2003 Financial statements - KU Leuven · The Automobile & Faurecia 3 consolidated financial...

2003 Financial statements

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Board of Directorsat December 31, 2003

Pierre LéviChairman and Chief Executive Officer

DirectorsLouis DeflineYann DelabrièreDaniel DewavrinPatrick DuvergerJean-Martin FolzJean-Louis GérondeauJean-Claude HanusGérard HauserThierry PeugeotDietrich Russell

Executive Committeeat December 31, 2003


Caspar BaumhauerModules and Systems Business Group

Patrick BikardGroup Industrial

Gérard BreiningGroup Purchasing

Gérard ChochoyAutomotive Seating Business Group

Arnaud de David-BeauregardGroup Development

Jean-Michel ElterGroup Customer Development

Jean-Marc HannequinExhaust Systems Business Group

Laurent HebenstreitInterior Systems Business Group

Thierry LemâneGroup Communications

Jean-Marc SalvanèsGroup Human Resources

Christophe SchmittComponents Business Group

Pierre-Jean SivignonChief Financial Officer

AuditorsStatutory AuditorsPricewaterhouseCoopers Auditrepresented by Christian Martin32, rue Guersant – 75017 Paris

Ernst & Young Auditrepresented by Patrick LhommeFaubourg de l’Arche 92400 Courbevoie

Alternate AuditorsCatherine Sabouret32, rue Guersant – 75017 Paris

Christian de ChastelluxTour Ernst & Young – 11, allée del’Arche92037 Paris-La Défense Cedex

Photo credits:A. Gonin, S. Muratet and C. Peus.

Design and publishing:

02 Group structure

04 Consolidated statements

05 Management report

23 Consolidated statements

55 Parent company financial statements


58 Resolutions


86 General information

Conte

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2 consolidated financial statementsThe Automobile & Faurecia

Simplified Group structure

Simplified organization chart of operatingcompanies at December 31, 2003

100%

100%

Faurecia Siègesd’Automobile(France)

Ecsa(France)

Siebret(France)

Siedoubs(France)

Sielest(France)

Sieloir(France)

Siemar (France)

Sienor (France)

Sieto (France)

Société Automobiledu Cuir de Vesoul(France)

Sotexo(France)

Armaduras deAsientos Ardasa SA(Spain)

Industrias CousinFrères SL(Spain)

Copo Ibérica SA(Spain)

Faurecia Assentos de Automóvel Lda(Portugal)

EDA – Estofagem de Assentos Lda(Portugal)

Sasal(Portugal)

Vanpro Assentos Lda(Portugal)

SAI AutomotivePortugal(Portugal)

Faurecia Lecotex AS(Czech Republic)

Faurecia AutositzeGmbH & Co. KG(Germany)

Faurecia AutomotiveSeating BV(Netherlands)

Faurecia FoteleSamochodowe SpZoo(Poland)

Faurecia WalbrzychSpZoo(Poland)

Arsed doo(Slovenia)

Faurecia Sistemas deEscape España SA(Spain)

Faurecia ExhaustMexicana SA(Mexico)

Tecnoconfort(Spain)

Faurecia ExhaustSystems Sro(Czech Republic)

Faurecia ServicesGroupe(France)

Faurecia Systèmesd’Échappement(France)

Faurecia ExhaustSystems AB(Sweden)

Faurecia Sistemas deEscape Portugal Lda(Portugal)

Sheesc(China)

Teec(China)

Daeki FaureciaCorporation(Korea)

Faurecia AutomotiveSeating UK Ltd(Great Britain)

Faurecia MidlandsLtd(Great Britain)

Faurecia Sistemas de Escapamento do Brasil Ltda(Brazil)

Faurecia Japan KK(Japan)

Cfxas(China)

Faurecia GSK(Wuhan) AutomotiveSeating Co. Ltd(China)

Faurecia ExhaustSystems South Africa(South Africa)

Faurecia ExhaustSystems Inc.(United States)

Exhaust ServicesMexicana SA(Mexico)

Faurecia NHK Co. Ltd(FNK)(Japan)

Faurecia NHKKyushu Co. Ltd (FNQ)(Japan)

Faurecia AutomotiveSeating India Private Ltd(India)

Société Tunisienned’Équipementsd’Automobile(Tunisia)

Teknik Malzeme(Turkey)

BFTC (Turkey)

PAB SA(Argentina)

Bertrand FaureArgentina SA(Argentina)

Somil(Uruguay)

FaureciaAbgastechnik GmbH(Germany)

Leistritz AbgastechnikStollberg GmbH(LAS)(Germany)

HJS LeistritzMarketing & ServiceGmbH(Germany)

Elgira GmbH(Germany)

Faurecia ExhaustSystems ChangchunCo. Ltd(China)

Faurecia AutomotiveSeating Inc.(United States)

Faurecia Sistemas deEscape Argentina SA(Argentina)

Faurecia RiversideLLC(United States)

Faurecia CanadaInvestment Company(Canada)

Faurecia AutomotiveSeating Canada Ltd(Canada)

Dynamec(United States)

WBFT (Canada)

Faurecia100% 100% 100%100% 100% 100% 100%

100% 100% 50% 50% 50% 50%

100% 100% 100%100% 50% 50% 50%

100% 100% 50%100% 20% 80%

100% 100% 100%100% 100% 100% 100%

50%

100% 100% 100%100% 50% 50%

100% 60%100% 51% 50% 50%

100% 100%100% 50% 50%

100% 100% 100%100% 100% 100%

100% 100% 51%100% 50% 49%

95.74% 100% 100%100% 100% 50% 50%

Faurecia AsientosPara AutomóvilEspaña SA(Spain)

Asientos de CastillaLeón SA(Spain)

Asientos del Norte SA(Spain)

Asientos de GaliciaSL(Spain)

Faurecia SeatingTalmaçiu SRL(Roumania)

Faurecia AutomotiveSlovakia Sro (Slovakia)

Faurecia (Wuxi)Seating ComponentsCo. Ltd(China)

100%

100%


Simplified Group structure

50% 50%

100%

100%100% 100% 51%

51%

96.82%

49%

100% 100% 100%

Europe

Asia

South America, Africa

North America

Faurecia Bloc Avant (France)

Faurecia Industries(France)

Faurecia Systèmes de Direction(France)

EAK SNC(France)

Trécia(France)

Faurecia KunststoffeAutomobilsystemeGmbH(Germany)

Faurecia InnenraumSysteme EmdenGmbH(Germany)

Faurecia IntérieurIndustrie(France)

Faurecia AD PlastikAutomotive RomaniaSRL(Romania)

Faurecia AutomotiveIndustrie(France)

Faurecia AutomotiveIntérieur France(France)

SAI Automotive AG(Germany)

AutomotiveSandouville(France)

Faurecia AutoplasticSouth Africa (Pty) Ltd(South Africa)

Faurecia Industrie NV(Belgium)

SAI AutomotiveFradley Ltd(Great Britain)

SAI AutomotiveWashington Ltd(Great Britain)

SASAutosystemtechnikGmbH & Co. KG(Germany)

Componentes de Vehículos de Galicia SA(Spain)

Faurecia InteriorSystems KK(Japan)

SAI AutomotiveArgentina SA(Argentina)

Faurecia InnenraumSysteme GmbH(Germany)

SAI AutomotiveBohemia Sro(Czech Republic)

SAI AutomotiveBratislava Sro(Slovakia)

SAI AutomotiveSilux SA(Luxembourg)

Faurecia InteriorSystems Sweden AB(Sweden)

Faurecia ExhaustSystems Korea(Korea)

SAI AutomotiveUSA – SAL, Inc.(United States)

SAI Automotive USAFountain Inn, Inc.(United States)

SAI Automotive SALde México SA de CV(Mexico)

Faurecia DuroplastMéxico SA de CV(Mexico)

Servicios Corporativosde personalespecializado SA de CV(Mexico)

SAS AutomotiveSystems SA de CV(Mexico)

SASAutosystemtechnikSro (Czech Republic)

Cartera e InversionesEnrich SA(Spain)

SAI AutomotiveUSA Inc.(United States)

SAS Autosystem-technik de PortugalUnipessoal Lda(Portugal)

SAS Automotive Sro(Slovakia)

SAS AutomotrizArgentina SA(Argentina)

Valencia Módulos de Puerta SL(Spain)

Faurecia GorzowSpZoo(Poland)

SAI AutomotivePolska SpZoo(Poland)

SASAutosystemtechnikZwickau GmbH(Germany)

SASAutosystemtechnikVerwaltungs GmbH(Germany)

SASAutosystemtechnik SA (Spain)

SAS CockpitAutomotive Systems SL (Spain)

SAS AutomotiveBelgium NV (Belgium)

SAS AutomotiveFrance(France)

SAI AutomotiveLignotock SL(Spain)

Faurecia AutomotiveEspaña SA(Spain)

Faurecia InnenraumSysteme Köln GmbH(Germany)

SAI Automotivedo Brasil Ltda(Brazil)

SAI Automotive SALCEspaña SL(Spain)

Faurecia LeatherKosice(Slovakia)

100% 50% 50%

100% 100% 100%100% 100%

100% 100% 100% 100% 100%

100%

100%

5% 51%

100% 100%

SAI AutomotivePolifleks AS(Turkey)

Dempo OtomotivSanayi ve Ticaret AS(Turkey)

100%

Cockpit AutomotiveSystems Douai SNC(France)

100%

100%100%100%

49%

100%100%

100%

100%

100%

100%

100% 100% 100% 100%

90% 100%

100% 100% 100% 100% 100%

100% 100%

100%

100% 100% 100%

SAS Automotive do Brasil Ltda(Brazil)

SAS Automotive Ltd(Great Britain)


06 Business review

06 Results

07 Outlook

08 Transition to IAS/IFRS

08 Risk management

11 Progress in Human Resources management and environmental protection

• Employment and skills development

• Environmental stewardship

• Safety and working conditions

23 Consolidated financial statements

23 Consolidated income statements

24 Consolidated balance sheet

26 Consolidated cash flow statements

27 Statement of changes in consolidated shareholders’ equity

28 Notes to the financial statements

Consolidated financial statements


In 2003, Faurecia achieved the two targets it had set for itself –sales growth outpaced expansion in European auto productionand operating margin was higher than in 2002.In terms of growth, 2003’s highlights were as follows.– Faurecia was selected by Chrysler Inc. part of the

DaimlerChrysler Group, to supply complete seat units, seatframes, instrument panels, center consoles, door panelsand exhaust systems for various forthcoming models. This success rewards Faurecia’s expansion efforts in NorthAmerica.

– Faurecia finalized an agreement with Siemens-VDO tostrengthen and expand their SAS joint venture. The newagreement bolsters the joint venture’s position in themanufacturing, assembly and just-in-time supply of cockpitmodules. As part of the agreement, four existing plants,including Faurecia’s Ghent unit in Belgium, were transferredto the joint venture on June 1.SAS assembles cockpits for BMW, DaimlerChrysler, Ford,Renault/Nissan and Volkswagen. In 2003, SAS sold 2.5 millioncockpits and generated sales of around €1.6 billion.Faurecia accounts for SAS under the equity method.

– Faurecia also acquired the assets of the South Koreancompany Chang Heung Precision Co. Ltd, making it SouthKorea’s second-largest supplier of exhausts with more than 20% of the market. Faurecia already led the Chineseexhaust system market with a share of around 25%, through joint ventures. The Exhaust Systems business now has a manufacturing presence in all continents.

The company continued to make progress in all four areas of its operating margin improvement strategy.

1. Continual improvement in production methods andreorganization of manufacturing capabilities

Quality is a major issue for both Faurecia and its customers,and there was a significant enhancement in quality indicatorsin 2003. Site safety also improved, with the accident frequency rate falling by a third.Production inventory turnover increased by 10%.

Faurecia continued to reorganize its manufacturing capabilities,and new production came on stream at several sites:– Neutraubling (Germany): front-end modules for the

BMW 3 Series;– Sittard (Netherlands): seats for the future Mitsubishi Colt

and Smart Forfour;– Gorzow (Poland): instrument panels and door panels for

the new Golf 5;– Walbrzych 2 (Poland): seat components;– Kyushu (Japan): seats for Nissan as part of the joint venture

with NHK;– Puebla 2 (Mexico): seating cut-and-sew operations;– Riverside (USA): seats for the Chevrolet Malibu.Site openings in Western Europe now consist mainly of just-in-time plants. In Central Europe, new facilities are beingopened alongside customer sites, but they mainly producecomponents. The increasing number of site openings outsideEurope demonstrates the shift in Faurecia’s activities to theseregions.In 2003, steps were taken to close sites at Roermond(Netherlands), Sassenburg (Germany), Sontra (Germany) andTelford (UK).

2. Purchasing planThe company continued to implement its purchasing plan in 2003, underpinned by three key goals: to reduce the numberof suppliers, to step up purchasing in low-cost countries andto develop online auctions.

3. Program Management System (PMS)PMS has now been rolled out throughout the Group, bringinga steady improvement in program management. Start-up costs fell by 36% in 2003 relative to 2002.

4. Research and development efficiency Faurecia started to streamline R&D in 2003. Centers are beingreorganized to become specialist units, and shared systemsare being introduced. As part of this initiative, a new R&D centerwas opened in Hagenbach, Germany, focusing on the designand development of interior modules.

Management report

Management report


Business ReviewFaurecia’s consolidated sales totaled €10,122.7 million in2003, up 2.6% on 2002. Excluding catalytic converters, salesrose by 4.5% to €9,504.1 million.In 2003 sales suffered from adverse currency effects – mainlycaused by the weak dollar – and from a change in Groupstructure. Excluding catalytic converters, like-for-like growthwas 8.3% in 2003 (based on a constant Group structure andexcluding the currency effect), while European autoproduction fell by an estimated 2.2%.Automotive Seating sales totaled €4,353.2 million in 2003,representing an 8.0% increase on 2002 and a 10.3% rise atconstant exchange rates. In the first half of the year Faureciabenefited from the ramp-up of various models (Audi A8 andA4 convertible, Ford Expedition and Lincoln Navigator, PSA-Fiat minivans, Peugeot 307, Toyota Yaris), along with the fullimpact of the Vigo plant in Spain, which opened in the summerof 2002 (Citroën Picasso and Berlingo, Peugeot Partner). In the second half, market conditions were tough, with anestimated 3.3% decline in European auto production.Nevertheless, automotive seating sales rose by 3.2%, and by4.9% at constant exchange rates, as production of new modelseither increased or got under way (Audi A3, BMW 5 Series,Chevrolet Malibu, Renault Mégane and Scénic).Sales of other Vehicle Interior modules came in at €3,505.7million in 2003, representing a rise of 1.2% or 7.3% on a like-for-like basis. Sales were adversely affected by exchange rates (3.2%) and by a change in Group structure (2.9%). This change in Group structure resulted from thedeconsolidation of cockpit sales from the plant in Ghent(Belgium), which was transferred to the SAS joint venture in the middle of the year. SAS is a joint venture betweenFaurecia and Siemens VDO, and is accounted for by theequity method. The Vehicle Interior business was fuelled bythe launch and ramp-up of new models (Audi A4 convertible,Citroën C3, Ford Fiesta and Fusion, Opel Meriva, Peugeot 307,PSA-Fiat minivans, Renault Espace, Renault Mégane andScénic, Volkswagen Touareg and Transporter).Exhaust Systems sales fell by 10.7% to €1,587.9 million.Excluding catalytic converters, the decrease was 3.5%. Exchangerates had a 5.9% negative impact – mainly due to the fall in thedollar – while changes in Group structure had a 2% positiveeffect, due to the fourth-quarter inclusion of sales from theexhaust business of the South Korean company Chang HeungPrecision Co. Ltd, acquired in May 2003. Overall, excludingcatalytic converters, sales rose by 0.4% on a like-for-like basis.Front-End module sales were up 13.9% to €675.9 million,mainly driven by the ramp-up of front-end modules for theBMW 3 Series. Deliveries to Audi also remained strong.

ResultsOperating income rose by €47.2 million to €302.8 million in2003, giving an operating margin of 3% (2002: €255.6 millionand 2.6% respectively). EBITDA(1) increased by €51.0 million,coming in at €637.1 million, and representing 6.3% of sales,versus €586 million and 5.9% of sales in 2002.The year-on-year growth in operating income seen in the firsthalf of 2003 continued in the second. Second-half operatingincome amounted to €141.5 million, equal to 2.9% of sales,versus €126.6 million and 2.6% respectively in the year-earlierperiod. Second-half EBITDA rose by €22.8 million, givingEBITDA margin of 6.3% versus 5.8% in the second half of 2002.The improvement in operating performance was driven by the following factors:– sales remained firm, particularly in the first half. Full-year

sales rose by 2.6%, and by 8.3% excluding catalyticconverters and on a like-for-like basis;

– the purchasing plan implemented in 2002 continued to havea positive effect, limiting the impact of rising plastic andsteel input prices, and despite ongoing severe pressure onoutput prices;

– productivity increased, thanks to enhanced productionmethods and the reorganization of manufacturing capabilities;

– the aggressive roll-out of the PMS (Program ManagementSystem) led to a reduction in program start-up costs in boththe first and second halves, and an improvement in someprograms still experiencing difficulties.

Total research and development costs fell by 13.6% to€532.3 million in 2003, equal to 5.3% of sales. This declinewas due to increased R&D efficiency, along with the smallernumber and greater maturity of programs under developmentin 2003. Excluding amounts billable to customers, R&D coststotaled €105.3 million (2.2% of sales) in the second half and€240.6 million (2.4% of sales) over the full year, comparedwith pro forma(2) figures of €145.1 million (3% of sales) and €280.6 million (2.8% of sales) for the equivalent periods of 2002. These reductions represent the combined impact oflower total R&D expenditure and an increase in the amountsbillable to customers.As in 2002, selling and administrative expenses equaled 2.9% of sales.Net interest expense fell €10.4 million to €82.9 million in2003, due to lower interest rates and stable debt levels. Thisfigure represents 0.8% of sales.The “Other income and (expense), net” caption showed a netexpense of €32.7 million, primarily reflecting €34.4 million

Management report

(1) Earnings before interest, tax, depreciation and amortization.

(2) Effective from the first half of 2003, margins on tooling sales previously deducted from net research and development costs are now reported as a reduction in cost of sales.


in restructuring costs – relating mainly to sites in France andGermany – and €5.1 million in exchange losses, offset by€7.7 million in gains on sales of fixed assets.The tax charge for 2003 increased to €54.7 million from€27.1 million in 2002, due to better earnings figures. The tax charge represented 29.2% of income before tax andgoodwill amortization versus 29.5% in 2002.Income from companies accounted for by the equity methodcontracted to €1.3 million. The 2003 total included a€5.3 million write-down on Faurecia’s stake in a joint venture.Net income before goodwill amortization came to €133.8 million,up €63.6 million on 2002. After goodwill amortization of€110.4 million (versus €113.6 million in 2002) and minorityinterests of €13.3 million, net income totaled €10.1 million,compared with a net loss of €59.1 million reported in 2002.Earnings per share were €5.04 before goodwill amortizationand €0.42 after, representing a major improvement on 2002,when Faurecia reported earnings per share of €2.29 beforegoodwill amortization and a loss of €2.49 per share after.Operating cash flow for 2003 amounted to €434.5 million(4.3% of sales), 16.1% higher than the comparable 2002figure of €374.2 million (3.8% of sales). Operating cash flowper share rose from €15.70 in 2002 to €18.20 in 2003.Although working capital requirements fell in the second half,they rose by €96.9 million over the year as a whole, primarilyreflecting higher inventories and a reduction in advancepayments from customers. Capital expenditure was €344.9 million, or 3.4% of sales,down from 3.9% in 2002. Net cash provided by operatingactivities less capital expenditure amounted to €7.3 million.Net debt was stable, ending the year at €1,695.7 millionversus €1,707.1 million at end-2002.The gearing ratio stood at 0.93 at December 31, 2003, based on shareholders’equity of €1,830.3 million, comparedwith the end-2002 ratio of 0.90.

OutlookOrganic growth in 2004 is likely to be weaker than in previousyears, but should pick up again at the end of the year, drivenby rising sales levels outside Europe. Faurecia does notanticipate any growth in auto production in 2004.Faurecia is standing by its objective of improving operatingmargin half-year on half-year going forward.

Management report


Transition to IAS/IFRS International Financial Reporting Standards (IFRS) will beapplicable as from January 1, 2005. In preparation for thisdeadline, the 2004 financial statements will be preparedbased on currently applicable French accounting principles,but also restated in accordance with the new standards forpurposes of comparison with the 2005 financial statements.Faurecia began preparing for this transition in 2002 byidentifying variances between its current practices and thenew international standards. In 2003, a task force wascharged with analyzing these variances in the recognition,valuation and presentation of financial data and making choicesamong the solutions offered within the standards, in a mannerconsistent with the treatments selected by Faurecia’s principalshareholder PSA. The task force was then able to draw up a list of retrospective data needed to generate an openingbalance sheet based on IFRS as of January 1, 2004. It was then possible to begin collecting these data, identifythe necessary upgrades in the Group information system andassess impacts on the financial statements.The key impacts on the financial statements, based on current IFRS, will be as follows:– restatement of Sommer Allibert goodwill and canceling

of restructuring reserves (IFRS 1);– research and tooling: a small number of ancillary expenses

will be capitalized, and some research costs currentlyrecognized under inventory will be transferred to intangibleassets (IAS 38);

– translation adjustments will be taken to consolidatedretained earnings (IFRS 1);

– unamortized post-employment benefit obligations andunrecognized net actuarial losses at January 1, 2004 will berecorded as reserves drawn from shareholders’ equity (IFRS 1);

– securitized receivables, which under current standards are not required to be recognized in the balance sheet, willbe recorded as receivables (IAS 39);

– options used to hedge interest-rate risks will be marked tomarket (IAS 39).

Restatements in accordance with IFRS 1 will mainly impactshareholders’ equity. The only expected material impacts on net income are those of IAS 38 and IAS 39 (for hedgingof interest-rate risks). Discontinuing the amortization ofgoodwill, as required by the revised IAS 22, will eliminate a systematic amortization expense. Finally, restating securitized receivables will increase balancesheet debt and thereby cause a slight rise in the gearing ratio. This work will be finalized in 2004 with the calculation ofrestatements to the balance sheet at January 1, 2004, whichwill be submitted to the Auditors for approval.

Risk managementThe Faurecia Group faces risks stemming from its industrialoperations as well as financial risks.

Risks related to Group operationsThe Group’s industrial operations expose it to inherent risks.Some could lead to business interruption at its manufacturingfacilities and are covered by property and casualty insurance,others concern liability for the products it markets and requireProduct Liability insurance.

Property and casualty insuranceFaurecia pursues a twofold strategy with regard to property andcasualty insurance:• Firstly, the Group has adopted, for some time now, a strong

policy of protecting against industrial risks by the ongoingdevelopment of procedures to meet the requirements of the HPR (Highly Protected Risks) label granted byinsurance companies. Faurecia’s fire safety managementpolicy, part of its Environment, Health and Safety strategy,aims to drive Group sites to excellence in fire prevention andreduce claims from fire damage. The aim of the process isto earn the HPR label, which insurance companies awardbased on the fire safety ranking of sites. The criteria appliedtake into account both the staff organization for preventionand response and the appropriateness of the protectiveequipment installed (e.g. detection systems, standpipehoses, sprinklers). Some 100 fire safety audits wereconducted in 2003, and 90% of Faurecia sites (factories ortechnical centers) have been audited since the HPR policywas launched. Each audit gives rise to an action plan forimprovement, of which about 80 are currently beingimplemented. Fire safety is built into the early stages of anyplant design or major upgrade, through compartmentalizingand fire safety equipment. Faurecia has also developed an Intranet-based fire safety management system throughwhich the HPR policy is rolled out to the entire Group. It provides all the necessary information and proceduresonline.

