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CITROňN AND PEUGEOT:
STRENGTH THROUGH CO-OPERATION

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15th July, 2005


By maintaining a highly skilled and flexible manufacturing base and carefully managing costs, PSA Peugeot CitroŽn is able to meet its goal of sustained long-term growth by producing expanded model line-ups of technically innovative yet sensibly priced vehicles.

This year alone the Group is introducing the Peugeot 1007, the Peugeot 107 and CitroŽn C1, the Peugeot 407 Coupť, the new Peugeot 307 and the CitroŽn C6 - a wide range of vehicles to satisfy an increasingly diverse and demanding international customer base.

To speed the growth behind this high model roll-out and yet keep additional costs to a minimum, PSA Peugeot CitroŽn maintains its own platform sharing manufacturing policy, while pursuing a clear strategy of joining hands with other vehicle manufacturers in long-term technological and manufacturing agreements.

Explaining the benefits of these agreements at the unveiling of the three new small cars made jointly with Toyota at the Geneva Motor Show earlier this year, Jean-Martin Folz said:

"Today, more than ever, we feel that this type of partnership between independent companies is the most appropriate response to the challenge of increasingly global markets and fast-changing customer expectations. These "win-win" agreements allow us to share development and production costs without renouncing our independence, and to pool skills and expertise. They also generate the economies of scale we need to be competitive, by speeding our development and increasing production capacity. In addition, such cooperations offer many opportunities to learn about each other's culture and processes."

An essential feature of these alliances is that each partner remains independent, ensuring the Group can deliver a diverse product offering to international markets without taking on burdensome capital or equity commitments. This also allows these projects to account for significant parts of the business without altering the group's core activities. For example, the diesel engines cooperation with Ford accounts for approximately two thirds of the Group's diesel engine requirements and will, this year alone, produce some 3 million diesel engines.

This cooperation strategy enables the Group to keep a presence in more than 140 countries. With worldwide sales of 3,375,300 vehicles in 2004, the Group has maintained its No. 2 position in Europe as well as expanding rapidly in other parts of the world, particularly in Central and Eastern Europe, in South America and China. In 2004, the Group sold 951,000 vehicles on international markets, 16% up on 2003 and accounting for 28% of total sales.

PSA Peugeot CitroŽn has for decades demonstrated an ability to forge technological and manufacturing agreements which respect each partner's personality and independence. It has worked with Renault on V6 engines and mid-range automatic transmissions, with Fiat on MPVs and light commercial vehicles and with the Ford Motor Company on a comprehensive line of common rail direct injection diesel engines, with Toyota on small entry-level European cars and with BMW on small, high-tech gasoline engines. This strategy is continuing with Fiat and Tofas for the joint development and production of a small utility vehicle and with Mitsubishi Motors Corporation in SUVs.




Cooperation Projects with Vehicle Manufacturers in Detail


Renault

PSA Peugeot CitroŽn and Renault have been working together for more than 30 years on the development of powertrain components. The two groups currently produce V6 petrol engines and automatic gearboxes at La FranÁaise de Mťcanique, in Douvrin, northern France.

History

1966: The Chairmen of Peugeot and Renault sign a cooperation agreement for the joint production of mechanical subassemblies.

1969: The partners establish La FranÁaise de Mťcanique to produce long-series components and engines and the Sociťtť de Transmissions Automatiques (STA) to produce automatic transmissions for Renault and rear-axle assemblies for Peugeot at its Ruitz plant in northern France.

1971: Peugeot and Renault join forces with Volvo to design and build a V6 engine at La FranÁaise de Mťcanique. Volvo withdraws from the venture in 1980.

1992: PSA Peugeot CitroŽn and Renault sign a technological and industrial agreement to develop a new family of automatic transmissions.

1996: La FranÁaise de Mťcanique introduces the new V6 Petrol engine for mid and high-end Renault, Peugeot and CitroŽn models.

1997: The BVA self-acting automatic transmission is introduced, to be manufactured at the STA plant in Ruitz and PSA Peugeot CitroŽn's plant in Valenciennes at a cost to each partner of FRF1.4 billion.

2000: The partners introduce a new three-litre V6 engine to be gradually installed in mid and high-end Renault, Peugeot and CitroŽn cars and multipurpose vehicles. 26,800 units produced that year at La FranÁaise de Mťcanique.


