and administrative expenses (68) 71 (6) K and administrative expenses (10) 1 D 274 J 1 Research and development costs (2,118) 316 A (1,802) Research and development costs Operating margin 2,182 (68) 32 335 2,481 Operating margin Early-termination plan costs (24) 24 - 3 25 28 Other income and (expenses), net 16 2 21 H (36) B 4 6 1 (93) 3 183 4 (19) 5 (68) H 14 319 5 319 Interest income, net Restructuring costs (69) 69 3 - (347) (42) (389) Finance costs (4) 2 (43) E (343) 5 1 I Interest income (expense), net (99) 99 5 - Other income and (expense), net 199 (199) - (9) 2 (5) 1 (183) 4 (2) Income before tax of fully Profit before tax and share in net consolidated companies 2,189 (68) - 318 2,439 earnings of companies at equity Income taxes (676) 24 (120) (772) Income tax expense Net earnings of companies (8) 21 13 Share in net earnings of companies at equity 20 A at equity 1E Amortization of goodwill (128) 128 D - Net income before minority interests 1,377 (44) - 347 1,680 Consolidated profit for the year Income (loss) attributable (20) (14) (34) Minority interests to minority interests (7) D (2) B (5) Net income 1,357 (44) - 333 1,646 Profit attributable to equity holders of the parent
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44.6. RECONCILIATION OF 2004 PROFIT
Attributable to equity (in millions of euros) Total holders of the parent Minority interests 2004 profit under CRC 99-02 1,377 1,357 20 Adjustments (44) (44) - Adjusted 2004 profit under CRC 99-02 1,333 1,313 20 A - Development costs 312 312 - B - Pension obligations - Cumulative actuarial gains and losses 82 79 3 C - Vehicle sales with a buyback commitment 16 16 - D1 - Goodwill 128 92 36 D2 - Contractual customer relationships (Sommer-Allibert) (119) (86) (33) E - Property, plant and equipment (10) (10) - H - Foreign currency hedges 21 21 - I - Interest rate hedges 7 6 1 L - Stock options (7) (6) (1) M - Share in net earnings of companies at equity 21 21 - Other 15 16 (1) Deferred taxes (119) (128) 9 2004 profit under IAS/IFRS 1,680 1,646 34
44.7. RECONCILIATION OF EQUITY AT DECEMBER 31, 2004
Attributable to equity (in millions of euros) Total holders of the parent Minority interests Equity under CRC 99-02 13,356 12,697 659 Adjustments (42) (42) - Adjusted equity under CRC 99-02 13,314 12,655 659 A - Development costs 2,889 2,888 1 B - Pension obligations - Cumulative actuarial gains and losses (1,160) (1,141) (19) C - Vehicle sales with a buyback commitment (264) (264) - D - Goodwill (89) (49) (40) E - Property, plant and equipment (302) (302) - F - Treasury stock (185) (181) (4) G - Available-for-sale financial assets 159 159 - H - Foreign currency hedges 36 36 - I - Interest rate hedges (4) (2) (2) M - Share in net earnings of companies at equity 19 19 - N - Deferred tax liabilities on Argentinean operations (158) (158) - Other 6 17 (11) Translation adjustments (2) (2) - Deferred taxes (556) (557) 1 Equity under IAS/IFRS 13,703 13,118 585
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44.8. IMPACTS ON THE 2004 CONSOLIDATED STATEMENT OF CASH FLOWS
A. Impact on working capital provided by operations – manufacturing and sales companies
(in millions of euros) Reported working capital provided by operations under CRC 99-02 3,465 Impact on profit 303 Depreciation and amortization A - Automobile Division R&D costs 369 A - Faurecia R&D costs 147 D1 - Goodwill (123) D2 - Contractual customer relationships (Sommer Allibert) 119 E - Property, plant and equipment (30) B - Pension obligations (82) Change in deferred taxes 109 Reclassification of short-term provisions (45) Other (61) Working capital provided by operations under IAS/IFRS 4,171
B. Impact on cash flows from investing activities – manufacturing and sales companies
(in millions of euros) Reported net cash used in investing activities under CRC 99-02 3,115 A - Automobile Division R&D costs 676 A - Faurecia R&D costs 222 E - Property, plant and equipment (69) C - Vehicle sales with a buyback commitment 16 Other (42) Net cash used in investing activities under IAS/IFRS 3,918
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44.9. DESCRIPTION OF ADJUSTMENTS H. Foreign currency options designated as cash flow hedges are AND RESTATEMENTS carried in the balance sheet at fair value. Any changes in intrinsic value (effective portion) of hedging instruments are Adjustments to the consolidated financial statements under reported in equity, while changes in the ineffective portion of CRC 99-02 include: the hedge are taken to profit or loss. - the effect of the change in accounting method at January 1, 2004 used to calculate allowances for impairment of I. The following instruments are measured at fair value through receivables and to record losses on receivables relating to profit or loss: the Banque PSA Finance group (note 1.14 B d); - derivative instruments, - the portion of Banque PSA Finance receivables hedged by - changes in the method of calculating provisions for warranty interest rate swaps, costs (note 44.1). - fixed-income securities hedged by interest rate swaps and The reconciliation tables above refer back to note 2.7 to the accounted for using the fair value option, consolidated IFRS financial statements published at - the portion of debt hedged by interest rate swaps, December 31, 2004, which provides a detailed description - liabilities accounted for using the fair value option, including of all adjustments made in connection with the transition to credit risk. IFRS. In view of the Group's hedging policies, the impact on profit A. Development expenditure, which was reported in operating of recognizing derivatives at fair value is not material. expenses under French GAAP, is capitalized in IFRS. J. The amortization (by the yield-to-maturity method) of acquisition B. Cumulative actuarial gains and losses relating to pension costs relating to finance receivables is recognized in sales. obligations that existed at January 1, 2004 have been K. Securitizations: recognized as a deduction from equity. Accordingly, the - Banque PSA Finance: Compartments of securitization vehicles statement of income no longer includes any amortization of (fonds commun de créances - FCC) are consolidated. As a these actuarial gains and losses. result, the finance receivables sold are once again recognized C. In accordance with IFRS, vehicle sales with a buyback as assets, together with the compartments' cash reserves, commitment are no longer accounted for as sales but as while the FCC preferred and subordinated shares are operating leases, whatever the duration of the buyback recognized in liabilities. Intragroup guarantee deposits are commitment. Under French GAAP, only new vehicle sales to eliminated in consolidation. Revenues relating to receivables end customers with a buyback option expiring within a held by the compartments of consolidated securitization maximum of three years were accounted for as operating vehicles are recognized in sales and revenue. leases. - Faurecia: the securitized receivables have been brought back onto the balance sheet, with a corresponding adjustment to D. The statement of income no longer includes any charge for debt, net of the guarantee deposits. goodwill amortization (D1), although Sommer-Allibert contractual customer relationships are amortized (D2). L. Stock options are measured at fair value on the grant date and carried in personnel expenses with a corresponding adjustment E. Borrowing costs and incidental expenses that do not meet to equity, over the option vesting period. the definition of directly attributable costs are not included in the cost of property, plant and equipment. Investment grants M. The book value of investments in companies at equity is are also deducted from the carrying value of the related assets. adjusted for capitalized development expenditure and the Certain leases previously accounted for as operating leases recognition as expenses of costs not directly attributable to are now treated as finance leases. property, plant and equipment.
F. Treasury stock is recorded as a deduction from equity, including N. Deferred taxes on Argentinean investments, which were shares held for allocation on exercise of stock options. included in cumulative translation adjustments under French GAAP, have been reclassified under deferred tax liabilities G. Available-for-sale financial assets have been remeasured at under IFRS. fair value, with the corresponding adjustment taken directly to equity.
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CONSOLIDATED COMPANIES AS AT DECEMBER 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated HOLDING COMPANY AND OTHER Peugeot Motocycles F 99.99 99.99 Peugeot S.A. - - Mandeure - France Paris - France Peugeot Motocycles Italia S.p.A. F 100.00 99.98 Grande Armée Participations F 100.00 100.00 Milan - Italy Paris - France Peugeot Motocycles PSA International S.A. F 99.92 99.92 Deutschland GmbH F 100.00 99.98 Geneva - Switzerland Morfelden - Germany
G.I.E. PSA Trésorerie F 100.00 100.00 AUTOMOBILE DIVISION Paris - France Peugeot Citroën Automobiles S.A. F 100.00 100.00 Financière Pergolèse F 100.00 100.00 Vélizy-Villacoublay - France Paris - France Peugeot Citroën Sochaux S.N.C. F 100.00 100.00 D.J. 06 F 100.00 100.00 Sochaux - France Paris - France Peugeot Citroën Mulhouse S.N.C. F 100.00 100.00 Pergolèse Investissement F 100.00 100.00 Sausheim - France Paris - France Peugeot Citroën Aulnay S.N.C. F 100.00 100.00 D.J. 10 F 100.00 100.00 Aulnay-sous-Bois - France Paris - France Peugeot Citroën Rennes S.N.C. F 100.00 100.00 D.J. 11 F 100.00 100.00 Chartres-de-Bretagne - France Paris - France Peugeot Citroën Poissy S.N.C. F 99.99 99.99 Pergolèse International F 100.00 100.00 Poissy - France Paris - France Peugeot Citroën Mécanique Société Anonyme de Réassurance du Nord-Ouest S.N.C. F 100.00 100.00 Luxembourgeoise - Saral F 100.00 100.00 Paris - France Luxemburg - Luxemburg Peugeot Citroën Mécanique Process Conception de l’Est S.N.C. F 100.00 100.00 Ingénierie S.A. F 100.00 100.00 Paris - France Meudon - France Société Mécanique Automobile PCI do Brasil Ltda F 100.00 100.00 de l’Est F 100.00 100.00 Rio de Janeiro - Brazil Trémery - France PCI Argentina S.A. F 100.00 99.99 Mécanique et Environnement F 100.00 100.00 Buenos Aires - Argentina Hérimoncourt - France Société de Construction Société Européenne de Véhicules d’Équipements de Mécanisations Légers du Nord - Sevelnord E 50.00 50.00 et de Machines - SCEMM F 100.00 100.00 Paris - France Saint-Étienne - France Societa Europea Veicoli Leggeri Peugeot Citroën Moteurs F 100.00 100.00 - Sevel S.p.A. E 50.00 50.00 Nanterre - France Atessa - Italy
F : Fully consolidated - E : Accounted for by the equity method
212 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated G.I.E. PSA Peugeot Citroën F 100.00 100.00 Establecimientos Mecanicos Paris - France Jeppener F 100.00 100.00 Buenos Aires - Argentina Gisevel E 50.00 50.00 Paris - France Dongfeng Peugeot Citroën Automobiles CY Ltd E 50.00 50.00 Sevelind E 50.00 50.00 Wuhan - China Paris - France Wuhan Shelong Hongtai Française de Mécanique E 50.00 50.00 Automotive KO Ltd E 20.00 10.00 Douvrin - France Wuhan - China Société de Transmissions Automobiles Peugeot F 100.00 100.00 Automatiques E 20.00 20.00 Paris - France Barlin - France Peugeot Motor Company Plc F 100.00 100.00 Siemens Automotive Coventry - United Kingdom Hydrolics S.A. E 48.00 48.00 Asnières - France Société Commerciale Paris Franche-Comté F 100.00 100.00 Peugeot Citroën Logistic Paris - France Deutschland GmbH F 100.00 100.00 Saarbrucken - Germany Botzaris Automobiles F 100.00 100.00 Paris - France Peugeot Citroën Automobiles UK F 100.00 100.00 Coventry - United Kingdom Société Commerciale Automobile F 100.00 100.00 Paris - France Peugeot Citroën Automoviles España S.A. F 99.98 99.98 Parisud S.A. F 100.00 100.00 Pontevedra - Spain Malakoff - France Peugeot Citroën Automoveis F 98.11 98.11 Sodexa F 99.99 99.99 Mangualde - Portugal Courbevoie - France Toyota Peugeot Citroën Seine-et-Marne Automobile F 100.00 100.00 Automobiles Czech s.r.o. E 50.00 50.00 Cesson - France Kolin - Czech Republic Société Brestoise des PCA Logistika CZ F 100.00 100.00 Garages de Bretagne F 100.00 100.00 Kolin - Czech Republic Brest - France Établissements Boniface F 100.00 100.00 PCA Slovakia s.r.o. F 100.00 100.00 Saint-Étienne - France Trnava - Slovakia Société Industrielle Automobile Peugeot Citroën do Brasil de Champagne-Ardennes F 100.00 100.00 Automoveis Ltda F 100.00 100.00 Cormontreuil - France Rio de Janeiro - Brazil Société Industrielle Automobile Peugeot Citroën Argentina S.A. F 99.61 99.97 du Havre F 100.00 100.00 Buenos Aires - Argentina Le Havre - France Cociar S.A. F 99.61 99.60 Société Industrielle Automobile Buenos Aires - Argentina du Languedoc F 99.89 99.89 Aupe S.A. F 99.61 99.60 Toulouse - France Buenos Aires - Argentina Société Industrielle Automobile CISA F 99.61 99.60 de Lorraine F 100.00 100.00 Buenos Aires - Argentina Vandœuvre-Lès-Nancy - France
F : Fully consolidated - E : Accounted for by the equity method
PSA Peugeot Citroën - 2005 reference document 213 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated Société Industrielle Automobile Peugeot Nederland N.V. F 100.00 100.00 de Mulhouse F 100.00 100.00 Utrecht - Netherlands Mulhouse - France Peugeot Deutschland GmbH F 100.00 100.00 Société Industrielle Automobile Saarbrücken - Germany du Nord F 100.00 100.00 Peugeot Bayern GmbH F 100.00 99.99 Lille - France Munchen - Germany Peugeot Moteur et Systèmes F 100.00 100.00 Peugeot Berlin Paris - France Brandenburg GmbH F 100.00 99.99 Société Industrielle Automobile Berlin - Germany de Normandie F 99.95 99.95 Peugeot Westfalen GmbH F 100.00 99.99 Rouen - France Dortmund - Germany Société Industrielle Automobile Peugeot Niederrhein GmbH F 100.00 99.99 de l’Ouest F 100.00 100.00 Düsseldorf - Germany Orvault - France Peugeot Main / Taunus GmbH F 100.00 99.99 Société Industrielle Automobile Paris Nord S.A. F 100.00 100.00 Frankfurt - Germany Bondy - France Peugeot Sudbaden GmbH F 100.00 100.00 Société Industrielle Automobile Saarbrucken - Germany de Provence F 100.00 100.00 Peugeot Hanse GmbH F 100.00 99.99 Marseille - France Hamburg - Germany Société Industrielle Automobile Peugeot Nordhessen GmbH F 100.00 99.99 du Sud-Ouest F 100.00 100.00 Lohfendel - Germany Le Bouscat - France Peugeot Hannover GmbH F 100.00 99.99 Societe Lyonnaise d’Industrie Hannover - Germany et de Commerce Automobile F 99.92 99.91 Peugeot Rheinland GmbH F 100.00 99.99 Vénissieux - France Cologne - Germany Régionale Française Automobile F 100.00 100.00 Peugeot Rein-Neckar GmbH F 100.00 99.99 Cesson Sévigné - France Rein-Neckar - Germany Grands Garages de l’Hérault F 100.00 100.00 Peugeot Saartal GmbH F 100.00 99.99 Montpellier - France Saarbrücken - Germany Grands Garages de Nice Peugeot Sachsen GmbH F 100.00 99.99 et du Littoral F 100.00 100.00 Dresde - Germany Nice - France Peugeot Schwaben GmbH F 100.00 99.99 Grands Garages du Limousin F 100.00 100.00 Stuttgart - Germany Limoges - France Peugeot Weser-Ems GmbH F 100.00 99.99 Peugeot Azur F 100.00 100.00 Brême - Germany Mougins - France Peugeot Mainz Wiesbaden GmbH F 100.00 99.99 Peugeot Belgique Luxembourg S.A. F 100.00 100.00 Wiesbaden - Germany Nivelles - Belgium Peugeot Automobili Italia S.p.A. F 100.00 100.00 S.A. Peugeot Distribution Milan - Italy Service N.V. F 100.00 100.00 Peugeot Milan F 100.00 99.98 Schaerbeek - Belgium Milan - Italy