• Secondly, Faurecia has for many years transferred some of its risks to the insurance market, by taking out coveragewith first-rate insurance companies. Coverage is organizedaround a “Master” policy that is due to be extendedworldwide, either through direct coverage (Freedom of Services Area) or in the form of joint reinsurance of localpolicies taken out in a certain number of countries. Claimssettlements under this policy are capped at €228 million.Premiums paid in 2003 for this type of coverage totaled€5.1 million. Due to a low claims in 2003, the loss ratiowas kept below 100%.

Management report


Liability insurance To cover its General Liability as well as Product Liability,Faurecia has set up another worldwide program, again withfirst-rate insurers. The policy is organized around a Masterpolicy but uses local policies even in regions where directcoverage is possible. The reason for this is that local policiesfit the legal environment of the country where Faureciasubsidiaries or sites are based, and as such they are bettersuited to handling small claims for liability from operations.The Master policy is designed to handle larger claims thatinvolve the Group’s product liability and require a large-scaleresponse, including management by Faurecia’s Legal andInsurance departments. Premiums paid in 2003 for this typeof coverage amounted to nearly €2 million. Faurecia has alsotaken out liability policies to cover the risk of accidentalpollution occurring at its industrial sites. Lastly, specific risksare covered using policies tailored to the type of risk involvedand the region concerned.

Other risksIn addition, it is worth noting that Faurecia’s operations are notsubject to any particularly onerous technical or regulatoryconstraints, which could create a specific risk. Similarly, sincethe Faurecia Group uses its own technological processes andruns its main research centers alone, it has no materialdependence on outside technology. Further, to guard against

the risk of interruption in the information flows required by itsoperations (in particular those from production management ITsystems), the Group has set up back-up systems for its major ormission-critical applications at its main sites. Thus, the productionmanagement systems of about one hundred European plantsare due to be backed up in 2004 by an outside provider thatoffers a high degree of availability and back-up solutions in theevent of a major disaster.

Financial riskFaurecia is exposed to financial risks resulting from interest-ratefluctuation and its impact on interest expense, as well as fromvariation in the exchange rates of certain currencies, impactingsome of its production sites. 99% of Group long-term debt at December 31, 2003 was at variable rates with maturities of interest-rate adjustments within less than one year. Such debts are hedged using caps, swaps or other options in a centralized process run by General Management. An upward or downward fluctuation in interest rates of 1% per year would cause a change in the same direction ofinterest income or loss, of approximately €17 million beforetax and before impact of any interest-rate hedging. The table below is a schedule of maturities of receivables and borrowings, according to the date of interest-rateadjustments.

(in € millions) Maturities of interest-rate adjustmentsWithin 1 year 1 to 5 years Over 5 years Total

Dtd to 1 year Fixed rate

Borrowings 2,156.9 8.1 44.8 0.0 2,209.8Cash and cash equivalents 514.1 514.1

Net balance sheet position 1,642.8 8.1 44.8 0.0 1,695.7

Fixed rate/variable rate swaps 42.0 (8.1) (33.9) – 0.0

Net position after hedging 1,684.8 0.0 10.9 0.0 1,695.7

Variable rate/fixed rate swaps onlyon interest paid in 2004 (1,013.0) 1,013.0

671.8 1,013.0 10.9 0.0 1,695.7

Due to the fall in interest rates, a series of successive hedges have been set up for 2004 at decreasing maximum rates. Caps andother options in euros and USD have been taken out to hedge interest on debt payable between December 2003 and June 2008.

(in € millions) 2004 2005 2006 2007 2008

Caps and other options 3,226.3 1,700 1,050 950 50

Management report

For its financing, Faurecia has access to a medium-term syndicated line of credit of up to €1,000 million, which can be drawndown for renewable periods of one to six months, expiring in December 2007, as well as a €545 million syndicated line of creditexpiring in December 2004, renewable at the lenders’ initiative for 364-day periods, which is designed to guarantee part of theliquidity for Faurecia’s commercial paper program.At December 31, 2003 the undrawn portion of these syndicated lines of credit amounted to €550 million and €545 million,respectively. These credit contracts contain restrictive clauses based on maximum values for certain consolidated financial ratios,presented in the table below.

Type of ratio Contractual limit Value as of

Dec. 31, 2003 June 30, 2003 Dec. 31, 2002Ratio Amount Ratio Ratio

(in € millions)

Adjusted net indebtedness*/EBITDA 3.75 maximum 2.73 1,738.6/637.1 2.93 3.02

EBITDA/net interest 4.00 minimum 7.69 637.1/82.9 6.75 6.28

* Adjusted net indebtedness = consolidated net debt of €1,695.7 million + adjustments for certain commitments given, based on definitions provided in credit contract (e.g. mortgages, collateralized debts, net cash impact of market value of derivatives).


Management report

Failure to comply with the maximum/minimum values of theseratios at a reference date would give the lenders the option ofearly termination of these credit lines. Lastly, the medium-termsyndicated line of credit also contains what is known as a“shareholder clause”, which gives each of the lending banksthe option of calling in its share in the credit should Peugeot SAreduce its stake to less than 50.1% of Faurecia’s shares orvoting rights.

The exposure of Faurecia’s results to exchange-rate risksresults mainly from the translation into euros of results in othercurrencies recorded by companies outside the euro zone.These companies, which accounted for 21.3% of Groupsales in 2003, for the most part conduct their purchasing and manufacturing in their own currency without exposure to exchange-rate risks other than the translation impact at the level of the Faurecia Group. As an example, based on 2003 results, a 1% change in the euro exchange rate inrelation to any other currency would have had a €1.5 million

impact on consolidated operating income. Further, forcompanies that carry some degree of exposure throughpurchasing of raw materials or other goods, or through thesale of their production in another currency than their own,the Group provides centralized management of these risksand hedging through futures or options, or loans in foreigncurrencies, applying strict internal control guidelines andunder the supervision of General Management. Further,subsidiaries outside the euro zone are granted intercompanyloans in their operating currencies, totaling €144.1 million at December 31, 2003. As such loans are refinanced in euros,exchange-rate risk is hedged through swaps. Net balance sheet positions and hedges by currency aredetailed in the notes to the consolidated financial statements(see note 27.1).The off-balance-sheet commitments described above ormentioned in the notes to the financial statements include allrelevant information required to assess the Group’s financialposition.


Progress in Human Resources management and environmental protection

Employment and skills developmentIn 2003, Faurecia continued to build and strengthen the in-house skill sets that its new size and international scope require. The Group’s overriding concerns in this process were facilitating change management for employees, bolstering their security and empowering them in their tasks to involve them in ongoing progress.

1 l A proactive employment policy

1.1 l A global GroupAs a first-tier supplier of six key automotive modules, Faurecia must constantly improve its performance in terms of quality, cost, timingand innovation. The Group needs to have a presence wherever in the world the main automakers set up their facilities. Meeting itscustomers’ needs places certain structural requirements on Faurecia: it must ensure, with full respect for employees’ rights, that its staffis mobile both geographically and functionally and that its industrial capabilities are nimble as well as competitive.

Employees at Dec. 31* 2002 2003 2003/2002

France 19,699 19,644 0.0%Other European countries** 25,695 24,936 – 3.0%Outside Europe** 6,832 7,461 +9.2%

Group total 52,226 52,041 –0.0%

(*) Excluding temporary employees.

(**) Europe: Belgium, Czech Republic, Germany, Luxembourg, Netherlands, Poland, Portugal, Slovakia, Spain, Sweden, United Kingdom.

Other countries: Argentina, Brazil, Canada, China, India, Japan, Mexico, South Africa, Tunisia, Turkey, United States.

The total number of employees, which had grown considerably in previous years, remained stable in 2003, reflecting mixed long-term trends across the different regions. 1. In France, Faurecia’s staff levels remained on a par with the previous years’, as a number of Group activities are positioned

on recent vehicles that have weathered the market downturn more successfully than most. 2. The two regions of Europe outside France recorded opposite experiences:

– in Western Europe, employee numbers either remained flat or contracted, with Germany being particularly hard hit. Germany’sstagnant domestic market and very high production costs, added to the ramp-up of manufacturing operations in Poland andthe Czech Republic to deliver to automakers in Central and Eastern Europe, account for the decline.

– staff expanded in Eastern Europe.3. Trends outside Europe were in line with Faurecia’s rising sales in these markets. Joint ventures in China are only partly

consolidated within Group staff numbers, and other joint ventures accounted for by the equity method, such as SAS’s cockpitassembly and delivery business, are not included in the above Group data.

1.2 l Recruitment and mobilityFaurecia maintained a very active recruitment policy during the year, with however a noticeable slowdown in line with the dip in overallbusiness, mainly in Europe outside France.

Recruitments by consolidated companies, Executives Other Total % totalunlimited-term contracts

France 620 1,148 1,768 33%Other European countries 319 2,088 2,407 45%Outside Europe 109 1,045 1,154 22%

Group total 1,048 4,281 5,329 100%

Figures corresponding to the Group’s scope of consolidation (excluding joint ventures).

In its recruitments, Faurecia seeks skill sets that will strengthen technical capabilities in each of its business segments. The Group also aims to bring on board high-level specialists that can boost its ability to innovate and optimize the organization of its far-ranging and international operations. As these operations continue to expand, a third focus of the recruitment policy is to support the creation of new industrial sites.

Management report


Focus

In-house mobility at Faurecia “In-house mobility at Faurecia means that employees canbuild their career path and expand their skill sets within theGroup. It is not limited to a promotion or a change of location,but can take the form of a change of function or profession.Human resources managers and operational leadership havethree tools that allow them to marry the Group’s needs withcareer management for their teams. Individual evaluationsgive all employees the opportunity to receive feedback ontheir past performance and to voice any wishes for changes in their career. The “Jobs Review”, an annual snapshot of thevarious organizations and their teams, allows job successionand career planning. Lastly, the Intranet Job OpportunitiesSite (JOS), accessible to all employees, ensures that all joboffers reach a wide audience.”

1.3 l A common recruitment policy for the Group Recruitment is one of the Group’s key success factors. Its objectives include renewing basic skills and building newpotential by bringing in promising young graduates or qualifiedsenior staff in areas that are crucial to the Group’s future,where only the outside market can provide the necessaryresources.The Group’s common recruitment policy, activelydeveloped in 2003 and due to be rolled out to all sites,revolves around the following goals: – raising the Group’s visibility and attractiveness; – increasing and promoting in-house mobility; – shortening the time required for recruitments, while

preserving quality and always guaranteeing a good fit withGroup values;

– reducing cost. Toward these ends, the following steps are being taken: – recruitment is based on the Group’s seven key behavioral

values: Entrepreneur, Accountability, Transparency, Drive,Teamwork, Speed and Master your future;

– the recruitment process is managed as one of the keydrivers of the Group’s strategy;

– the Group’s policy is being rolled out to all units throughappropriate internal communication channels;

– all open job offers within the organization are input into the recruitment system;

– in-house mobility is promoted whenever possible, boththrough direct access by staff to job offers and as part of the follow-up to “Job Reviews”;

– principles of non-discrimination are adhered to throughoutthe process.

Focus

A new visual identity for Group recruitment“Faurecia has adopted a new corporate color scheme forrecruitment, that will be applied globally. This tool to enhanceand promote the Group’s image as an employer should allowus to raise our visibility with university graduates, applicants,professionals, key decision makers in the economy, as well aswith people working in manufacturing and in various institutions.It also aims to make prospective applicants want to join usand encourage them to apply. Internally, we also have a newcommon identity which can serve as a point of focus foremployees’ pride in belonging to the Group.”

1.4 l International recruitmentThe men and women recruited to staff the variousmanufacturing and R&D units around the world are drawn as a first priority from the local job market, as the “Country of origin of managers and professionals” table illustrates. Thisapproach has produced considerable diversity, since a total of 49 nationalities are represented, of which 21 to a significantdegree (by more than ten managers and professionals). To ensure a successful integration of employees from diversebackgrounds and build a foundation of shared reference forthe Group’s corporate culture, Faurecia has upgraded itsintegration processes and training programs, and has promotedthe creation of multicultural teams. The deployment of theFaurecia Excellence System (FES), the increasing use amongmanagers of training modules developed under the responsibilityof “Faurecia University” or the growing inclusion of people of different origins within executive management teams aresome of the steps that have been taken towards building a truly global Group.

Country of origin of managers Men Women Totaland professionals

France 3,053 611 3,664Other European countries 2,043 319 2,362Outside Europe 608 110 718

Total 5,704 1,040 6,744

Management report


1.5 l ExpatriatesAs its operations become more and more international,Faurecia needs to call upon the specific expertise of senioremployees who can coach its greenfield operations in newcountries outside Europe. The international mobility policy,which was thoroughly overhauled in 2003, is designed toinstitute common rules for all worldwide sites, promote thetransfer of know-how and develop local management incountries where new Group entities are based. The policyalso applies to all Group managers working in research,training, skills development and resource optimization. The rising number of expatriates, from a greater number of countries, testifies to the success of the Group’s policy of adapting to changing needs.

Expatriates France Other Outside TotalEuropean Europecountries

France 35 94 129Other European countries 13 12 28 53Outside Europe 8 3 6 17

Total 21 50 128 199

2 l Anticipating industrial transitions and managing them more successfully

Faurecia’s industrial operations involve a very broad range of increasingly complex products, that are often highly specificto a particular vehicle and have to be manufactured near the automaker’s plant of final assembly for just-in-time delivery. If sales of the vehicle come in below expectations or thevehicle reaches the end of its market life, if Faurecia’s contractis not renewed, if market demand moves away from a certaintype of technological process, or if cost efficiency gains proveinsufficient to meet clients’ price reduction demands, Faureciahas to adapt, and sometimes restructure, its manufacturingprocesses.

Departures in 2003, by reason Resignation Layoff Retirement

France 537 1,025 115Other European countries 722 1,875 95Outside Europe 609 483 15

Group total 1,868 3,383 225

Industrial transition operations that had begun in 2002 for theFrench Exhaust Systems business and for the Sassenburgplant in Germany continued in 2003. Others had to be launchedin 2003, for the reasons explained above, the largest of themconcerning the Sontra facility in Germany. Knowing that it will

have to adapt its manufacturing base on an ongoing basis,Faurecia is gradually developing a policy of anticipatingrestructuring operations, to be able to manage the process in a way that takes into account both the Company’srequirements and employees’ interests. Two situations that theGroup encountered in 2003 illustrate how these principles areput into practice.

2.1 l Negotiations on the closing the Sontra site(Germany) Negotiations began immediately after the decision to close thesite of Sontra had been announced. The facility mostly producedcomposite wood door panels and its 456 employees werefaced with the risk of redundancies. Thanks to the immediatelaunch of a mediation procedure and to the high quality of thebenefits package Faurecia offered, eleven negotiating sessionswere enough to reach a landmark agreement on June 30,2003, between the management, employee representativesand local partners. This agreement was groundbreaking in its combination of the following achievements: • Faurecia was able to withdraw within a short time-frame

(by August 1, 2003) while ensuring the continuity of industrialoperations at the site.

• Alterprodia GmbH, a manufacturing company, was set up to manage the transition and ensure continuing service for delivery contracts with Volkswagen.

• Door panel and spare parts production for Faurecia werepreserved through Bo-parts and Bo-systems, twocompanies formed through management buy-outs, thatemploy 111 people.

• A company called Res Services GmbH was set up topromote local employment at the site, coordinate the variousstakeholders in the negotiated solution and enhance theoverall effectiveness of the solutions that were found.

• Finally, 298 Faurecia employees were transferred to a humanresources company as of August 1, 2003, to provide them with a gradual transition to the job market, offer them temporary work within the new companies (over100 temporary jobs were created, mostly within AlterprodiaGmbH) and give them training leading to certification.

As a result of all these measures, employees were able, for at least one year and up to two years depending on the co-financing organized with the Federal EmploymentAgency, to keep their rights to unemployment benefits, build skills that are valued in the current job market and thus make a successful transition.• This site closure did not lead to any outright layoffs.

Management report


2.2 l Anticipating a transition and transferring staff to another site (the Netherlands) In 2001, as it restructured its Exhaust Systems business,Faurecia began to consider discontinuing production at itsRoermond plant in the Netherlands. At about the same time,Faurecia was selected by Nedcar to provide seating for the future vehicles that will be produced using just-in-timeprocesses at its Dutch facility. After having weighed up thevarious possible solutions, Faurecia saw the possibility ofretraining employees from manufacturing exhaust systems to assembling seats in the new factory. Beginning in 2002,various committees were set up to organize the transfer ofExhaust Systems operations, determine the conditions for the transfer, negotiate with employee representatives, obtainsupport from local authorities and prepare the ground for staff training. In mid-2003, a first team of 15 operators begantraining in Bad Abbach, Germany. Since mid-October, theyhave been in charge of training the other operators. All employees from Roermond who volunteered are graduallybeing transferred to Sittard and trained on a model line.Production is scheduled to come on stream on January 5,and at the writing of this report 60 of the 90 operators fromthe Exhaust Systems site had already been retrained. This project is proceeding satisfactorily, thanks to the commitment of the management team and the activeinvolvement of employees.

2.3 l A new European forum for dialogue with employee representativesAlthough the Company is already represented within PSA’sEuropean Works Committee, Faurecia decided, with theapproval of its majority shareholder, to set up its ownEuropean-level forum for dialogue with employee representatives,to reflect its specific business conditions, its size and thediversity of its operations. The preamble to the agreementsetting up this body states that “The management andemployee representatives of the various operating units of Faurecia in Europe wish to set up a forum for information and consultation that can promote Europe-wide dialogue and communication. Their common goal is to continuallyenhance the understanding of what is taking place in Europeat all levels of the Company. They are determined to contributeto integrating economic criteria and employee issues in themanagement of the Company.” The agreement was signedunanimously by all members of the ad hoc negotiating group,in June 2003.

2.4 l Negotiations with employee representativesThe Group made further strides in 2003 in applying its policyof negotiating agreements with employee representatives. In France, all Group companies signed agreements as part of the mandatory annual negotiations. In addition, as severalcompanies returned to significantly better results, theynegotiated profit-sharing agreements providing for thepossibility of half-yearly contributions, based on financialperformance and progress in line with objectives. In Spain,several major multi-year “Convenios” were signed. In Germany, innovative agreements were signed at severalsites, on flexi-time and annual modulation of work based on workload, on setting up a company for employee training,on work/study contracts. Some of these agreements werereached as part of negotiations on restructuring. An agreement on the application of trade union rights wasalso signed in South Africa.

The first plenary meeting took place on November 3 and 4,2003, at the Group’s Head Office in Nanterre. It broughttogether employee representatives from countriesbelonging to the future expanded 25-member EuropeanUnion. This meant that the representatives of the CzechRepublic, Poland and Slovakia were welcomed as fullmembers of the 25-person body, which also includesemployees from Belgium, France, Germany, Luxembourg,the Netherlands, Portugal, Spain, Sweden and the UnitedKingdom. At this meeting, first-half 2003 results and the outlook for the second half were presented, as were the Group’s strategy and positioning; current challengesrelative to quality, security, programs and profitability; the employment situation and expected developments inEurope, as well as the key role employee involvement willplay in the success of the Faurecia Excellence System.

Management report


3 l Reaching for excellence

The encouraging results achieved in 2003 show that the in-depth work that Faurecia has begun towards becoming a leading global automotive supplier is starting to bear fruit.This positive momentum needs to be broadened and mademore lasting by means of a thorough roll-out of best practicesand working methods throughout the Group.

3.1 l Faurecia Excellence System (FES)The Faurecia Excellence System (FES) is gradually beingintroduced to all Group units and bolstered where it is alreadyin place. In accordance with the project plans, the roll-outprocess, the toolkit, the training programs and the progressand audit indicators have all been standardized. The “employee involvement” section of the FES definesprogress along specific stages, with standard indicators to measure the actual completion of each stage, based on the following core principles: – organize employees into autonomous teams; – create conditions for respect and trust, beginning with

a safe environment; – ensure continuous progress; – encourage and recognize contributions from employees. The effective implementation of each stage in the day-to-daywork of the various teams is measured through specificindicators, as well as through the frequency of accidents,absenteeism, in-house mobility, ideas for improvement and training data.

Focus

Ideas for improvement“In Beaulieu (France), in the Steering Systems Division,submitting ideas for improvement has become second naturefor employees. Since autonomous production groups wereset up, on average no fewer than 150 ideas for improvementare put forward each month. To boost collective involvement,an award is given annually to the three autonomous productiongroups that provided the greatest number of ideas.”

3.2 l Energizing employees’ skillsThe Group continued to drive “management developmentinitiatives” in 2003. The “Job Reviews” have now been inplace for two years and have become firmly establishedwithin management practices. They are now backed bylateral analyses performed by the support functions (e.g.Procurement, Quality Assurance, HR, Finance) to obtain areading of the skills and know-how that their teams havetruly mastered. Based on these data, human resources andoperating management design training and succession plansthat can help Faurecia reach its ambitious goals. Some of thefindings from “Job Reviews” have led Faurecia University toimplement large-scale training plans, going beyond the scopeof existing executive training to focus on procurement, plantmanagement and, soon, the future program managers. Eachof the training courses offers an opportunity to bring togetheremployees from different operating segments and countries,promoting not only the acquisition of new knowledge, but alsonetworking among trainees and the building of the Group’snascent identity.

Faurecia’s core values The Group’s core values, which have been documented in the “Faurecia Charter”, are Entrepreneur, Accountability,Transparency, Drive, Teamwork, Speed and Master yourfuture. Alongside the FES, Faurecia’s core values are an essential management tool to reach operational excellence.These values describe the behaviors that Faurecia wishes tosee among its employees. Human resources procedures canbe structured around them, and they can become actualperformance criteria, based on the “behaviors and aptitudes”that each of the values has been translated into. A testevaluation has been designed for year-end performanceevaluation interviews, with key questions that managers needto ask themselves in assessing their teams’ work. In 2004, all Group executives will be evaluated based on their technicalexpertise, their performance and their behavior.

RECRUITMENT OF YOUNG ENGINEERSIn the first half of 2003, Faurecia decided to promote within engineering and business schools the developmentopportunities it offers. A recruitment drive was launched for more than 50 young graduates, to bolster teams in research and development, manufacturing, productiondevelopment, logistics and quality assurance. Faureciaseeks high-potential candidates who can lead projects or manage a team and lead their professional life in line with Faurecia’s values.

Management report


3.3 l Training employees and building the necessary skillsEmployee training is central to the Company’s development.The Faurecia Excellence System (FES) emphasizes itsimportance repeatedly for the implementation of the humanorganization of production. Training is one of the keysuccess factors for autonomous production teams, which aremeant to improve their performance on an ongoing basis. Whenever autonomous production groups (Gap) are set up,training is now provided to the designated “Gap Leaders”, tosupervisors and to managers of autonomous production units(UAP). Within the teams themselves, a considerable amountof attention is devoted to mastering the skills for the job, to quality assurance training, to process control and teamwork.The new reporting system, which has been standardized forthe entire Group, now tracks and accounts for the traininginitiatives of each operating unit. This information is part of theindicators that the HR function began deploying to all Groupoperating units worldwide at the end of 2003.

