Increased output and efficiency for PSA Peugeot-Citroen’s production base

January 27,2003; Building on strong growth over the past five years, PSA Peugeot-Citroen has embarked on a programme to enhance the efficiency of its production facilities. This initiative, combined with a further increase in output in the coming years, will help to improve profitability.

PSA Peugeot Citroën produced 3,262,100 vehicles in 2002, 55% more than in 1998, when the Peugeot and Citroën plants were combined and the platform policy was introduced. Current output is 14,000 vehicles a day in 14 assembly plants (of which three operated under cooperation agreements).

To expand output, new production schedules have been introduced, extending operating hours and increasing the European capacity utilization rate to 117%, compared with 69% on 1 January 1998. Plants operate non-stop (no summer shutdown) in three or four shifts, including a weekend shift.

The production base has also been expanded with additional production capacity outside Europe, at Porto Real in Brazil, Buenos Aires in Argentina and Wuhan in China. By 2005-2006, additional capacity will come on stream in Central Europe, at plants under construction in Kolin in the Czech Republic and Trnava in Slovakia.

PSA Peugeot Citroën has now reached a stage in its development where it can focus on enhancing manufacturing efficiency, based on three improvement drivers:

- Deploying the platform strategy

The platform strategy is now in place, and the three new platforms account for 60% of total output, although only 50% of the projected economic benefits had been achieved at end-2002. Continued deployment of this strategy as new models are launched will be a source of further efficiency gains and cost savings.

- Implementing an improved manufacturing system

The manufacturing system, which is currently being deployed at PSA Peugeot Citroën, has been shaped by the general improvement in the Group’s production facilities, based on:

- The Convergence Plan, which aims to align Group production sites with global best practices.

- The modernization of industrial processes and logistics, for which the capital budget is €1 billion a year.

- Efficient plant organization, in areas such as maintenance and procurement.

- Improving assemblability and working conditions

Significant progress has been made in improving new vehicle assemblability and working conditions. Easier parts assembly, fewer components and enhanced workstation ergonomics will drive major improvements in manufacturing performance.

Together, these initiatives are expected to generate more than €1 billion a year in savings by 2006. They will also enable the PSA Peugeot Citroën production base to further increase output to 4 million vehicles while improving efficiency.

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