F : Fully consolidated - E : Accounted for by the equity method
214 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated Peugeot Gianicolo S.p.A. F 100.00 100.00 Peugeot Russie Avto F 100.00 100.00 Rome - Italy Moscow - Russia Talbot Exports Ltd F 98.00 98.00 Peugeot Polska S.p.z.o.o. F 100.00 100.00 Coventry - United Kingdom Warszawa - Poland Robins and Day Ltd F 100.00 100.00 Peugeot Ceska Republica s.r.o. F 100.00 100.00 Coventry - United Kingdom Prague - Czech Republic Realtal UK Ltd F 100.00 100.00 Peugeot Slovakia s.r.o. F 100.00 100.00 Coventry - United Kingdom Bratislava - Slovakia Robins and Day Investments Ltd F 98.00 98.00 Peugeot Hungaria Kft F 100.00 100.00 Budapest - Hungary Coventry - United Kingdom Peugeot Slovenija d.o.o. P.Z.D.A. F 100.00 100.00 Boomcite Ltd F 100.00 100.00 Ljubljana - Slovenia Coventry - United Kingdom Peugeot Hrvatska d.o.o. F 100.00 100.00 Aston Line Motors Ltd F 100.00 100.00 Zagreb - Croatia Coventry - United Kingdom Peugeot Otomotiv Pazarlama AS Bishopbriggs Motors Ltd F 99.80 99.80 - Popas F 100.00 100.00 Coventry - United Kingdom Istanbul - Turkey Warwick Wright Motors Tekoto Motorlu Tastlar Istanbul F 100.00 100.00 Chiswick Ltd F 99.80 99.80 Istanbul - Turkey Coventry - United Kingdom Tekoto Motorlu Tastlar Ankara F 100.00 100.00 Rootes Ltd F 100.00 100.00 Ankara - Turkey Coventry - United Kingdom Tekoto Motorlu Tastlar Bursa F 100.00 100.00 Peugeot España S.A. F 100.00 100.00 Bursa - Turkey Madrid - Spain Tekoto Motorlu Tastlar Antalya F 100.00 100.00 Hispanomocion S.A. F 100.00 100.00 Antalya - Turkey Madrid - Spain Peugeot Algérie S.p.A. F 100.00 100.00 Peugeot Portugal Automoveis S.A. F 100.00 100.00 Alger - Algeria Lisbon - Portugal Stafim E 34.00 34.00 Peugeot Portugal Automoveis Tunis - Tunisia Distribucao F 99.40 99.40 Stafim - Gros E 33.99 33.99 Lisbon - Portugal Tunis - Tunisia Peugeot (Suisse) S.A. F 99.92 99.92 Peugeot Égypte S.A.E. F 90.09 90.09 Bern - Switzerland Cairo - Egypt Lowen Garage AG F 97.00 97.00 Peugeot Motors of America F 100.00 100.00 Bern - Switzerland Little Falls - United States Acacias Motors S.A. F 99.02 99.02 Peugeot Chile F 96.92 96.92 Geneva - Switzerland Santiago of Chile - Chile Peugeot Austria GmbH F 100.00 100.00 Automotores Franco Chilena S.A. F 100.00 99.73 Vienna - Austria Santiago of Chile - Chile Peugeot Autohaus GmbH F 100.00 100.00 Peugeot Mexico S.A.de CV F 100.00 100.00 Vienna - Austria Mexico - Mexico
F : Fully consolidated - E : Accounted for by the equity method
PSA Peugeot Citroën - 2005 reference document 215 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated Servicios Auto. Franco Mexicana F 100.00 100.00 Citroën Deutschland AG F 99.95 99.95 Mexico - Mexico Cologne - Germany Peugeot Japan KK Co Ltd F 100.00 100.00 Citroën Frankfurt GmbH F 100.00 100.00 Tokyo - Japan Frankfurt - Germany Peugeot Tokyo F 100.00 100.00 Citroën Commerce GmbH F 100.00 99.95 Tokyo - Japan Cologne - Germany Peugeot Motors South Africa Ltd F 100.00 100.00 Citroën Italia S.p.A. F 100.00 100.00 Johannesburg - South Africa Milan - Italy Automobiles Citroën F 100.00 100.00 Citroën U.K. Ltd F 100.00 100.00 Paris - France Coventry - United Kingdom Société Commerciale Citroën F 100.00 100.00 Citroën Sverige AB F 100.00 100.00 Paris - France Vallingby - Sweden Citroën Champ de Mars F 100.00 100.00 Citroën Danmark A/S F 100.00 100.00 Paris - France Copenhagen - Denmark Citroën Dunkerque F 100.00 100.00 Citroën Norge A/S F 100.00 100.00 Paris - France Skaarer - Norway Citer F 98.40 98.40 Citroën (Suisse) S.A. F 99.75 99.75 Paris - France Geneva - Switzerland Citroën Paris F 100.00 100.00 Citroën Österreich GmbH F 100.00 100.00 Paris - France Vienna - Austria Société Nouvelle Armand Escalier F 100.00 100.00 Automoveis Citroën S.A. F 99.99 99.99 Antibes - France Lisbon - Portugal LM2B F 100.00 100.00 Automoviles Citroën España F 99.95 99.95 Sarcelles - France Madrid - Spain Citroën Pau F 100.00 100.00 Comercial Citroën S.A. F 99.96 96.57 Bizanos - France Madrid - Spain Centrauto F 100.00 100.00 Autotransporte Turistico Sarcelles - France Español S.A. (Atesa) F 100.00 99.41 Prince S.A. F 99.96 99.96 Madrid - Spain Aulnay-sous-Bois - France Garaje Eloy Granollers S.A. F 100.00 99.41 Citroën Argenteuil F 100.00 100.00 Granollers - Spain Bois-Colombes - France Motor Talavera F 100.00 99.95 Citroën Orléans F 100.00 100.00 Talavera - Spain Olivet-la-Source - France Rafael Ferriol S.A. F 100.00 99.41 Cie Picarde de Logistique Alboraya - Spain Automobile F 98.34 98.34 Citroën Hungaria Kft F 100.00 100.00 Beauvais - France Budapest - Hungary Citroën Belux S.A. - N.V. F 100.00 100.00 Citroën Polska S.p.z.o.o. F 100.00 100.00 Brussels - Belgium Warszawa - Poland Citroën Nederland B.V. F 100.00 100.00 Citroën Slovenija d.o.o. F 100.00 100.00 Amsterdam - Netherlands Komer - Slovenia
F : Fully consolidated - E : Accounted for by the equity method
216 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated Citroën - Hrvatska d.o.o. F 100.00 100.00 Sielest F 100.00 71.33 Zagreb - Croatia Pulversheim - France Citroën Slovakia s.r.o. F 100.00 100.00 Siedoubs F 100.00 71.33 Brastislava - Slovakia Montbéliard - France Citroën Ceska Republica s.r.o. F 100.00 100.00 Sienor F 100.00 71.33 Prague - Czech Republic Lieu-Saint-Amand - France Citroën do Brasil F 51.00 51.00 Sieval F 100.00 71.33 São Paulo - Brazil Boulogne-Billancourt - France Citroën Japan F 100.00 100.00 Sieto F 100.00 71.33 Tokyo - Japan Somain - France
AUTOMOTIVE EQUIPMENT Société de Textile de l’Ostrevant Sotexo F 100.00 71.33 Faurecia F 71.33 71.33 Somain - France Boulogne-Billancourt - France Sieloir F 100.00 71.33 Faurecia Investments F 100.00 71.33 Romorantin - France Boulogne-Billancourt - France ECSA - Études et Construction Financière Faurecia F 100.00 71.33 de Sièges pour l’Automobile F 100.00 71.33 Boulogne-Billancourt - France Crévin - France Société Foncière pour EAK - Composants l’Équipement Automobile SFEA F 100.00 71.33 pour l’Automobile S.A.S. F 51.00 36.38 Boulogne-Billancourt - France Valentigney - France Faurecia Sièges d’Automobile SAS F 100.00 71.33 EAK - Composants Boulogne-Billancourt - France pour l’Automobile SNC F 51.00 36.38 Faurecia Systèmes d’Échappement F 100.00 71.33 Valentigney - France Boulogne-Billancourt - France Faurecia Automotive Blériot Investissements F 100.00 71.33 Intérieur France F 100.00 71.33 Boulogne-Billancourt - France Nanterre - France Faurecia Services Groupe F 100.00 71.33 Faurecia Automotive Holdings F 100.00 71.33 Boulogne-Billancourt - France Nanterre - France Faurecia Global Purchasing F 100.00 71.33 Faurecia Bloc Avant F 100.00 71.33 Boulogne-Billancourt - France Nanterre - France Faurecia Cooling System F 100.00 71.33 Faurecia Intérieur Industrie SNC F 100.00 71.33 Boulogne-Billancourt - France Nanterre - France Siemar F 100.00 71.33 Faurecia Exhaust International F 100.00 71.33 Sandouville - France Nanterre - France Faurecia Industries F 100.00 71.33 Faurecia Automotive Industrie SNC F 100.00 71.33 Boulogne-Billancourt - France Nanterre - France Trecia F 100.00 71.33 Automotive Sandouville F 100.00 71.33 Étupes - France Nanterre - France Siebret F 100.00 71.33 SAS Automotive France E 50.00 35.67 Redon - France Nanterre - France
F : Fully consolidated - E : Accounted for by the equity method
PSA Peugeot Citroën - 2005 reference document 217 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated Société Automobile Faurecia Automotive Seating BV F 100.00 71.33 du Cuir de Vesoul F 100.00 71.33 Roermond - Netherlands Vesoul - France Faurecia Exhaust Systems AB F 100.00 71.33 Société Internationale Torsas - Sweden de Participations S.I.P. F 100.00 71.33 Faurecia Interior Systems Brussels - Belgium Sweden AB F 100.00 71.33 Faurecia Industrie NV F 100.00 71.33 Torsas - Sweden Gent - Belgium United Parts Exhaust Systems AB F 100.00 71.33 Faurecia AST Luxembourg S.A. F 100.00 71.33 Torsas - Sweden Eselborn - Luxemburg Faurecia Asientos Para Faurecia Autositze GmbH & Co KG F 100.00 71.33 Automovil España S.A. F 100.00 71.33 Stadthagen - Germany Madrid - Spain Faurecia Kunstoffe Asientos de Castilla Leon S.A. F 100.00 71.33 Automobilsysteme GmbH F 100.00 71.33 Madrid - Spain Ingolstadt - Germany Asientos de Galicia SL F 100.00 71.33 Faurecia Abgastechnik GmbH F 100.00 71.33 Vigo - Spain Furth - Germany Asientos del Norte S.A. F 100.00 71.33 Leistritz Abgastechnik Vitoria - Spain Stollberg GmbH F 100.00 71.33 Industrias Cousin Frères SL F 50.01 35.67 Pfaffenhain - Germany Burlada - Spain Faurecia Deutschland Holding GmbH & Co KG F 100.00 71.33 Tecnoconfort F 50.00 35.67 Stadthagen - Germany Pamplona - Spain Faurecia Innenraum Faurecia Sistemas de Systeme Köln GmbH F 100.00 71.33 Escape España S.A. F 100.00 71.33 Cologne - Germany Vigo - Spain Faurecia Verwaltungs GmbH F 100.00 71.33 Faurecia Automotive España S.A. F 100.00 71.33 Stadthagen - Germany Madrid - Spain Faurecia Automotive GmbH F 100.00 71.33 Faurecia Interior Systems Frankfurt - Germany España S.A. F 100.00 71.33 Valencia - Spain Faurecia Innenraum Systeme GmbH F 100.00 71.33 Faurecia Interior Systems Hagenbach - Germany Salc España SL F 100.00 71.33 Valencia - Spain Industriepark Sassenburg GmbH F 100.00 71.33 Sassenburg - Germany Cartera e Inversiones Enrich S.A. F 100.00 71.33 Madrid - Spain SAS Autosystemtechnik GmbH & Co KG E 50.00 35.67 Componentes de Vehiculos Karlsrühe - Germany de Galicia E 50.00 35.67 Porrino - Spain SAS Autosystemtechnik Verwaltung GmbH E 50.00 35.67 Copo Iberica E 50.00 35.67 Karlsrühe - Germany Vigo - Spain Faurecia Netherlands Holding BV F 100.00 71.33 SAS Autosystemtechnick S.A. E 50.00 35.67 Roermond - Netherlands Pamplona - Spain
F : Fully consolidated - E : Accounted for by the equity method
218 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated Valencia Modulos de Puerta SL F 100.00 71.33 Faurecia Systemy Valencia - Spain Kierownicze Sp.z.o.o. F 100.00 71.33 Faurecia Assentos Walbrzych - Poland de Automovel Limitada F 100.00 71.33 Faurecia Seating Talmaciu S.r.o. F 100.00 71.33 Sao Jao de Madeira - Portugal Roumania Faurecia Sistemas de Escape Arced d.o.o. E 50.00 35.67 Portugal LDA F 100.00 71.33 Novo Mesto - Slovenia Concelho de Braganca - Portugal Faurecia Interior Systems SASAL F 100.00 71.33 Bratislava s.r.o. F 100.00 71.33 Sao Jao de Madeira - Portugal Bratislava - Slovakia Faurecia Slovakia s.r.o. F 100.00 71.33 Vanpro Assentos Lda E 50.00 35.67 Bratislava - Slovakia Palmela - Portugal Faurecia Leather Kosice s.r.o. F 100.00 71.33 Faurecia Sistemas de Interior Portugal Componentes Bratislava - Slovakia Para Automovel S.A. F 100.00 71.33 Faurecia Magyarorszag Kipufogo Palmela - Portugal - Rendszer Kft F 100.00 71.33 SAS Autosystemtechnik de Vasvar - Hungary Portugal Unipessoal Ltda E 50.00 35.67 Faurecia Exhaust Systems s.r.o. F 100.00 71.33 Palmela - Portugal Bakov - Czech Republic EDA - Estofagem de Assentos Lda F 100.00 71.33 Faurecia Lecotex AS F 95.93 68.43 Palmela - Portugal Tabor - Czech Republic Faurecia Automotiv Seating UK Ltd F 100.00 71.33 Faurecia Interior Systems Coventry - United Kingdom Bohemia s.r.o. F 100.00 71.33 Faurecia Midlands Ltd F 100.00 71.33 Mlada Boleslav - Czech Republic Coventry - United Kingdom SAS Autosystemtechnik s.r.o. E 50.00 35.67 SAI Automotive Telford Ltd F 100.00 71.33 Mlada Boleslav - Czech Republic Telford - United Kingdom Teknik Malzeme Ticaret Ve Sanayi A.S. E 50.00 35.67 SAI Automotive Fradley Ltd F 100.00 71.33 Bursa - Turkey Fradley - United Kingdom Faurecia Polifleks Otomotiv SAI Automotive Washington Ltd F 100.00 71.33 Sanayi Ve Ticaret A.S. F 100.00 71.33 Washington - United Kingdom Istanbul - Turkey SAI Automotive SAL UK Ltd F 100.00 71.33 Société Tunisienne Coventry - United Kingdom d’Équipements Automobiles F 100.00 71.33 Faurecia Fotele Ben Arous - Tunisia Samachodowe Sp.z.o.o. F 100.00 71.33 Faurecia Automotive Seating Grojec - Poland Canada Ltd F 100.00 71.33 Faurecia Walbrzych Sp.z.o.o. F 100.00 71.33 Mississauga - Canada Walbrzych - Poland Faurecia Canada Investment Faurecia Gorzow Sp.z.o.o. F 100.00 71.33 Company F 100.00 71.33 Gorzow - Poland Montréal - Canada Faurecia Legnica Sp.z.o.o. F 100.00 71.33 WBF Technologies E 50.00 35.67 Legnicza - Poland Mississauga - Canada
F : Fully consolidated - E : Accounted for by the equity method