Faurecia UniversityAlongside the main training programs that remain theresponsibility of each unit, Faurecia’s offerings have expandedconsiderably, reflecting extensive needs. This growth alsohighlights the role these programs play in building a majorinternational group, and confirms how much importanceFaurecia attaches to training for the development of its teamsand of the Company as a whole.

Number of participants 2003 2002 Change

Management-Development 517 269 +92%Skills-Expertise 912 304 +200%Methods 590 864 –32%

Total 2,019 1,437 +40%

Other human resources data

Overtime (hours paid for work beyond the legal threshold orthe terms of the employment contract) – December 2003

France 34,123Other European countries 107,099Outside Europe 80,248

Total 221,470

Training hours in December 2003 (average number of daysworked: 14)

France 26,165Other European countries , 24,467Outside Europe 8,019

Total 58,780

Workers on unlimited-term contracts declared handicappedas per the definition used by the International LaborOrganization, December 2003

France 757Other European countries 332Outside Europe 46

Total 1,135

Personnel costs in 2003(in € millions)

France 814.9Other European countries 842.2Outside Europe 218.6

Total 1,875.7

Costs of external staff in 2003(in € millions)

France 213.8Other European countries 37.3Outside Europe 0.7

Total 251.8

Total staffat December 31, 2003 Employees Temporary Total

employees

France 19,644 5,362 25,006Other European countries 24,936 1,695 26,631Outside Europe 7,401 480 7,881

Total 52,041 7,537 59,578

Management report


Environmental stewardshipThe building of the Faurecia Group, in its current scope, wascompleted at the beginning of 2001. The EHS practices of the various Group companies were first collected, then theirappropriateness was analyzed against local legislation. An overall site certification policy has now been designed,Group standards were drafted and common objectives are set, with progress indicators. A specific EHS dashboard willcome into effect at the end of 2004. The Faurecia Group takes environmental issues into account at every stage in the product life-cycle, from the design phase to the end of product life. The operation of industrial sites is naturally of particular concern.

Product designEuropean Directive 2000/53/CE, concerning end-of-life vehicles,requires that automakers stop using the heavy metals cadmium,hexavalent chromium, mercury and lead in their manufacturingprocesses. It also demands greater recyclability of vehicles.

Date Rate of reuse Rate of reuseand recovery and recycling

January 1, 2006 > 85%/vehicles/year > 80%/vehicles/year

January 1, 2015 > 95%/vehicles/year > 85%/vehicles/year

The Faurecia Group therefore took on board these newrequirements in its development processes and works with itssuppliers in order to satisfy its own customers as regards thecomposition of the products it delivers, providing full and exactinformation.

Focus“The group of experts in Bavans (Exhaust Systems business)has been charged with designing efficient solutions to reducepollution from exhaust systems, in order to meet the requirementsof car manufacturers and comply with international standards.Their main line of research this year focuses on the collector-catalyst pair. Shorter and shorter collectors, as an example,allow exhaust fumes not to lose too many calories in goingthrough them, thus reaching the decontamination system at a high enough temperature for the latter to be active and doits work. The aim is both to comply with current standards and to anticipate future requirements. In addition to its in-houseengineering work to study products and their functions, theBavans center carries out joint research with automakers andsuppliers, and contributes to the development of innovativeproducts. It also seeks to optimize tests for detecting pollutantlevels, as the means of analysis and detection of gases need to be increasingly precise to match more and more stringentstandards.”

Focus “Particular care was devoted to the quality and esthetics ofthe instrument panel for the new Golf VW. The panel is coveredin a very soft PVC slush foam. True to its constant concern forthe environment, Faurecia made maximum use of polypropylene,a clean material, and made more sparing use of paint coatings.This also improves the recyclability of the instrument panel at the end of the vehicle’s life.”

Focus “Faurecia designs its door modules in a way that facilitatesdisassembly and recycling. For example, the carrier for the“HIM” (High Integrated Module) is mainly made of long-fiberpolypropylene, a homogenous and easy to recycle material.Design choices, for example glue-free stapled joins, make iteasy to take the door apart with simple tools while avoidingmixing dissimilar items and components, a particularlyimportant issue for door modules in which many differentmaterials are used for reasons of practicality.”

Manufacturing processesWhen products have been designed with the aim of minimizingany harm to the environment, the manufacturing processesused to make them should also be geared towards preservingnatural resources and protecting the environment.

Focus “In 2003, Faurecia commissioned a new painting line for front-end modules, that meets very strict solvent emissionstandards and already complies with the regulations onvolatile organic compounds (VOCs) that will come into effectin 2007.”

As part of their drive to optimize their organization within the Faurecia Excellence System (FES), industrial sites aregradually implementing environmental management systemsbased on the ISO 14001 standard.

ISO 14001 environmental certification

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0

10

20

30

40

50

1997 1998 1999 2000 2001 2002 2003

3 59

17

27

37

50

Greenhouse gases (estimate)

Atmospheric emissions CO2 N2O CH4 SO2 NO2

From natural gas 105,663.1 4.7 7.5 1.0 112.1From heavy fuel oil 19,071.9 0.4 0.7 370.0 41.9From light fuel oil 42,075.4 0.8 0.8 80.8 56.5

Total in metric tons 166,810.4 6.0 9.1 451.8 210.6


The implementation of ISO 14001 systems by Group sitesincludes the following steps:

• Gradually providing all employees with environmentaltraining and education.

Environmental 2002 2003 Change training 2003/2002

Training hours 7,902 13,799 +75%Participants 8,724 12,518 +43%Cost (in € thousands) 163 171 +5%

• Undertaking communication efforts with neighborhoodresidents, in order to take into account their wishes on issuessuch as integration in the surrounding landscape, the impact of vehicles entering sites and minimizing any possible emissionsof noises or odors.

Environmental 2003 complaints

Noise 41Odors 37Other 4

Environmental indicatorsThe Faurecia Group is beginning to measure the environmentalimpact of its operations through indicators that allow it tomonitor the effectiveness of steps it has taken.

• Water consumption and discharges to water:

Sources of water consumption in 2003 (estimate)

The Group’s total water consumption for 2003 is estimated at 4.6 million cubic meters.

Types of effluent discharges in 2003 (estimate)

Throughout the world, direct or indirect discharges must complywith applicable legislation.

• Energy consumption and atmospheric emissions:

Breakdown of energy consumption in 2003 (estimate)

The Group’s total energy consumption for 2003 is estimated at 3.9 million MWh.

• Conditions of soil use:

Breakdown of surfaces used by the Group in 2003 (estimate)

Total surfaces used by the Group are estimated at 551 hectares(1,361 acres).

Management report

Watertight surfaces 67%

Porous surfaces 33%

River 59%

Groundwater 15%

Municipal network 26%

To natural environment 34%

To wastewater network 66%

Electricity 78%

Fuel oil 1%

Natural gas 15%

Purchased steam 6%

Calculation of atmospheric emissionsBased on our current knowledge of our energy consumption,we can make a preliminary evaluation of our overall atmosphericemissions, by applying a conversion factor to consumptionfigures in MWh, to obtain metric tons of gas released.

Greenhouse gas

CO2 In natural gas 1 MWh 0.18322In light fuel oil 1 MWh 2.640988In heavy fuel oil 1 MWh 3.092760

N20 In natural gas 1 MWh 0.00005323In light fuel oil 1 MWh 0.00007In heavy fuel oil 1 MWh 0.000078

CH4 In natural gas 1 MWh 0.00001296In light fuel oil 1 MWh 0.00005323In heavy fuel oil 1 MWh 0.00012

Other gases

SO2 In natural gas 1 MWh 0.0000018In light fuel oil 1 MWh 0.00507In heavy fuel oil 1 MWh 0.08In low-sulfur fuel oil 1 MWh 0.04In very low sulfur fuel oil 1 MWh 0.02

NO2 In natural gas 1 MWh 0.0001944In light fuel oil 1 MWh 0.003549In heavy fuel oil 1 MWh 0.0068

• Waste generation:

Breakdown of waste treatments in 2003 (estimate)

Total waste generated by the Group in 2003 is estimated at 890 thousand metric tons.

Safety and working conditions

1 l Environment, Health and Safety organization (EHS)

The Group’s EHS policy has the following objectives: – protect the health and improve the safety of employees

at their workstations;– reduce risks of fire;– minimize environmental impacts. Toward these ends, the Group EHS Department, part of the Group Quality Assurance Department, is responsible for: – recommending the Group’s EHS policy and objectives

to General Management;– organizing the monitoring of new legislation and regulations

that concern the Group’s businesses;– defining and distributing the rules that must be complied

with, and providing self-evaluation tools;– facilitating, advising and helping the EHS network; – coordinating site EHS audits;– consolidating the results of Group entities. Coordinators for the various business segments areresponsible for translating these measures to the specificsituation of each site, where an EHS coordinator is appointedby site management. An Intranet site provides a link betweenthese various players, ensuring that the EHS policy isconsistently rolled out to all Group sites across all countries.

2 l Organization of work

Faurecia’s mission is to create and deliver to its customersinnovative products with high added value, at the highest levelof quality. Its industrial organization, and particularly its just-in-time operations, must match the customer’s timings tofollow demand and adapt to varying workloads. As a result,there is considerable variation in the way the work is organizedwithin the Group. As a general rule, virtually all manufacturingunits work in shifts. When the equipment used has requiredlarge-scale capital expenditure, night teams are also used. In the case of more specific constraints, such as in the caseof a production start-up, a particular type of organization onthe part of the customer or a production volume exceedingthe nominal objective set by the customer, the use of weekendteams or the setting up a fourth daily shift are negotiatedlocally. Finally, there are numerous agreements on modulatingworking hours over peak and non-peak periods of the year,particularly in France, Spain and, increasingly, in Germany. In other countries, plants make greater use of overtime to meet peaks in demand, for historical reasons and due to the greater flexibility with which it can be implemented.


Management report

Landfilling 36%

Destruction 3%

In-house recycling 5%

Outside recycling 52%

Reuse as energy source 4%


3 l Security

Faurecia furthered its commitment to safety and to betterworking conditions throughout the year. Safety in the workplaceis one of the building-blocks of the search for excellence, and it is the minimum mark of respect for the staff which allfacilities should demonstrate.

FocusThe importance of safety was specifically reaffirmed by PierreLévi, Chairman and CEO of Faurecia, in the Group’s in-housenewsletter (Faurecia Infos issue No. 14 – July 2003): “Everyday, men and women who come to work in our facilities injurethemselves. This state of affairs is wholly unacceptable for ourGroup. Since January 1, 2003, we have a common indicator,called FR0t. The goal that has been set with the members of the Executive Committee is very clear: we must reach a level of five by 2005. Today, 40 of the 160 sites making up our Group have already reached this target. It is thereforecompletely achievable. I want to remind you that, in workingon safety, it is the company as a whole that we are improving.In addition, I notice in each of my on-site visits that the bestperformance in terms of safety comes out of our best sites. In fact, an improvement in one area produces improvementsin all other areas too. That is the very essence of the FaureciaExcellence System (FES). I am absolutely convinced thatsafety depends not so much on tools and systems but firstand foremost on personal commitment in the workplace,every day and over time. It requires thoroughness, will andcourage. Above all, safety should be the concern of each andevery one of Faurecia’s 60,000 employees.” The results of initiatives in this area are measured using the frequency rate of workplace injuries called FR0 (whichcorresponds to the number of workplace injuries with losttime per million hours worked. An FR0 of 5 corresponds to 5 workplace injuries per 1 million hours worked). In order to guarantee the same level of safety for temporary workers,data concerning injuries of staff from this category have beenincluded in calculations of the indicator which is now called FR0t.

Focus“Safety management can be broken down into four successiveand complementary stages, which are also developed in theFaurecia Excellence System (FES).1. Without management, each person guards against risks

to the best of his or her ability.2. An EHS coordinator is appointed, to control risks and bring

advice and expertise.3. The EHS management committee defines an action plan for

improvement, to be implemented in each autonomousproduction unit (UAP) by the EHS core team.

4. Each autonomous production group is directly involved.Each operator owns his or her safety.”

The regular decline in the frequency of workplace injuries andthe matching decrease in the severity rate are encouragingresults. All Group business segments have experienced asimilar downward trend in accident risks. Greater efforts areneeded to be on target for the objective of 5 set by the Group for the end of 2005.

Already more than 37% of Group sites have reached the target, meaning that they are below the threshold of fiveinjuries with lost worktime, including temporary employees. The number of industrial sites with more than 100 employeesthat have reached this goal was multiplied twofold between2002 and 2003. They are spread throughout the world, whichproves that the objective is within reach for all sites, regardlessof business segment or of being based in a developed ordeveloping country.

Management report

2001 2002 2003

28.1

20.8

16.1

2002 2003

46

63

0

10

20

30

40

50

Number of sites that have reachedthe objective of FR0t < 5: a 37% improvement in 2003

Change in the frequencyrate of injuries (FR0t)

FR0 2003/2002–23%


Top sites for safety – December 2003 Business segment Country FR0t 12 months Number of employees

Barrie Seating Canada 0.0 484Stadeln Exhaust Systems Germany 0.0 309Walbrzych (Recliner) Components Poland 0.0 252Valentigney (EAK) Modules France 0.0 232Port Elizabeth Exhaust Systems South Africa 0.0 183Legnica Modules Poland 0.0 181Attibele Seating India 0.0 180Walton (Dynamec) Seating United States 0.0 157Rosslyn Vehicle Interior South Africa 0.0 128Porto Real Seating Brazil 0.0 102Walbrzych (Frames) Components Poland 1.0 608Orense Vehicle Interior Spain 1.1 551Ben Arous Components Tunisia 1.2 538Messei Exhaust Systems France 1.2 515Port Elizabeth Vehicle Interior South Africa 1.5 427Louisville Exhaust Systems United States 1.5 411Fountain Inn Vehicle Interior United States 2.0 915São João da Madeira (Covers) Components Portugal 3.1 830Granger Exhaust Systems United States 3.1 603Mlada Boleslav Vehicle Interior Czech Republic 3.5 713Lecotex (Tabor Pocatky Sébirov) Components Czech Republic 3.5 706Walbrzych (Foam) Components Poland 3.6 176Crévin – Ecsa Seating France 3.7 168

Management report

4 l Safety training

Once the basic conditions for ongoing improvements in safetyhad been set, the Group provided different types of training andeducation programs to drive home the message and guaranteeeffective implementation of all aspects of safety management.

Teams with an increasing amount of safety training

Safety training 2002 2003 Change2003/2002

Training hours 63,740 74,889 +17%Participants 14,228 18,304 +29%Cost (in € thousands) 1,303 1,476 +13%

Focus“The Group Quality Assurance/EHS Department, working withFaurecia University and the Group Legal Affairs Department,has developed a one and a half day training module on safety.This training has three main goals: explaining to site managersFaurecia’s challenges in terms of environmental protection,health and safety (EHS); presenting the EHS objectives set bythe Executive Committee, which make regulatory complianceand risk prevention core responsibilities of Group managers; andlastly, informing managers of the extent of their responsibilitiesat their site. This module was offered in France in June 2003,then was deployed to Spain, Germany and the United Kingdomin the second half of 2003. Each session takes place at anindustrial site, to allow an easy linkage between theory andpractice. This training is mainly intended for site managers,human resources managers, EHS coordinators and, whereappropriate, leaders of autonomous production units.”


FocusIn Walbrzych, Poland, there have been no workplace injuriesat the Recliners factory since its commissioning in 2001.“Safety was our watchword even before the plant came onstream,” explains Marek Zych, manager of the Reclinersfacility. “We paid particular attention to working conditions.The ceiling of the thermal treatment unit opens for ventilationto ensure that the temperature never exceeds 26°C (79° F).Rest areas, showers, space… help make the environmentmore pleasant. But in terms of equipment, this facility is nodifferent from other Group sites. What has changed is thecreation of a genuinely safety-focused company culture,which goes hand in hand with quality and technical performancein production. In-depth training is provided on an ongoingbasis during weekly meetings and a new session is organizedwhenever there is a change in machines or processes. Strict compliance with safety measures is also essential andno exceptions are tolerated.”

Safety certificationAs part of their drive to optimize their organization, sites aregradually implementing workplace safety management systemsbased on the 0SHAS 18000 standard or local equivalents.

OSHAS 18000 certification

5 l Ergonomics and working conditions

Over the past several years, Faurecia has taken steps to bettertake into account the strains caused by workstations and offsetthem to greatest degree possible. In line with commitmentsundertaken as part of agreements on the departure of certainelderly workers, Faurecia continued to analyze workstationsusing the AGREPT method, particularly within the AutomotiveSeating business in 2003. Solutions have been found andimplemented at manufacturing workstations. These solutionsneed to be rolled out throughout production operations and should be more systematically taken into account fromthe outset of product and tool design. Toward this end, a memorandum is being distributed to all process engineersand managers in charge of efficiency in manufacturingsystems, to emphasize the need to analyze workloads andtake into account the ergonomic constraints of workstations.This memorandum aims to provide basic training in this areafor persons, such as the members of site health and workingconditions committees, who are involved in the organizationof work or workstation design.

6 l Absenteeism

Measuring and reducing absenteeism are part of the avenuesfor improvement that Faurecia has set in its pursuit of excellence.Continuous improvement requires an environment wherepreventing risks of injury is a constant focus, but it also needsdiligent, trained and motivated staff in the workplace. Thusthe level and trend of absenteeism for illness and workplaceinjury provide one measurement of employee satisfaction.Analyzing these data can bring to light causes of dissatisfactionand lead to the taking of corrective action. Work on standardizingthis measurement has begun as part of the new reportingsystem.

Absenteeism for illness – workplace injury – without causeDecember 2003

France 5.19%Other European countries 4.70%Outside Europe 3.20%Total 4.63%

Management report

0

5

10

15

2000 2001 2002 2003

3

8

14


Consolidated income statements

(in € millions) Notes 2003 2002 2001 2001pro forma (1)

Sales 4 10,122.7 9,865.5 9,610.7 9,610.7

Operating expenses 5 (9,819.9) (9,609.9) (9,351.0) (9,351.0)

Operating income 302.8 255.6 259.7 259.7

Interest expense, net 6 (82.9) (93.3) (95.4) (92.1)

Other income and (expense), net 7 (32.7) (70.4) (53.0) (53.0)

Income before tax and amortization of goodwill 187.2 91.9 111.3 114.6

Corporate income taxes 8 (54.7) (27.1) (35.2) (36.4)

Net income before amortization of goodwill 132.5 64.8 76.1 78.2

Equity in net income of companies accounted for by the equity method 1.3 5.4 1.7 1.7

Amortization of goodwill (110.4) (113.6) (112.0) (93.1)

Net income/(loss) before minority interests 23.4 (43.4) (34.2) (13.2)

Minority interests (13.3) (15.7) (17.8) (43.1)

Net income/(loss) 10.1 (59.1) (52.0) (56.3)

Diluted earnings per share (in €) (2) 9

Before amortization of goodwill 5.04 2.29 2.50 1.84

After amortization of goodwill 0.42 (2.49) (2.18) (2.85)

(1) In order to facilitate comparisons with prior-period data, pro forma accounts have been prepared for 2001 as if the acquisition of Sommer Allibert and the mergerwith SIT had taken place on January 1, 2001.

(2) Calculation based on the weighted average number of shares (see note 9).

Consolidated income statements

Consolidated balance sheet



A s s e t s

(in € millions) Notes Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001

Fixed assets

Goodwill 10 1,785.0 1,914.1 1,963.0

Intangible assets 19.7 22.2 25.4

Property, plant and equipment, net 11 1,484.3 1,516.4 1,569.5

Investments in companies accounted for by the equity method 12 48.3 39.9 27.9

Other equity interests 13 5.5 17.0 13.5

Long-term loans and receivables 14 23.4 32.9 27.7

Other non-current assets and deferred charges 15 64.3 29.1 40.7

Total fixed assets 3,430.5 3,571.6 3,667.7

Current assets

Inventories, net 16 978.3 941.8 862.7

Trade accounts receivable 17 1,572.9 1,595.8 1,705.1

Other operating receivables 18 254.4 237.0 211.3

Other receivables and prepaid expenses 19 274.5 307.5 252.6

Treasury stock 20 15.1 15.1 11.2

Cash and cash equivalents and marketable securities 21 514.1 462.6 533.1

Total current assets 3,609.3 3,559.8 3,576.0

Total assets 7,039.8 7,131.4 7,243.7



L i a b i l i t i e s a n d s h a r e h o l d e r s ’ e q u i t y

(in € millions) Notes Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001

Shareholders’ equity

Capital stock 169.4 169.2 169.1

Additional paid-in capital 722.4 721.6 735.0

Retained earnings 1,065.0 1,145.7 1,210.1

Translation adjustment (136.6) (73.9) 6.5

Net income/(loss) 10.1 (59.1) (56.3)

Total shareholders’ equity 22 1,830.3 1,903.5 2,064.4

Minority interests 23 62.7 51.1 47.3

Reserves and long-term liabilities

Reserves for post-retirement and other post-employment benefit obligations 24 122.3 115.0 112.3

Long-term deferred taxes 47.5 37.6 53.6

Other reserves and long-term liabilities 25 190.0 193.9 225.8

Total reserves and long-term liabilities 359.8 346.5 391.7

Long-term debt 26 609.8 820.1 809.0

Short-term liabilities

Current portion of long-term debt 26 30.5 52.6 201.1

Prepayments from customers 77.5 108.8 129.1

Trade payables 1,908.7 1,950.7 1,776.1

Other operating payables 365.6 355.9 335.4

Other payables and deferred income 28 225.4 245.2 205.3

Short-term debt 26 1,569.5 1,297.0 1,284.3

Total short-term liabilities 4,177.2 4,010.2 3,931.3

Total liabilities and shareholders’ equity 7,039.8 7,131.4 7,243.7

Consolidated cash flow statements


Consolidated cash flow statements

(in € millions) 2003 2002 2001 2001pro forma

I. Operating activities

Net income/(loss) before minority interests 23.4 (43.4) (34.2) (13.2)

Depreciation and amortization 440.8 440.5 420.4 401.5

Deferred tax (benefits)/charges 4.5 (3.4) (24.4) (24.4)

Increase/(decrease) in reserves and other long-term liabilities (25.0) (31.8) (4.9) (4.9)

Equity in net income of companies accountedfor by the equity method net of dividends received 3.9 0.6 1.2 1.2

Capital (gains)/losses on disposals of assets (8.2) (6.0) 4.4 4.4

Other (4.9) 17.7 (5.8) (7.9)

Cash flow from operations 434.5 374.2 356.7 356.7

Change in inventories (60.3) (127.0) (95.9) (95.9)

Change in trade accounts receivable 14.1 61.4 62.7 62.7

Change in trade payables (22.9) 216.1 85.8 85.8

Change in other operating receivables and payables (38.9) (24.6) (32.4) (32.4)

Change in other receivables and payables 11.1 (46.3) 39.3 39.3

(Increase)/decrease in working capital requirement (96.9) 79.6 59.5 59.5

Net cash provided by operating activities 337.6 453.8 416.2 416.2

II. Investing activities

Additions to property, plant and equipment (344.9) (380.0) (438.2) (438.2)

Acquisition of Sommer Allibert (1) (200.6)

Other acquisitions of investments (13.3) (15.5) (31.1) (31.1)

Divestments of property, plant and equipment 28.9 47.5 34.3 34.3

Proceeds from the disposal of investments 5.4 5.4

Impact of the timing of cash flows 12.1 (28.8) (4.0) (4.0)

Other movements (4.1) (5.1) (18.2) (18.4)

Net cash used by investing activities (321.3) (381.9) (451.8) (652.6)

Net cash provided/(used) by operating andinvesting activities (I)+(II) 16.3 71.9 (35.6) (236.4)

III. Financing activities

Issuance of shares by Faurecia and fully consolidated companies 4.9 0.3 1.1 1.1

Dividends paid by the parent company (21.6) (21.7) (12.9) (12.9)

Dividends paid to minority interests in consolidated subsidiaries (7.5) (5.6) (14.0) (14.0)

Issuance of debt securities and increase in borrowings 49.8 56.5 354.6 682.6

Repayments of borrowings and perpetual notes (7.1) (167.2) (157.7) (157.7)

Net cash (used)/provided by financing activities 18.5 (137.7) 171.1 499.1

IV. Other changes in cash and cash equivalents

Impact of exchange rate changes on cash and cash equivalents 16.7 (4.7) 1.4 1.4

Net increase/(decrease) in cash and cash equivalents 51.5 (70.5) 136.9 264.1

Cash and cash equivalents at beginning of period 462.6 533.1 396.2 269.0

Cash and cash equivalents at end of period 514.1 462.6 533.1 533.1

(1) Acquisition cost of Sommer Allibert and SAI Automotive AG shares. (628.7)Cash and cash equivalents in balance sheet of SIT and the Sommer Allibert group. 428.1

(200.6)

Statement of changes in consolidated shareholders’ equity


Statement of changes in consolidatedshareholders’ equity

(in € millions) Number Capital Additional Retained Translation Consolidatedof shares stock paid-in earnings adjustment shareholders’

capital equity

Shareholders’ equity at December 31, 2001before loss appropriation 24,164,251(2) 169.1 735.0 1,153.8 6.5 2,064.4

Issuance of shares (1) 10,000 0.1 0.2 0.3

Addition to legal reserve (13.6) 13.6

2001 dividends (21.7) (21.7)

Translation adjustment (80.4) (80.4)

Net loss for the period (59.1) (59.1)

Shareholders’ equity at December 31, 2002 before loss appropriation 24,174,251(2) 169.2 721.6 1,086.6 (73.9) 1,903.5

Issuance of shares (1) 32,500 0.2 0.8 1.0

Addition to legal reserve

2002 dividends (21.6) (21.6)

Translation adjustment (62.7) (62.7)

Net income for the period 10.1 10.1

Shareholders’ equity at December 31, 2003 before income appropriation 24,206,751(2) 169.4 722.4 1,075.1 (136.6) 1,830.3

(1) Shares issued on exercise of stock options.

