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- A new defined contribution supplementary pension plan was set up
on July 1, 2002.
Under this plan, eligible employees will be entitled to supplementary
pension benefits if their compensation exceeds the ceiling for social
security contributions during all or part of their remaining service lives
from the date on which the plan was set up. The rights of eligible
employees corresponding to the defined contributions will vest
immediately. Two-thirds of the contributions are paid by the employer
and one-third by the employee.
Since it is a defined contribution plan, the Group has no future
obligations towards employees under the plan. The cost of the plan is
charged to income when the contributions are paid.
4. Periodic pension cost
The total obligation is determined at each year-end as explained above.
The periodic pension cost each year corresponds to:
- service cost, representing the benefit entitlements earned by
employees during the year,
- interest cost, corresponding to adjustments to the discounted present
value of the opening projected benefit obligation,
- amortization of deferred items.
The periodic pension cost is partially offset by the return on external
funds, calculated on the basis of a standard rate of return on long term
investments (8 % up to 1999, 7.5% as from 2000). The difference
between the standard rate of return and the actual return on external
funds (for French funds, (2.59%) in 2002, (0.9%) in 2001, 3.3 % in
2000) is deducted from or added to the unamortized net obligation.
The periodic pension cost is included in payroll costs except for the
€82 million net exceptional cost arising from the June 2002 change in
the Group’s supplementary pension plans. It can be analyzed as follows:
(in millions of euros) 2002 2001 2000
French companies (37) (41) (41)
Foreign companies (44) (42) (42)
Service cost (81) (83) (83)
French companies (64) (71) (69)
Foreign companies (90) (90) (70)
Interest cost (154) (161) (139)
French companies 58 70 69
Foreign companies 82 87 72
Return on external funds 140 157 141
French companies (21) (16) (11)
Foreign companies (14) 13 7
Amortization of deferred items (35) (3) (4)
French companies (82) - -
Foreign companies 1 - -
Curtailments and settlements (81) - -
French companies (146) (58) (52)
Foreign companies (65) (32) (33)
Total (211) (90) (85)
o/w manufacturing and
sales companies (208) (89) (82)
o/w finance companies (3) (1) (3)
b) 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 46-a). The estimated
liability is reserved for in full in the accounts and amounts to:
(in millions of euros) 2002 2001 2000
French companies 22 19 16
Foreign companies 3 2 4
Total 25 21 20
c) Other post-retirement benefits
In addition to the retirement obligations described above, Faurecia
Exhaust Systems Inc., an American subsidiary of Faurecia, pays the
healthcare costs of retired employees.
The related obligation is reserved for in full in the consolidated
financial statements and amounts to:
(in millions of euros) 2002 2001 2000
24 28 27
➔ Note 47 - Foreign exchange and
interest risk management
a) General principles
1. Currency risk
The manufacturing and sales companies manage their foreign exchange
positions on transactions denominated in foreign currencies with the
objective of hedging the risk of fluctuations in exchange rates. These
risks primarily concern the Automobile division. Positions are managed
primarily by making forward purchases or sales of the currencies
concerned, as soon as the foreign currency invoice is accounted for,
through the PSA Peugeot Citroën Group's specialized company, PSA
International S.A. (PSAI). PSAI also hedges currency risks on firm
planned transactions to be carried out by the Automobile division in
yen (note 47-c) 3).
PSAI also carries out transactions involving currency instruments as
part of its activities. These transactions, which are subject to very strict
exposure limits, are closely monitored on a continuous basis. They are
the only non-hedging transactions carried out by companies in the
PSA Peugeot Citroën Group and do not have a material impact on
consolidated net income.
2. Interest rate risk
Cash surpluses and short-term financing needs of manufacturing and
sales companies except Automotive Equipment companies in euroland
countries and, since 2001, in sterling, are centralized at the level of
GIE PSA Trésorerie which invests net cash reserves on the financial
markets, mainly in short-term instruments indexed to floating rates.
The gross borrowings of manufacturing and sales companies except
Automotive Equipment companies consist mainly of fixed and
adjustable rate long-term loans.
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PSA PEUGEOT CITROËN - APPENDICES TO THE MANAGING BOARD REPORT