PSA COUV page . page RA GB - PEUGEOT Presse

1. Automobile division
An early-termination plan has been set up for Automobile division
employees in France, in application of an internal agreement dated
March 4, 1999 and an industry-wide agreement signed on July 26, 1999
by UIMM (the industry federation) with the support of the majority of
trade unions represented within the Group.
2. Automotive Equipment division
Following further negotiations between UIMM and the trade unions, in
March 2001, the plan was extended to additional companies, including
the Faurecia group.
b) Estimated liability
1. 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 4.1% and an inflation rate of 1.75%. The
short-term portion is included in “Other payables” and the long-term
portion is reported under “Reserves for contingencies and liabilities”.
2. Change in estimated liability
Reserves for
(in millions of euros) Other contingencies
payables and liabilities
Balance as of December 31, 2001 62 323
Early-termination cost for the year (57) -
Changes in employee numbers - 118
Discounting adjustment (5) 45
Transfer from long-term to short-term 86 (86)
Balance as of December 31, 2002 86 400
The €158 million charge recorded in the income statement includes
€118 million corresponding to the cumulative effect of changes in
employee numbers and a €40 million discounting adjustment. The €57
million reversal is offset by a charge recorded under payroll costs
representing the Group’s contribution to the Unedic fund responsible
for paying benefits to terminated employees.
For the Automobile division, the charge for changes in employee
numbers reflects the reduction in the early-retirement age for certain
production workers from 57 to 56 and the extension of the plan to
technical and industrial supervisors through February 2005.
c) Number of employees concerned
As of December 31, 2002, 13,978 employees were concerned by the
plans, including 881 Faurecia group employees.
➔ Note 46 - Pension and other postretirement
benefits
a) Supplementary pensions and retirement bonuses
Group employees in certain countries – mainly France, the United
Kingdom and Germany – are entitled to supplementary pension
benefits, payable annually, or retirement bonuses, representing one-off
payments made at the time of retirement.
This note describes the accounting treatment of obligations under
defined benefit plans as opposed to defined contribution plans under
which the Group has no future obligations towards employees.
1. Calculation base
The Group’s obligation under these supplementary pension and
retirement bonus plans is calculated on an actuarial basis by independent
actuaries using models based on the method defined in US standard
SFAS 87. Actuarial valuations are generally performed at three-yearly
intervals, or more frequently in cases of a change in actuarial
assumptions. The most recent actuarial valuations for the principal plans
were carried out as of December 31, 2002 based on:
- retirement age assumptions, generally based on retirement at the age of
60 for employees in France or after 60 in the case of employees who
have not paid pension contributions over the minimum period required
to qualify for a full pension under the government-sponsored scheme;
- an appropriate discount rate;
- an appropriate inflation rate.
Deferred items include:
- unrecognized net gains and losses corresponding to the effect of
changes in actuarial assumptions, together with the difference
between the actual return on plan assets held in external funds and
the return calculated based on the estimated yield on long-term
investments. These gains and losses, which are not recognized in the
balance sheet, are amortized over the estimated average remaining
service lives of employees.
- unrecognized transition obligations corresponding to gains and losses
arising on adoption of SFAS 87 and following retroactive plan
amendments (prior service cost).
These gains and losses, which are not recognized in the balance sheet, are
amortized over the estimated average remaining service lives of employees.
Total pension obligations, including the transition obligation, are intended
to be funded by contributions to external funds. Any excess of external
funds over the sum of the projected benefit obligation and the transition
obligation is recorded as an asset under “Other non-current assets”.
2. Assumptions used
The assumptions used to calculate the Group’s obligation for pension
and other retirement benefits are as follows for 2002, 2001 and 2000:
(in %) Euro zone United Kingdom
Discount rate
Inflation rate
2002 5.25 5.75
2001 5.75 6.00
2000 6.00 6.50
2002 1.75 2.25
2001 1.75 2.00
2000 2.00 2.50
France United Kingdom
Return on long-term investments
2002 7.50 7.25
2001 7.50 7.25
2000 7.50 7.25
Mortality and staff turnover assumptions used are based on the specific
economic conditions of each Group company or the country in which
they operate.
PSA PEUGEOT CITROËN - APPENDICES TO THE MANAGING BOARD REPORT 169