(2) Of which 412,834 shares held in treasury stock (see note 19).

Notes to the consolidated financial statements


Notes to the consolidated financial statementsyear ended December 31, 2003

Note 1 Changes in scope of consolidation

1.1 l 2003In February 2003, Faurecia set up Fesk, a wholly-ownedKorean company, in order to be able to acquire the exhaustsystems business of Chang Heung Precision Co. Ltd. Fesk is fully consolidated.The Japan-based Faurecia Japan KK, and the Group’sinterests in the Chinese companies Cfxas, Scheesc and Teecwere fully consolidated in 2003.

1.2 l 2002At the end of March 2002, Faurecia acquired a 49% interestin Daeki – a South Korean exhaust systems company – for €8.5 million, with an option to increase its stake to 51%.The company is accounted for by the equity method.

1.3 l The 2001 acquisition of Sommer Allibert and pro forma accountsBacked by Peugeot SA, from the beginning of 2001 Faureciaacquired effective control of the automotive businesses ofSommer Allibert, the European leader in instrument panels andcockpits, door panels and modules as well as acoustics andsoft trim.Since Faurecia acquired its shares in Sommer Allibert and SAI Automotive AG in several stages, the portion of 2001 netincome attributable to each batch of shares acquired wasrecorded under minority interests between January 1, 2001and the date of their acquisition, and goodwill was calculatedon each batch of shares at that date.Faurecia – which at December 31, 2003, held 96.82% of theshares in SAI Automotive AG (27.48% directly and 69.34%indirectly through Faurecia Automotive Holdings (formerlySommer Allibert) – launched a compulsory buyout procedurefor the remaining shares at a price of €13.5 per share. SAIAutomotive AG’s shareholders approved the buyout at theirGeneral Meeting held on November 19, 2002. The decisionhas been filed for registration with the Frankfurt commercialcourt but the registration procedure has been postponedfollowing an application to the court made by minorityshareholders.In order to permit meaningful comparisons with prior-perioddata, pro forma accounts were prepared for 2001 as if theacquisition of Sommer Allibert and SAI Automotive AG sharesand the merger with SIT had taken place on January 1, 2001.

Note 2 Summary of significant accounting policies

The consolidated financial statements have been prepared in accordance with Accounting Regulatory Committee (CRC)regulation 99-02.Subsidiaries have been consolidated on the basis of financialstatements at December 31, 2003 and for the year then ended,presented in accordance with the local accounting principlesapplicable in the countries in which they operate, as restatedin accordance with Group accounting policies.However, for the companies jointly owned with Siemens (theSAS Group) – which are accounted for by the equity method –financial statements at September 30, 2003 have been used.Newly acquired subsidiaries are consolidated as from the dateof acquisition.The accounting principles used to prepare the 2003consolidated financial statements are identical to thoseapplied in 2002 and 2001.

2.1 l Consolidation principlesCompanies which are at least 20%-owned are consolidatedwhere one of the following criteria is met: annual sales of over€20 million, total assets over €20 million, debt over €5 million.Subsidiaries which are over 50%-owned, and 50%-ownedsubsidiaries managed exclusively by the Group are fullyconsolidated. Companies that are 50%-owned but notmanaged by the Group are carried at equity. Companies thatare between 20% and 50%-owned are also carried at equitywhen the Group exercises a significant influence. The balance sheets of foreign subsidiaries are translated intoeuros at the year-end exchange rate and their incomestatements are translated at the average monthly exchangerate. The resulting translation adjustments are reported withinconsolidated shareholder’s equity and minority interests. Forcompanies located in high-inflation countries, non-monetaryassets and liabilities and the corresponding income statementitems are translated at historical exchange rates and theresulting translation gain or loss is recognized in the incomestatement. This method is applied to the Turkish companiesSAI Automotive Poliflex, which is fully consolidated, andTeknik Malzeme, which is accounted for by the equity method.


2.2 l Property, plant and equipmentProperty, plant and equipment are stated at acquisition costor production cost in the case of assets produced by theGroup for its own use.Revaluations are not taken into account in the consolidatedfinancial statements.Maintenance and repair costs are expensed as incurred,except where they serve to increase productivity or to prolongthe useful life of an asset.Property, plant and equipment are depreciated by the straight-line method over their estimated useful lives, as follows:– buildings 20 to 30 years– leasehold improvements, fixtures and fittings 10 to 20 years– machinery, tooling and furniture 3 to 16 yearsInvestment grants are recorded under liabilities and writtenback to the income statement to match the depreciationcharged on the fixed assets acquired.Property, plant and equipment acquired under capital leasesare recorded under assets at cost at the inception of the leaseand depreciated as above. An obligation in the same amountis recorded as a liability.Specific tooling is depreciated over the estimated life of the corresponding models, which is generally shorter than the useful life of the tooling, due to the rate at which modelsare replaced.

2.3 l GoodwillGoodwill, representing the difference between the cost of shares in consolidated subsidiaries and the Group’s equityin the fair value of the underlying net assets at the time ofacquisition, is amortized over twenty years or a shorter periodaccording to the specific situation of the subsidiary.

2.4 l Investments and capitalized receivablesInvestments in non-consolidated companies are stated at thelower of cost or fair value, determined based on the company’srevalued net assets, earnings and future outlook. Capitalized loans, receivables and other assets are stated attheir redemption value, like other monetary assets and liabilities.

2.5 l Intangible assetsIntangible assets correspond primarily to the acquisition costsof user-specific software (computer programs provided by software engineering firms), which are amortized by thestraight-line method over a period of one to three years, as well as patents and licenses.

2.6 l InventoriesRaw materials and supplies are stated at cost, determined by the FIFO method.Finished and semi-finished products, as well as work in progress, are stated at production cost, determined by the FIFO method. Production cost includes the cost of rawmaterials and direct and indirect production costs, excludingoverheads not linked to production and interest expense.Work in progress includes costs incurred under contracts withcarmakers to develop and research products for new vehiclemodels. These costs are written off to the income statementover the period in which the corresponding sales are made.Allowances are booked for slow-moving inventories andinventories for which the probable realizable value is below cost.

2.7 l ReceivablesReceivables are taken to the balance sheet at cost.Allowances are booked on a case-by-case basis for all doubtfulaccounts, corresponding primarily to trade accounts.Allowances may also be booked for current account advancesto non-consolidated companies in cases where the company’sfinancial position makes full collection of the advance unlikely.

2.8 l Marketable securities Marketable securities consist mainly of units in mutual fundsand are stated at the lower of cost and market value. Accruedinterest on fixed income securities is credited to interestincome over the investment period.

2.9 l Cash and cash equivalentsCash and cash equivalents correspond to highly liquid investmentswith original maturities of less than three months.



2.10 l Foreign currency transactionsDebts and receivables in foreign currency are converted at theexchange rate prevailing on the transaction date. At the year-end,they are reconverted at the year-end exchange rate or the hedgingrate where applicable and the resulting gain or loss is recorded in the income statement under “Other income and expense”.

2.11 l Minority interestsThis item corresponds to minority shareholders’ interests in the net assets of consolidated subsidiaries. In the case of subsidiaries with a negative net worth, minority interests are deducted from consolidated shareholders’ equity exceptwhere an agreement has been signed requiring minorityshareholders to contribute to financing the company pro ratato their stake in the capital.

2.12 l Reserves for post-retirement and other post-employment obligationsThe Group’s liability for post-retirement and other post-employment benefits is determined on an actuarial basis usingthe projected benefit obligation method. The valuation takesinto account the probability of employees staying with theGroup up to retirement age and expected future salary levels.Benefit obligations are partially funded by contributions to external funds. In cases where the funds are permanentlyallocated to the benefit plan concerned, their value is deductedfrom the related liability.Periodic pension and retirement costs are recognized over the benefit-vesting period.

2.13 l Restructuring and reorganization reservesA reserve for restructuring is booked as soon as GroupGeneral Management has decided upon a rationalization of the organization structure and announced the program to the employees concerned or their representatives.

2.14 l Reserves and allowances for long-term contract lossesReserves and allowances are booked where it is probable that the income receivable under a contract with a customerwill represent less than the total corresponding costs,including research, start-up and production costs. The portionof the expected loss already recognized as costs is recordedas an allowance for impairment in value of inventories, withthe remainder recorded under reserves for contingencies.

2.15 l Revenue recognitionSales are recognized when title is transferred, generally whenthe goods are shipped or the services are performed.

2.16 l Research and development costsResearch and development costs which are not incurred undercontracts with customers are expensed as incurred.

2.17 l Other income and expenseOther income and expense includes dividends received fromnon-consolidated companies and exchange gains and losses,as well as non-recurring income and expenses arising fromevents such as the rationalization of structures, discontinuingof a business line, the closure or divestment of a manufacturingfacility, or the sale of non-operating real estate.

2.18 l Corporate income taxesDeferred taxes are recognized by the liability method for alltemporary differences between the book value of assets andliabilities and their tax basis. Temporary differences arise mainlyfrom accelerated depreciation charged for tax purposes, untaxedreserves, expenses that are not deductible in the year in whichthey are recorded in the accounts and tax loss carryforwards.Deferred tax assets resulting from deductible temporarydifferences and tax loss carryforwards are recognized in the accounts, except in cases where the future recoveryof the deferred tax assets seems uncertain. Where appropriate, an accrual is booked to cover taxes payableon the distribution of retained earnings of subsidiaries andaffiliates which are not considered as having been permanentlyreinvested.

2.19 l Financial instrumentsCurrency and interest rate risks are hedged, where appropriate,using financial instruments traded on organized or over-the-counter markets, with first-rate counterparties.Hedging gains and losses are recognized on a symmetricalbasis with the loss or gain on the hedged item.

2.20 l Use of estimatesThe preparation of financial statements requires the use ofestimates and assumptions that affect the reported amountsof assets, liabilities, revenue and expenses as reflected in the financial statements. Actual results could differ fromthese estimates and assumptions.

2.21 l Earnings per shareBasic earnings per share are calculated by dividing net incomeby the weighted average number of shares outstanding duringthe year, excluding treasury stock.Diluted earnings per share are calculated by the treasurystock method (see note 9).




Note 3 Subsequent events

No significant post-balance sheet events have occurred.

Note 4 Information by business segment and geographic area

4.1 l Sales

4.1a l Sales by business segment

(in € millions) 2003 % 2002 % 2001 %

Automotive Seating 4,353.2 43 4,031.6 41 3,519.2 37Vehicle Interior 3,505.7 34 3,462.8 35 3,297.6 34Exhaust Systems 1,587.9 16 1,777.7 18 2,219.3 23Front-end 675.9 7 593.4 6 574.6 6

Total 10,122.7 100 9,865.5 100 9,610.7 100

4.1b l Sales by geographic area (based on the country of sale)

(in € millions) 2003 % 2002 % 2001 %

France 3,496.0 35 3,347.7 34 3,377.7 35Germany 2,475.2 24 2,306.3 23 2,271.3 24Spain 1,286.4 13 1,130.4 12 980.0 10United Kingdom 394.1 4 446.7 5 379.5 4Other European countries 1,012.2 10 1,123.6 11 1,057.7 11

Sub-total Europe 8,663.9 86 8,354.7 85 8,066.2 84

North America 1,048.7 10 1,228.8 12 1,299.3 13South America 135.5 1 145.7 2 145.5 2Rest of world 274.6 3 136.3 1 99.7 1

Total 10,122.7 100 9,865.5 100 9,610.7 100


4.2 l Key figures by business segmentOperating income has been broken down into two separate segments, “vehicle interior modules” and “other modules”.This analysis reflects actual sales trends as vehicle interior modules are increasingly sold as package deals that include seating,instrument panels and cockpits, door panels, and soft trim and acoustics.

2003

(in € millions) Vehicle interior Other Totalmodules modules

Sales 7,859.0 2,263.7 10,122.7Operating income 228.9 73.9 302.8 As a % of sales 2.9% 3.3% 3.0%

Property, plant and equipment, net 1,228.5 255.8 1,484.3Capital expenditure 290.3 54.6 344.9 Depreciation of property, plant and equipment 261.8 61.9 323.7

2002




2001






4.3 l Key figures by geographic area

2003

(in € millions) France Germany Other European North Other Totalcountries America countries

Property, plant and equipment, net 572.8 237.0 476.1 155.6 42.8 1,484.3 Capital expenditure 115.4 63.1 113.8 40.7 11.9 344.9 Number of employees at December 31 24,966 10,317 16,537 4,790 2,968 59,578

2002


Property, plant and equipment, net 603.8 235.7 470.3 172.7 33.9 1,516.4 Capital expenditure 122.0 77.4 126.6 44.2 9.8 380.0 Number of employees at December 31 24,628 11,355 15,680 4,958 2,257 58,878

2001


Property, plant and equipment, net 634.9 229.2 437.6 211.3 56.5 1,569.5Capital expenditure 144.1 59.6 162.1 51.8 20.6 438.2Number of employees at December 31 23,987 10,958 13,829 4,358 1,957 55,089

Note 5 Operating expenses

5.1 l Analysis by function

(in € millions) 2003 2002 2001

Cost of sales (9,283.5) (9,108.0) (8,850.1)

Research and development costs– gross (532.3) (615.9) (648.1)– amounts billed to customers and changes in inventories 291.7 401.4 392.4 – net (240.6) (214.5) (255.7)

Selling and administrative expenses (295.8) (287.4) (245.2)

Total (9,819.9) (9,609.9) (9,351.0)

From 2003, margins on tooling sales previously deducted from net research and development costs are now reported as a reductionin cost of sales. Based on this new presentation, net pro forma research and development costs for 2002 would have amounted to €280.6 million.



5.2 l Analysis by natureOperating expenses break down as follows by nature for the years ended December 31, 2003, 2002 and 2001:

(in € millions) 2003 2002 2001

Purchases used in production (6,305.8) (6,231.3) (6,097.7)External expenses (1,315.4) (1,255.1) (1,278.9)Payroll costs (1,875.7) (1,879.9) (1,751.5)Taxes other than on income (53.8) (57.3) (56.5)Other income and expense (1) 3.2 81.8 105.9Depreciation, amortization and allowances (272.4) (268.1) (272.3)

Total (9,819.9) (9,609.9) (9,351.0)

(1) Including production taken into inventory. 17.3 104.2 87.5

5.3 l Payroll costs

(in € millions) 2003 2002 2001

Wages and salaries (1,450.5) (1,467.8) (1,370.6)Payroll taxes (425.2) (412.1) (380.9)

Total (1,875.7) (1,879.9) (1,751.5)

5.4 l Depreciation, amortization and allowances for impairment in value

(in € millions) 2003 2002 2001

Depreciation and amortization of property, plant and equipmentand intangible assets (excluding assets acquired under capital leases) (325.7) (324.8) (297.8)Depreciation and amortization of property, plant and equipmentacquired under capital leases (4.1) (3.5) (4.6)Allowances for impairment in value of property, plant and equipmentand intangible assets (4.5) (2.2) (5.5)

Total (334.3) (330.5) (307.9)

Note 6 Interest expense, net

(in € millions) 2003 2002 2001 2001pro forma

Interest income 54.7 39.0 26.8 26.8 Interest expense (137.6) (132.3) (122.2) (118.9)

Total (82.9) (93.3) (95.4) (92.1)



Note 7 Other income and expense

Other income and expense breaks down as follows:

(in € millions) 2003 2002 2001

Net exchange losses (5.1) (2.3) (6.6)Releases of/(charges to) reserves for contingencies and charges andallowances for impairment in value of non-current assets, net (0.9) 1.4 6.8 Restructuring costs (1) (33.8) (74.0) (49.0)(Charges to)/releases of reserves for early retirement costs (2) (0.6) 4.1 (2.9)Gains/(losses) on disposals of assets, net 7.7 (2.7) 0.3 Other 3.1 (1.6)

Total (32.7) (70.4) (53.0)

(1) In 2003, this item includes restructuring costs of €31.9 million, and asset write-downs of €1.9 million compared to €71.3 million and €2.7 million respectively in 2002.

(2) Charges to reserves for early retirement costs for employees approaching retirement age (see note 24).

Note 8 Income taxes

Income taxes can be analyzed as follows:

(in € millions) 2003 2002 2001

Current taxes (49.9) (30.9) (49.4)Deferred taxes (4.8) 3.8 13.0

Total (54.7) (27.1) (36.4)

8.1 l Analysis of the tax chargeThe effective rate of tax paid by the Group in 2003 amounted to 29.2% of income before tax and amortization of goodwill (2002: 29.5%; 2001: 31.7%).The difference compared with the standard French tax rate of 35.43% is mainly due to:

(in%) 2003 2002 2001

Standard French tax rate (35.4) (35.4) (36.4)Income taxable at a reduced rate (France) 0.6 3.1 1.1Impact on deferred tax assets and liabilities of changesin tax rates in certain countries (1.3) 1.5Impact of different tax rates applicable to foreign subsidiaries 2.0 3.5 1.7Tax credits 5.4 9.1 7.9Utilization of previously unrecognized tax loss carryforwards 6.2 4.3 6.4Tax loss carryforwards arising during the year for whichno deferred tax asset was recognized (8.2) (11.8) (14.7)Permanent differences and other 1.5 (2.3) 0.8

Effective tax rate (29.2) (29.5) (31.7)



8.2 l Analysis of deferred taxesThe net deferred tax asset at December 31, 2003 can be analyzed as follows by type of temporary difference:

(in € millions) Deferred taxassets/(liabilities)

Depreciation and amortization (84.2)Temporary difference on allowances 61.8Tax loss carryforwards 97.9Other (3.8)

Net deferred tax asset 71.7

8.3 l Unrecognized deferred tax assetsDeferred tax assets corresponding to tax loss carryforwards that are not certain of being utilized are not recognized.These tax loss carryforwards can be analyzed as follows by year of expiry.

(in € millions) Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001

Y+1 1.0 0.3 2.5 Y+2 4.4 0.0 0.1 Y+3 1.8 8.8 4.1Y+4 1.8 13.3 19.7Y+5 and beyond 28.4 31.9 29.3 Available indefinitely 138.2 70.7 43.2

Total 175.6 125.0 98.9

Note 9 Earnings per share

Number of shares

2003 2002 2001 2001pro forma

Number of shares outstanding at the period-end (1) 24,206,751 24,174,251 24,164,251 24,164,251Adjustments:– treasury stock (412,834) (412,834) (315,974) (315,974)– impact of share issues weighted based on

the period between the date of the share issueand the year-end (2) (17,496) (6,753) (28,227) (4,062,636)

Basic weighted average number of shares 23,776,421 23,754,664 23,820,050 19,785,641

Weighted impact of dilutive instruments(stock options) (3) 123,465 89,980 186,221 186,221

Weighted average number of shares after dilution 23,899,886 23,844,644 24,006,271 19,971,862

(1) Changes in the number of shares outstanding at December 31 can be analyzed as follows:

At December 31, 2001: number of Faurecia shares outstanding 24,164,251• Faurecia stock options exercised in 2002 10,000

At December 31, 2002: number of Faurecia shares outstanding 24,174,251• Faurecia stock options exercised in 2003 32,500

At December 31, 2003: number of Faurecia shares outstanding 24,206,751

(2) As the merger with SIT was effective from June 1, 2001 (see note 1), the weighted average number of shares includes the impact of the 9,752,049 shares issued on June 1, 2001,as recorded in the 2001 financial statements.However, in the pro forma financial statements for 2001, the shares issued in payment for assets contributed on the merger of SIT are deemed to have been createdon January 1 of the year in question.

(3) As of December 31, 2003, 782,100 stock options were outstanding and exercisable (December 31, 2002: 817,900). In the above table, the weighted impact of dilutive instrumentswas calculated using the treasury stock method. This method consists of multiplying the number of outstanding stock options by the ratio between the average exercise priceof outstanding stock options and the average share price for the year, i.e. €49.67.



Earnings per shareIn order to permit meaningful earnings per share comparisons, the consolidated net loss for 2001 has been adjusted as if theacquisition of Sommer Allibert and SAI Automotive AG shares and the merger with SIT had taken place on January 1, 2001.This restated figure also takes into account a discounting adjustment stated net of tax, between January 1, 2001 and the effectivedates of payment for the shares purchased.