PSA Peugeot Citroën - 2005 reference document 219 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated Faurecia USA Holdings Inc. F 100.00 71.33 Exhaust Services Wilmington - United States Mexicana S.A. de CV F 100.00 71.33 Faurecia Automotive Seating Inc. F 100.00 71.33 Mexico - Mexico Troy - United States Faurecia Interior Systems KK F 100.00 71.33 Faurecia Exhaust Systems Inc. F 100.00 71.33 Tokyo - Japan Wilmington - United States Faurecia Japon KK F 100.00 71.33 Faurecia Interior Systems Tokyo - Japan USA Fountain Inn Inc. F 100.00 71.33 Faurecia NHK Co Ltd E 50.00 35.67 Fountain Inn - United States Tokyo - Japan Faurecia Interior Systems USA Detroit Inc. F 100.00 71.33 Faurecia NHK Kyushu Ltd E 50.00 35.67 Detroit - United States Tokyo - Japan Faurecia Automotive do Brasil Ltda F 100.00 71.33 CFXAS - Changchun Faurecia Quatro-Barras - Brazil Xuyang Automotive Faurecia Sistemas de Seating Co Ltd F 60.00 42.80 Escapamento do Brasil Ltda F 100.00 71.33 Changchun - China São Paulo - Brazil SCHEESC - Shanghai Honghu Ecia SAS Automotive do Brasil Ltda E 50.00 35.67 Exhaust Systems Company Ltd F 51.00 36.38 São Jose dos Pinhais PR - Brazil Shanghai - China Faurecia Sistemas Faurecia Tongda Exhaust System de Escape Argentina S.A. F 100.00 71.33 (Wuhan) Co Ltd F 60.00 42.80 Buenos Aires - Argentina Wuhan - China Bertrand Faure Argentina S.A. E 50.00 35.67 Faurecia Exhaust Systems Buenos Aires - Argentina Changchun F 51.00 36.38 Pab S.A. E 50.00 35.67 Changchun - China Buenos Aires - Argentina Faurecia (Wuxi) Seating SAS Automotriz Argentina S.A. E 50.00 35.67 Components Co Ltd F 100.00 71.33 Buenos Aires - Argentina Wuxi - China Faurecia Duroplast Faurecia GSK (Wuhan) Automotive Mexico S.A. de CV F 50.00 35.67 Seating Co Ltd F 51.00 36.38 Puebla - Mexico Wuhan - China Servicios Corporativos de Faurecia (Changchun) Automotive Personal Especializado S.A. de CV F 50.00 35.67 Systems Co Ltd F 100.00 71.33 Puebla - Mexico Changchun - China Faurecia Interior Systems Mexico S.A. de CV F 100.00 71.33 Faurecia (Shanghai) Mexico - Mexico Management Cy Ltd F 100.00 71.33 Shanghai - China Faurecia Exhaust Mexicana S.A. de CV F 100.00 71.33 Daeki Faurecia Corp F 100.00 71.33 Mexico - Mexico Shiheung City - Korea
F : Fully consolidated - E : Accounted for by the equity method
220 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated FESK - Faurecia Exhaust Gefco Tunisie E 50.00 49.97 System Korea F 100.00 71.33 Tunis - Tunisia Shiheung City - Korea Gefco Maroc F 100.00 99.95 Faurecia Automotive Seating Casablanca - Morocco India Private Ltd F 100.00 71.33 Gefco Participacoes Ltda F 100.00 99.95 Bangalore - India Rio de Janeiro - Brazil Faurecia Exhaust Systems Gefco do Brasil Ltda F 100.00 99.95 South-Africa (Pty) Ltd F 100.00 71.33 Rio de Janeiro - Brazil Johannesburg - South Africa Gefco Argentina S.A. F 100.00 99.95 Faurecia Autoplastic Buenos Aires - Argentina South Africa (Pty) Ltd F 100.00 71.33 Port Elisabeth - South Africa Gefco DTW Logistics Co. Ltd E 49.97 49.95 Beijin - China TRANSPORTATION AND LOGISTICS FINANCE COMPANY Gefco F 99.95 99.95 Banque PSA Finance F 100.00 100.00 Courbevoie - France Paris - France Gefco Benelux S.A. F 100.00 99.93 Société Financière de Banque Ath - Belgium - Sofib F 100.00 100.00 Gefco Deutschland GmbH F 100.00 99.95 Levallois-Perret - France Morfelden - Germany Sofira - Société de Financement Gefco Suisse S.A. F 98.64 98.59 des Réseaux Automobiles F 100.00 100.00 Fahy - Switzerland Levallois-Perret - France Gefco Österreich GmbH F 99.95 99.90 Société Nouvelle de Développement Vienna - Austria Automobile - SNDA F 100.00 100.00 Gefco Italia S.p.A. F 100.00 99.93 Paris - France Milan - Italy Compagnie Générale de Crédit Gefco U.K. Ltd F 100.00 99.93 aux Particuliers - Crédipar F 100.00 100.00 London - United Kingdom Levallois-Perret - France Gefco España S.A. F 99.99 99.94 GIE Foncier Crédipar F 100.00 100.00 Levallois-Perret - France Madrid - Spain Dicoma Gestion F 99.98 99.98 GEFCO Portugal Transitarios Ltd F 100.00 99.94 Levallois-Perret - France Lisbon - Portugal Loca-Din F 100.00 100.00 LLC Gefco (CIS) F 99.95 99.90 Levallois-Perret - France Moscow - Russia Compagnie pour la Location Gefco Polska Sp. z.o.o. F 100.00 99.95 de Véhicules - CLV F 100.00 100.00 Warszawa - Poland Levallois-Perret - France Gefco Ceska Republica s.r.o. F 100.00 99.95 FCC Auto ABS - Prague - Czech Republic Compartiment 2001.01 F 100.00 100.00 Gefco Slovakia s.r.o. F 100.00 99.95 Levallois-Perret - France Bratislava - Slovakia FCC Auto ABS - Compartiment Gefco Tasimacilik Ve Lojistik AS F 100.00 99.95 2002.01 (Créances françaises) F 100.00 100.00 Istanbul - Turkey Levallois-Perret - France
F : Fully consolidated - E : Accounted for by the equity method
PSA Peugeot Citroën - 2005 reference document 221 08 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Companies as at December 31, 2005
Company F/E Percent Percent Company F/E Percent Percent controlled consolidated controlled consolidated PSA Finance Belux F 100.00 100.00 PSA Finance Suisse S.A. F 99.98 99.98 Brussels - Belgium Ostermudigen - Switzerland PSA Finance Nederland B.V. F 100.00 100.00 PSA Finance Austria Bank AG F 100.00 100.00 Rotterdam - Netherlands Vienna - Austria PSA Financial Holding B.V. F 100.00 100.00 PSA Gestao Comercio e Aluger de Veiculos F 97.00 97.00 Rotterdam - Netherlands Lisbon - Portugal Peugeot Finance International N.V. F 100.00 100.00 PSA Finance Polska F 100.00 100.00 Rotterdam - Netherlands Warszawa - Poland Peugeot Commercial Paper GmbH F 100.00 100.00 PSA Finance Hungaria Rt F 100.00 100.00 Frankfurt - Germany Budapest - Hungary FCC Auto ABS - PSA Finance Ceska Compartiment 2004.01 F 100.00 100.00 Republika s.r.o. F 100.00 100.00 Frankfurt - Germany Prague - Czech Republic PSA Factor Italia S.p.A. F 100.00 100.00 PSA Finance Slovakia s.r.o. F 100.00 100.00 Milan - Italy Bratislava - Slovakia PSA Wholesale Ltd F 100.00 100.00 Banco PSA Finance Brasil S.A. F 99.98 99.98 London - United Kingdom São Paulo - Brazil Arche Investments Ltd F 100.00 100.00 PSA Finance Arrendamiento London - United Kingdom Comercial F 99.94 99.94 PSA Finance Plc F 50.00 50.00 São Paulo - Brazil London - United Kingdom PSA Finance Argentina S.A. F 50.00 50.00 Vernon Wholesale Buenos Aires - Argentina Investments Co Ltd F 100.00 100.00 BPF Mexico S.A. de CV F 100.00 100.00 London - United Kingdom Mexico - Mexico
F : Fully consolidated - E : Accounted for by the equity method
222 PSA Peugeot Citroën - 2005 reference document 08
PSA Peugeot Citroën - 2005 reference document 223 08 CONSOLIDATED FINANCIAL STATEMENTS Subsidiaries and Affiliates as of December 31, 2005
SUBSIDIARIES AND AFFILIATES AS OF DECEMBER 31, 2005
(in thousands of euros or in thousands of national currency) Retained earnings before income Percent COMPANIES OR GROUPS Capital appropriation interest I - Detailed information about investments with a carrying value in excess of 1% of the Company's capital stock A. Subsidiaries (at least 50%-owned) Peugeot Citroën Automobiles 293,304 4,110,817 100.00 route de Gisy, 78943 Vélizy (Yvelines, France) Faurecia 169,635 384,565 71.33 2, rue Hennape, 92000 Nanterre (Hauts-de-Seine, France) Grande Armée Participations 60,435 389,986 100.00 75, avenue de la Grande-Armée, 75116 Paris (France) Banque PSA Finance 177,408 1,216,429 74.93 75, avenue de la Grande-Armée, 75116 Paris (France) Automobiles Citroën 16,000 79,240 99.99 12, rue Fructidor, 75017 Paris (France) Automobiles Peugeot 171,285 144,780 99.99 75, avenue de la Grande-Armée, 75116 Paris (France) Process Conception Ingénierie 22,954 98,309 84.54 9, avenue du Maréchal Juin, 92048 Meudon-la-Forêt (Hauts-de-Seine, France) Peugeot Motocycles 7,142 (34,878) 99.99 103, rue du 17 Novembre, 25350 Mandeure (Doubs, France) Gefco 8,000 193,091 99.94 77 à 81, rue des Lilas d’Espagne, 92400 Courbevoie (Hauts-de-Seine, France) PSA International S.A. CHF 5,979 200,983 - 62, quai Gustave Ador, 1207 Genève (Switzerland) EUR 3,845 129,241 99.92 Peugeot Citroën Moteurs 880 7,930 100.00 49, rue Noël Pons, 92000 Nanterre (Hauts-de-Seine, France) B. Affiliates (10% to 50%-owned)
II - Aggregate information about investments with a carrying value corresponding to less than 1% of the Company's capital stock A. Subsidiaries not listed above - French subsidiaries (aggregate data) - Foreign subsidiaries (aggregate data) B. Affiliates not listed above - French companies (aggregate data) - Foreign companies (aggregate data)
224 PSA Peugeot Citroën - 2005 reference document CONSOLIDATED FINANCIAL STATEMENTS 08 Subsidiaries and Affiliates as of December 31, 2005
Last Dividends Outstanding published received by Book value loans and Guarantees Last net the Company of shares advances from given by published income during Cost Net the Company the Company net sales (loss) the year Comments
2,606,246 2,606,039 - 306,672 63,665,167 146,463 96,147
1,262,691 1,262,283 - - 82,779 (415,758) 19,014
408,923 408,923 - - nm 41,362 160,765
380,084 380,084 - - nm 278,581 71,615
257,654 257,654 - - 7,732,794 75,854 58,625
180,798 180,745 - - 14,391,122 96,918 310,205
170,304 97,898 - - 288,655 18,919 8,800
73,808 - 33,000 - 195,681 (32,752) -
32,197 32,197 - - 1,915,594 89,978 61,960
- - - - nm 27,131 1 EUR = 1.5551 CHF 6,843 6,843 - - 17,446 14,461 4,374 4,374 - - 56,836 4,388 10,214
242 242 - 2,100,000 100 2,127 2,127 - - 35
-- - - - 219 219 - - 3
PSA Peugeot Citroën - 2005 reference document 225 226 PSA Peugeot Citroën - 2005 reference document 09 ANNUAL STOCKHOLDER’S MEETING
Presentation of the Resolutions 228
Financial Authorizations in effect 230
Resolutions 232
PSA Peugeot Citroën – 2005 reference document 227 09 ANNUAL STOCKHOLDER’S MEETING Presentation of the Resolutions
PRESENTATION OF THE RESOLUTIONS
Stockholders have been asked to approve eight resolutions Joseph F.Toot, Jr., 70, is the former Chief Executive Officer submitted to the Annual Meeting and one resolution of The Timken Company. submitted to the Extraordinary Meeting. Additional information concerning the positions held by The first and second resolutions concern stockholder the members of the Supervisory Board may be found in approval of the annual financial statements, the Report of Chapter 3 – Corporate Governance. the Managing Board, the Report of the Supervisory Board, The seventh resolution invites stockholders to elect the Auditors’ Report and the consolidated financial Jean-Louis Silvant, a former member of the Executive statements. Committee of PSA Peugeot Citroën, to replace François The third resolution approves the appropriation of income Michelin on the Supervisory Board. for the year and the payment of a dividend. The consolidated The eighth resolution authorizes the Managing Board to results reported in 2005 and the outlook for 2006 have carry out a share buyback program. The authorization is prompted the Managing Board to recommend that granted for a period of up to eighteen months – until stockholders maintain the dividend unchanged at €1.35 a November 24, 2007 – and replaces the authorization granted share, to be paid in cash on May 31, 2006. by the previous Annual Meeting. Based on the number of shares outstanding at December It could be used to buy back up to 23 million shares of 31, 2005, the recommended dividend represents a total Peugeot S.A. stock, representing nearly 10% of issued capital, payout of €317 million, or 30.8% of consolidated net income in order to reduce the Company’s capital or to acquire shares for the year. for attribution on exercise of stock options or on redemption, The fourth resolution approves the Auditors’ Report on conversion, exchange or exercise of share equivalents. agreements with companies that have common directors The maximum purchase price is set at €65 per share. and the agreements described therein. In 2005, the Group purchased 4,130,162 shares of Peugeot S.A. The fifth and sixth resolutions concern the terms, as stock at an average price of €47.85 and, on November 17, members of Supervisory Board of Ernest-Antoine Seillière canceled 8,490,880 shares, representing 3.49% of issued and Joseph F.Toot, Jr., which end at the Annual Meeting capital at that date. At December 31, 2005, the Group held called to approve the 2005 financial statements. Stockholders 5,612,693 shares in treasury representing 2.39% of issued are invited to re-elect them to new six-year terms, to end at capital, including 5,274,725 being held for allocation on the Annual Meeting called in 2012 to approve the 2011 exercise of stock options and 337,968 scheduled to be financial statements. canceled.
Ernest-Antoine Seillière, 68, is Chairman of Wendel The Group will use the authorization in the same way as Investissement and a member of the Strategy Committee previously, depending on market opportunities and while and the Compensation and Appointments Committee of the maintaining careful control over its net financial position. PSA Peugeot Citroën Supervisory Board.
228 PSA Peugeot Citroën – 2005 reference document ANNUAL STOCKHOLDER’S MEETING 09 Presentation of the Resolutions
In compliance with article L. 225-209 of the Commercial Code and articles 241-1 to 242-7 of AMF General Rules and Regulations, a description of the new program will be available in the Stockholder/Annual Meeting section of the www.psa-peugeot-citroen.com website, as well as on the AMF website: www.amf-france.org.
Lastly, the ninth resolution renews the authorization for the Managing Board to grant employees, executives or officers of the Company or its subsidiaries options to purchase existing shares of Peugeot S.A. stock that the Company holds in treasury. Under the authorization, which is valid until August 31, 2007, options may be granted over the period for up to 2,000,000 shares, or 0.85% of issued capital, and may be exercisable for up to eight years.
The resolution renews the same authorization that was granted by the Extraordinary Stockholders’ Meeting of May 26, 2004.
PSA Peugeot Citroën – 2005 reference document 229 09 ANNUAL STOCKHOLDER’S MEETING Financial Authorizations in effect
FINANCIAL AUTHORIZATIONS IN EFFECT
Financial authorizations in effect before the combinated Annual and Extraordinary Stockholders Meeting of May 24, 2006 Maximum Granted Validity Expires capital Authorization 1 - Annual Stockholders Meeting Buyback of shares May 25, 2005 18 months Nov. 25, 2006 Purchase of up to 24,000,000 shares Maximum purchase price: €65 2 - Extraordinary Stockholders Meeting Issuance of equity or securities May 25, 2005 26 months July 25, 2007 €400 million(1) conferring the right to acquire equity directly or indirectly with pre-emptive subscription rights Issuance of equity or securities May 25, 2005 26 months July 25, 2007 €400 million(1) conferring the right to acquire equity directly or indirectly without pre-emptive subscription rights Options to purchase existing Peugeot S.A. shares Cancellation of shares May 25, 2005 24 months May 25, 2007 10% of the capital stock per each 24-months period (1) Together, theses issues may not have the aggregate effect of increasing the Company’s capital stock to more than €400 million.