Fiat

PSA Peugeot CitroŽn and Fiat have jointly developed and produced LCVs for almost 30 years and more recently MPVs. The Sevelnord plant at Hordain, northern France and the Sevelsud plant at Val di Sangro, Italy, have produced over 3 and a half million LCVs since 1978 and more than half a million MPVs since 1994. Recently a three-way agreement with Fiat and the Turkish company Tofas was signed to jointly develop and produce a new small LCV in Turkey.

History

1978: PSA Peugeot CitroŽn and Fiat sign their first cooperation agreement to design and produce a LCV. This leads to the creation of a joint venture, Sociťtť Europťenne de Vťhicules Lťgers (Sevel SpA).

1981: Production of large LCVs begins at Val di Sangro : the Fiat Ducato, the Peugeot J5 and the CitroŽn C25.

1988: The partnership is extended to replace vehicles in production since 1981 and a new agreement is signed to design and produce a MPV.

1993: Production of small LCVs starts at Val di Sangro: the CitroŽn Dispatch, the Peugeot Boxer and Fiat Ducato.

1994: The new Sevelnord plant is brought on stream to produce the Peugeot 806, CitroŽn Synergie, Fiat Ulysse and Lancia Z (Zeta). The Peugeot Expert, CitroŽn Relay and Fiat Scudo (large LCVs) are added to the plant's portfolio in 1995.

2002: Fiat Auto and PSA Peugeot CitroŽn sign an agreement to extend their two companies' industrial cooperation for LCVs through to 2017, committing around Ä1.7 billion to the manufacture of two new lines from 2005.

2005: Fiat, PSA Peugeot CitroŽn and Tofas sign a cooperation agreement to develop and produce small, entry-level LCVs powered by especially fuel efficient engines at the Tofas plant in Bursa, Turkey for rollout in 2008. Destination: European markets. Annual production capacity will be 135,000 units, of which 2/3 for PSA Peugeot CitroŽn and 1/3 for Fiat including Tofas. Total investment, including R & D and production start-up costs estimated roughly at Euros 350 Million.


Ford

With a development and production investment of Ä1.22 billion, this joint cooperation will see the 2 partners become the world's leading diesel engine manufacturers in the short term, producing some 3 million diesel engines in 2005 - more than 9,000 engines a day. The JV will produce and market 4 families of common rail direct injection diesel engines; 1.4-litre, 1.6-litre, second-generation 2-litre, and 2.7-litre V6 engine, plus a new family of engines for light commercial vehicles.

History

1998: PSA Peugeot CitroŽn and Ford Motor Company announce an agreement to jointly develop a new family of small common rail diesel engines incorporating the latest technologies. With a development target of two and a half years, the new engine is to be manufactured at the Douvrin plant.

1999: An agreement is signed to extend the cooperation over four specific phases: "An extension of the family of small aluminium diesel engines already being engineered by the partners "Technological upgrades of a mid-sized second generation HDi engine "A family of V-shaped diesel engines for both companies' luxury vehicles " An extended range of diesel engines with new technologies to equip commercial vehicles.

2001: PSA Peugeot CitroŽn and Ford Motor Company introduce the first direct injection diesel engine developed under their cooperation agreement. Marketed as the 1.4 HDi by PSA Peugeot CitroŽn and as the Duratorq TDCi 1.4 by Ford, the engine is to equip PSA Peugeot CitroŽn Platform 1 and 2 vehicles and Ford's small and mid-range cars.

2003: With a further investment of nearly Ä1 billion, PSA Peugeot CitroŽn and Ford introduce a new 1.6-litre and a 2-litre common rail direct injection diesels to be manufactured at PSA Peugeot CitroŽn's Trťmery plant - northern France - and to gradually equip both partners' model lines in the second half of 2003. PSA Peugeot CitroŽn have the lead in the engineering production and production for the first 2 phases of 1.4, 1.6 and 2.0 engine families

Also announced is a new high performance 2.7 litre V6 diesel engine to be produced at Ford purpose-built facilities at Dagenham in the UK. This new engine will debut on a Jaguar model (the S type). The project represents an investment of Ä350 million by Ford Motor Company and PSA Peugeot CitroŽn. Ford has the lead and production responsibility for this V6 premium diesel engine and for the forthcoming range of LCV diesel engines.