(in € millions)

2001 net loss (56.3)

Discounting adjustment, net of tax (2.1)

Adjustment of net income attributable to Faurecia 25.3

Impact of recalculation of fair value adjustments at January 1, 2001 (18.9)

2001 pro forma net loss (52.0)

(in €) 2003 2002 2001 2001pro forma

Primary earnings per share

– before amortization of goodwill 5.07 2.29 2.52 1.86– after amortization of goodwill 0.43 (2.49) (2.18) (2.85)

Diluted earnings per share

– before amortization of goodwill 5.04 2.29 2.50 1.84– after amortization of goodwill 0.42 (2.49) (2.18) (2.85)

Primary earnings per share are computed by dividing income by the weighted average number of shares outstanding overthe period, excluding shares held in treasury stock.

Note 10 Goodwill

(in € millions) 2003 2002 2001

Net goodwill at January 1 1,914.1 1,963.0 943.4

Sommer Allibert goodwill in 2001 and adjustments in 2002 99.6 1,090.6

Acquisitions 13.0 0.2 9.8

Amortization for the year (110.4) (113.6) (93.1)

Translation adjustment and other movements (31.7) (35.1) 12.3

Net goodwill at December 31 1,785.0 1,914.1 1,963.0

Net goodwill breaks down as follows:


Acquisition of Sommer Allibert and SAI Automotive AG 1,031.6 1,093.5 1,053.7Bertrand Faure shares acquired in 1998 and 1996 561.0 601.7 642.1 “Acquisition” of minority interests in Bertrand Faure and ECTRA in 1999 23.2 24.7 26.3 Acquisition of AP Automotive Systems 136.7 174.9 220.3 Other 32.5 19.3 20.6

Total 1,785.0 1,914.1 1,963.0



Goodwill relating to Sommer Allibert and SAI Automotive AG breaks down as follows:

(in € millions)

Acquisition cost of Sommer Allibert and SAI Automotive AG shares 628.7Fair value of net assets received on merger of SIT into Faurecia 1,169.8Total acquisition cost 1,798.5

Equity in net assets acquired 906.1

Difference 892.4

Fair value adjustments (net of deferred taxes):

Recorded at Adjustments TotalDec. 31, 2001 2002

– inventories (52.4) (17.1) (69.5)– reserves and allowances for long-term contract losses (65.7) (9.4) (75.1)– interest rate instruments (1.6) (1.6)– property, plant and equipment and intangible assets (30.9) 1.0 (29.9)– reserves for restructuring costs (5.9) (26.7) (32.6)– other reserves for contingencies and charges (15.7) (6.7) (22.4)– deferred taxes (11.9) (40.0) (51.9)– other receivables and payables, net (24.9) (2.2) (27.1)

Total fair value adjustments (100%) (209.0) (101.1) (310.1)Fair value adjustments attributable to the Group (198.2) (99.6) (297.8)

Plus fair value adjustments attributable to the Group 198.2 99.6 297.8 297.8

Goodwill 1,190.2Amortization for 2001 (36.9)Amortization for 2002 (59.8)Amortization for 2003 (59.8)Exceptional amortization recorded as a contra-entryto a write-back from reserves for contingencies (2.1)

Net goodwill at December 31, 2003 1,031.6

Faurecia performs impairment tests on assets (including goodwill) in each of the Group’s businesses, by comparing net book valuewith a valuation based on discounted future cash flows, using management’s most recent forecasts.Based on the conclusions of independent experts a discount rate ranging from 6.3% to 8% is applied and, for the period beyondmanagement forecasts, projected cash flows are obtained by extrapolating to perpetuity the last year of the forecast (2007),applying a growth rate of 1.5%.No allowances for impairment in value were recorded at December 31, 2003 based on these tests.




Note 11 Property, plant and equipment

Property, plant and equipment can be analyzed as follows:

(in € millions) Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001Cost Depreciation Net Net Net

Land 72.5 (3.7) 68.8 67.9 52.5 Buildings 748.2 (387.4) 360.8 364.9 388.0 Plant and equipment 2,393.5 (1,574.1) 819.4 851.4 835.5 Other and assets under construction 489.8 (254.5) 235.3 232.2 293.5

Total 3,704.0 (2,219.7) 1,484.3 1,516.4 1,569.5

Fixed assets under capital leases included above 72.1 (36.3) 35.8 39.6 43.6

The main movements in property, plant and equipment during 2003, 2002 and 2001 were as follows:

(in € millions) 2003 2002 2001

Additions (including own work capitalized) (1) 375.6 380.0 438.2 Sommer Allibert asset contributions – – 458.3 Disposals (net book value) (51.4) (41.2) (36.5)Depreciation and allowances for impairment in value (319.1) (313.3) (292.1)Other movements (translation adjustments, changes in scope of consolidation, etc.) (37.2) (78.6) 10.9

Total (32.1) (53.1) 578.8

(1) Including in 2003: land (€3.2 million), buildings (€55.6 million), plant and equipment (€240.1 million), other assets (€50.2 million) and assets under construction (€26.5 million).

Note 12 Investments in companies accounted for by the equity method

At December 31, 2003, this item breaks down as follows:

(in € millions) % Group Dividends Group Groupinterest share of received by share of share of

(*) equity the Group sales total assets

Vanpro Assentos Lda 50 2.5 2.5 59.6 9.0WBF Technologies 50 0.2 0.0 0.0 0.2Teknik Malzeme 50 5.1 0.0 53.6 23.2Armaduras de Asientos Ardasa SA 50 8.9 0.0 15.7 13.8Copo Ibérica SA 50 9.5 1.2 22.0 20.5Changchun Lat Exhaust Systems (CLEC) 50 4.1 1.3 21.0 8.3Daeki Faurecia Corp. (Korea) 49 6.6 0.0 33.5 15.1Componentes de Vehículos de Galicia SA 50 3.9 0.2 13.2 9.3Faurecia Japan NHK Kyushi Co. Ltd 50 0.0 0.0 37.9 8.4Faurecia Japan NHK Co. Ltd 50 0.0 0.0 0.0 5.3Arsed doo 50 (0.5) 0.0 11.7 8.2

Total – 40.3 5.2 268.2 121.3

SAS Group 50 8.0 0.0 606.5 282.9

Total – 48.3 5.2 874.7 404.2

(*) Percent interest held by the company that owns the shares.


Note 13 Other equity interests

(in € millions) % Book valueinterest Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001

Cost Net Net Net

Changchun Lat Exhaust Systems (CLEC) (1) 50 – – 1.7 1.7Copo Ibérica (2) 34 – – – 2.4JV Scheesc (3) 51 – – 1.2 1.2Faurecia Japan NHK Kyushi Co. Ltd (1) 50 – – 4.4 1.2SCI Messei 100 0.4 0.4 0.4 0.4Tongda Ecia Exhaust Company Ltd (Teec) (3) 50 – – 2.2 2.2Faurecia Japan NHK Co. Ltd (1) 50 – – 0.9 0.9Cfxas China (3) 60 – – 2.8 1.1Faurecia Interior Systems KK (4) 90 – – – 1.3Faurecia GSK Wuhan Automotive seating Co. Ltd 51 2.5 2.5 2.0 –Faurecia Seating Timaciu SRL 100 1.5 1.5 – –Other – 2.1 1.1 1.4 1.1

Total 6.5 5.5 17.0 13.5

(1) Accounted for by the equity method in 2003.

(2) Accounted for by the equity method since 2002.

(3) Fully consolidated in 2003.

(4) Fully consolidated since 2002.

Note 14 Long-term loans and receivables

This item includes:

(in € millions) Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001Cost Allowances Net Net Net

Loans to subsidiaries and affiliates 2.8 1.6Long-term loans 21.9 (5.4) 16.5 22.7 14.4 VAT credit – – – – 0.6 Other 12.4 (5.5) 6.9 7.4 11.1

Total 34.3 (10.9) 23.4 32.9 27.7

Note 15 Other non-current assets and deferred charges

This item includes:


Excess of external funds over future post-retirement benefit obligations (1) 11.6 9.4 8.7Long-term deferred tax assets 52.5 19.2 27.5Deferred charges 0.2 0.5 4.5

Total 64.3 29.1 40.7

(1) Corresponding to the excess of the amounts invested in external funds by certain companies over the present value of their future benefit obligations.



Note 16 Inventories

(in € millions) Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001Cost Allowances Net Net Net

Raw materials and other supplies 251.0 (24.4) 226.6 236.5 242.6 Work in progress 748.4 (80.8) 667.6 612.2 532.2 Finished and semi-finished products 92.1 (8.0) 84.1 93.1 87.9

Total 1,091.5 (113.2) 978.3 941.8 862.7

Work in progress at December 31, 2003 includes €456 million in research and development costs billable to customers (December 31, 2002: €375 million; December 31, 2001: €269.1 million).

Note 17 Trade accounts receivable


Trade accounts receivable 1,588.0 1,617.3 1,738.6Allowances for doubtful accounts (15.1) (21.5) (33.5)

Total 1,572.9 1,595.8 1,705.1

In 2000, Faurecia and certain of its French subsidiaries entered into an agreement with a Group bank providing for the sale of receivables through November 2005. The bank’s right of recourse is limited to the amount of the related subordinated deposit.In order to further diversify its financial resources, in December 2002 Faurecia entered into a second agreement with another Group bank, extending the receivables securitization program to other French and European subsidiaries through December 2007.The same subordinated deposit principle applies to this agreement.

The financing raised under these programs and the related balance sheet impact break down as follows:


Financing, net of subordinated deposit 679.0 651.4 260.1 Sold receivables 294.9 281.4 155.9 Subordinated deposit, recorded under other receivables 101.1 106.0 16.6 Sold receivables, net of subordinated deposit 193.8 175.4 139.3

Note 18 Other operating receivables

This item breaks down as follows:


Prepayments to suppliers 50.9 62.6 67.0 Other receivables (1) 203.5 174.4 144.3

Total 254.4 237.0 211.3

(1) Including €150.1 million in VAT receivables in 2003 (€166.7 million in 2002).



Note 19 Other receivables and prepaid expenses


Current maturities of long-term loans 0.3 0.4 7.1 Prepaid expenses 34.7 32.4 20.0 Short-term deferred tax assets 100.0 121.8 120.0 Subordinated deposit paid in connection with the sale of receivables (1) 101.1 106.0 16.6 Other receivables 38.4 46.9 88.9

Total 274.5 307.5 252.6

(1) See note 17.


Note 20 Treasury stock

At December 31, 2003 Faurecia held 412,834 shares intreasury stock, including: – 200,000 shares contributed by ECTRA in 1999;– 19,613 shares purchased in 2000 at a cost of €0.8 million;– 96,361 shares purchased in 2001 at a cost of €4.2 million;– 96,860 shares purchased in 2002 at a cost of €3.8 million.The shares are being held for allocation on exercise of stockoptions granted to directors and managers of the Group.At the Meetings held on September 6, 1999, September 4,2000 and April 26, 2001, the Board of Directors decided to grant, respectively, 200,000 stock options with an exerciseprice of €52 each, 254,000 options with an exercise price of €40 and 43,500 options with an exercise price of €54.5.

Note 21 Cash and marketable securities

At December 31, 2003, cash and marketable securitiesincluded current account balances of €276.5 million(December 31, 2002: €249.1 million; December 31, 2001:€526 million) and marketable securities of €237.6 million(December 31, 2002: €213.5 million; December 31, 2001:€3.7 million).The book value of marketable securities is almost identical to market value as they are held on a very short term basis.

Note 22 Shareholders’ equity

22.1 l Capital stock and additional paid-in capitalAt December 31, 2003, capital stock amounted to€169.4 million, divided into 24,206,751 fully paid-up commonshares with a par value of €7 each. Shares which have beenregistered in the name of the same holder for at least two yearscarry double voting rights (16,514,248 shares at December 31,2003).The exercise of all the stock options granted to directors andmanagers of the Group that were outstanding at December 31,2003, i.e. 782,100 options exercisable at an average price of €46.20 would result in:– capital stock being increased by €5.5 million through

the issuance of 782,100 common shares with a par value of €7 each;

– additional paid-in capital being increased by €30.6 million.

22.2 l Retained earningsIn addition to net income for the year and retained earnings,distributable reserves held by the parent company mainlycomprise a long-term capital gains reserve amounting to €3.1 million. Full distribution of this reserve would give rise to the payment of additional tax in an amount of €0.7 million.


Note 23 Minority interests

Changes in minority interests were as follows:

(in € millions) 2003 2002 2001

Balance at January 1 51.1 47.3 28.3Increase in minority capital 3.8Impact of acquisition of SommerAllibert as of January 2, 2001 – 18.6Other changes in the scopeof consolidation and translationadjustments (*) 2.1 (6.2) (3.7)Minority interests in net incomefor the year 13.2 15.7 43.1Less net income allocated to minority interests betweenJanuary 1 and acquisition datesof Sommer Allibert Group shares – (25.3)Dividends paid to minorityshareholders (7.5) (5.7) (13.7)

Balance at December 31 62.7 51.1 47.3

(*) Including:

2001 : buyout of minority shareholders of Trécia (5.0)

2002 : impact of changes in fair valueadjustments relating to Sommer Allibert (1.5)

2003 : minority interests of Chinese companiesconsolidated in 2003 7.9

Note 24 Post-retirement and other post-employment benefit obligations

24.1In addition to the retirement benefits provided under locallegislation in the various countries where Group companiesare located, Group employees are entitled to supplementarypension benefits and retirement bonuses. The Group’s obligations under these plans are determined on an actuarial basis. The assumptions used are as follows: – retirement age of between 60 and 65 for employees

in France;– staff turnover assumptions;– mortality assumptions;– estimated future salary levels;– assumptions concerning the return on plan assets;– for French companies, a 4.5% discount rate and a 2.0%

inflation rate;– for foreign companies, discount and inflation rates based

on local conditions.

24.2 l Projected benefit obligation


Present value of future benefit obligations 315.5 282.1 243.1

Funded status:– reserves booked in the accounts 122.3 115.0 112.3– external funds (market value) 83.5 85.5 88.0– excess of external funds over

future benefit obligations (1) (11.6) (9.4) (8.7)– unamortized benefit obligation

and unrecognized net loss 121.3 91.0 51.5

Total 315.5 282.1 243.1

(1) The excess of external funds over future benefit obligations is included in “Other non-current assets and deferred charges” (see note 15).

Unamortized benefit obligations and unrecognized net lossesinclude:– benefit obligations calculated when the initial reserve was

booked;– gains and losses arising from changes in actuarial assumptions

and differences between the actual return on external fundsand the estimated return on long-term investments.

These benefit obligations and gains and losses, which are notrecognized in the balance sheet, are recorded in the incomestatement according to the average remaining service lives of employees.

24.3 l Change in reserves for post-retirement and other post-employment benefit obligationsMovements in the reserve in 2003 were as follows:

(in € millions) Amounts

Balance at December 31, 2002 115.0Effect of changes in Group structure (reserve net of theexcess of external funds over future benefit obligations) 0.5Allocations for the year 22.6Expenses charged to the reserve (6.9)Payments to external funds (10.2)Other movements 1.3

Balance at December 31, 2003 122.3

24.4 l Periodic post-retirement and post-employmentbenefit costPeriodic post-retirement and post-employment benefit costbreaks down as follows:


Service cost 11.5 12.2 14.4 Interest cost 12.5 11.7 13.9 Actual return on external funds (7.0) (7.5) (7.5)Net amortization and deferral 5.6 1.7 (0.6)

Total 22.6 18.1 20.2



Note 25 Other reserves and long-term liabilities

Other reserves and long-term liabilities can be analyzed as follows:


Restructuring reserves (1) 59.3 111.5 58.6 Early retirement plan reserves (2) 13.4 16.3 22.0 Employee profit-sharing reserve 5.7 1.6 5.0 Reserves for long-term contract losses and customer warranty reserves 60.8 75.1 99.7 Reserves for claims and litigation 19.3 17.4 13.9 Reserves for contingencies related to subsidiaries and affiliates 7.1 7.3 6.0 Length of service awards 15.7 15.2 13.6 Other 32.1 20.9 25.2

Sub-total – Reserves 213.4 265.3 244.0

Investment grants 19.4 21.1 12.0 Conditional subsidies (long-term portion) 3.9 3.8 3.3

Total 236.7 290.2 259.3

Less: short-term portion of restructuring reserves (3) (46.7) (96.3) (33.5)

Total other reserves and long-term liabilities 190.0 193.9 225.8

(1) Restructuring reserves concern rationalization decisions announced before the end of the financial year.

(2) Early retirement plan reserves concern the early retirement of employees of French companies aged 57 and over between February 9, 2000 and February 28, 2005.The reserve corresponds to the discounted present value of the amounts to be paid to the employees concerned, less Government contributions to the cost of the plan. The discountedpresent value is determined using a discount rate of 3.0% and an estimated rate of increase in early retirement benefits of 2.0%. The amount of the reserve was revalued at end-2003and a total of 746 employees are eligible to participate in the plan.

(3) The short-term portion of restructuring reserves is included in “Other payables and deferred income” (see note 28).

Movements in reserves in 2003 were as follows:

(in € millions) Balance at Allocations Expenses Reversals (1) Effect of changes Balance at Dec. 31, 2002 charged to in Group structure Dec. 31, 2003

reserves and othermovements (2)

Restructuring reserves 111.5 27.1 (78.7) (1.8) 1.2 59.3Early retirement plan reserves 16.3 0.6 (3.5) 13.4Employee profit-sharing forthe year (3) 1.6 5.4 (1.3) 5.7Reserves for long-term contract losses and customer warranty reserves 75.1 26.5 (27.8) (13.0) 60.8Reserves for claims and litigation 17.4 11.1 (5.4) (2.5) (1.3) 19.3Reserves for contingenciesrelated to subsidiaries andaffiliates 7.3 (0.2) 7.1Length of service awards 15.2 1.8 (0.9) (0.4) 15.7Other 20.9 17.9 (1.4) (2.8) (2.5) 32.1

Total 265.3 90.4 (117.9) (7.5) (16.9) 213.4

(1) Reserves no longer required.

(2) Including €16.4 million reclassified from reserves for long-term contract losses to allowances for impairment in value of inventories.

(3) The reserve for employee profit-sharing concerns French companies of the Group.



Note 26 Net debt

26.1 l Detailed breakdown


Perpetual notes (TDI) 11.7 17.8 23.8 Bank borrowings 558.0 752.2 726.4 Other borrowings 17.2 22.2 25.5 Obligations under capital leases 22.9 27.9 33.3

Sub-total – Long-term debt 609.8 820.1 809.0

Current portion of long-term debt 30.5 52.6 201.1 Short-term debt 1,569.5 1,297.0 1,284.3

Total 2,209.8 2,169.7 2,294.4

Cash and cash equivalents (514.1) (462.6) (533.1)

Net debt 1,695.7 1,707.1 1,761.3

Faurecia has access to a medium-term syndicated line of credit of up to a maximum of €1,000 million which can be drawn downfor renewable periods of one, three or six months, as well as a 364-day syndicated line of credit for €545 million.At December 31, 2003 the undrawn portion of these syndicated lines of credit amounted to €550 million and €545 million, respectively.The contracts for these lines of credit impose certain conditions, particularly relating to maximum consolidated financial ratios. At December 31, 2003 these conditions were all respected.Faurecia and certain of its French subsidiaries entered into an agreement in 2000 with a Group bank providing for the sale of receivables through November 2005. The bank’s right of recourse is limited to the amount of the related subordinated deposit.In order to further diversify its financial resources, in December 2002 Faurecia entered into a second agreement with another Group bank, extending the receivables securitization program to other French and European subsidiaries through December 2007. The same subordinated deposit principle applies to this agreement.At December 31, 2003, the total amount of these programs, net of subordinated deposits stood at €679.0 million (see note 17)compared with €651.4 million at December 31, 2002.

26.2 l Analysis of long-term debt by maturity

(in € millions) 2005 2006 2007 2008 2009 Totaland beyond

Perpetual notes (TDI) 6.4 5.3 – – – 11.7 Bank borrowings 43.9 16.8 473.1 8.0 16.2 558.0 Other borrowings 9.7 2.7 4.2 0.6 – 17.2 Obligations under capital leases 4.2 4.1 3.6 2.9 8.1 22.9

Total at December 31, 2003 64.2 28.9 480.9 11.5 24.3 609.8

26.3 l Perpetual notesOn October 15, 1991, Faurecia (formerly Bertrand Faure) issued subordinated perpetual notes amounting to FRF 900 million(€137.2 million) paying interest at the 6-month Pibor plus 1.1% through October 15, 2006 and a symbolic rate of interest thereafter. The notes were repackaged in 1996 and the subordination clause was eliminated. In the pro forma balance sheet at December 31, 1997,the notes were stated at their estimated discounted present value at that date of €50 million, determined on the basis of the valueof future cash flows discounted at the rate of 4.21%, corresponding to the 6-month Pibor at the end of 1997 plus a 0.4% margin.As from 1998, the residual value is being amortized on the basis of the repayments that would be due on a fixed rate loan at 4.21% interest over the period remaining to October 15, 2006.



26.4 l Analysis of long and short-term debt by currency and interest rateAt December 31, 2003, 99% of borrowings were at variable rates, taking into account swap transactions.

(in € millions) Before swaps After swaps

Variable rate 2,150.3 2,192.3Fixed rate 59.5 17.5

Total 2,209.8 2,209.8

Borrowings (taking into account currency swaps) break down as follows by repayment currency:

(in € millions) Dec. 31, 2003 % Dec. 31, 2002 % Dec. 31, 2001 %

Euros 2,063.6 93.4 2,014.2 92.8 1,878.4 81.9US dollars 101.0 4.6 93.6 4.3 358.9 15.6Other currencies 45.2 2.0 61.9 2.9 57.1 2.5

Total 2,209.8 100.0 2,169.7 100.0 2,294.4 100.0

The estimated market value of debt at December 31, 2003 was €2,207.2 million.At December 31, 2003, the weighted average interest rate on borrowings was 2.8% (3.2% at December 31, 2002).

Note 27 Hedging of currency and interest rate risks

Symmetrical hedge transactions (for example combinations of options forming tunnels) are reported below on the basis of thehedged amount and not the arithmetical sum of the transactions.

27.1 l Currency hedgesThe Group’s exposure to currency risk is limited primarily to the translation into euros of the results of foreign subsidiaries.The purchases and production costs of non-euro zone companies, which account for 21.3% of consolidated sales, are generallydenominated in the currency of the country in which they operate, thus limiting currency risks.Certain entities may be subject to some degree of currency risk on purchases of raw materials and supplies, sales billed in foreigncurrencies or investments in foreign countries.These risks are managed centrally by Faurecia, principally using forward purchase and sale contracts and options as well as foreigncurrency financing. Subsidiaries outside the euro zone are granted intercompany loans in their operating currencies. As such loansare refinanced in euros, exchange-rate risk is hedged through swaps.These risks are managed centrally by Faurecia, principally using forward purchase and sale contracts and options as well as foreigncurrency financing.All of these hedging transactions are subject to internal control procedures, directly supervised by Group General Management.



