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Growth Strategy
Corporate
Governance
Business Review
Corporate Policies
Management’s
Discussion
and Analysis
Statistics
measures at certain Faurecia plants,
including the closure of the Toledo plant
in the United States, the Sassenburg plant
in Germany, the Senones and Crevin plants
in France and the Roermond plant in the
Netherlands; initial downsizing measures
in Argentina, implemented in May 2001,
and a downsizing plan at the Automobile
division’s Villaverde plant in Spain.
Restructuring costs for 2000 amounted
to €41 million and concerned the closure
of three Faurecia plants at Nogent-sur-
Seine, Tredegar and Northampton.
4.3. Net interest expense - manufacturing
and sales companies
In 2002, the Group had net interest
expense of €25 million, compared with
net interest expense of €48 million in 2001
and net interest income of €86 million in
2000. The sharp reduction in interest
expense in 2002 stems from the use of
the substantial free cash flow generated by
the manufacturing and sales companies
to pay off debt. Following the acquisition
by Faurecia of Sommer Allibert’s automobile
business, the manufacturing and sales
companies had net debt of €102 million
as of June 30, 2001 and €511 million as of
December 31, 2001. By June 30, 2002, the
situation had been reversed and the
manufacturing and sales companies had
net cash reserves of €362 million, rising to
€594 million at the year-end. The industrial
and financial restructuring measures taken
in Argentina at the end of 2001 and in
early 2002 enabled Peugeot Citroën
Argentina to pay off its debt, which had
become very expensive in the second half
of 2001 due to the extremely high local
interest rates.
Interest expense increased in 2001
compared with 2000 primarily due to the
cost of financing Faurecia’s acquisition of
Sommer Allibert’s automobile business.
In addition, the cost of financing the
Automobile division’s operations in
Argentina and Brazil rose by €53 million.
In Brazil, the higher interest costs were
due to the investment in the new Porto
Real plant, 50% of which was financed
by borrowings in real. In Argentina, the
increase was due to soaring interest rates
in the second half of the year. Lastly,
significantly lower money market rates in
euros in the second half of 2001 led to a
drop in interest income from the investment
of the surplus cash generated by the
Automobile Division in Europe.
4.4. Other income and expense
Other income and expense represented
income of €19 million in 2002, versus
€189 million in 2001 and €18 million
in 2000. These amounts break down as
follows:
(in millions of euros) 2002 2001 2000
Manufacturing and sales companies 22 193 21
Finance companies (3) (4) (3)
Total PSA Peugeot Citroën 19 189 18
The net amount for 2002 includes a €101
million charge to cover the impact of
decisions concerning supplementary
pension benefits for employees in France
other than in the Automotive Equipment
division. Details of these decisions are
provided below (see Group Financing 5.
Supplementary pension and other postretirement
benefits). The charge results
from the decision that employees covered
by the defined benefit plan would cease
earning benefit entitlements under the
plan effective from June 30, 2002 except
for employees aged over 59. It corresponds
to the immediate recognition of the
portion of pension obligations previously
included in deferred items and amortized
over the remaining service lives of the
employees concerned, together with the
related income tax and payroll tax effects.
Other income and expenses also include a
€89 million gain on sales of marketable
securities.
Income for 2001 corresponds mainly
to the €228 million pre-tax gain realized
on the sale of a real estate complex in the
Paris area that was surplus to the Group’s
requirements. In additional, €27 million
were released from the reserve for
redemption premiums on the 1994
convertible debenture issue, following
conversion at maturity of 722,586
debentures into Peugeot S.A. shares,
during the first quarter of 2001. This
income was partly offset by a €14 million
loss on the divestment of Transauto-Stur
by Gefco.
In 2000, the Group realized €95 million
PSA PEUGEOT CITROËN - MANAGING BOARD REPORT 105