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Management’s discussion and analysis
prices were successfully adjusted in most
of its markets. These adjustments more
than offset the cost of extending the
standard warranty period from one to
two years in most Western European
countries, between the end of 2001 and
the beginning of 2002;
- production cost savings totaled €773
million, including some €106 million
attributable to lower raw materials prices.
This further demonstrated the Group’s
ability to steadily reduce production
costs, excluding raw materials, by around
an aggregate €600 million a year;
- changes in exchange rates had a negative
impact of €71 million, mainly attributable
to the British pound and the Polish zloty;
- increases in employee compensation had
an estimated impact of €236 million,
including a €19 million rise in statutory
profit-sharing and incentive bonus
programs. In all, €232 million was
granted to Automobile Division employees
under these two programs in 2002
(€249 million for the Group as a whole);
- higher research and development
spending had a €170 million impact;
- capital spending-related increases in
depreciation expense and operating costs
reduced operating margin by €130 million;
- lastly, a €43 million charge was recorded
in connection with the new European
regulations governing end-of-life vehicles,
primarily related to vehicles in the
Netherlands.
Operating margin in the Transport and
Logistics business amounted to €134 million,
representing 5.1% of sales, versus
€119 million (4.5% of sales) in 2001 and
€100 million (4.3% of sales) in 2000.
The 12.6% increase in 2002 – achieved in
a period of economic weakness and
subdued sales growth – was attributable to
the increased proportion of sales generated
by higher value-added services (logistics,
warehousing and car preparation services)
coupled with ongoing productivity gains.
Automotive Equipment operating margin
came to €251 million after eliminating
transactions with the Automobile Division
or €256 million including these transactions,
representing 2.6% of sales. The comparative
figures for 2001 and 2000 were respectively
€260 million (2.7% of sales) and €182
million (3.1% of sales).
The change in operating margin in 2002
reflects the net impact of the following
developments:
- strong growth in sales (up 7.8% excluding
catalytic converters), with all businesses
except exhaust systems contributing to
the increase;
- sustained productivity gains achieved
under the 10/10 Plan, as well as through
the redeployment of manufacturing
resources and the implementation of a
new purchasing plan;
- the initial benefits of the new program
management system (PMS);
- significantly lower margins compared with
earlier generations under programs that
went into production between 2000 and
2002 and accounted for 50% of 2002
sales; a limited number of these programs
are currently generating negative margins;
- high production start-up costs, due in part
to the large number of launches in 2002
but also performance levels that still fall
short of expectations;
- tight control over research and
development costs, which, excluding
costs billed to customers, declined
16.1% to €215 million in 2002;
- an increase in administrative and selling
expenses, to the equivalent of 2.9% of
sales versus 2.6% the previous year, in
order to enhance the management
resources needed to cope with Faurecia’s
increased size.
3.2. Research and development costs -
manufacturing and sales companies
R&D costs totaled €1,865 million
versus €1,733 million in 2001. Spending
increased by 7.6% in 2002 and 6.6%
in 2001.
Automobile Division R&D spending came
to €1,631 million, an increase of 11.6%
compared with 5.3% in 2001. Controlled
growth in these costs, which currently
increase at roughly the same rate as sales,
is attributable to the platform strategy,
which has been applied to all new vehicle
development since 2001. That was when
the three platforms that serve as the basis
for the majority of the Group’s vehicles
became fully available, leading to a
significant decrease in the R&D costs of
vehicles to be launched.
The strategy of cooperation with other
carmakers is also delivering increasing
benefits in terms of R&D costs. This strategy
allows the Group to share development
and process engineering costs with its
partners on a 50/50 basis for new
mechanical components (Ford, BMW,
Renault) or platforms (Fiat, Toyota). In
2002, R&D costs shared with partners
totalled €428 million.
Automobile Division R&D spending for
2002 represented 3.7% of division sales.
Including development costs related to
existing models, covering new versions,
new engine offers and restyles, the total
was €2,019 million, corresponding to
4.6% of sales. These latter costs are
included in cost of sales, rather than R&D
costs, in order to present production costs
more fairly and measure sales margins
more accurately. The current contained
growth in R&D spending means that both
percentages are close to those for 2001
(3.5% and 4.5% respectively).
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