Hedging transactions by currency are as follows:

(in € millions) Currency sold/ USD/ USD/ GBP/ CAD/ JPY/ EUR/ EUR/ SEK/ EUR/ EUR/ Totalcurrency purchased EUR CAD EUR EUR EUR CZK ZAR EUR PLN KRW

Trade receivables net of payables 2.4 20.2 11.4 0.0 (0.02) 3.2 11.5 (0.7) 9.6 0.0 57.6Borrowings 0.0 0.0 10.9 0.0 0.00 (4.4) (2.5) 0.0 (38.3) (7.0) (41.3)Net position before hedging 2.4 20.2 22.3 0.0 (0.02) (1.2) 9.0 (0.7) (28.7) (7.0) 16.3Hedging (3.4) (15.8) (4.2) 0.0 0.02 0.0 (10.4) 0.0 (13.1) 7.0 (39.9)Net balance sheet position after hedging (1.0) 4.4 18.1 0.0 0.00 (1.2) (1.4) (0.7) (41.8) 0.0 (23.6)Hedging of future receivables and payables (11.8) (71.3) (12.9) 0.0 0.00 0.0 4.8 0.0 (44.4) 0.0 (135.6)

Inter-company loans in currencies swappedfor euros 96.6 0.0 4.7 0.0 4.30 14.7 7.0 4.2 12.8 0.0 144.1

All of these hedging transactions mature in 2004.Forward purchase and sale contracts (excluding swaps relating to the refinancing of intercompany loans) and call and put options are as follows:

(in € millions) USD/EUR USD/CAD GBP/EUR EUR/ZAR EUR/Other Total

Forward sales 3.7 – – 14.6 10.0 28.3Forward purchases 0.4 – – 12.6 – 13.0Call options – – – – – –Put options 12.0 87.1 17.0 3.6 47.5 167.2

Currency forward contracts represent an unrealised capital gain of €0.2 million in relation to exchange rates on December 31, 2002.At the same date, the market value of options was €1.6 million more than their carrying value.

27.2 l Interest rate hedgesFixed rate borrowings of €42 million due in more than one year have been swapped for variable rate debt with the same maturities.

(in € millions) Interest-rate adjustmentsWithin 1 year 1 to 5 years Beyond 5 years Total

Intraday to 1 year Fixed rate

Borrowings 2,156.9 8.1 44.8 0.0 2,209.8Cash and cash equivalents 514.1 514.1

Net balance sheet position 1,642.8 8.1 44.8 0.0 1,695.7

Fixed rate/variable rate swaps 42.0 (8.1) (33.9) – 0.0

Net position after hedging 1,684.8 0.0 10.9 0.0 1,695.7

Variable rate/fixed rate swaps only on interest paid in 2004 (1,013.0) 1,013.0

671.8 1,013.0 10.9 0.0 1,695.7

Caps and other options in euros and USD (including €100 million in tunnels) have been taken out to hedge interest on debt payablebetween January 2004 and June 2008.

(in € millions) 2004 2005 2006 2007 2008

Caps and other options 3,226.3 1,700 1,050 950 50

Premiums reported under assets in the balance sheet at December 31, 2003 (see note 19) stood at €18.3 million including€12.9 million to be paid in installments between 2004 and 2007.Instruments whose value exceeded the amount of interest anticipated over the period were marked to market and a reserve for contingencies was recorded in an amount of €2.3 million.The book value of other interest rate instruments exceeded their market value by €8.5 million. Premiums not valued at market value are amortized over the life of the hedging instruments.

27.3 l Country risksThe Group’s exposure to country risks is not material. Notes to the consolidated financial statements


Note 28 Other payables and deferred income


Due to suppliers of fixed assets 66.7 52.5 81.5 Short-term deferred taxes 33.3 22.0 1.4 Deferred income 5.6 5.1 15.0 Restructuring reserves – short-term portion 46.7 96.3 33.5 Other payables 73.1 69.3 73.9

Total 225.4 245.2 205.3

Note 29 Commitments given


Minimum future lease payments under non-cancelable operating leases 107.7 112.1 71.2 Debt collateral:– pledged shares of Group companies 0.0 0.0 562.6 – mortgages 20.5 22.0 34.8 Other debt guarantees 17.1 28.4 81.9 Firm orders for property, plant and equipment 89.9 86.0 118.2 Other 0.3 0.2 0.3

Total 235.5 248.7 869.0

Minimum future lease payments under non-cancelable operating leases break down as follows:


2002 23.5 2003 24.8 16.5 2004 24.7 16.3 10.3 2005 18.1 12.8 20.9 2006 14.2 11.3 2007 12.2 10.7 2008 and beyond 38.5 36.1

107.7 112.1 71.2

Maturities of mortgages and guarantees at December 31, 2003:

(in € millions) Dec. 31, 2003

Due within 1 year 11.5 Due in one to 5 years 11.9 Due beyond 5 years 14.2

37.6



Note 30 Transactions with PSA Peugeot Citroën

The Faurecia Group is managed independently and transactions with the PSA Peugeot Citroën Group are conducted on arm’slength terms.Related party transactions with the PSA Peugeot Citroën Group are as follows:

(in € millions) 2003 2002 2001

Sales 2,662.4 2,360.3 2,293.3 Purchases of products, services and materials 38.5 43.1 47.7 Receivables at December 31 618.2 631.2 640.2 Payables at December 31 42.5 35.0 37.9

Note 31 Employees

The number of employees of fully consolidated companies at December 31, 2003, 2002 and 2001 was as follows:

2003 2002 2001

Europe– France 24,966 24,628 23,987– Germany 10,317 11,355 10,958– Other European countries 16,537 15,680 13,829

Sub-total Europe 51,820 51,663 48,774

Outside Europe 7,758 7,215 6,315

Total 59,578 58,878 55,089

The number of employees by business segment at December 31 is as follows:

2003 2002 2001

Vehicle interior modules 50,512 49,027 45,346 Other modules 9,066 9,851 9,743

Total 59,578 58,878 55,089

Note 32 Management compensation

The total compensation for 2003 awarded to the members of the Board of Directors and the Executive Committee was €5,405,104 including directors’ fees of €195,500.No stock options were granted to members of the Board of Directors or the Executive Committee in 2003.

Note 33 Information on the consolidating company

The consolidated accounts of the Group are included in the consolidated financial statements of PSA Peugeot Citroën Group, 75, avenue de la Grande-Armée, 75116 Paris.At December 31, 2002 Peugeot SA held 71.41% of the capital and 83.76% of the voting rights of Faurecia SA, the parent company of the Faurecia Group.



Consolidated companies at December 31, 2003

Country % interest % control (1)

I. Fully consolidated companies

Holdings companies and other companiesFaurecia France Parent companyFinancière Faurecia “ 100.00 100.00SFEA – Société Foncière pour l’Équipement Automobile “ 100.00 100.00Faurecia Investments “ 100.00 100.00Faurecia Automotive Holdings (formerly Sommer Allibert) “ 100.00 100.00Blériot Investissements “ 100.00 100.00Faurecia Services Groupe “ 100.00 100.00Faurecia Global Purchasing “ 100.00 100.00Faurecia Exhaust International “ 100.00 100.00SIP Werwaltungs GmbH Germany 100.00 100.00Faurecia USA Holdings, Inc. USA 100.00 100.00Faurecia Automotive Holdings, Inc. “ 100.00 100.00Société Internationale de Participations (SIP) Belgium 100.00 100.00Faurecia Netherlands Holding BV Netherlands 100.00 100.00United Parts Exhaust Systems AB Sweden 100.00 100.00

Automotive Seating and Vehicle InteriorFaurecia Sièges d’Automobile SA France 100.00 100.00Faurecia Industries “ 100.00 100.00Faurecia Systèmes de Direction “ 100.00 100.00EAK Composants pour l’Automobile SAS “ 51.00 51.00EAK Composants pour l’Automobile SNC “ 51.00 51.00Trécia “ 100.00 100.00Siebret “ 100.00 100.00Sieloir “ 100.00 100.00Siemar “ 100.00 100.00Sienor “ 100.00 100.00Sieto “ 100.00 100.00Sieval “ 100.00 100.00Sotexo “ 100.00 100.00Siedoubs “ 100.00 100.00Sielest “ 100.00 100.00ECSA – Études et Construction de Sièges pour l’Automobile “ 100.00 100.00Faurecia Intérieur Industrie SNC (formerly SAI Autom. Allibert Ind.) “ 98.38 100.00Faurecia Automotive Industrie SNC (formerly SAI Autom. Sommer Ind.) “ 98.38 100.00

(1) Total interest of fully consolidated companies.

Consolidated companies



Automotive Sandouville France 96.82 100.00Faurecia Automotive Intérieur France (formerly SAI Automotive France) “ 96.82 100.00Société Automobile du Cuir de Vesoul “ 100.00 100.00Faurecia Autositze GmbH & Co. KG Germany 100.00 100.00ECIA GmbH “ 100.00 100.00Faurecia Deutschland Holding GmbH & Co. KG “ 99.99 100.00SAI Automotive AG “ 96.82 96.82Faurecia Innenraum Systeme GmbH (formerly SAI Automotive Peine GmbH) “ 96.82 100.00Industriepark Sassenburg GmbH (formerly SAI Automotive TDW GmbH) “ 96.82 100.00Faurecia Innenraum Systeme Köln GmbH “ 96.82 100.00Faurecia Asientos para Automóvil España SA Spain 100.00 100.00Asientos de Castilla León SA “ 100.00 100.00Asientos del Norte SA “ 100.00 100.00Industrias Cousin Frères SL “ 50.01 50.01Tecnoconfort “ 50.00 50.00Faurecia Automotive España SA “ 96.82 100.00SAI Automotive Lignotock SA “ 96.82 100.00SAI Automotive SALC España SA “ 96.82 100.00Cartera e inversiones Enrich SA “ 96.82 100.00Asientos de Galicia SL “ 100.00 100.00Valencia Modulos de Puerta SL “ 100.00 100.00Faurecia Assentos de Automóvel, Lda Portugal 99.99 100.00Sasal “ 99.99 100.00SAI Automotive Portugal “ 96.82 100.00EDA – Estofagem de Assentos Lda “ 99.99 100.00Faurecia Automotive Seating UK Ltd United Kingdom 100.00 100.00Faurecia Midlands Ltd “ 100.00 100.00SAI Automotive Telford Ltd “ 96.82 100.00SAI Automotive Fradley Ltd “ 96.82 100.00SAI Automotive Washington Ltd “ 96.82 100.00SAI Automotive SAL UK Ltd “ 96.82 100.00Faurecia Fotele Samochodowe SpZoo Poland 100.00 100.00Faurecia Walbrzych SpZoo “ 100.00 100.00SAI Automotive Polska SpZoo “ 96.82 100.00Faurecia Systemy Kierownicze SpZoo “ 100.00 100.00Faurecia Gorzow SpZoo “ 96.82 100.00Faurecia Automotive Seating Canada Ltd Canada 100.00 100.00Faurecia Canada Investment Company “ 100.00 100.00





Faurecia Automotive Seating Inc. USA 100.00 100.00Dynamec Inc. “ 50.00 50.00Faurecia Riverside, LLC “ 50.00 50.00SAI Automotive USA Inc. “ 96.82 100.00SAI Automotive USA SAL Inc. “ 96.82 100.00SAI Automotive USA Fountain Inn Inc. “ 96.82 100.00Faurecia Automotive do Brasil (formerly Faurecia Bancos Para Automóveis Ltda) Brazil 96.82 100.00Faurecia Automotive Seating India Private Ltd India 100.00 100.00Faurecia Lecotex AS Czech Republic 95.93 95.93SAI Automotive Bohemia Sro “ 96.82 96.82SAI Automotive Bratislava Sro Slovakia 96.82 100.00SAI Automotive Autoplastic (Pty) Ltd South Africa 96.82 100.00SAI Automotive Silux SA Luxembourg 96.82 100.00Faurecia Industrie NV Belgium 96.82 100.00Sommer Allibert Duroplast Mexico SA de CV Mexico 48.41 50.00Servicios Sommer Allibert SA de CV “ 48.41 50.00SAI Automotive SAL de México “ 96.82 100.00SAI Automotive Polifleks AS Turkey 96.82 100.00Cfxas China 60.00 60.00Faurecia Japan KK Japan 100.00 100.00Faurecia Interior Systems “ 90.00 100.00Faurecia Interior Systems Sweden 96.82 96.82Société Tunisienne d’Équipements Automobiles Tunisia 100.00 100.00Faurecia Automotive Seating BV Netherlands 100.00 100.00

Exhaust Systems and Front End Modules Faurecia Systèmes d’Échappement France 100.00 100.00Faurecia Bloc Avant “ 100.00 100.00Faurecia Abgastechnik GmbH Germany 100.00 100.00Faurecia Kunststoffe Automobilsysteme GmbH “ 100.00 100.00Leistritz Abgastechnik Stollberg GmbH “ 100.00 100.00AP Parts Europe GmbH “ 100.00 100.00AP Parts Europe Technical Center GmbH “ 100.00 100.00Faurecia Sistemas de Escape España, SA Spain 100.00 100.00Faurecia Sistemas de Escape Argentina SA Argentina 100.00 100.00Faurecia Sistemas de Escape Portugal Lda Portugal 100.00 100.00Faurecia Sistemas de Escapamento do Brasil Ltda Brazil 100.00 100.00Faurecia Magyarorszag Kipufogo-Rendszer Kft Hungary 100.00 100.00





Faurecia Exhaust Systems Sro Czech Republic 100.00 100.00Faurecia Exhaust Systems, Inc. USA 100.00 100.00Faurecia Exhaust Systems BV Netherlands 100.00 100.00Faurecia Exhaust Systems AB Sweden 100.00 100.00Faurecia Exhaust Systems South Africa (PTY), Ltd South Africa 100.00 100.00Scheesc China 51.00 51.00Teec “ 60.00 60.00Fesk Korea 96.82 100.00

II – Companies accounted for by the equity method

Automotive Seating and Vehicle InteriorVanpro Assentos Lda Portugal 50.00 50.00Teknik Malzeme Turkey 50.00 50.00Bertrand Faure Argentina SA Argentina 50.00 50.00PAB SA “ 49.99 50.00WBF Technologies Canada 49.99 50.00Armaduras de Asientos Ardasa SA Spain 49.99 50.00Componentes de Vehículos de Galicia “ 48.41 50.00Copo Ibérica SA “ 50.00 50.00Arsed Slovenia 50.00 50.00Faurecia NHK Co. Ltd Japan 50.00 50.00Faurecia NHK Kyushu Ltd “ 50.00 50.00

Exhaust Systems and Front End Modules Faurecia Exhaust Systems Changchun (formerly CLEC) China 50.00 50.00Daeki Faurecia Corporation Korea 49.00 49.00

SAS Group SAS Automotive France France 48.41 50.00SAS Autosystemtechnik Verwaltungs GmbH Germany 48.41 50.00SAS Autosystemtechnik GmbH & Co. KG “ 48.41 50.00SAS Autosystemtechnik de Portugal Unipessoal Lda Palmela Portugal 48.41 50.00SAS Autosystemtechnick SA Spain 48.41 50.00SAS Automotriz Argentina SA Argentina 48.41 50.00SAS Automotive do Brasil Brazil 48.41 50.00SAS Autosystemtechnick Sro Czech Republic 48.41 50.00




Statutory Auditors’ report on the consolidated financial statementsYear ended December 31, 2003“This is a free translation of the original French report.”

Consolidated financial statements

To the shareholders,

In compliance with the assignment entrusted to us by the Annual Shareholders’ Meeting, we have audited the accompanyingconsolidated financial statements of Faurecia SA and its subsidiaries for the year ended December 31, 2003. These consolidatedfinancial statements have been approved by the Board of Directors. Our responsibility is to express an opinion on these financialstatements based on our audit.

1. Opinion on the consolidated financial statementsWe conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well asevaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements give a true and fair view of the consolidated results of operations for the yearended December 31, 2003 and the consolidated assets and liabilities and financial position of Faurecia SA and its subsidiaries at that date, in accordance with the accounting rules and principles applicable in France.

2. Justification of our assessmentsIn accordance with the requirements of article L. 225-235 of the French Commercial Code (Code de Commerce) relating to thejustification of our assessments, introduced by the Financial Security Act of August 1, 2003 and which came into effect for the firsttime this year, we bring to your attention the following matters:– Note 10 to the financial statements, concerning goodwill, presents the methods used to compare the value of the assets of each Group business, including goodwill, with discounted future cash flows derived from the most recent forecasts. We verifiedthat the approach used complied with accounting standards applicable in France. Our work also consisted in verifying that the methods described in this note had been correctly applied, assessing whether the data and assumptions used were reasonable,and double-checking the calculations. – Note 2.18 to the financial statements, concerning corporate income taxes, specifies that deferred tax assets are recognizedin the accounts except in cases where the future recovery of the deferred tax assets seems uncertain. Our work consisted in verifying that this method had been correctly applied and assessing whether the forecast data and assumptions supporting the probability of recovery for these deferred tax assets were reasonable. The assessments were made in the context of our audit of the consolidated financial statements, taken as a whole, and thereforecontributed to the formation of the unqualified opinion expressed in the first part of this report.

3. Specific verificationIn accordance with professional standards applicable in France, we have also verified the information given in the Group ManagementReport. We have no matters to report regarding its fair presentation and conformity with the consolidated financial statements.

March 22, 2004

The Statutory Auditors

PricewaterhouseCoopers Audit Ernst & Young AuditChristian Martin Patrick Lhomme


58 Resolutions


65 Statements of income

66 Balance sheets

68 Cash flow statements

69 Notes to the financial statements

Parent companyfinancial statements

56 parent company financial statementsThe Automobile & Faurecia

Management report

The parent company, Faurecia, is a holding company whichdirectly and indirectly provides financial, accounting, generalmanagement and administrative services to the Groupcompanies.

Sales for Faurecia rose to €56.3 million in 2003, compared to €51.2 million in 2002. The Company posted an operatingloss of €10.8 million, comparable to the one for 2002(€10.9 million), attributable to certain holding companyexpenses that were not billable to subsidiaries.

Net financial income of €20.4 million for 2003 (down from€29.6 million in 2002), was made up of the following:– net interest expense on borrowings amounting to

€66.6 million (against €67.8 million in 2002); – dividends and similar income from subsidiaries and affiliates

of €115.3 million in 2003 (up from €86.9 million in 2002); – allowances for impairment in value of investments totaling

€26.0 million and reserves for contingencies and charges of €2.3 million.

Net debt, corresponding to borrowings net of cash and cashequivalents and net intercompany cash advances, amountedto €1,437.8 million at December 31, 2003, compared to€1,466.4 million at December 31, 2002. The Company’smain sources of financing are two medium-term syndicatedlines of credit of €1,000 million and €545 million.

Only the €1,000 million medium-term line of credit had beenused at December 31, 2003, with a €450 million drawdown.The balance of the Company’s financing comes from issues of commercial paper, of which €850 million were outstanding at December 31, 2003, versus €664 million a year earlier.

The contracts for the syndicated lines of credit impose certainconditions, particularly relating to maximum consolidatedfinancial ratios. At December 31, 2003 these conditions wereall respected.

After taking into account net non-recurring income of€2.4 million resulting mainly from the disposal of a buildingand the €23.7 million tax benefit arising from group relief in France, the Company reported net income of €35.8 millionfor 2003, compared to €25.2 million in 2002.

The Board of Directors intends to recommend the payment of a dividend in the same amount as last year, i.e. €0.91 pershare, representing total dividends of €22 million.

The draft resolutions presented below complete the informationprovided to shareholders on the development of the businessand results of the Company and Group.

In the ordinary resolutions, shareholders will be asked toapprove the financial statements for the Company and theGroup, as well as to appropriate net income for the year and approve regulated agreements. Shareholders will alsobe asked to ratify the July 22, 2003 appointment by the Boardof Directors of Gérard Hauser to replace Arnaud Leenhardt.

Finally, the Board of Directors will invite shareholders to grantan authorization to the Board to buy back the Company’sshares, primarily for allocation to Group employees throughstock option plans and, where appropriate, in order to stabilizethe share price. The Board of Directors did not make use in2003 of the previous authorization granted on May 27, 2003.

Management report


In the extraordinary resolutions, the Board of Directors requestsa twenty-six month authorization to issue, with or without preferential subscription rights for existing shareholders,securities giving direct or indirect, immediate or later accessto the capital, that may have the effect of increasing thecapital by a maximum amount of €61 million. The maximumaggregate nominal value of debt securities that may be issued under this authorization may not exceed €1 billion.

In accordance with legal requirements, the Board of Directorsrequests, alongside the above proposal, an authorization toissue shares in the Company reserved for employees, withoutpreferential subscription rights for existing shareholders, up to a maximum aggregate par value representing 3% of capitalstock.

The Board of Directors also requests that article 24 of theCompany bylaws be brought into compliance with the termsof the Financial Security Act of August 1, 2003, as expressedin article L. 233-7 paragraphs 1 and 2 of the FrenchCommercial Code, which reduces from fifteen days to five the lead time for reporting the crossing of disclosure thresholdsto the Company and to the Autorité des marchés financiers.Similarly, to take into account the more detailed descriptionof the duties and prerogatives of the Chairman of the Boardgiven in the same Act and expressed in articles L. 225-35 and L. 225-51 of the French Commercial Code, the Board of Directors requests that articles 13 and 14 of the Company’sbylaws be modified in line with the text of the draft resolutionsubmitted for your approval.

The Board of Directors also requests an authorization to grantcertain corporate officers and employees of the Companystock options potentially representing 300,000 Faureciashares. In 2003 the Board of Directors did not grant any stockpurchase or subscription options to employees or corporateofficers.

The reports of the Statutory Auditors provide additionalinformation concerning these various transactions.

The operation of the Board of Directors and of its specializedCommittees, as well as key data concerning Faurecia, arepresented in greater detail in a section of this report devotedto corporate governance and internal control.

Management report


Resolutions

I. Ordinary resolutions

First resolutionApproval of the parent company and consolidated financial statements, of the Board of Directors’ report and of the Auditors’ reports

The Shareholders’ Meeting, having reviewed the Board of Directors’ report and the Auditors’ report, approves all of the sections of these reports and the financial statements of the Company and the Group for the year ended December 31, 2003, as presented. The Meeting notes that net income from operations for the year amounted to €35,775,918.

Second resolutionAppropriation of 2003 net income

Based on the proposal made by the Board of Directors, the Shareholders’ Meeting resolves to appropriate net income for the yearended December 31, 2003 as follows:

(in €)

Net income for the year 35,775,918Legal reserve (22,750)Retained earnings carried over from prior years 26,900,801

Balance available for distribution 62,653,969

Appropriation: Dividend per share of €0.91 payable on 24,206,751 shares 22,028,143(corresponding to a dividend per share of €0.910, representing total revenue per share of €1.365 including the €0.455 tax credit)

Retained earnings 40,625,826

Third resolutionPayment of the dividend

In application of the second resolution, the Shareholders’ Meeting resolves that the net dividend of €0.910 per common share of €7 par value be paid as from July 12, 2004.In the event that the Company holds any of its own shares, the fraction of the dividend related to these shares will be credited to unappropriated retained earnings.In order to comply with the provisions of the law, it is noted that dividends paid in the last three years were as follows:

Full year Number of shares carrying dividend rights Net dividend Avoir fiscal (tax credit) Total revenue per share

2000 14,362,152 FRF6.00 FRF3.00 FRF9.002001 24,164,251 €0.910 €0.455 €1.3652002 24,174,251 €0.910 €0.455 €1.365

Resolutions


Fourth resolutionApproval of Auditors’ special report on regulated agreements

The Shareholders’ Meeting, having reviewed the Auditors’ special report on agreements governed by sections L. 225-38 et seq.of the French Commercial Code, approves this report and its conclusions.