230 PSA Peugeot Citroën – 2005 reference document ANNUAL STOCKHOLDER’S MEETING 09 Financial Authorizations in effect
Financial authorizations granted in resolutions submitted to the combinated Annual and Extraordinary Stockholders Meeting of May 24, 2006 Maximum Granted Validity Expires capital Authorization
May 24, 2006 18 months Nov. 11, 2007 Purchase of up to 23,000,000 shares Maximum purchase price: €65
May 25, 2005 26 months July 25, 2007 €400 million(1)
May 25, 2005 26 months July 25, 2007 €400 million(1)
May 24, 2006 15 months August 31, 2007 2,000,000 shares
May 25, 2005 24 months May 25, 2007 10% of the capital stock per each 24-months period
PSA Peugeot Citroën – 2005 reference document 231 09 ANNUAL STOCKHOLDER’S MEETING Resolutions
RESOLUTIONS
RESOLUTIONS TO BE VOTED ON IN THE ANNUAL STOCKHOLDERS’ MEETING
FIRST RESOLUTION The Annual Meeting notes that the dividends for the years ended December 31, 2002, 2003 and 2004 were as follows: Approval of the report of the Managing Board and the financial statements Year Shares outstanding Dividend The Annual Meeting, having reviewed the annual financial 2002 240,820,430 shares with a par value of €1. 0 0 €1. 3 5 statements, the Report of the Managing Board, the Report of 2003 237,437,862 shares with a par value of €1. 0 0 €1. 3 5 the Supervisory Board and the Auditors’ Report on the annual 2004 229,803,390 shares with a par value of €1. 0 0 €1. 3 5 financial statements, approves the Report of the Managing Board. FOURTH RESOLUTION The Annual Meeting approves the 2005 financial statements, Approval of the Auditors’ Report showing net income of €904,989,652.92. on agreements with companies that have common directors SECOND RESOLUTION The Annual Meeting, having reviewed the Auditors’ Report Approval of the consolidated financial on agreements with companies that have common directors, statements approves the Report and the transactions referred to therein. The Annual Meeting, having reviewed the consolidated financial statements, the Report of the Managing Board, and FIFTH RESOLUTION the Auditors’ Report on the consolidated financial statements, Re-election of a member approves the consolidated financial statements for the year of the Supervisory Board ended December 31, 2005, as presented. The Annual Meeting re-elects Ernest-Antoine Seillière as member of the Supervisory Board for a six-year term THIRD RESOLUTION ending at the Annual Stockholders’ Meeting to be called in Appropriation of income for the year 2012 to approve the accounts for the year ended December 31, 2011. The Annual Meeting notes that distributable income, representing net income for the year of €904,989,652.92 plus retained earnings brought forward from the prior year SIXTH RESOLUTION in an amount of €597,606,604.94, totals €1,502,596,257.86. Re-election of a member The Annual Meeting resolves to appropriate distributable of the Supervisory Board income as follows: The Annual Meeting re-elects Joseph Frederick Toot, Jr. as - To the payment of a dividend €316,734,659.10 member of the Supervisory Board for a six-year term ending - To other reserves €500,000,000 at the Annual Stockholders’ Meeting to be called in 2012 to approve the accounts for the year ended December 31, 2011. - To unappropriated retained earnings €685,861,598.76
The dividend of €1.35 per share, of which the entire amount is eligible for the 40% tax relief stipulated in article 158, 3-2 to 4 of the General Tax Code for eligible stockholders, will be paid as from May 31, 2006.
232 PSA Peugeot Citroën – 2005 reference document ANNUAL STOCKHOLDER’S MEETING 09 Resolutions
SEVENTH RESOLUTION of the Company or any related entity, or for attribution on redemption, conversion, exchange or exercise of share Election of a member of the Supervisory Board equivalents. The shares may be purchased by any appropriate The Annual Meeting elects Jean-Louis Silvant as member of means and at any time, on-or off-market, including through the the Supervisory Board for a six-year term ending at the Annual use of put options and any and all other derivatives traded Stockholders’ Meeting to be called in 2012 to approve the on a regulated market or over-the-counter. accounts for the year ended December 31, 2011. He will The maximum purchase price is set at €65 per share. If any replace François Michelin, whose term ends at this Annual shares acquired under this authorization are attributed on Meeting. exercise of stock options, as provided for in articles L. 225-179 et seq. of the French Commercial Code, the price at which EIGHTH RESOLUTION the shares are attributed to optionholders will be determined Authorization to carry out a share buyback in accordance with the applicable legal provisions. program The Managing Board may acquire up to a maximum The Annual Meeting, having reviewed the Report of the of 23,000,000 issued shares outstanding under this Managing Board, authorizes the Managing Board to buy back authorization, which is granted for a period of eighteen the Company’s shares on the stock market in order to reduce months from May 24, 2006 and replaces with immediate the Company’s issued capital, or for attribution on exercise effect the previous authorization granted by the Annual of stock options granted to employees, executives or officers Meeting held on May 25, 2005.
RESOLUTION TO BE VOTED ON IN THE EXTRAORDINARY STOCKHOLDERS’ MEETING
NINTH RESOLUTION The number of shares to be issued upon exercise of the options may not exceed 2,000,000. Authorization for the Managing Board to grant options to purchase existing shares The option exercise period may not exceed eight years. of Peugeot S.A. stock The Extraordinary Meeting gives full powers to the Managing The Extraordinary Meeting, having reviewed the Report of Board to act on this authorization, and in particular to set the the Managing Board and the Report of the Supervisory Board, maximum number of options that may be granted to a single authorizes the Managing Board to grant, on one or several grantee, determine the terms and conditions of said grant occasions, employees, executives or officers of the Company, and make the necessary adjustments in the event of its subsidiaries or any related entity options to purchase corporate actions undertaken after the date of grant. existing shares of Peugeot S.A. stock that the Company holds in treasury following their purchase on the open market. The authorization will be valid until August 31, 2007.
The Managing Board will use the authorization as provided for by law, in particular as concerns the price of the shares to be purchased upon exercise of the options.
PSA Peugeot Citroën – 2005 reference document 233 234 PSA Peugeot Citroën – 2005 reference document 10 INVESTOR INFORMATION
Stockholder Relations 236
Information about the Company’s Capital 240
Stockholder Information 243
PSA Peugeot Citroën - 2005 reference document 235 10 INVESTOR INFORMATION Stockholder Relations
STOCKHOLDER RELATIONS
STOCKHOLDER INFORMATION
PSA Peugeot Citroën is committed to providing clear, regular To nurture effective relations with investors, PSA Peugeot Citroën information to all individual and institutional stockholders, in organizes a growing number of events for its stockholders and the France and abroad. It is constantly improving the effectiveness entire financial community. Three major meetings are held for of the investor relations process, including the various sources the presentation of interim earnings, the presentation of annual of stockholder information and direct investor contacts at earnings and the Annual Meeting. meetings and special events, in compliance with best practices In addition, the Group regularly interacts with investors by inviting and the recommendations issued by stock market authorities. them to meetings or plant visits in Europe, the United States and All stockholders have access to the following sources of Asia, and invites financial analysts to theme meetings to help information: improve their understanding of the Group's business operations. - The Annual Report, available in French and English, provides The Group also participates in industry presentations by financial essential information about PSA Peugeot Citroën and its institutions active in the capital markets. operations, including multi-year financial highlights and key Moreover, the Group is committed to meeting regularly data. with individual stockholders in France through presentations in - The Reference Document, prepared in French and English cities outside Paris, plant visits and a booth at the Actionaria and filed with the Autorité des Marchés Financiers investor fair. Individual stockholders may also request (French Financial Markets Authority), provides a detailed information from the Investor Relations team via e-mail, at presentation and analysis of the consolidated financial [email protected], or by phone at +33 1 40 66 36 71. statements, the operations of the different divisions, the resolutions submitted to stockholders in Annual Meeting Stockholders wishing to receive financial information on and legal information about the Company. a regular basis may register at Company headquarters: - The Interim Report, also published in French and English, is Peugeot S.A. – Investor Relations available as soon as interim results are released in late July. 75, avenue de la Grande-Armée, 75016 Paris, France E-mail: [email protected] - Press releases and financial notices are posted on the Phone: +33 1 40 66 36 71. Company website. - The Letter to our stockholders, published to coincide with the release of annual results, the Annual Meeting and the release of interim results, is sent to registered stockholders, INVESTOR CALENDAR holders of more than 10 bearer shares registered with a French financial institution at December 31 and employee April 27, 2006: First-quarter 2006 sales released stockholders. It is also available upon request. May 24, 2006: Annual Stockholders' Meeting - The Stockholders' Guide answers the most frequently asked May 31, 2006: 2005 dividend paid questions regarding stockholder rights and the management of PSA Peugeot Citroën shares. July 26, 2006: First-half 2006 results released October 26, 2006: Third-quarter 2006 sales released All these publications are available on-line at www.psa-peugeot-citroen.com, which also displays February 7, 2007: 2006 annual results released the Peugeot S.A. stock price in real time.
Visit www.developpement-durable.psa.fr to read the latest news about the Group’s commitment to responding to the social and environmental challenges facing today’s world.
236 PSA Peugeot Citroën - 2005 reference document INVESTOR INFORMATION 10 Stockholder Relations
SHARE DATA ISIN FR0000121501 Markets Euronext Paris, Eurolist continuous trading – Compartment A Other markets: - Europe: Euronext Brussels and SEAQ International – London - United States: Traded as American Depositary Receipts (ADRs), with one ADR representing one share of common stock. Listed in the major indexes CAC 40, SBF 120, SBF 250, Euronext 100, DJ Euro Stoxx Auto, Advanced Sustainable Performance Indices (ASPI) and FTSE4Good Eligible for Deferred settlement under the SRD system and inclusion in French PEA stock savings plans Par value €1. 0 0 Shares outstanding at December 31, 2005 234,618,266 Closing price on December 31, 2005 €48.70 Market value at December 31, 2005 €11.43 billion Weighting in the CAC 40 index at December 31, 2005 0.97%
SHARE PERFORMANCE
The Peugeot S.A. share gained 4.28% in 2005, ending the year at €48.70. This compared with increases of 23.4% in the CAC 40 index and of 19.9% in the DJ Euro Stoxx Auto index over the same period.
Over the past five years, the Peugeot S.A. share has gained 20.6%, compared with a decline of 20.4% in the CAC 40 index and an increase of 4.32% in the DJ Euro Stoxx Auto index.
Five-year performance of the Peugeot S.A. share versus the CAC 40 Index and the DJ Euro Stoxx Auto Index (base 100)
160
140
120
100
80
60
40
20
0
2001 2002 2003 2004 2005 2006 Peugeot S.A. share CAC 40 DJ Euro Stoxx Auto
PSA Peugeot Citroën - 2005 reference document 237 10 INVESTOR INFORMATION Stockholder Relations
Five-year summary of stock price performance and trading volumes 2001 2002 2003 2004 2005 Shares outstanding at December 31 259,109,146 259,109,146 243,109,146 243,109,146 234,618,266 High for the year (€) 58.27 60.80 43.85 52.70 57.95 Low for the year (€) 35.40 32.20 33.53 36.93 45.20 Year-end closing (€) 47.75 38.86 40.40 46.70 48.70 Market value at December 31 (€ billions) 12.37 10.07 9.82 11.35 11.43 Average daily trading volume 1,390,484 1,320,196 1,442,174 1,325,810 1,093,731
DIVIDEND POLICY
Based on the number of shares outstanding at December 31, 2005, the 2005 dividend submitted to stockholder approval at the May 24, 2006 Annual Meeting corresponds to a total payout of €317 million, or 30.8% of profit attributable to equity holders of the parent for the year.
Every year, the dividend is paid seven days after stockholder approval at the Annual Meeting, which for the 2005 dividend corresponds to May 31, 2006.
2001 2002 2003 2004 2005 Dividend per share Before tax credit 1.15 1.35 1.35 1.35 1.35 * Tax credit 0.58 0.675 0.675 – ** – ** Total revenue 1.73 2.025 2.025 – ** – ** Payout ratio 17.6% 20.7% 21.9% 24.2% 30.8% * Subject to stockholder approval at the May 24, 2006 Annual Meeting. ** Beginning with dividends received in 2005, the tax credit has been replaced, under certain conditions, with tax relief.
238 PSA Peugeot Citroën - 2005 reference document INVESTOR INFORMATION 10 Stockholder Relations
CAPITAL STRUCTURE AND OWNERSHIP
The Company's capital stock amounted to €234,618,266 at Voting rights structure at December 31, 2005 December 31, 2005, represented by 234,618,266 shares with a par value of €1.00 each. Peugeot The interests held by the main stockholders identified by the family 45.06% Company are presented in the “Ownership Structure” table Other 45.93% on page 241.
Apart from the impact of share buybacks and the subsequent cancellation of 8,490,880 shares, the only change in the ownership and voting rights structure is a decrease in Société Générale's interest from 2.19% to 1.41%. Michelin 1.89% Société Générale 1.31% Stockholder structure at December 31, 2005 Caisse des Employee mutual fund 1.98% Dépôts 2.07% BNP Paribas 1.76%
Peugeot Other 58.48 % family 30.22% Events after December 31, 2005
Michelin 1.20% On March 3, 2006, Michelin announced the sale of its remaining 2,826,000 shares of Peugeot S.A. stock, representing 1.20% Société Générale 1.41% of issued capital.
Caisse des On March 6, 2006, Wellington Management Company Dépôts 2.64% informed the Autorité des Marchés Financiers and Peugeot S.A. BNP Paribas 1.13% that its interest in the company has exceeded 5% of issued Treasury stock 2.39% Employee mutual fund 2.53% capital, with a 5.05% stake as of February 21, 2006.
On March 9, 2006, Franklin Resources Inc. informed Peugeot S.A. that its interest in the company now exeeds 2% and stands at 2.0299%
SHARE BUYBACKS AND CANCELLATIONS
PSA Peugeot Citroën believes that buying back its own shares enabled it to carry out these programs while maintaining its represents an attractive investment opportunity for both itself capital expenditure commitment. In 2005, the Group purchased and its stockholders until such time as its strategic objectives 4,130,162 shares of Peugeot S.A. stock for a total of €198 million. are fully reflected in the stock price. Between 1999 and 2005, On November 17, 2005, it canceled 8,490,880 shares, or 3.49% stock buyback programs have been implemented to reduce of issued capital, which is now represented by 234,618,266 the company's capital, or to acquire shares for attribution on shares of common stock. At year-end, the Group held 5,612,693 exercise of stock options, or on redemption, conversion, shares in treasury, or 2.39% of issued capital, including exchange or exercise of share equivalents. The Group's 5,274,725 shares held for allocation on exercise of stock recurring cash flow from operations and cash holdings have options and 337,968 that will be canceled.
PSA Peugeot Citroën - 2005 reference document 239 10 INVESTOR INFORMATION Information about the Company’s Capital
INFORMATION ABOUT THE COMPANY’S CAPITAL
Capital stock The authorization is being sought for a period of 18 months As of December 31, 2005, the Company’s capital stock and concerns the buyback of a maximum of 23,000,000 shares. € amounted to €234,618,266, divided into 234,618,266 shares The maximum purchase price is set at 65. € with a par value of 1.00, all fully paid-up and of the same In compliance with article L. 225-209 of the Commercial Code class. Shares may be held in registered or bearer form, at and articles 241-1 to 242-7 of AMF General Rules and the choice of the stockholder. Regulations, a description of the new program will be available in the Stockholder/Annual Meeting section of the Specific provisions of the bylaws concerning www.psa-peugeot-citroën.com website, as well as on the changes in capital and other stockholder rights AMF website www.amf-france.org. Not applicable. Securities not conferring a right to acquire equity Authorization to buy back Company shares capital At the Annual Stockholders’ Meeting of May 24, 2006, the Not applicable. Managing Board will seek an authorization to carry out a share buyback program. The purpose of the buybacks will be to: Securities conferring a right to acquire equity - reduce the Company’s issued capital; capital - acquire shares for attribution to employees, executives Employee stock options or officers of the Company or any related entities on the Options to purchase existing shares of company stock were exercise of stock options; granted to Group executives and senior managers in 2005 - acquire shares for allocation on redemption, conversion, and prior years. As of December 31, 2005, there were exchange or exercise of share equivalents. 5,274,725 such options outstanding.