2004: the 2 partners announce plans for expansion of diesel engine production for the 1.4, 1.6 and 2.0 litre. Addition of production facilities for 1.4 and 1.6 at Ford Dagenham from 2007, and for the 2.0 at Volvo's Kovde engine plant in Sweden from 2006. This is a clear indicator of the strength of the cooperation between Ford & PSA Peugeot CitroŽn.


Toyota

In 2001, the two groups signed a cooperation agreement to jointly develop and produce 3 small cars to be marketed primarily to the European market - The Peugeot 107, CitroŽn C1 and Toyota Aygo - at a brand new plant in KolŪn, 60 kilometres east of Prague in the Czech Republic.

Toyota has the responsibility of the major part of the developing of the vehicles and of the construction of the plant. PSA Peugeot CitroŽn develops the seats and the diesel engine installation and is responsible for project procurement, selecting suppliers from both Groups' regular rosters but also locally - approximately 80% of purchasing volumes, representing more than 50% of total sourcing value, come from the Czech Republic.

Production started in March 2005 at the Toyota Peugeot CitroŽn Automobile (TPCA) plant in Kolin, which will have a capacity of 300,000 vehicles a year - 200,000 units for Peugeot and CitroŽn and 100,000 for Toyota. The project represents a total investment (R & D and industrial expenditure) of around Ä1.3 billion and will employ some 3,000 people.

History

March 2002: Toyota Peugeot CitroŽn Automobile Czech (TPCA) is formed.

October 2002: First stone is laid by Jean-Martin Folz, Chairman of PSA Peugeot CitroŽn, and Fujio Cho, President of Toyota Motor Corporation. The site will cover some 120 hectares and will offer complete vehicle manufacturing facilities: stamping, welding, final assembly and painting.

December 2004: First official photos of the 3 cars are published: the Peugeot 107, Toyota Aygo and CitroŽn C1 are revealed as modern four-passenger vehicles.

February 2005: The first production models of the Peugeot 107, Toyota Aygo and CitroŽn C1 roll off the TPCA assembly line. The vehicles go on show for the first time on the eve of the Geneva Motor Show.

June 2005: TPCA officially opens.


BMW

In 2002, PSA Peugeot CitroŽn and BMW announced a cooperation to jointly develop and produce a new family of small technically advanced petrol engines in a new unit at La FranÁaise de Mťcanique in Douvrin, north west France. The engines will equip small and mid-size Peugeot and CitroŽn cars and the BMW Mini from 2006. Total output expected: around one million units a year, or 2,500 a day.

The new engine family is a significant move for both partners in fulfilling the self-commitment assumed by European car makers within their European Association (ACEA), promising to reduce fleet consumption and, as a result, CO2 emissions to 140 g/km by the year 2008.

History

July 2002: PSA Peugeot CitroŽn and BMW Group announce that they have joined forces to develop and manufacture a new family of small gasoline engines. Peugeot, CitroŽn and future variants of MINI vehicles will be equipped with the engines from this cooperation project. The BMW Group R&D department is in charge of designing the engines with the common project team based in Munich. PSA Peugeot CitroŽn will manage process development, engineering for production, manufacturing as well as procurement.

January 2003: PSA Peugeot CitroŽn to manufacture the new family of small gasoline engines at a new production unit within the FranÁaise de Mťcanique plant at Douvrin. Developed on the same production model designed for the 1.4-litre HDi common rail diesel engine, the highly integrated production unit comprises machining lines for the main engine components (cylinder head, crankcase, crankshaft, and connecting rod) and related assembly lines. The new unit will cover around 60,000 square meters and represents an investment of some Ä430 million. At full capacity, it will employ 850 people producing up to 2,500 engines a day.

December 2004: PSA Peugeot CitroŽn and BMW Group unveil the state-of-the-art technologies deployed in their new gasoline engines. 2 engines at launch: A 1.6-litre 85 kW (115 hp) normally aspirated engine and a 1.6-litre 105 kW (143 hp) direct injection, compressed turbo engine.


Mitsubishi

In February 2005 , PSA Peugeot CitroŽn and Mitsubishi sign a memorandum of understanding for a partnership on a new SUV platform, with 30,000 vehicles a year to be produced in Japan and sold under the Peugeot and CitroŽn marques.

Scheduled for rollout in 2007, the Peugeot and CitroŽn versions will be styled differently, but both will be equipped with the latest HDi diesel engines fitted with the Group's Diesel Particulate Filter System (DPFS). They aim to attract new customers in predominantly European markets.





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