Fifth resolutionApproval of the appointment of a Director

The Shareholders’ Meeting ratifies the July 22, 2003 appointment by the Board of Directors of Gérard Hauser as a Director to replace Arnaud Leenhardt, for the remainder of his predecessor’s term of office, expiring at the Ordinary Shareholders’ Meetingto be held in 2009 to approve the 2008 financial statements.

Sixth resolutionAuthorization to purchase the Company’s shares up to a maximum of 10% of capital

Having reviewed the Board of Directors’ report and the information memorandum concerning the Company’s purchase of its ownshares approved by the Autorité des marchés financiers, in accordance with sections L. 225-209 et seq. of the French CommercialCode, the Shareholders’ Meeting authorizes the Board of Directors to trade in Faurecia shares on the open market or otherwise,subject to the following conditions:– maximum purchase price per share: €95.– minimum sale price per share: €35.

The number of Faurecia shares held by the Company at any given time may not represent over 10% of the capital at the date of this Meeting, i.e. 2,420,675 shares, representing a maximum amount of €229,964,125 based on the maximum purchase price of €95 per share.

Given that the Company already holds 412,834 shares or 1.71% of the capital, the share buy-back programs may only involve8.29% of the capital or 2,007,841 shares representing a maximum amount of €190,744,895 based on the maximum purchaseprice of €95 per share.

In the event of any transaction affecting shareholders’ equity, particularly any bonus share issue paid up by capitalizing retainedearnings, or a stock-split or reverse stock-split, the above prices per share will be adjusted based on the ratio between the numberof shares issued and outstanding before and after the transaction.The purpose of this authorization is to allow the Company to: – award shares to employees and managers of the Group on the terms and by the methods provided by law (stock options,

employee profit-sharing, employee share issues);– and, if appropriate, to stabilize the share price.

Subject to the limits set by stock market regulations, the Board of Directors may purchase, sell, exchange or transfer Companyshares at any time (including during a public tender offer), either over the counter or on any organized market, using any method,including by means of a block transfer or the use of derivative instruments.

Resolutions


As an exception to the price restrictions referred to above, the price of shares purchased for allocation on exercise of stock optionsgoverned by sections L. 225-177 et seq. of the French Commercial Code, shall be fixed in accordance with the legal provisionsapplicable to stock options.

This authorization, which is valid for a maximum period of eighteen months – i.e. up to the Ordinary Shareholders’ Meeting to becalled to approve the financial statements for the year ending December 31, 2004 – cancels that given to purchase Faurecia sharesin the Shareholders’ Meeting held to approve the financial statements for the year ended December 31, 2002.

In order to implement this authorization, the Board of Directors shall have full powers, including the power of delegation, to placeany stock market orders, enter into any and all agreements including for recording purchases and sales, carry out any and all filingand other formalities with the Autorité des marchés financiers or any other institution, and generally do whatever is necessary.

Seventh resolutionPowers for formalities

The Shareholders’ Meeting gives full powers to the bearer of a copy or an extract of the minutes of this Meeting to:– carry out any and all filing and publication formalities in any and all jurisdictions,– sign any and all documents, returns and schedules, and generally do whatever is necessary.

II. Extraordinary resolutions

Eighth resolutionBringing the article on crossing of disclosure thresholds into compliance with the French Commercial Code revised by theFinancial Security Act of August 1, 2003

Having reviewed the Board of Directors’ report, the Shareholders’ Meeting decides to bring article 24 of the Company’s bylaws on crossing of disclosure thresholds into compliance with article L. 233-7 of the French Commercial Code, and to change itswording as follows:

Former wording

ARTICLE 24When a shareholder, acting alone or in concert, within the meaning of section L. 356-1-3 of the French Commercial Code, crosses the disclosure threshold of 2% of the voting rights, whether below the 5% provided for by law or above the said 5%, the said shareholder must inform the Company of the crossing of each threshold of 2%, whether by virtue of an increase or a reduction in the shareholder’s interest, within fifteen (15) days of the threshold being crossed, by registered letter with return receipt requested.

In the case of failure to comply with these disclosure rules, at the request of one or several shareholders present or represented at the Meeting with combined holdings representing at least 2% of the capital or voting rights, the undisclosed shares will bestripped of voting rights. Said request must be recorded in the minutes of the General Shareholders’ Meeting.

These rules apply in addition to the disclosure thresholds rules prescribed by law.

Resolutions


New wording

ARTICLE 24When an individual or corporate shareholder, acting alone or in concert, within the meaning of section L. 233-10 of the FrenchCommercial Code, crosses the disclosure threshold of 2% of the voting rights, whether above or below the 5% provided for byarticle L. 233-7 of the French Commercial Code, the said shareholder must inform the Company of the total number of shares andvoting rights held by the shareholder, within five business days of the threshold being crossed, by registered letter with returnreceipt requested.

The shareholder must also inform the Autorité des marchés financiers within the same time-frame, so that the latter can disclose this information to the public, in accordance with its general regulations.

In the case of failure to comply with these disclosure rules, at the request of one or several shareholders present or represented at the Meeting with combined holdings representing at least 2% of the capital or voting rights, the undisclosed shares will bestripped of voting rights. Said request must be recorded in the minutes of the General Shareholders’ Meeting.

This procedure is in addition to the legal requirements concerning disclosure thresholds set out in article L. 233-7 of the FrenchCommercial Code.

Ninth resolutionBringing the article on the powers of the Chairman of the Board of Directors into compliance with the French CommercialCode revised by the Financial Security Act of August 1, 2003

Having reviewed the Board of Directors’ report, the Shareholders’ Meeting decides to bring articles 13 and 14 of the Company’sbylaws into compliance with the Financial Security Act of August 1, 2003, and to change their wording as follows:

Former wording

ARTICLE 13 – POWERS OF THE BOARD OF DIRECTORS…

The Board of Directors carries out controls and verifications as it sees fit. Each Director receives all information needed to fulfill his or her responsibilities and may receive all documents he or she deems useful toward this end.

ARTICLE 14 - CHAIRMAN…

The Chairman of the Board of Directors represents the Board, organizes and leads its work, and reports thereon to the Shareholders’ Meeting. The Chairman sees to the satisfactory operation of the Company’s leadership bodies and in particular ensures that Directors are in a position to fulfill their responsibilities.…

New wording

ARTICLE 13 – POWERS OF THE BOARD OF DIRECTORSThe Board of Directors carries out controls and verifications as it sees fit.The Chairman of the Board or the Chief Executive Officer of the Company are required to provide each Director with all documents and information needed to fulfill their responsibilities.

ARTICLE 14 - CHAIRMANThe Chairman of the Board of Directors organizes and leads the work of the Board, and reports thereon to the Shareholders’ Meeting. The Chairman sees to the satisfactory operation of the Company’s leadership bodies and in particular ensures that Directors are in a position to fulfill their responsibilities.

The rest of the bylaws remain unchanged thresholds.

Resolutions


Tenth resolution Authorization to issue securities giving direct or indirect access to the capital

The Shareholders’ Meeting, having reviewed the Board of Directors’ report and the Auditors’ report, decides the following, in the contextof these reports and of the provisions of article L. 225-129 of the French Commercial Code:

I. The Shareholders’ Meeting gives full powers to the Board of Directors, for a period of twenty-six months from the date of this Meeting, to increase the capital, on one or more occasions, whether in France or outside France, by the following means:a) issuing:

• shares and/or securities giving immediate or later access, by any means, at an open or set date, to shares in the Company;• and/or equity warrants, either stand-alone or attached to securities issued by the Company;

b) and/or granting bonus shares or raising the par value of existing shares, by capitalizing income, retained earnings, or issue premiums, subject to the following conditions:• the shares issued under this authorization will grant holders the same rights as older shares, subject only to the date

of transfer of ownership;• and marketable securities indirectly increasing capital may be issued in foreign currency, in euros or in any other unit

designed with reference to a set of currencies.

II. The Shareholders’ Meeting decides that:a) increases in capital resulting from the issues of securities mentioned above (including possible issues of shares to preserve

the rights of holders of previously issued securities) may not increase capital stock by more than €61,000,000;b) the maximum aggregate nominal value of debt securities issued under this authorization will be €1,000,000,000 or the foreign

currency equivalent. This overall ceiling will not include issue and/or redemption premiums.

III. The Shareholders’ Meeting decides that:a) if the Board of Directors issues shares with preferential subscription rights maintained for existing shareholders, shares not

taken up by shareholders with priority rights will be granted to shareholders with reducible rights, in due proportion to the subscription rights to which they are entitled and the amount of their requests;

b) if the full share issue is not taken up by shareholders with priority or reducible subscription rights, the Board of Directors maydecide either to limit the share issue to the amount subscribed in accordance with legal provisions, or to allocate as bonusshares all or part of the shares not taken up, or to sell them on the open market;

c) in the event of a bonus share issue paid up by capitalizing retained earnings, income or additional paid-in capital, fractionalrights representing less than a share will not be tradable and the corresponding shares will be sold; proceeds from the salewill be allocated to the holders of rights, at the latest thirty days following the posting to their account of the round number of shares granted;

d) in the event of an issue of composite marketable securities, shareholders shall have no preferential subscription rights to shares issued to the holders of these securities.

IV. The Shareholders’ Meeting gives full powers to the Board of Directors to:a) decide on the type of securities to be issued based on financial opportunities in France or outside France and set the terms

and conditions for their issue based on applicable laws and regulations;b) carry out all formalities, in particular related to disclosures, sign as appropriate any agreements with banks to ensure

the satisfactory completion of the issues, make the resulting changes to the Company bylaws, and generally do whatever is necessary.

V. This authorization supersedes any previous authorizations covering the same scope granted to the Board by ExtraordinaryShareholders’ Meetings.

Resolutions


Eleventh resolutionAuthorization to issue securities giving direct or indirect access to the capital, without preferential subscription rights for existing shareholders

Having reviewed the Board of Directors’ report and the Auditors’ report, the Shareholders’ Meeting decides, in accordance with the provisions of the French Commercial Code, particularly articles L. 225-135 and L. 225-136, that the issues of shares orother marketable securities or warrants giving immediate or later access to part of the capital described in the tenth resolution maybe carried out, in France or outside France, without preferential subscription rights for existing shareholders if the Board of Directorsdeems it advisable, up to the maximum amount of the increase in the capital set in paragraph II.a of the tenth resolution.

The Shareholders’ Meeting explicitly waives this right in the event that the Board of Directors makes use of the authorizationgranted by this resolution, subject to the condition that the issue price for each of the shares to be created through subscription,conversion, exchange or exercise of warrants shall be at least equal to the average price at the Paris stock exchange for tenconsecutive business days chosen from the twenty business days preceding the date of issue.

Twelfth resolutionAuthorization to issue shares reserved for employees

Having reviewed the Board of Directors’ report and the Auditors’ special report, and in accordance with the provisions of article L. 225-129-VII of the French Commercial Code, the Shareholders’ Meeting authorizes the Board of Directors to issueshares reserved for employees, on one or more occasions, subject to the conditions set by article L. 443-5 of the French LaborCode and up to a maximum aggregate par value of €5,083,417.

The Shareholders’ Meeting gives full powers to the Board of Directors to determine the amounts of the issues, set the dates of the subscription period and define the terms and conditions for each issue. The Board of Directors shall determine the issueprice for new shares in accordance with the provisions of article L. 443-5 of the French Labor Code and set the conditions forpaying up the shares, as well as the terms, conditions and timing of employee subscriptions. The Board of Directors will alsohave full powers to recognize the corresponding increases in capital stock, amend the Company bylaws accordingly and carryout the resulting formalities, and more generally take any and all necessary steps and carry out all formalities related to the issue and listing of the new shares.

This authorization is granted for a period of twenty-six months from the date of this Shareholders’ Meeting.

Resolutions


Thirteenth resolutionAuthorization to issue stock subscription options

Based on the proposal made by the Board of Directors and having reviewed the Auditors’ special report, the Shareholders’ Meetingauthorizes the Board of Directors, for a period of thirty-eight (38) months from the date of this Meeting, in accordance with articles225-177 et seq. of the French Commercial Code, to grant to corporate officers and employees of Faurecia SA, its more than 50%-owned subsidiaries, and its sub-subsidiaries that are directly or indirectly more than 50%-owned, stock subscription optionsleading to the issue of new shares, subject to the conditions and limits set by law.

The total number of options to be offered by the Board of Directors based on this authorization may not lead to the issue of morethan 300,000 shares with €7 par value, representing an aggregate par value of €2,100,000. The exercise price for the options shallbe set by the Board of Directors at the time of deciding to grant the options. The Shareholders’ Meeting decides that this exerciseprice may not be less than the minimum provided for by applicable legislation. It may not be amended during the life of the option,except in the case of adjustments provided for by law.

In granting this authorization, shareholders explicitly waive their preferential subscription rights to the shares to be issued uponexercise of the options.

The options shall be granted in accordance with the procedure adopted by the Board of Directors on February 6, 2003 and in compliance with legal requirements stating that no options may granted in the following cases: – in the ten business days before and after the date of publication of the consolidated financial statements;– in the period between the date at which the Company’s leadership bodies become aware of certain information which could, once

disclosed, have a significant impact on the Company’s share price, and ten business days after the date of disclosure of said information;

– less than twenty business days before or after a dividend payment date or increase in the capital.

The vesting period for the options, to be determined by the Board of Directors, may not exceed ten years from the granting of the options.

The Shareholders’ Meeting gives full powers to the Board of Directors to determine the beneficiaries of the options in accordancewith legal requirements, set the practical terms and conditions for the granting of the options, take all necessary steps and carryout all required formalities.

The Board of Directors will report each year to the Annual Shareholders’ Meeting on any transactions performed based on this authorization.

Fourteenth resolutionPowers for formalities

The Shareholders’ Meeting gives full powers to the bearer of a copy or extract of the minutes of this Meeting to: – carry out any and all filing and publication formalities in any and all jurisdictions;– sign any and all documents, returns and schedules, and generally do whatever is necessary.

Resolutions


Statements of income

(in € thousands) Notes 2003 2002 2001

Services sold 56,335 51,199 34,314

Sales 56,335 51,199 34,314

Own work capitalized 3,133

External services (53,749) (52,454) (35,472)

Taxes other than on income (502) (660) (448)

Wages and salaries (8,058) (10,159) (6,598)

Payroll taxes (3,199) (4,016) (2,378)

Depreciation, amortization and allowances (less reversals) (4,582) 3,416 5,868

Other income and expenses (159) 1,824 (147)

Total operating expense (67,116) (62,049) (39,175)

Operating loss (10,781) (10,850) (4,861)

Interest, dividends and other financial income 4 164,578 139,698 96,756

Interest and other financial expenses 4 (144,181) (110,111) (95,094)

Net financial income 4 20,397 29,587 1,662

Operating income/(expense) after financial income 9,616 18,737 (3,199)

Non-recurring income 5 3,085 2,768 3,670

Non-recurring expense 5 (667) (3,568) (2,191)

Net non-recurring income/(expense) 5 2,418 (800) 1,479

Employee profit-sharing (48) 39

Corporate income tax 6 23,742 7,268 15,743

Net income 35,776 25,157 14,062

Statements of income


Balance sheets at December 31

Balance sheets

A s s e t s

(in € thousands) 2003 2002 2001Depreciation,

amortization andNotes Cost allowances Net Net Net

Intangible assets 3,441 2,216 1,225 487 111

Property and equipment 7 13,182 2,142 11,040 7,472 688

Investments 8 2,343,478 56,305 2,287,173 2,306,561 2,317,917

Total fixed assets 2,360,101 60,663 2,299,438 2,314,520 2,318,716

Trade receivables 16,268 16,268 18,075 19,945

Other receivables 9 891,895 61 891,834 820,477 442,083

Cash and cash equivalents 10 22,571 22,571 16,170 11,608

Total current assets 930,734 61 930,673 854,722 473,636

Prepaid expenses 11 18,882 18,882 18,082 5,427

Conversion losses 1 1 0 32,563

Deferred charges 6,536 6,536 8,803 6,133

Total assets 3,316,254 60,724 3,255,530 3,196,127 2,836,475


Balance sheets

L i a b i l i t i e s a n d s h a r e h o l d e r s ’ e q u i t y

(in € thousands) Notes 2003 2002 2001

Capital stock 169,447 169,220 169,150

Additional paid-in capital 722,381 721,598 734,973

Legal reserve 16,922 16,915 3,342

Untaxed reserves 12,024 12,024 12,024

Retained earnings 26,901 23,374 31,014

Net income for the year 35,776 25,157 14,062

Untaxed provisions 217 326 557

Total shareholders’ equity 13 983,668 968,614 965,122

Reserves for contingencies and charges 14 5,851 2,510 19,762

Long and short-term debt

Perpetual notes 14 68,290 69,742 71,531

Other debt 15 1,344,457 1,325,181 1,463,567

Total debt 1,412,747 1,394,923 1,535,098

Operating payables 16 22,036 20,878 15,362

Other payables 16 828,867 805,772 296,575

Total payables 850,903 826,650 311,937

Deferred income 17 2,361 3,430 4,556

Total liabilities and shareholders’ equity 3,255,530 3,196,127 2,836,475


Cash flow statements

Cash flow statements

(in € millions) 2003 2002 2001

I. Operating activities

Net income 35.8 25.1 14.1

Depreciation and amortization 4.1 4.6 1.5

Increase/(decrease) in reserves and other long-term liabilities 29.3 (12.8) 15.4

Capital (gains)/losses on disposals of assets (2.4) (0.1) (0.2)

Cash flow from operations 66.8 16.8 30.8

(Increase)/decrease in working capital requirements (16.1) (22.7) (28.9)

Net cash provided/(used) by operating activities 50.7 (5.9) 1.9

II. Investing activities

Acquisitions of intangible assets and property and equipment (5.8) (9.8) (0.4)

Acquisition of Sommer Allibert and SAI Automotive AG (1) (306.5)

Acquisitions of investments in subsidiaries and affiliates (2.3) (10.1) (57.7)

Other investments (11.9)

Divestments of property and equipment 2.5 0.2 0.2

Net cash used by investing activities (5.6) (19.7) (376.3)

Net cash provided/(used) by operating and investing activities (I)+(II) 45.1 (25.6) (374.4)

III. Financing activities

Issuance of shares 1.0 0.3 1.1

Dividends paid (21.6) (21.7) (12.9)

Issuance of debt securities and increase in borrowings 184.4 55.0 449.1

Repayments of borrowings and perpetual notes (166.6) (162.8) (71.0)

Changes in intercompany borrowings (35.9) 159.4 12.4

Net cash (used)/provided by financing activities (38.7) 30.2 378.7

Net increase in cash and cash equivalents 6.4 4.6 4.3

Cash and cash equivalents at beginning of period 16.2 11.6 7.3

Cash and cash equivalents at end of period 22.6 16.2 11.6

(1) Cost of Sommer Allibert and SAI AG shares (excluding transaction costs) 622.8Less: SIT cash and cash equivalents (316.3)

306.5


Note 1 Summary of significant accounting policies

The financial statements have been prepared in accordance withFrench generally accepted accounting principles. The main policiesapplied are as follows:

1.1 l Property and equipmentProperty and equipment are stated at acquisition or productioncost. Depreciation is calculated by the straight-line methodover the estimated useful life of the assets, as follows:– buildings: 25 to 30 years;– leasehold improvements, fixtures and fittings: 7 to 10 years;– other fixtures and fittings: 10 years;– office equipment and computers: 3 to 5 years;– software: 1 to 3 years;– furniture: 10 years.

1.2 l InvestmentsInvestments are stated at the lower of cost or fair value. Fair value is based on the subsidiary’s net assets, profitabilityand future outlook.For investments intended to be sold, fair value estimates alsotake into account prices at which prior transactions werecarried out, if any.

1.3 l Marketable securities Marketable securities are stated globally at the lower of costand market.

1.4 l Foreign currency transactionsDebts and receivables in foreign currency are converted at the exchange rate prevailing on the transaction date. At the year-end, they are reconverted at the year-end exchangerate and the resulting gain or loss is recorded in the balancesheet under “Conversion losses” or “Conversion gains”.Hedged debts and receivables are converted at the hedgingrate.

1.5 l Reserves for pension and retirement benefitsThe vested rights of employees under supplementary pensionand retirement bonus plans are determined on an actuarial basisusing the projected benefit obligation method. The valuationtakes into account the probability of employees staying withthe Company up to retirement age and expected future salarylevels. Benefit obligations are partially funded by contributionsto external funds. In cases where the funds are permanentlyallocated to the benefit plan concerned, their value is deductedfrom the related liability.

1.6 l Non-recurring itemsUnusual or non-recurring items are included under “Non-recurring income and expense”.

1.7 l Financial instrumentsInterest rate risks are hedged, where appropriate, usingfinancial instruments traded on organized or over-the-countermarkets.Hedging gains and losses are recognized on a symmetricalbasis with the loss or gain on the hedged item.

Note 2 Significant events

Backed by Peugeot SA, from the beginning of 2001 Faureciaacquired effective control of the commercial businesses of Sommer Allibert, the European leader in instrument panelsand cockpits, door panels and modules as well as acousticsand soft trim.Faurecia owns 100% of Sommer Allibert, now called FaureciaAutomotive Holdings, and 96.82% of SAI Automotive AG(27.48% held directly and 69.34% through Faurecia AutomotiveHoldings). Faurecia launched a compulsory buyout procedurefor the remaining shares in SAI Automotive AG, at a price of €13.5 per share. SAI Automotive AG’s shareholdersapproved the buyout at their General Meeting held onNovember 19, 2002. The decision has been filed for registrationwith the Frankfurt commercial court but the registrationprocedure has been postponed following an application to the court made by minority shareholders.

Notes to the financial statements



Note 3 Subsequent events

No significant post-balance sheet events have occurred.

Note 4 Net financial income

Net financial income breaks down as follows:

(in € thousands) 2003 2002 2001

Interest, dividends and other financial income

Income from investments in subsidiaries and affiliates (1) 115,323 86,857 89,909Other interest income 49,255 37,617 6,835Net gains from sales of marketable securities 12Reversals of allowances and reserves (2) 15,224

Total 164,578 139,698 96,756

Interest and other financial expenses

Interest expense 115,819 105,457 78,845Charges to allowances and reserves (3) 28,362 4,654 16,249

Total 144,181 110,111 95,094

Net financial income 20,397 29,587 1,662

(1) This item corresponds to dividends and similar income from subsidiaries and affiliates.