Peugeot S.A. stock option plans in effect at December 31, 2005 Number of shares to be purchased Number of Options Date of (of which corporate Exercise Exercise Options outstanding Managing shares granted officers period period exercised as of Board meeting to corporate officers) (1) concerned (1) begins ends Price in 2005 Dec. 31, 2005 March 31, 1999 462,900 14 03/31/2001 03/30/2007 €20.83 128,168 144,247 183,000 October 5, 2000 709,200 13 10/05/2002 10/04/2008 €35.45 119,160 561,978 237,000 November 20, 2001 798,600 13 11/20/2004 11/19/2008 €46.86 6,700 776,900 330,000 August 20, 2002 860,100 13 08/21/2005 08/20/2009 €46.28 1,000 851,100 335,000 August 21, 2003 996,500 13 08/21/2006 08/20/2011 €39.09 0 992,500 396,000 August 24, 2004 1,004,000 13 08/24/2007 08/23/2012 €47.59 0 995,000 435,000 August 23, 2005 953,000 13 08/24/2009 08/23/2013 €57.37 0 953,000 435,000 (1) Corporate officers are defined as members of the Managing Board, the Executive Committee and the Senior Management.
240 PSA Peugeot Citroën - 2005 reference document INVESTOR INFORMATION 10 Information about the Company’s Capital
Changes in capital stock
(in number of shares, adjusted for the stock split) 2005 2004 2003 2002 2001 Shares outstanding as of January 1 243,109,146 243,109,146 259,109,146 259,109,146 278,223,630 • Exercise of options - - - - - • Conversion of bonds - - - - 4,335,516 • Cancellation of shares (8,490,880) - (16,000,000) - (23,450,000) Shares outstanding as of December 31 234,618,266 243,109,146 243,109,146 259,109,146 259,109,146 Voting rights outstanding as of December 31 299,814,508 303,857,079 308,888,782 313,211,826 330,352,845
(in euros) 2005 2004 2003 2002 2001 Capital stock as of January 1 243,109,146 243,109,146 259,109,146 259,109,146 278,223,630 • Exercise of options - - - - - • Conversion of bonds - - - - 4,335,516 • Cancellation of shares (8,490,880) - (16,000,000) - (23,450,000) Capital stock as of December 31 234,618,266 243,109,146 243,109,146 259,109,146 259,109,146
Diluted capital There were no share equivalents or options to purchase new shares of Peugeot S.A. stock outstanding as of December 31, 2005.
Identity of stockholders (article 7 of the bylaws) The company is entitled to request details of the identity of stockholders and holders of securities conferring the right to acquire equity capital, including the number of shares or securities held, in accordance with the applicable legislation.
Ownership structure As of December 31, 2005, capital stock consisted of 83,560,011 registered shares, held by 609 stockholders, and of 151,058,255 bearer shares. December 31, 2005 December 31, 2004 December 31, 2003 % %% Number % voting Number % voting Number % voting Main identified stockholders (1) of shares interest rights of shares interest of shares of shares interest of shares Établissements Peugeot Frères 6,923,760 2.95 4.62 6,923,760 2.85 4.56 6,923,760 2.85 4.48 La Française de Participations Financières (LFPF) 12,156,000 5.18 6.82 12,156,000 5.00 7.23 12,156,000 5.00 7.11 Foncière, Financière et de Participations (FFP) 51,792,738 22.08 33.60 51,792,738 21.30 32.05 51,792,738 21.30 31.53 Comtoise de Participation 36,000 0.02 0.02 36,000 0.01 0.02 36,000 0.01 0.02 Peugeot Family Group 70,908,498 30.22 45.06 70,908,498 29.17 43.86 70,908,498 29.17 43.14
Michelin Group 2,826,000 1.20 1.89 2,826,000 1.16 1.86 2,826,000 1.16 1.83 Société Générale Group (including trading) 3,296,817 1.41 1.31 5,309,926 2.18 2.53 3,246,501 1.34 1.38 Caisse des Dépôts et Consignations Group 6,191,462 2.64 2.07 7,508,462 3.09 2.47 8,478,658 3.49 2.74 BNP Paribas Group 2,641,800 1.13 1.76 2,641,800 1.09 1.74 2,641,800 1.09 1.74 Treasury stock 5,612,693 2.39 - 10,230,439 4.21 - 4,086,884 1.68 - PSA corporate mutual fund 5,946,782 2.53 1.98 5,304,562 2.18 1.75 4,705,701 1.94 1.52 (1) On the basis of registered shares and notifications to the Company that disclosure thresholds had been crossed. The number of registered shares pledged at December 31, 2005, is not material.
PSA Peugeot Citroën - 2005 reference document 241 10 INVESTOR INFORMATION Information about the Company’s Capital
Other stockholders A survey of banks and brokers holding more than 150,000 shares, commissioned from the Euroclear France clearing organization on December 31, 2005, determined that there are approximately 86,969 holders of more than 10 bearer shares.
There are no stockholders’ pacts in force as of December 31, 2005.
Directors’ interests Directors’ interests in the Company’s capital, held in the form of registered shares or stock options, represent less than 1% of total shares outstanding.
242 PSA Peugeot Citroën - 2005 reference document INVESTOR INFORMATION 10 Stockholder Information
STOCKHOLDER INFORMATION (Euronext data) All figures adjusted for the six-for-one stock split on July 2, 2001
Price data 2005 2004 % change on 2004 closing (in euros) High Low Dec. 31, 2005 High Low Dec. 31, 2004 price Peugeot S.A. share 57.95 45.20 48.70 52.70 36.93 46.70 4.28% CAC 40 index 4,780.05 3,804.92 4,715.23 3,856.01 3,452.41 3,821.16 23.40%
Trading data 2005 2004 Daily Daily Total average Total average - Number of shares 281,088,775,0 1,093,731,0 343,384,908,0 1,325,810,0 - Value (in millions of euros) 14,037.2 54.6 15,350.0 59.3
Price and trading volume of the Peugeot S.A. share on the Euronext Paris Compartment A (Deferred Settlement Service)
Share price (in euros) Trading volume Low High Last Volume Average value (in thousands of euros) 2004 January 37.56 41.65 37.71 33,874,852 64,000.2 February 36.93 41.10 40.05 30,496,254 59,900.1 March 39.00 43.00 41.46 31,841,517 57,120.7 April 40.83 46.58 44.82 38,403,414 85,156.2 May 43.05 46.90 46.75 33,031,955 70,577.5 June 44.75 47.00 45.77 33,935,423 70,166.2 July 43.38 48.15 47.95 24,979,783 51,585.9 August 46 .74 49.90 49.29 22,874,648 50,103.3 September 48.58 52.70 49.60 26,660,433 60,584.9 October 46.65 52.10 48.17 26,587,398 59,021.3 November 45.84 49.73 45.99 20,509,022 44,492.5 December 44.61 47.04 46.70 20,190,209 40,127.6 2005 January 46.05 49.37 47.73 22,385,789 50,689.3 February 47.45 51.40 49.48 23,610,571 58,377.0 March 48.16 50.50 49.02 18,219,609 42,670.9 April 45.20 50.25 45.72 26,924,081 61,166.2 May 45.51 48.79 48.68 26,585,050 57,310.0 June 46.91 49.23 48.98 24,166,911 52,720.7 July 47.30 53.45 53.10 20,946,631 50,345.2 August 50.05 54.20 50.30 17,595,415 40,006.9 September 49.70 57.60 56.50 24,796,149 59,557.3 October 48.60 57.95 50.70 26,947,645 69,113.5 November 49.05 52.05 51.20 25,605,052 58,899.5 December 47.82 52.90 48.70 23,305,872 55,672.1 2006 January 46.60 51.65 48.87 34,609,679 77,281.2 February 46.80 50.35 48.93 30,697,251 74,874.3 March 46.74 52.45 52.00 30,425,644 65,874.2
PSA Peugeot Citroën - 2005 reference document 243 10 INVESTOR INFORMATION Stockholder Information
LISTING
The Peugeot S.A. share is listed on the Euronext Paris market, where it is eligible for the deferred settlement system, as well as on the Brussels Stock Exchange. It is also traded in London on the SEAQ International system and in the United States in the form of American Depositary Receipts (ADRs), traded on the New York over-the-counter market. Each share of common stock is represented by one ADR.
COUPONS ELIGIBLE FOR PAYMENT
Dividends Tax credit Dividend for tax already Total Number Par Coupon Payment Tim barred paid before paid to French income of shares value number as from as from tax credit Treasury per share Shares 46,370,605 €6 39 May 23, 2001 May 23, 2006 €5.00 €2.50 €7.50 259,109,146 €1 40 May 22, 2002 May 22, 2007 €1. 15 €0.58 €1.73 259,109,146 €1 41 June 4, 2003 June 4, 2008 €1.35 €0.675 €2.025 243,109,146 €1 42 June 2, 2004 June 2, 2009 €1.35 €0.675 €2.025 243,109,146 €1 43 June 1, 2005 June 1, 2010 €1.35 * * * Beginning with dividends received in 2005, the tax credit has been replaced, under certain conditions, with tax relief.
Other right Nomber Par Coupn Ex-coupon Type of of shares value number date transaction Share 18,479,370 FRF70 26 July 15, 1987 Bonus share issue (1 new share for 5 existing shares)
244 PSA Peugeot Citroën - 2005 reference document REPORT OF THE CHAIRMAN 11 OF THE SUPERVISORY BOARD ON THE PREPARATION AND ORGANIZATION OF SUPERVISORY BOARD MEETINGS AND ON INTERNAL CONTROL
PSA Peugeot Citroën - 2005 reference document 245 REPORT OF THE CHAIRMAN 11 OF THE SUPERVISORY BOARD Report of the Chairman of the Supervisory Board on the preparation and organization of Supervisory Board meetings and on Internal Control
1. PREPARATION AND ORGANIZATION OF SUPERVISORY BOARD MEETINGS
1.1. SUPERVISORY BOARD MEMBERSHIP, The Compensation and Appointments ROLE AND RESPONSIBILITIES Committee The Peugeot S.A. Supervisory Board has twelve members Set up in 1998, the Compensation and Appointments and two non-voting advisors. No member of the Board Committee is responsible for preparing Supervisory Board exercises any executive responsibilities or is a salaried decisions regarding compensation for members of the employee of a Group company. Managing Board, the Supervisory Board and the Board Committees, as well as stock option grants to members of the The Supervisory Board appoints members of the Managing Managing Board. Board and can remove them from office. According to the law, it is responsible for overseeing the Managing Board’s In February 2003, the Committee’s terms of reference were management of the business. The Company’s bylaws also broadened to include preparing Supervisory Board decisions attribute to the Supervisory Board sole authority to approve concerning the appointment of new members of the corporate actions, bond issues, the signature or termination Supervisory Board and Managing Board, by proposing of agreements with other companies operating in the same selection criteria, organizing the selection process industry that will have a decisive impact on the Group’s future and recommending candidates for appointment or re- development, and any major transaction that substantially appointment. It is also informed of appointments and alters the business or financial structure of the Company or compensation of members of the Executive Committee and the Group. In addition, the Supervisory Board ensures that the Senior Management team. the strategy implemented by the Managing Board is The Committee comprises three members, appointed in consistent with the Group’s long-term vision, as defined by their own name and not as representatives of corporate the Supervisory Board. Supervisory Board members. It met three times in 2005, to review the fixed compensation and variable bonuses of 1.2. SUPERVISORY BOARD MEETINGS Managing Board members and the granting of stock options to Managing Board members. The Supervisory Board meets at least once every quarter; the agenda of each meeting is drawn up by the Chairman. The Strategy Committee The Supervisory Board met four times in 2005, with an The Strategy Committee, set up in 1998, is responsible for average attendance rate of 94%. considering the Group’s long-term growth trajectory and Board members are provided with detailed information about strategic direction. It reviews the Managing Board’s long- all material transactions. Guarantees given on behalf of term strategic plan and is consulted about proposed major subsidiaries are submitted for Supervisory Board approval transactions. It also prepares Supervisory Board decisions when the amount involved exceeds €25 million or the on strategic projects submitted for the Board’s approval cumulative amount of guarantees given during the year in accordance with Article 9 of the bylaws. exceeds €125 million (excluding customs and tax bonds). The Committee comprises seven members, appointed in At the beginning of 2006, the Supervisory Board performed their own name and not as representatives of corporate a self-assessment of its organization and procedures. Supervisory Board members. The Strategy Committee met four times in 2005, to review the proposed cooperation 1.3. COMMITTEES OF THE BOARD agreement with Mitsubishi, the long-term strategy for the Automobile Division and the challenges and objectives of the The Supervisory Board has set up three committees, each Platforms, Technical Affairs and Purchasing Department. of which has its own internal rules.
246 PSA Peugeot Citroën - 2005 reference document REPORT OF THE CHAIRMAN OF THE SUPERVISORY BOARD 11 Report of the Chairman of the Supervisory Board on the preparation and organization of Supervisory Board meetings and on Internal Control
The Finance Committee for internal control and, like the Chairman of the Supervisory The Finance Committee, set up in 2002, is responsible for Board, with the auditors, with or without line management informing the Board of its opinion on the interim and annual attending. The Committee comprises three members, financial statements of the Company and the Group, and it appointed in their own name and not as representatives of may also be asked to review any corporate actions and other corporate Supervisory Board members. The Committee met projects requiring prior approval by the Board. To this end, four times in 2005 to review the reconciliation of the French the Committee reviews in detail the interim and annual GAAP and IFRS accounts, the Group’s internal control financial statements, the most significant financial transac- approach and internal audit plan, Banque PSA Finance’s tions and the management reporting schedules. It also liquidity policy, Group tax planning policy and the valuation monitors off-balance sheet commitments and data to assess of fixed assets. In February 2006, it met with the Statutory the Group’s risk exposure. Auditors to review the procedures for closing the Group’s The Finance Committee, which enjoys free access to all the 2005 accounts, prior to their presentation to the Supervisory information it needs, can meet with the persons responsible Board on February 7, 2006.
2. INTERNAL CONTROL PROCEDURES
2.1. ORGANIZATION OF INTERNAL The Internal Audit department reports directly to the Chairman CONTROL of the Managing Board and is completely independent from all other departments and divisions. The Vice-President, Since 1972, Peugeot S.A. has had a two-tier management Internal Audit, has direct authority over the corporate-level structure, with a Supervisory Board and a Managing Board. internal auditors and has a dotted-line reporting relationship This structure guarantees a clear separation between the with the internal auditors working in various departments Managing Board’s day-to-day management of the business of the Automobile Division (Platforms, Technical Affairs, and the Supervisory Board’s oversight, exercised with the Purchasing, Manufacturing, the Marques and Information support of three Committees of the Board (see section 1.3). Systems) and the other Group companies (Banque PSA It represents an effective corporate governance model, by Finance and Gefco). He reports twice a year to the Executive maintaining an appropriate balance of powers between the Committee on all of the internal auditors’ work. executive and control functions. As part of this organization, internal control is the responsibility of senior management, In accordance with French company law, the financial represented by the Managing Board. statements of Peugeot S.A. and the consolidated financial statements are audited by two firms of auditors. The two The overall structure of delegations of authority down the firms jointly audit all of the accounts and examine the chain of command reflects the Group’s internal organization. processes used to prepare the financial statements, as well Account is taken of each manager’s job as well as of his or her as the Group’s internal control processes and procedures. position in the chain of command, in order to grant powers to Through the members of their networks in all the countries individuals who have the necessary authority, resources and where the Group operates, they act as contractual auditors competence in the area concerned. Each delegation of of all the Group’s fully consolidated subsidiaries, with the authority describes the individual’s role and responsibilities, exception of the companies in the Faurecia sub-group. the rules and regulations to be complied with and the Effective from 2003, they perform continuous audits of practices to be followed. the main Automobile Division companies and finance A Code of Ethics setting out the standards of conduct and companies in France, in order to improve the overall quality behavior to be met by all employees has been available for of their audit. consultation on the Group Intranet by all employees since March 2003.
PSA Peugeot Citroën - 2005 reference document 247 REPORT OF THE CHAIRMAN 11 OF THE SUPERVISORY BOARD Report of the Chairman of the Supervisory Board on the preparation and organization of Supervisory Board meetings and on Internal Control
Faurecia is listed on the Euronext Paris market and its Management controls within the Group are organized around statutory auditors are appointed by its stockholders in General an integrated three-tier structure: Meeting. The auditors of joint ventures set up with other – a corporate department is responsible for the entire system automakers, which are accounted for by the equity method, and for issuing finance and management standards and are appointed by the joint venture partners. procedures, describing the methods to be used, the related software applications and the timelines for the various tasks; The internal and external auditors work closely together and exchange information about their respective audits of the – the second tier consists of management control structures system of internal control, while respecting each other’s at divisional level, with Automobile Division controls independence. organized around the main entities (the marques, production, R&D); As a credit institution, Banque PSA Finance is required to – the third tier corresponds to management control structures comply with French banking regulations and is supervised in each operating unit, such as a plant or a distribution by the French Banking Commission, the supervisory arm of subsidiary for the Automobile Division. the Bank of France. The Banking Commission is responsible for verifying compliance with the laws and regulations Capital expenditure is managed according to a similar process, applicable to credit institutions, reviewing business practices based on Group strategy and, for the Automobile Division, and ensuring that capital adequacy requirements are met. manufacturing and product strategies. Banque PSA Finance also complies with all banking laws and The management control entities produce monthly regulations in the other countries where it has operations. management reporting packages for submission to the Executive Committee, based on the full monthly consoli- 2.2. INTERNAL CONTROL SYSTEMS IN dation packages. THE CORPORATE DEPARTMENTS AND THE SUBSIDIARIES The management control system also includes detailed automobile costing analyses, including analyses of variances Internal control is assessed based on the Group’s operational and product margins, for use by line management. organization as well as its legal structure. Published financial information is based on the consolidated 2.2.1. Procedures for the preparation and financial statements approved by the Managing Board and processing of financial and accounting presented to the Supervisory Board, as well as on analyses of information consolidated data. The annual and interim information is audited The consolidated financial statements are prepared by or reviewed by the Statutory Auditors prior to being published. the Consolidation Department, which is also responsible for 2.2.2. Divisional operating procedures establishing and updating Group accounting policies. The Department’s teams visit Group subsidiaries (at least once Automobile Division every five years for Automobile Division entities and once Development and process engineering work for each new every three years for Banque PSA Finance entities) to audit vehicle or component requires extensive resources, the cost their consolidated reporting procedures and provide related of which has an impact on the Group’s future profitability. assistance where necessary. Implementation of each project is based on a comprehensive design process – known as the operational development A full set of consolidated financial statements is produced plan – defining product service, profitability, quality and time- each month, for both internal management and external to-market objectives. Progress in meeting these objectives is reporting purposes. tracked by a system of project milestones, corresponding Off-balance sheet commitments are recorded, tracked and to the various stages at which the financial and technical validated according to the same process. indicators are reviewed.
248 PSA Peugeot Citroën - 2005 reference document REPORT OF THE CHAIRMAN OF THE SUPERVISORY BOARD 11 Report of the Chairman of the Supervisory Board on the preparation and organization of Supervisory Board meetings and on Internal Control
In light of the very significant contribution of suppliers, specific used vehicles, replacement parts, spare parts or compo- rules apply to the purchasing function. To ensure that the cost nents). A secure payments policy has been drawn up to avoid base remains competitive, suppliers are selected based on credit risks, supported by a monthly reporting system that competing bids and the rules governing the purchasing ensures compliance with the policy. process are strictly applied, with the help of product-costing Programmed and manual controls are performed to ensure and commodity price-management experts. Close attention that customer invoices comply with local customs, tax and is paid to supplier risk, particularly the risk of supply chain other regulations in both the shipping country and the delivery disruption or of supplier bankruptcy. country, as well as with the terms of the order or contract Contractual commitments to suppliers are strictly adhered covering the price, incoterms, transfer of title and other matters. to. Orders, inward deliveries and invoices are systematically Periodic and continuous physical inventories are performed to recorded. Supplier payments are made only when the ensure that all delivered goods have been duly invoiced. invoices have been checked for compliance with the order Financing decisions and banking relationships are managed and the applicable regulations, and when they correspond at corporate level. Cash management transactions for euro to the goods actually received. zone subsidiaries, foreign currency cash flows and related In manufacturing, the assembly plants have been transactions on the currency markets, and financial market ISO 9001:2000-certified by UTAC, to comply with the transactions related to interest rates are managed by requirements of European Directive 2001/116, Appendix X. specialist teams at Group level. Back-up trading rooms have All of the manufacturing plants’ environmental management been set up to avoid the risk of any interruption of trading systems are ISO 14001-certified. All employees are trained following a major incident. For entities outside the euro zone, in safety and workplace procedures and a constant focus locally managed cash flows and cash balances are closely is maintained on improving plant safety. Ergonomic tracked at Group level. Investment and financing strategies and considerations are taken into account in the design of strategies for managing counterparty risks arising from products and the related plant and equipment in order to financial market transactions are approved at the monthly improve working conditions in the production shops. Finance Committee meetings chaired by the Chairman of the Managing Board. In marketing and sales, internal control for the two marques, Peugeot and Citroën, is based on descriptions of operating The quality department authorizes the sale of each vehicle processes and procedures applicable at corporate level that leaves the production line and organizes any necessary recalls of faulty vehicles delivered to the dealers or to and by the import subsidiaries and dealerships. Senior customers. management provides the leadership and impetus for operational management in each department, subsidiary and Human resources management and development procedures dealership, backed by a system of controls and a continuous are designed to ensure that the Group has constant access improvement process. Led by Corporate Management to the skills needed to run the business. Regulatory changes Control, management control teams at each marque monitor are closely monitored to ensure that the Group is viewed at compliance with Group management rules and standards, all times as a benchmark employer. produce management reporting schedules and guarantee The Risk Prevention and Management Department is transparency and cooperation among the various participants. responsible for ensuring that the Group is in a position to Automobile Division vehicle and replacement part sales in effectively manage any risk that could affect earnings, by the countries where Banque PSA Finance has operations are implementing appropriate risk prevention and management carried out on a cash basis, with any financing requested by methods and policies and assisting the various entities in customers being provided by Banque PSA Finance. For sales prioritizing the action to be taken in this area. The Department in other countries, a standard has been issued stipulating identifies insurable risks, negotiates insurance cover payment and credit terms to be applied by the Automobile and monitors the effectiveness of preventive and remedial Division to customers according to the product (new vehicles, action plans.
PSA Peugeot Citroën - 2005 reference document 249 REPORT OF THE CHAIRMAN 11 OF THE SUPERVISORY BOARD Report of the Chairman of the Supervisory Board on the preparation and organization of Supervisory Board meetings and on Internal Control
Information system development projects are approved by The internal control system has been modified to comply a specialized committee and are conducted using project with the new provisions of standard CRBF 97-02, appli- management techniques. IT resources are managed in-house cable as from January 1, 2006. It is now built around a and consist mainly of large-scale processing centers meeting headquarters-based internal control unit that performs internal the highest standards of security. Procedures are in place to audits of Banque PSA Finance, its subsidiaries and branches prevent unauthorized access and system down time, as well and the Group entities responsible for supplying essential as to protect data, programs and IT infrastructure. services (IT, Accounting and Cash Management/Financing). The unit is supported by the Compliance, Risk Management Local internal audit teams check that rules and standards and Operational Risk Control departments, which are are consistent with Group strategy and ensure compliance. completely independent from the line units. Transactions Where necessary, improvements are recommended carried out by the line units are controlled by a series of and follow-up checks are performed to ensure that these procedures, formal authorizations, commitment limits and recommendations are implemented. programmed controls. The new system was approved by the Bank’s senior management and Board of Directors in Banque PSA Finance December 2005. To cover all of the risks inherent in its business, Banque PSA Finance has set up an internal control system which checks: Transportation and Logistics: Gefco - that the Bank’s transactions, internal organization and Gefco operates integrated branch networks that all apply the procedures comply with the applicable regulations, same operating and service quality standards and use the professional standards and codes of practice; same information system. In the finance area, the Gefco - that decision-making procedures are strictly followed, companies apply PSA Peugeot Citroën Group standards and whatever the nature of the decision; policies and participate in the Group cash pool. The networks - the quality of accounting and financial information; are ISO 19001-certified. - the existence of an audit trail guaranteeing data traceability; The system of internal control comprises three tiers. - the quality of information and communication systems. Headquarters internal control teams check the quality of the The Bank’s internal control unit, which is independent from monthly statutory and management reporting packages the line units, comprises all the internal control teams based submitted by the subsidiaries, the national accounting at Bank headquarters and in the subsidiaries. The unit was departments ensure that financial flows comply with Group given additional resources in 2005. Regular controls are procedures, while the branches check that all services performed at the various levels of the Bank’s operating performed are accounted for and billed at the agreed price. structures, within a framework defined by a series of cross- functional and local procedures. Ex-ante controls performed Automotive Equipment: Faurecia by headquarters teams mainly concern significant lending The Faurecia Board of Directors, whose Chairman is also decisions made by the Banque PSA Finance group credit the sub-group’s Chief Executive Officer, has set up a Finance committee under the system of discretionary lending limits, Committee and a Compensation and Appointments new products and services that are submitted to the new Committee. products committee for approval, and pricing decisions. Internal control is based on a set of procedures available for The headquarters Risk Committee monitors trends in retail consultation by all employees via the Faurecia Intranet. The financing credit losses, as well as changes in lending margins procedures mainly concern controls over programs, in order and competitive positioning indicators. The headquarters team to track the execution of complex contracts for the design, also closely tracks the performance of the operating entities, production and supply of complex equipment to automakers, through a standard management reporting system, for both and financial and accounting controls designed to ensure that budgetary control and risk-monitoring purposes. financial and accounting information is properly processed, thereby underpinning the company’s responsiveness. In 2005, the Bank’s Board of Directors set up an Audit Committee to monitor internal control structures and Faurecia has its own internal audit department, responsible procedures and to report its findings to the Board. It met for assessing the effectiveness of internal financial control three times in 2005. systems.
250 PSA Peugeot Citroën - 2005 reference document REPORT OF THE CHAIRMAN OF THE SUPERVISORY BOARD 11 Report of the Chairman of the Supervisory Board on the preparation and organization of Supervisory Board meetings and on Internal Control
2.2.3. Internal Control Procedures The assessment is based on definitions of processes, the and Processes related risks and the measures taken to manage them. It The internal control system is managed by a headquarters covers all action taken or overseen by the various functions team reporting to the Vice President, Internal Audit. The team to help prevent risks. For example, the Legal Department defines and updates internal control procedures, checks that assesses legal risks, business interruption risks, safety risks the system complies with the applicable laws and good and the risk of damage to or loss of assets. The Quality practice recommendations, and ensure that procedures are Department assesses quality risks affecting products and consistent and appropriate and address all identified risks. services, the Human Resources Department assesses It also performs various tests and checks, oversees employee-related and labor law compliance risks, the implementation of recommended improvements and reports Engineering, Methods and Purchasing Department assesses on the effectiveness of internal control. automobile regulations compliance risks and the Finance Department assesses compliance risks related to accounting, Starting 2005, the overall quality of the Group’s system of tax and financial regulations and guidelines. internal control is assessed annually, based on assessments performed by all the significant units, in France and abroad, Action plans are implemented by the units to remedy any of the different departments of the Automobile Division and weaknesses identified by the assessments. the non-Automobile subsidiaries (except Faurecia and its As in 2005, the 2006 internal audit plan includes a certain subsidiaries, which have their own system). These units number of specific audits of areas identified as giving rise to include corporate departments, plants, import subsidiaries, significant risks, whatever the quality of the related internal captive dealerships, finance companies, local finance controls as determined by the assessment process. The departments, facility accounting departments, etc.). results of these audits are systematically compared with the assessment results, to ensure that all risks are adequately addressed by the internal control system.
PSA Peugeot Citroën - 2005 reference document 251 252 PSA Peugeot Citroën - 2005 reference document 12 STATUTORY AUDITORS’ REPORT
Statutory Auditors’ Report on the Consolidated Financial Statements 254
Statutory Auditors’ Report prepared in accordance with article L. 225-235 of the French Commercial Code (Code de commerce), on the report prepared by the Chairman of the Board of Directors of Peugeot S.A. on the Internal Control procedures relating to the preparation and processing of financial and accounting information 256
PSA Peugeot Citroën - 2005 reference document 253 12 STATUTORY AUDITORS’ REPORT Statutory Auditors’ Report on the Consolidated Financial Statements
STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2005
This is a free translation into English of the Statutory Auditors’ report issued in French and is provided solely for the convenience of English speaking users. The Statutory Auditors’ report includes information specifically required by French law in such reports, whether modified or not. This information is presented below the opinion on the consolidated financial statements and includes an explanatory paragraph discussing the auditors’ assessments of certain significant accounting and auditing matters. These assessments were considered for the purpose of issuing an audit opinion on the consolidated financial statements taken as a whole and not to provide separate assurance on individual account captions or on information taken outside of the consolidated financial statements.
This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
Following our appointment as Statutory Auditors by your In our opinion, the consolidated financial statements give a Annual General Meeting, we have audited the accompanying true and fair view of the assets and liabilities and of the financial consolidated financial statements of Peugeot S.A. for the position of the Group as at December 31, 2005, and of the year ended December 31, 2005. results of its operations for the year then ended in accordance with IFRSs as adopted for use in the European Union. The consolidated financial statements have been approved by the Managing Board. Our role is to express an opinion on these financial statements based on our audit. These financial II - JUSTIFICATION OF OUR ASSESSMENTS statements have been prepared for the first time in In accordance with the requirements of article L. 823-9 of accordance with IFRSs as adopted for use in the European the French Commercial Law (Code de commerce) relating to Union. They include comparative information restated in the justification of our assessments, we bring to your accordance with the same standards in respect of financial attention the following matters: year 2004. • Regarding the first-time adoption of International Financial Reporting Standards (IFRS) to prepare the 2005 I - OPINION ON THE CONSOLIDATED consolidated financial statements, note 44 sets out all of FINANCIAL STATEMENTS the disclosures required concerning the change in accounting standards at January 1, 2004, and describes We conducted our audit in accordance with professional the steps taken to ensure that the financial statements standards applicable in France. Those standards require that presented for 2005 and 2004 in accordance with IFRS we plan and perform the audit to obtain reasonable assurance are comparable. As part of our assessment of the about whether the consolidated financial statements are accounting principles and methods applied, we verified, free of material misstatement. An audit includes examining, in particular, the correct application of the method on a test basis, evidence supporting the amounts and used to record development expenditure within assets disclosures in the financial statements. An audit also includes (note 1.11.A), as well as the amortization method applied in assessing the accounting principles used and significant view of the revised useful life of vehicle projects, which is estimates made by the management, as well as evaluating now capped at 7 years (note 44.1.A), and the method of the overall financial statements presentation. We believe that testing the recoverable amount of these assets (note 1.13). our audit provides a reasonable basis for our opinion.
254 PSA Peugeot Citroën - 2005 reference document STATUTORY AUDITORS’ REPORT 12 Statutory Auditors’ Report on the Consolidated Financial Statements
We also verified the correct calculation of the adjustments impairment tests described in the notes to the consolidated in respect of sales subject to a buyback commitment financial statements were carried out correctly. We also (note 1.5.A.a) in view of the increased accuracy resulting assessed whether the cash flow projections applied and from the new IT programs developed for this purpose other assumptions used were reasonable. (note 44.1.A), and that any other changes described in this These assessments were made in the context of our audit note were appropriate. of the consolidated financial statements taken as a whole, • As indicated in note 1.10, goodwill is no longer amortized and therefore contributed to the opinion we formed which but is tested for impairment at least annually according to is expressed in the first part of this report. the method set out in note 1.13. In 2005, the impairment test conducted by the Automotive Equipment Division, as III - SPECIFIC VERIFICATION described in note 8.1, led to a write-down of €180 million In accordance with professional standards applicable in on assets assigned to the Vehicle Interior Systems and France, we have also verified the information given in the Modules segment. As part of our assessment of the Group’s management report. We have no matters to report significant estimates made by management, we verified as to its fair presentation and its consistency with the that this approach complied with IFRS and that the consolidated financial statements.
Neuilly-sur-Seine and La Défense, April 11, 2006
The Statutory Auditors Mazars & Guérard PricewaterhouseCoopers Audit Thierry de Bailliencourt Christian Martin
PSA Peugeot Citroën - 2005 reference document 255 12 STATUTORY AUDITORS’ REPORT Statutory Auditors’ Report prepared in accordance with article L. 225-235 of the French Commercial Code (Code de commerce), on the report prepared by the Chairman of the Board of Directors of Peugeot S.A. on the Internal Control procedures relating to the preparation and processing of financial and accounting information
STATUTORY AUDITORS’ REPORT PREPARED IN ACCORDANCE WITH ARTICLE L. 225-235 OF THE FRENCH COMMERCIAL CODE (CODE DE COMMERCE), ON THE REPORT PREPARED BY THE CHAIRMAN OF THE BOARD OF DIRECTORS OF PEUGEOT S.A. ON THE INTERNAL CONTROL PROCEDURES RELATING TO THE PREPARATION AND PROCESSING OF FINANCIAL AND ACCOUNTING INFORMATION YEAR ENDED DECEMBER 31, 2005
This is a free translation into English of the Statutory Auditors’ report issued in the French language and is provided solely for the convenience of English speaking readers.
This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.
To the shareholders, procedures to assess the fairness of the information set out in the Chairman’s report on the internal control procedures relating In our capacity as Statutory Auditors of Peugeot S.A. to the preparation and processing of financial and accounting and in accordance with article L. 225-235 of the French information. These procedures notably consist of: Commercial Code, we hereby report to you on the report of - obtaining an understanding of the objectives and general the Chairman of your Company in accordance with article organization of internal control, as well as the internal control L. 225-68 of the French Commercial Code for the year ended procedures relating to the preparation and processing of December 31, 2005. financial and accounting information, as set out in the In his report, the Chairman is notably required to give Chairman’s report; an account of the conditions in which the duties of the - obtaining an understanding of the work performed to Supervisory Board are prepared and organized and of the support the information given in the report. internal control procedures in place within the Company. It On the basis of these procedures, we have no matters to is our responsibility to report to you our observations on the report in connection with the information concerning the information set out in the Chairman’s report on the internal internal control procedures relating to the preparation and control procedures relating to the preparation and processing processing of financial and accounting information, as set of financial and accounting information. out in the Chairman’s report, prepared in accordance with We performed our procedures in accordance with professional the final paragraph of article L. 225-68 of the French guidelines applicable in France. These require us to perform Commercial Code.
Neuilly-sur-Seine and La Défense, April 11, 2006
The Statutory Auditors
PricewaterhouseCoopers Audit Mazars & Guérard Christian Martin Thierry de Bailliencourt
256 PSA Peugeot Citroën - 2005 reference document 13 LEGAL AND FINANCIAL INFORMATIONS
Information about Peugeot S.A. 258
Organization at December 31, 2005 260
Persons responsible for the Reference Document and the Audit of the Accounts 262
PSA Peugeot Citroën - 2005 reference document 257 13 LEGAL AND FINANCIAL INFORMATIONS Information about Peugeot S.A.
INFORMATION ABOUT PEUGEOT S.A.
HISTORY OF THE COMPANY
Founded in 1896, Peugeot S.A. engaged in manufacturing turning point in the development of the Group’s finance and sales until 1965, when it was transformed into a holding business. PSA Finance Holding, whose subsidiaries offer company as part of a legal and financial restructuring of the financing for Peugeot and Citroën customers in Europe, was Group. Its operating activities were taken over by a subsidiary, converted into a bank in June 1995 and renamed Banque Automobiles Peugeot. PSA Finance.
In December 1974, Peugeot S.A. began the process of joining Aciers et Outillages Peugeot merged with Cycles Peugeot in forces with Automobiles Citroën, which at the time was 1987 and was renamed Ecia. It then became Faurecia in 1998 suffering from the difficult market conditions created by the following its friendly merger with automotive equipment first oil crisis. The other stockholders of Citroën S.A. were manufacturer Bertrand Faure. gradually bought out and the two companies were merged The Automobile Division was reorganized on December on September 30, 1976. 31, 1998 to align legal structures with the new functional Under the terms of an agreement signed on August 10, 1978 organization introduced the previous January. Automobiles and approved by stockholders on December 21, 1978, Peugeot and Automobiles Citroën transferred all their motor Peugeot S.A. acquired the Chrysler Corporation’s European vehicle development and manufacturing assets to Peugeot manufacturing and sales operations in exchange for shares. Citroën Automobiles and their capital equipment design At the end of 1980, the newly-acquired companies — which and manufacturing operations to Process Conception continued to do business under the Talbot marque — were Ingénierie. transferred to Automobiles Peugeot. In the first half 2001, Peugeot S.A. supported Faurecia’s In 1979, Chrysler Financial Corporation’s European acquisition of Sommer Allibert’s automotive equipment commercial financing subsidiaries were acquired, marking a business.
LEGAL INFORMATION
COMPANY NAME TERM Peugeot S.A. Date of incorporation: 1896 Date term ends: December 31, 2058, unless extended or the The name “PSA Peugeot Citroën” refers to the entire Group Company is dissolved. of companies owned by the Peugeot S.A. holding company.
CORPORATE PURPOSE REGISTERED OFFICE AND (summary of article 3 of the bylaws) ADMINISTRATIVE HEADQUARTERS The Company’s purpose is to participate, directly or indirectly, 75, avenue de la Grande-Armée, 75116 Paris, France. in any and all industrial, commercial or financial activities, in France or abroad, related to: LEGAL FORM - the manufacture, sale or repair of all forms of motor vehicles; - the manufacture and sale of all steel products, tools and A Société Anonyme (joint stock corporation), governed by a tooling; Managing Board and a Supervisory Board under the terms of the Commercial Code. - the manufacture and sale of all manufacturing, mechanical and electrical engineering equipment; - the granting of short, medium and long-term consumer GOVERNING LAW loans, the purchase and sale of all marketable securities and The Company is governed by the laws of France. all financial and banking transactions;
258 PSA Peugeot Citroën - 2005 reference document LEGAL AND FINANCIAL INFORMATIONS 13 Information about Peugeot S.A.
- the provision of all transport and other services; STOCKHOLDERS’ MEETINGS - the acquisition of all real property and property rights, by (Article 11 of the bylaws) any appropriate means; and generally to conduct any and all commercial, industrial, financial, securities or real estate Notice of Meeting transactions related directly or indirectly to any of the above Stockholders’ meetings are held either at the Company’s purposes or any other purpose that contributes to the registered office or at any other location specified in the development of the Company’s business. Notice of Meeting, which is prepared in compliance with the applicable legislation. REGISTRATION Double voting rights Registered in Paris, no. B 552 100 554. Fully paid-up shares registered in the name of the same Business identification (APE) code: 741 J. stockholder for at least four years carry double voting rights.
This system was maintained following the 1972 change in CONSULTATION OF LEGAL DOCUMENTS Peugeot S.A.’s governance structure, from a company with Legal documents concerning the Company, including the a Board of Directors to one with a Managing Board and bylaws, the reports of Annual Stockholders’ Meetings, the Supervisory Board. The vesting period was increased from reports of auditors and all other documents sent to two to four years at an Extraordinary Stockholders’ Meeting stockholders may be consulted at the Company’s registered on June 29, 1987. In the event of a bonus share issue paid office. up by capitalizing reserves, net income or additional paid-in capital, the bonus shares issued in respect of shares carrying FISCAL YEAR double voting rights will be eligible for double voting rights from issue. January 1 to December 31. As prescribed by law, double voting rights are striped from all shares converted into bearer shares or sold, except when INCOME APPROPRIATION the transfer of ownership results from an inheritance, a (Article 12 of the bylaws) divorce, or a gift to a spouse or other relative in the direct The Annual Stockholders’ Meeting has full discretionary line of succession. powers to decide the appropriation of net income, except for the appropriations required by law. DISCLOSURE THRESHOLDS (Article 7 of the bylaws) EXCEPTIONAL EVENTS, In addition to complying with the disclosure requirements CLAIMS AND LITIGATION prescribed by law, any company or natural person that No exceptional events, claims or litigation are in progress or becomes the direct or indirect holder of shares representing pending that are likely to have a material impact on the results, more than 2% of the capital is required to disclose their total business, assets and liabilities or financial condition of the interest to the Company within five calendar days of the date Company or the Group. on which the shares are recorded in their account. Each additional 1% of the capital acquired must also be disclosed. These disclosure rules, which are specified in the bylaws, apply even in the case of interests in excess of the first legal disclosure threshold of 5%.
In the case of non-disclosure, at the request of one or several stockholders together holding at least 5% of the capital, the undisclosed shares will be stripped of voting rights for a period of two years from the date on which the omission is remedied.
There are no other bylaw clauses limiting voting rights.
PSA Peugeot Citroën - 2005 reference document 259 13 LEGAL AND FINANCIAL INFORMATIONS Organization at December 31, 2005 ORGANIZATION AT DECEMBER 31, 2005
99.99% 99.99% PEUGEOT CITROËN AUTOMOBILES S.A. AUTOMOBILES PEUGEOT
50% 50% 100% 100% FRANÇAISE PEUGEOT CITROËN PEUGEOT CITROËN 4 SALES FRANCE RENAULT DE MÉCANIQUE SOCHAUX S.N.C. RENNES S.N.C. COMPANIES 80% 20% 100%100% 100% SOCIÉTÉ DE SOCIÉTÉ PEUGEOT CITROËN SOCIÉTÉ TRANSMISSIONS MÉCANIQUE POISSY S.N.C. COMMERCIALE AUTOMATIQUES AUTOMOBILE DE L’EST AUTOMOBILE 100% 100% PEUGEOT CITROËN PEUGEOT CITROËN 24 SALES AULNAY S.N.C. MULHOUSE S.N.C. COMPANIES
100% 100% 99.99% PEUGEOT CITROËN PEUGEOT CITROËN SOCIÉTÉ MÉCANIQUE MÉCANIQUE DE DISTRIBUTION DE L’EST S.N.C. DU NORD OUEST S.N.C. ET D’EXPLOITATION D’AUTOMOBILE 50% 50% 100% SODEXA FIAT AUTO SOCIÉTÉ EUROPÉENNE MÉCANIQUE (France) DE VÉHICULES LÉGERS ET ENVIRONNEMENT DU NORD SEVELNORD
50% 50% 99.96% 100% 100% SOCIETA EUROPEA PEUGEOT CITROËN PEUGEOT PEUGEOT MOTOR EUROPE FIAT S.p.A. VEICOLI LEGGERI- AUTOMOVILES ESPAÑA S.A. COMPANY PLC SEVEL S.p.A. ESPAÑA (Spain) (United Kingdom) (Italy) (Spain) 98.11% 95% 100% PEUGEOT CITROËN PEUGEOT AUTOMOBILI PEUGEOT AUTOMOVEIS ITALIA S.p.A. NEDERLAND N.V. PORTUGAL (Italy) (Netherlands) (Portugal) 100% 99.99% PEUGEOT PORTUGAL PEUGEOT BELGIQUE 50% 50% 100% AUTOMOVEIS S.A. LUXEMBOURG S.A. TOYOTA MOTOR TOYOTA PEUGEOT PEUGEOT CITROËN (Portugal) (Belgium) CORPORATION CITROËN AUTOMOBILES UK AUTOMOBILES (United Kingdom) 100% 99.92% (Czech Republic) PEUGEOT PEUGEOT 99.99% DEUTSCHLAND GmbH SUISSE S.A. PEUGEOT CITROËN (Germany) (Switzerland) AUTOMOBILES SLOVAKIA 100% 100% (Slovakia) PEUGEOT PEUGEOT POLSKA Sp z.o.o. AUSTRIA GmbH (Poland) (Austria)
100% 100% PEUGEOT PEUGEOT SLOVENIJA d.o.o. HUNGARIA Kft (Slovenia) (Hungary)
100% 100% PEUGEOT PEUGEOT CESKA HRVATSKA d.o.o. REPUBLICA s.r.o. (Croatia) (Czech Republic)
100% 100% PEUGEOT PEUGEOT SLOVAKIA RUSSIE AVTO (Slovakia) (Russia) 100% 99.97% 100% 100% 3.19% 3.19% OTHER PEUGEOT CITROËN PEUGEOT CITROËN PEUGEOT CHILE AUTOMOTORES DONGFENG PEUGEOT CONTINENTS DO BRASIL ARGENTINA S.A. (Chile) FRANCO CHILENA S.A. CITROËN AUTOMOBILE AUTOMOVEIS Ltda (Argentina) (Chile) COMPANY Ltd (Brazil) (China) 43.61% 100% 100% 100% 100% 90.09% PEUGEOT OTOMOTIV PEUGEOT JAPON PEUGEOT MEXICO PEUGEOT ALGÉRIE PEUGEOT ÉGYPTE SAE PAZARLAMA AS (Japan) (Mexico) (Algeria) (Egypt) (Turkey) 100% 40% PEUGEOT MOTORS PEUGEOT AUTOMOBILE SOUTH AFRICA NIGERIA Ltd (South Africa) (Nigeria)
260 PSA Peugeot Citroën - 2005 reference document LEGAL AND FINANCIAL INFORMATIONS 13 Organization at December 31, 2005
PEUGEOT S.A.
99.99% 71.33% 99.95% AUTOMOBILES CITROËN FAURECIAGEFCO AUTOMOBILES CITROËN
98.40% 100% CITER SOCIÉTÉ COMMERCIALE CITROËN 100% CITROËN 13 SALES CHAMP DE MARS COMPANIES
94.82% 99.71% 99.95% 100% 100% CITROËN ITALIA AUTOMOVILES CITROËN GEFCO ITALIA GEFCO U.K. Ltd S.p.A. CITROËN ESPAÑA DEUTSCHLAND AG S.p.A. (United Kingdom) (Italy) (Spain) (Germany) (Italy)
99.75% 99.97% 99.97% 100% 100% 100% CITROËN (SUISSE) S.A. AUTOMOVEIS CITROËN U.K. Ltd GEFCO GEFCO BENELUX S.A. GEFCO ÖSTERREICH (Switzerland) CITROËN S.A. (United Kingdom) DEUTSCHLAND GmbH (Belgium) (Austria) (Portugal) (Germany)
100% 100% 100% 99.95% 99.95% 100% CITROËN CITROËN BELUX CITROËN GEFCO PORTUGAL GEFCO ESPAÑA S.A. GEFCO SLOVAKIA DANMARK A/S S.A. - N.V. NEDERLAND B.V. TRANSITARIOS LIMITADA (Spain) (Slovakia) (Denmark) (Belgium) (Netherlands) (Portugal)
100% 100% 100% 100% 98.64% CITROËN SVERIGE CITROËN CITROËN GEFCO POLSKA GEFCO (SUISSE) AB ÖSTERREICH GmbH NORGE A/S Sp. z.o.o. S.A. (Sweden) (Austria) (Norway) (Poland) (Switzerland)
100% 100% 100% 100% 100% CITROËN CITROËN CITROËN LLC GEFCO (CIS) GEFCO CESKA SLOVENIJA d.o.o. POLSKA HUNGARIA Kft (Russia) REPUBLICA s.r.o. (Slovenia) (Poland) (Hungary) (Czech Republic)
100% 100% 100% CITROËN CITROËN CITROËN CESKA SLOVAKIA s.r.o. HRVATSKA d.o.o. REPUBLICA s.r.o. (Slovakia) (Croatia) (Czech Republic)
51% 100% 100% 100% CITROËN CITROËN JAPON GEFCO DO BRASIL GEFCO GEFCO 99.99% DO BRASIL (Japan) Ltda PARTICIPACOES Ltda ARGENTINA S.A. (Brazil) (Brazil) (Brazil) (Argentina)
87.50% 50% 100% GEFCO TASIMACILIK GEFCO TUNISIE GEFCO MAROC VE LOJISTIK ANONIM (Tunisia) (Morocco) SIRKETI (Turkey) 50% DTW 50% GEFCO DTW (China) (China)
PSA Peugeot Citroën - 2005 reference document 261 LEGAL AND FINANCIAL INFORMATIONS 13 Organization at December 31, 2005
74.93% 84.54% 9.02% 16.05% 15.46% BANQUE PSA FINANCE AUTOMOBILES PEUGEOT PROCESS CONCEPTION INGENIERIE S.A.
100% 98% 98.67% 99.99% 100% CRÉDIPAR SOFIRA-SOCIÉTÉ GIE PSA SOCIÉTÉ PEUGEOT DE FINANCEMENT TRÉSORERIE DE CONSTRUCTION CITROËN MOTEURS DES RÉSEAUX D’ÉQUIPEMENTS AUTOMOBILES DE MÉCANISATIONS ET DE MACHINES - 99.99% SCEMM PEUGEOT MOTOCYCLES 100% SOCIÉTÉ FINANCIÈRE DE BANQUE-SOFIB
99.99% 100% 99.92% PSA WHOLESALE PEUGEOT FINANCE PSA Ltd INTERNATIONAL N.V. INTERNATIONAL S.A. (United Kingdom) (Netherlands) (Switzerland)
100% 100% 100% PSA FINANCE PSA FINANCIAL PSA FINANCE AUSTRIA BANK AG HOLDING B.V. NEDERLAND B.V. (Austria) (Netherlands) (Netherlands)
97% 82.35% 17.63% PSA GESTAO- PSA FINANCE COMERCIO E SUISSE S.A. ALUGUER DE VEICULOS (Portugal) (Switzerland) 100% 6.64% 93.36% PSA FINANCE PSA FINANCE POLSKA BELUX (Poland) (Belgium)
100% 100% PSA FINANCE PSA FINANCE SLOVAKIA HUNGARIA (Slovakia) (Hungary)
100% PSA FINANCE CESKA REPUBLICA (Czech Republic)
99.98% 99.94% 100% 100% Automobile Division: Manufacturing companies BANCO PSA PSA ARRENDAMIENTO PROCESS CONCEPTION PROCESS CONCEPTION Automobile Division: Sales companies FINANCE BRASIL S.A. MERCANTIL S.A. INGENIERIE DO BRASIL INGENIERIE ARGENTINA Transportation and Logistics companies (Brazil) (Brazil) Ltda S.A. Finance companies 50% 20% 80% (Brazil) (Argentina) Other businesses PSA FINANCE BPF MEXICO ARGENTINA S.A. DE C.V. (Argentina) (Mexico) 13 LEGAL AND FINANCIAL INFORMATIONS Persons responsible for the Reference Document and the Audit of the Accounts
PERSONS RESPONSIBLE FOR THE REFERENCE DOCUMENT AND THE AUDIT OF THE ACCOUNTS
PERSON RESPONSIBLE FOR THE REFERENCE DOCUMENT
Jean-Martin Folz Chairman of the Peugeot S.A. Managing Board
STATEMENT BY THE PERSON RESPONSIBLE FOR THE REFERENCE DOCUMENT
We hereby declare that, having taken all reasonable care to ensure that such is the case, the information contained in the Reference Document is, to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
We obtained a statement from the Statutory Auditors at the end of their engagement affirming that they have read the whole of the Reference Document and examined the information about the financial position and the historical accounts contained therein.
Jean-Martin Folz Chairman of the Peugeot S.A. Managing Board
STATUTORY AUDITORS
AUDITORS
Statutory Auditors Substitute Auditors PricewaterhouseCoopers Audit Yves Nicolas Christian Martin 63, rue de Villiers 63, rue de Villiers 92200 Neuilly-sur-Seine 92200 Neuilly-sur-Seine First appointed: at the Annual Stockholders’ Meeting of May 28, First appointed: at the Annual Stockholders’ Meeting of May 28, 2003 2003 Appointment ends: at the Annual Stockholders’ Meeting Appointment ends: at the Annual Stockholders’ Meeting called to approve the 2010 financial statements called to approve the 2010 financial statements Patrick de Cambourg Mazars & Guérard 39, rue de Wattignies Thierry de Bailliencourt 75012 Paris 39, rue de Wattignies First appointed: at the Annual Stockholders’ Meeting of May 25, 75012 Paris 2005 First appointed: at the Annual Stockholders’ Meeting of May 25, Appointment ends: at the Annual Stockholders’ Meeting 2005 called to approve the 2010 financial statements Appointment ends: at the Annual Stockholders’ Meeting called to approve the 2010 financial statements
262 PSA Peugeot Citroën - 2005 reference document LEGAL AND FINANCIAL INFORMATIONS 13 Persons responsible for the Reference Document and the Audit of the Accounts
PERSON RESPONSIBLE FOR FINANCIAL INFORMATION
Investor Relations Officer Valérie Magloire Phone: +33 (0)1 40 66 54 59
INFORMATION INCORPORATED BY REFERENCE In compliance with article 28 of EC regulation No. 809/204, 2003 the following information is incorporated by reference in the The 2003 Annual Report was filed as a Reference Document Reference Document: with the Autorité des Marchés Financiers (No. D. 04-0593) on April 27, 2004. The consolidated accounts are presented 2004 with the legal and financial documents, pages 3-51, and the The 2004 Reference Document was filed with the Autorité des accompanying auditors’ report on page 110. The auditors’ Marchés Financiers (No. D. 05-0495) on April 20, 2005. The statement is presented with the legal and financial consolidated accounts are presented in chapter 8, pages 123- documents, page 127. 200, and the accompanying auditors’ report in chapter 13, page 318. The auditors’ statement is presented in chapter 13, page 333.
PUBLIC-ACCESS DOCUMENTS
The following materials are available on the PSA Peugeot Citroën - The 2003 Reference Document filed as an Annual Report website (www.psa-peugeot-citroen.com): with the Autorité des Marchés Financiers - The 2005 Reference Document filed with the Autorité des - Financial press releases Marchés Financiers The Peugeot S.A. bylaws may be consulted at the company’s - The 2004 Reference Document filed with the Autorité des head office at 75, avenue de la Grande-Armée, 75016 Paris Marchés Financiers (phone: +33 (0)1 40 66 55 11).
PSA Peugeot Citroën - 2005 reference document 263 THE VICE-PRESIDENTS COMMITTEE
THE VICE-PRESIDENTS COMMITTEE
Didier Aleton Bernard Delpit Hervé Guyot Manufacturing and Components, Finance, Control and Performance, Chief Executive, Banque PSA Finance Aulnay Manufacturing Center Budget Control Alain Hamm Alain Baldeyrou Philippe Dorge Platforms, Engineering and Purchasing, Manufacturing and Components, Employee Relations Vehicle Subassembly Activities Trnava Manufacturing Center and Human Resources, Institutional and Labor Relations Jean-Claude Hanus Frédéric Banzet Group Vice-President, Citroën Marque, Denis Duchesne Legal Affairs International Sales and Marketing Manufacturing and Components, Sochaux Manufacturing Center Pascal Hénault Vincent Besson Innovation and Quality, Citroën Marque, Yves Fallouey Research and Innovation Products and Markets Internal Audit and Organization Jean Jacquemart Patrick Briens Yves Fargues Citroën Marque, Manufacturing and Components, Vice-President Operations – China Sales and Marketing France Mulhouse Manufacturing Center Xavier Fels Liliane Lacourt Jean-Marie Brom Group Vice-President, Group Vice-President, Manufacturing and Components, External Relations Corporate Communications Poissy Manufacturing Center Jean-Martin Folz Véronique Larrieu-Pelegry Alain Cordier Chairman of the Managing Board Citroën Marque, Peugeot Marque, Communications Spare parts Logistics Jean-Charles Gaury Finance, Control and Performance, Norbert Lartigue Jean-Philippe Collin Automobile Accounting Platforms, Engineering and Purchasing, Platforms, Engineering and Purchasing, Chassis and Powertrains Purchasing Pierre Gosset Innovation and Quality, Jean-Paul Level Louis Defline Quality Platforms, Engineering and Purchasing, Chaiman, Gefco Vehicle Function Activities Jean-Louis Grégoire Yann Delabrière Group Vice-President, Liu Weidong Executive Vice-President, Executive Staff Chief Executive Officer, Finance, Control and Performance Dongfeng Peugeot Citroën Automobile Bruno de Guibert Christian Delous Peugeot Marque, Hubert Maillard Peugeot Marque, Products and Markets Platforms, Engineering and Purchasing, Sales and Marketing Europe Platform 1
264 PSA Peugeot Citroën - 2005 reference document THE VICE-PRESIDENTS COMMITTEE
Victor Mallo Jacques Pompanon Bernd Schantz Strategy and Group Product Planning, Employee Relations Peugeot Marque, Industrial Strategy and Human Resources, International Sales and Marketing Human Resources Development Daniel Marteau Michel Schreiber Strategy and Group Product Planning, Guy Quéromes Strategy and Group Product Planning, Manufacturer Relations Platforms, Engineering and Purchasing, Products and Marketing and Cooperation Agreements Cooperation Platforms Paul Sevin Gilles Michel Javier Riera Nieves Peugeot Marque, Executive Vice-President, Manufacturing and Components, Sales and Marketing France Platforms, Engineering and Purchasing Vigo Manufacturing Center François Soulmagnon Jean-Marc Nicolle Gilles Robert Employee Relations Executive Vice-President, Finance, Control and Performance, and Human Resources, Strategy and Group Product Planning International Finance Training and Working Conditions
Philippe Pelletier Alain Rojon Bernard Troadec Manufacturing and Components, Manufacturing and Components, Citroën Marque, Mechanical Component Plants Corporate Services Technical After Sales and Foundries Sylvie Rucar Claude Vajsman Bernard Peloux Finance, Control and Performance, Executive Vice-President, Citroën Marque, Group Treasurer Dongfeng Peugeot Citroën Automobile Services and Spare parts Frédéric Saint-Geours Roland Vardanega Christian Peugeot Executive Vice-President, Executive Vice-President, Peugeot Marque, Peugeot Marque Manufacturing and Components Communications Henri Saintigny Jean-Luc Vergne Robert Peugeot Special Advisor to the Chairman Executive Vice-President, Executive Vice-President, of the Supervisory Board Employee Relations Innovation and Quality and Human Resources Magda Salarich Jacques Pinault Citroën Marque, Daniel Zamparini Platforms, Engineering and Purchasing, Sales and Marketing Europe Innovation and Quality, Platform 2 and Automoviles Citroën España S.A. Information Systems
Jean-Claude Play Alain Sartoris Manufacturing and Components, Manufacturing and Components, International Cooperation and Rennes Manufacturing Center Manufacturing Claude Satinet Jean-François Poluzot Executive Vice-President, Platforms, Engineering and Purchasing, Citroën Marque Platform 3 As of March 1, 2006
PSA Peugeot Citroën - 2005 reference document 265 CROSS-REFERENCE TABLE
CROSS-REFERENCE TABLE
The table below provides cross references between the pages in the registration document and the key information required under European Commission Regulation (EC) n° 809/2004 implementing EC Directive 2003/71/EC of the European Parliament and of the Council.
Key information required under Annex 1 Registration document of European Commission Regulation 809/2004 page number 1. Persons responsible p. 262 to 263 2. Statutory auditors p. 262 3. Selected financial information 3.1. Historical financial information p. 104 to 118 and 133 to 210 and 263 3.2. Selected financial information for interim periods n.a. 4. Risk factors p. 119 to 122 5. Information about the issuer 5.1. History and development of the issuer p. 258 and 259 5.2. Investments p. 41 and 114 6. Business overview 6.1. Principal activities p. 10 and 36 to 102 6.2. Principal markets p. 124 to 129 and 152 to 153 6.3. Exceptional factors n.a. 6.4. Dependence on patents or licenses, industrial, commercial or financial contracts or new manufacturing n.a. 6.5. Competitive position p. 124 to 129 7. Organizational structure 7.1. Brief description of the Group p. 260 to 262 7.2. List of significant subsidiaries p. 212 to 225 8. Property, plant and equipment 8.1. Material tangible fixed assets and any major encumbrances thereon p. 131 and 163 8.2. Environmental issues that may affect the utilization of tangible fixed assets p. 86 and 119 9. Operating and financial review 9.1. Financial condition p. 111 to 118 9.2. Operating results p. 104 to 110 10. Capital resources 10.1. Information concerning capital resources p. 115; 118 10.2. Cash flows p. 113 to 115; 138 10.3. Borrowing requirements and funding structure p. 111 to 112 and 185 to 189 10.4. Restrictions on the use of capital resources p. 112 10.5. Anticipated sources of funds p. 111 11. Research and development, patent and licenses p. 11 ; 82 to 88 and 107 to 108 12.Trend information p. 12 and 42
266 PSA Peugeot Citroën - 2005 reference document CROSS-REFERENCE TABLE
13. Profit forecasts or estimates n.a. 14. Administrative, management, and supervisory bodies and senior management 14.1. Administrative bodies p. 14 to 18 and 23 to 31 14.2. Conflicts of interest p. 17 and 33 15. Remuneration and benefits 15.1. Remuneration and benefits in kind p. 32 and 33 15.2. Total amounts set aside or accrued to provide pension, retirement or similar benefits p. 181 16. Board practices 16.1. Date of expiration of current terms of office p. 23 to 31 16.2. Service contracts with members of the administrative, management or supervisory bodies p. 17 16.3. Audit and compensation committees p. 16 16.4. Statement of compliance with France’s corporate governance regime p. 14 17. Employees 17.1. Number of employees p. 65 17.2. Shareholdings and stock options p. 23 to 31 and 33 17.3. Arrangements which may result in a change in control of the issuer n.a. 18. Major shareholders 18.1. Shareholders owning over 5% of the capital p. 241 18.2. Different voting rights p. 259 18.3. Control of the issuer p. 241 18.4. Arrangements which may result in a change in control of the issuer n.a. 19. Related party transactions n.a. 20. Financial information concerning the issuer’s assets and liabilities, financial position and profits and losses 20.1. Historical financial information p. 134 to 211; 254 to 256 and 263 20.2. Pro forma financial information n.a. 20.3. Financial statements p. 134 to 211 20.4. Auditing of historical annual financial information p. 254 to 256 and 263 20.5. Age of latest financial information p. 134 to 211 20.6. Interim and other financial information n.a. 20.7. Dividend policy p. 238 20.8. Legal and arbitration proceedings p. 120 20.9. Significant change in the issuer’s financial or trading position p. 203 21. Additional information 21.1. Share capital p. 239 to 242 21.2. Memorandum and articles of association p. 258 to 259 22. Material contracts n.a. 23.Third party information and statement by experts and declarations of any interests n.a. 24. Documents on display p. 263 25. Information on holdings p. 212 to 225 and 260 to 261
PSA Peugeot Citroën - 2005 reference document 267 NOTES
268 PSA Peugeot Citroën - 2005 reference document 4,000 copies of this document were printed.
A copy of this document may be requested at the following adress: PSA PEUGEOT CITROËN - Investor Relations Department 75, avenue de la Grande-Armée - 75116 Paris, France - Tel.: (33) 1 40 66 37 60 - Fax : (33) 1 40 66 51 99 Design and production: Franklin Partners - Groupe Mediagérance Printed in France PEUGEOT S.A. Incorporated in France with issued capital €234,618,266 Governed by a Managing Board and a Supervisory Board Registered office: 75, av de la Grande-Armée 75116 Paris, France R.C.S. Paris B 552 100 554 Siret 552 100 554 00021
Tel.: 33 (1) 40 66 55 11 Fax: 33 (1) 40 66 54 11 www.psa-peugeot-citroen.com