(2) Including reversals of reserves for currency risks 15,224 –

(3) Including:– allowances for impairment in value

of securities 26,040 4,654 7,230– reserves for currency risks – 9,019– reserves for contingencies

and financial expenses 2,322

Note 5 Net non-recurring income/(expense)

Net non-recurring income/(expense) breaks down as follows:

(in € thousands) 2003 2002 2001

Non-recurring income

From revenue transactions 29 331 42Proceeds from the disposal of assets (1) 2,593 230 214Reversals of allowances and reserves (2) 463 2,207 3,414

Total 3,085 2,768 3,670

Non-recurring expense

On revenue transactions (3) 8 1,737Book value of assets sold 186 118Charges to depreciation,amortization and allowances (4) 473 1,713 2,191

Total 667 3,568 2,191

Net non-recurring income/(expense) 2,418 (800) 1,479

(1) Including proceeds from the sale of the Rocquencourt building 2,420

(2) Including:– untaxed provisions 109 232– reserves for contingencies and charges 354 1,975 3,414

(3) restructuring costs 1,605

(4) additions to reserves for contingencies and charges 473 1,713 2,191

Note 6 Corporate income tax

Faurecia and its main French subsidiaries have elected to fileconsolidated tax returns. Effective from January 1, 2002, the tax Group includes Faurecia Automotive Holdings(formerly Sommer Allibert) and its French subsidiaries. Thiselection allows Faurecia to obtain a tax benefit by setting offits tax losses and those of some of its subsidiaries against thetaxable income of other subsidiaries in the tax group:

(in € thousands) 2003 2002 2001

Tax benefit from subsidiaries in the tax Group 23,742 7,268 15,743



Note 7 Property and equipment

Property and equipment can be analyzed as follows:

(in € thousands) Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001Cost Net Net Net

Land 59 59 162 222Buildings 326 14 21 9Other property and equipment 12,797 10,967 7,289 457

Total 13,182 11,040 7,472 688

Capital expenditure amounted to €5,826 thousand in 2003, including €527 thousand on fixtures and fittings, €1,026 thousand on furniture, €1,096 thousand on other property and equipment and €3,177 thousand on assets under construction.

Note 8 Investments

(in € thousands) Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001Cost Allowances Net Net Net

Investments in subsidiaries and affiliates 2,314,472 56,294 2,258,178 2,281,935 2,276,421Loans to subsidiaries and affiliates 28,956 28,956 24,588 41,458Other 50 11 39 38 38

Total 2,343,478 56,305 2,287,173 2,306,561 2,317,917

Loans to subsidiaries and affiliates are due beyond one year.


Note 9 Trade and other receivables

These comprise mainly:– cash advances to various Group companies totaling

€765.4 million at December 31, 2003 (December 31, 2002:€702.6 million; December 31, 2001: €406.7 million);

– taxes due by subsidiaries in the tax Group, in an amount of €17.3 million (December 31, 2002: €3.1 million; December 31, 2001: €14.4 million);

– corporate income tax receivables in an amount of€2.2 million at December 31, 2003 (December 31, 2002:€2.8 million; December 31, 2001: €1.5 million);

– securitization deposit in an amount of €101.1 million atDecember 31, 2003 (December 31, 2002: €106 million;December 31, 2001: €16.6 million);

– recoverable VAT of €4.1 million (2002: 2.7 million).€890.4 million worth of receivables are due within one yearand €1.4 million are due beyond one year.

Note 10 Cash and cash equivalents

At December 31, 2003, this item corresponds mainly to412,834 Faurecia shares with a carrying value of €15.1 millionas at December 31, 2002:– 200,000 were contributed by Ectra in 1999;– 19,613 were purchased in 2000;– 96,361 were purchased in 2001;– and 96,860 were purchased in 2002.The shares are being held for allocation on exercise of stockoptions granted to directors and managers of the Group.At the Meetings held on September 6, 1999, September 4,2000 and April 26, 2001, the Board of Directors decided togrant, respectively, 200,000 stock options with an exerciseprice of €52 each, 254,000 stock options with an exerciseprice of €40 each and 43,500 stock options with an exerciseprice of €54.5 each.


Note 11 Prepaid expenses

Prepaid expenses comprise mainly:

(in € thousands) Dec. 31, 2003 Dec. 31, 2002 Dec. 31, 2001

Premiums on currency and interest rate instruments 18,322 17,079 5,407Prepaid interest 97 566Commissions and bank charges 443 432Other 20 5 20

Total 18,882 18,082 5,427

Note 12 Shareholders’ equity

12.1 l Changes in shareholders’ equity

(in € thousands) Balance at Appropriation Issuance Other Balance at Dec. 31, 2002 decided at of shares movements Dec. 31, 2003

Shareholders’Meeting of

May 27, 2003

Capital stock 169,220 227 169,447Additional paid-in capital 721,598 783 722,381Legal reserve 16,915 7 16,922Untaxed reserves 12,024 12,024Retained earnings 23,374 3,527 26,901Net income for the year 25,157 (25,157) 35,776 35,776Untaxed provisions 326 (109) 217

Total 968,614 (21,623)(1) 1,010 35,667 983,668

(1) Dividend of €0.91 per share for 23,761,417 shares, excluding treasury stock.


12.2 l Capital stock and additional paid-in capital• At December 31, 2003, the Company’s capital stock

amounted to €169,447,257, divided into 24,206,751 fullypaid-up common shares with a par value of €7 each.Shares which have been registered in the name of the sameholder for at least two years carry double voting rights(16,514,248 shares at December 31, 2003).

• The exercise of all the stock options granted to directors andmanagers that were outstanding at December 31, 2003, i.e.782,100 options exercisable at an average price of €46.20would result in:

– capital stock being increased by €5.5 million through the issuance of 782,100 common shares with a par value of €7 each;

– additional paid-in capital being increased by €30.6 million.

12.3 l ReservesIn addition to net income for the year and retained earnings,distributable reserves mainly comprise a long-term capitalgains reserve amounting to €3.1 million. Full distribution of this reserve would give rise to the payment of additional tax in an amount of €0.6 million.


Note 13 Reserves for contingencies and charges


Reserves for contingencies

Exchange rate losses (1) 1 15,224Impairment in value of financial instruments 2,322Other 2,805 1,936 2,199

Sub-total 5,128 1,936 17,423

Reserves for charges

Reserves for pension and retirement benefits (2) 542 48 1,768Other 181 526 571

Sub-total 723 574 2,339

Total 5,851 2,510 19,762

(1) This reserve was put in place to cover unrealized exchange losses on the US dollarfinancing for the APAS acquisition. The unrealized exchange loss of €32.6 million atDecember 31, 2001 was recognized over the life of the debt. This US dollar hedgewas unwound in July 2002.

(2) The reserve for pension and retirement benefits covers:– statutory lump-sum bonuses payable to employees on retirement;– supplementary pension benefits payable to certain employees.The Company’s obligations for supplementary pension benefits are fully funded under aninsured plan. Consequently, the Company has no further pension commitments towardsformer employees. The benefit obligation has been estimated by independent actuariesusing a discount rate of 4.5% and an inflation rate of 2%.

Note 14 Perpetual notes

On October 15, 1991, Faurecia (formerly Bertrand Faure) issuedsubordinated perpetual notes amounting to €137.2 millionpaying interest at the 6-month Pibor plus 1.1% throughOctober 15, 2006 and a symbolic rate of interest thereafter. At the time of issue of the notes, Faurecia signed an agreementwith a third party providing for the payment by Faurecia of aninitial sum of €38.7 million to be invested in zero coupon bonds.In exchange, the third party gave a commitment to noteholders to buy back the perpetual notes after fifteen years.In 1996, Faurecia entered into an agreement with a bank to restructure the perpetual notes to reflect the consequencesof the fall in interest rates and the improvement in the financialsituation of the Company and its subsidiaries.On July 30, 1996, the bank purchased the perpetual notesfrom the holders at their face value (€137.2 million) plus the interest accrued since the last half yearly interest date. Then it recovered full ownership of the zero coupon bonds,which were sold on July 30, 1996 at their market value.

Once the subordination clause was eliminated, the bank soldthe notes to a securitization fund created for this purpose.The fund issued securities to new subscribers to finance the purchase of the debt.The €8.6 million profit on the entire transaction is beingrecognized on a straight line basis over the period betweenJuly 30, 1996 and October 15, 2006.This operation was approved by the French tax administration(Service de la législation fiscale) and the deductibility ofinterest based on the actual proceeds received from the issue(i.e. €98.5 million) authorized when the notes were issued in 1991 was maintained.

Note 15 Other debt


Bank borrowings 1,342,450 1,321,696 1,459,573Other 2,007 3,485 3,994

Total 1,344,457 1,325,181 1,463,567

Maturities of other debt are as follows:

(in € thousands) Dec. 31, 2003

2004 852,3702005 30,0132006 242007 462,0462008 and beyond 4

Total 1,344,457

Taking into account a swap relating to fixed rate borrowings of €42 million, all of the Company’s borrowings are at variablerates. These borrowings are hedged using interest rateoptions as described in note 20.1.Faurecia has access to a medium-term syndicated line of creditof up to a maximum of €1,000 million which can be drawndown for renewable periods of one, three or six months, aswell as a 364-day syndicated line of credit for €545 million.At December 31, 2003 the undrawn portion of these syndicatedlines of credit amounted to €550 million and €545 million,respectively.The contracts for these lines of credit impose certain conditions,particularly relating to maximum consolidated financial ratios.At December 31, 2003 these conditions were all respected.



Note 16 Operating and other payables


Trade payables 18,842 16,983 13,254Other payables 3,194 3,895 2,108

Sub-total operating payables 22,036 20,878 15,362

Cash advances from subsidiaries 813,011 790,235 294,426Other 15,856 15,537 2,149

Sub-total other payables 828,867 805,772 296,575

Total 850,903 826,650 311,937

Note 17 Deferred income

At December 31, 2003, this caption primarily corresponds to the profit arising on the perpetual notes repackaging in an amount of €2.4 million (December 31, 2002: €3.2 million;December 31, 2001: €4.1 million). The total profit is beingrecognized in the income statement over the period to October 15, 2006 (see. note 14).

Note 18 Unrecognized deferred taxes

Unrecognized deferred taxes correspond to:– temporary differences between book income and taxable

income;– tax loss carryforwards of the tax group;– tax savings arising from the use of tax losses of companies

in the tax group which will have to be restored to them ifand when they return to profit.

They are computed based on the tax rate for the year in whichthey are expected to reverse (i.e. 35.43% for the year 2004and beyond).

Unrecognized deferred taxes can be analyzed as follows:


Deferred tax liabilities on temporary differences (2,398) (154) (6,340)Deferred tax liabilities corresponding to tax savings arising from the use of the tax losses of companies in the tax group (87,761) (63,053) (36,214)

Sub-total deferred tax liabilities (90,159) (63,207) (42,554)

Tax paid on taxable income that is not yet accounted for 837 1,136 1,436Charges accounted for, deductible in future years 1,650 1,239 2,082Future tax savings on tax losses of the tax group 94,389 78,863 43,357

Sub-total deferred tax assets 96,876 81,238 46,875

Unrecognized deferred tax assets 6,717 18,031 4,321

Note 19 Commitments given

At December 31, 2003, guarantees consist solely of thosegiven to direct and indirect subsidiaries and affiliates, in anamount of €35.7 million (December 31, 2002: €14.8 million;December 31, 2001: €15.2 million).

Note 20 Financial instruments used to hedge market risks

20.1 l Interest rate hedgesFixed rate borrowings of €42 million due in more than oneyear have been swapped for variable rate debt with the samematurities.Swaps, caps and other options in euros and USD have beentaken out to hedge interest on debt payable between January2004 and June 2008.



Positions for 2004 to 2008 can be analyzed as follows by type of financial instrument:

(in € millions) 2004 2005 2006 2007 2008

Caps 2,850 1,700 1,050 950 50Swap 792 42 12Other options 250 150

(in USD millions)

Caps 100Swap 175 50

Premiums reported under assets in the balance sheet at December 31, 2003 stood at €18.3 million including €12.9 million to be paid in installments between 2004 and 2007.


20.2 l Currency hedgesCurrency risks on financing provided to subsidiaries arehedged by currency swaps amounting to ZAR 59.1 million,and USD 84.9 million.

Note 21 Employees

2003 2002 2001

Management 42 44 43Other 4 2 6

Total 46 46 49

Note 22 Management compensation

In 2003, the total attendance fees paid to directors amountedto €195,500 (2002: €76,250).

Note 23 Related party transactions


In the income statement

– Services invoiced to subsidiaries 56,257 51,178 34,314

– Income from subsidiaries and affiliates 115,323 85,458 88,908

– Interest income 2,173 1,755 2,142– Services invoiced

by subsidiaries (37,479) (24,720) (17,288)– Interest expense (17,534) (11,538) (8,450)

In the balance sheet

Loans to subsidiariesand affiliates 28,956 24,588 41,457– Trade and other receivables 799,255 745,541 440,910– Trade and other payables 829,425 809,094 294,427

Related companies are companies that are fully consolidatedin the Faurecia Group consolidated accounts.

Note 24 Information on the consolidating entity

Peugeot SA — 75, avenue de la Grande-Armée — 75116 Paris.


Subsidiaries and investmentsat December 31, 2003

Subsidiaries and investments

(in € thousands) Capital Retained % interest Book value ofstock earnings before shares held

appropriation (cost)of net income

I. Detailed information

A. Subsidiaries (at least 50%-owned)

Faurecia Automotive Holdings (formerly Sommer Allibert) 22,050 428,124 100.00 890,103

FSE 84,730 62,264 100.00 110,316

Faurecia Investments (formerly Bertrand Faure SP) 75,660 216,558 100.00 452,488

Faurecia Industries (formerly Ecia Industrie) 93,251 (56,202) 100.00 138,152

Faurecia Automotive Holding 29 223,083 100.00 146,303

Faurecia USA Holding Inc. 17 103,781 100.00 132,432

Ecia GmbH (formerly Ecia – Abgastechnik GmbH) 38,475 14,574 100.00 39,085

Société Internationale de Participations (SIP) 9,274 765 100.00 30,196

Faurecia Sistemas de Escape España SA (formerly Silenciadores PCG SA) 452 16,297 99.93 27,442

Faurecia Sistemas de Escape Argentina SA (formerly Ecia Argentina SA) 474 5,291 100.00 26,509

SFEA – Société Foncière pour l’Équipement Automobile 9,637 579 100.00 9,947

Financière Faurecia 33,000 29,460 100.00 53,841

Faurecia Exhaust Systems Sro (formerly Ecia Czech Repulic Sro) 5,554 (1,864) 100.00 5,001

Faurecia Systemy Kierownicze SpZoo 3,577 (281) 100.00 4,433

Faurecia Sistemas de Escapamento do Brasil Ltda (formerly Ecia do Brasil) 9,076 (7,606) 100.00 16,459

EAK – Composants pour l’Industrie Automobile SA 4,668 2,358 51.00 2,420

EAK – Composants pour l’Industrie Automobile SNC 1,515 13,495 51.00 785

Faurecia Exhaust International 4,691 (368) 100.00 5,002

B. Investments (10 to 50%-owned)

SAIG 130,509 200,981 27.48 210,232

Teec (Tongda Ecia Exhaust Company Ltd) 50.00 2,217

Trécia 203 14,780 50.00 8,556

Subsidiaries and investments not included in section A 2,456

Subsidiaries and investments not included in section B 95

Total 2,314,472


Subsidiaries and investments

Book value of Outstanding Guarantees Last Last Dividends Conversionshares held loans and given published published received or rate

(net) advances sales net income receivable by (loss) the Company

890,103 6,982 13,371 2,866

110,316 581,618 31,904

452,488 (3,272) 64,967

113,152 267,991 (16,695)

146,303 561 €1 = USD 1.263

132,432 €1 = USD 1.263

39,085 (285)

30,196 3,825 6,289

27,442 159,129 5,372 14,990

8,009 8,051 1,061 €1 = ARS 3.0654

9,947 256 1,494 2,699

53,841 697,041 1,790 1,870

5,001 60,800 824 €1 = CZK 33.940

3,333 10 146 €1 = PLN 3.8732

5,359 2,108 1,583 14,532 104 €1 = BRL 2.8656

2,420 2,832 1,750 968

785 84,302 4,386 721

4,502 (387)

210,232 5 276,998 21,599

2,217 1,451 €1 = CNY 10.4536

8,556 82,257 4,606 1,958

2,456 5,061 209

2

2,258,177 98,988


Five-year financial summary

(in €) 2003 2002 2001 2000 1999

1. Capital stock at year-end

a) Capital stock 169,447,257 169,219,757 169,149,757 100,535,064 109,406,196

b) Number of common shares 24,206,751 24,174,251 24,164,251 14,362,152 14,353,152

c) Maximum number of shares to be created:

• Through exercise of options 782,100 817,900 228,450 270,450 279,450

2. Results of operations

a) Net sales and revenues 56,335,224 51,199,132 34,314,055 35,351,776 2,030,980

b) Income before tax, depreciation, amortization and allowances, and employee profit sharing 45,430,754 9,683,878 15,254,270 15,479,776 8,216,861

c) Income tax (1) (23,741,720) (7,267,778) (15,742,862) (18,641,866) (13,280,030)

d) Employee profit sharing 0 48,301 (38,794) 66,057 25,307

e) Net income 35,775,918 25,156,645 14,062,007 20,503,233 16,217,960

f) Total dividend (2) (3) 22,028,143 21,998,568 21,989,468 13,136,975 13,128,743

3. Earnings per share

a) Income after tax and employee profit sharing, before depreciation, amortization and allowances 2.86 0.70 1.28 2.37 1.50

b) Net income 1.48 1.04 0.58 1.43 1.13

c) Dividend per share (net) 0.91 0.91 0.91 0.91 0.91

4. Employee data

a) Average number of employees 46 46 49 39 6

b) Total payroll 8,057,569 10,158,717 6,598,074 3,895,548 1,293,576

c) Total benefits 3,198,762 4,016,113 2,378,229 1,822,700 457,258

(1) The amounts in brackets represent tax benefits arising from group relief.

(2) The 2003 dividend is subject to approval at the Annual Shareholders’ Meeting.

(3) In the event that the Company holds any of its own shares, the fraction of the dividend related to these shares will be credited to unappropriated retained earnings.

Five-year financial summary


Appropriation of 2003 net income

Appropriation of 2003 net income

(in €)

Net income for the year 35,775,918Recommended appropriation:

1. Source

Retained earnings carried over from prior years 26,900,801

Net income for the year 35,775,918

62,676,719

2. Affectation

Legal reserve 22,750

Dividends (1) 22,028,143

Retained earnings 40,625,826

62,676,719

(1) In the event that the Company holds any of its own shares, the fraction of the dividend related to these shares will be credited to unappropriated retained earnings.

Dividends for the last three years were as follows:

Year Number of shares Dividend Avoir fiscal Total revenue(in €) on which dividends paid paid (tax credit) per share

2000 14,362,152 0.915 0.457 1.372

2001 24,164,251 0.910 0.455 1.365

2002 24,174,251 0.910 0.455 1.365

Recommended 2003 (2) 24,206,751 0.910 0.455 1.365

(2) Including shares held by the Company.


Securities portfolio at December 31, 2003

(in € thousands) Number Nature and Net book par value value

1. Main securities

a) Shares in subsidiaries and affiliates

Faurecia Systèmes d’échappements 5,648,699 Shares of €15 110,316

Faurecia Investments 5,043,998 Shares of €15 452,488

Faurecia Industries 11,035,661 Shares of €8.45 113,152

Faurecia Automotive Holdings 1,400 Shares of USD 0.001 146,303

Faurecia USA Holdings Inc. 2,314 Shares of USD 0.001 132,432

Ecia GmbH 1 Share 39,085

Sté Internationale de Participations (SIP) 1,168,999 Shares 30,196

Faurecia Sistemas de Escape España SA 1,503 Shares of €300.51 27,442

SFEA – Société Foncière pour l’Équipement Automobile 642,499 Shares of €15 9,947

Financière Faurecia 2,200,000 Shares of €15 53,841

Trécia 6,762 Shares of €15 8,556

Faurecia Sistemas de Escapamento do Brasil Ltda(including BRL 2 million in unpaid capital) 34,999,900 Share of BRL 1 5,359

Faurecia Exhaust Systems Sro 1 Share 5,002

Faurecia Exhausts Systems Hungary 24,900,000 Share of HUF 1 0

Faurecia Systemy Kierownicze SpZoo 33,639 Share of PLN 500 3,333

Faurecia Sistemas de Escape Argentina SA 1,739,162 Shares of 1 ARS 8,009

EAK – Composants pour l’Industrie Automobile SAS 158,722 Shares of €15 2,420

Teec (Tongda Ecia Exhaust Company Ltd) 22,800,340 Shares 2,217

Faurecia Exhaust Systems South Africa Ltd 100 Shares of ZAR 1 1,073

EAK – Composants pour l’Industrie Automobile SNC 51,510 Shares of €15 785

Sheesc (Shangai Honghu Ecia Exhaust Systems Company Ltd) 8,568,000 Share 1,212

Faurecia Automotive Holding 22,049,732 Shares of €1 890,103

SAI Automotive AG 14,029,477 Shares of €2.56 210,232

Blériot Investissements 2,500 Shares of €16 46

Faurecia Services Groupe 2,500 Shares of €16 46

Faurecia Exhaust International 312,750 Shares of €15 4,502

Faurecia Global Purchasing 1 Shares of €1,000 1

Pelican Investissement 1 2,500 Shares of €16 40

Pelican Investissement 2 2,500 Shares of €16 40

2,258,178

b) Other securities 39

Total 2,258,217

2. Other long-term investments

Faurecia 412,834 Shares of €7 15,060

Total 2,273,277

Securities portfolio



In compliance with the assignment entrusted to us by the Annual Shareholders’ Meeting, we hereby report to you, for the yearended December 31, 2003, on:• the audit of the accompanying financial statements of Faurecia SA,• the justification of our assessments,• the specific verifications and information required by law. These financial statements have been approved by the Board of Directors. Our role is to express an opinion on these financialstatements based on our audit.

1. Opinion on the financial statementsWe conducted our audit in accordance with professional standards applicable in France. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well asevaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements give a true and fair view of the assets and liabilities and financial position of the Company as of December 31, 2003 and of the results of its operations for the year then ended, in accordance with the accounting rules and principles applicable in France.

2. Justification of our assessmentsIn accordance with the requirements of article L. 225-235 of the French Commercial Code relating to the justification of ourassessments, introduced by the Financial Security Act of August 1, 2003 and which came into effect for the first time this year,we bring to your attention the following matter: Note 1.2 to the financial statements presents the rules and methods applied to investments. Investments in subsidiaries and affiliates are stated at the lower of cost and fair value. Fair value is based on the subsidiary’s net assets, profitability and future outlook. As part of our assessment of the accounting rules and methods,we verified the appropriateness of the accounting methods mentioned above, ensured that they had been correctly applied andthat reasonable estimates had been used. The assessments were made in the context of our audit of the financial statements, taken as a whole, and therefore contributed to the formation of the unqualified opinion expressed in the first part of this report.

3. Specific verifications and informationWe have also performed the specific verifications required by law, in accordance with professional standards applicable in France.We have no matters to report as to the fair presentation and the conformity with the financial statements of the information given in the Management report of the Board of Directors and in the documents addressed to the shareholders with respect to the financial position and the financial statements. We draw your attention to the position taken by the Company in relation to the disclosure mentioned in article L. 225-102-1 of the French Commercial Code, on remuneration of the Company’s directors and officers in the form of wages from the Company’s parent. As stated in the Management report, Faurecia’s parent company discloses the compensation and benefits paid to some of Faurecia’sdirectors or officers who also hold directorships within the parent company.As required by law, we have also verified that details of the identity of the principal shareholders are disclosed in the Management Report.

March 22, 2004



Statutory Auditors’ report

Statutory Auditors’ report on the financial statements Year ended December 31, 2003“This is a free translation of the original French report.”


In our capacity as Statutory Auditors of Faurecia SA, we present below our report on regulated agreements.

Agreement authorized in 2003

We have been advised of the following agreement governed by section L. 225-40 of the French Commercial Code that wasapproved in advance by the Board of Directors.Our responsibility does not include identifying any undisclosed agreements. We are required to report to shareholders, based on the information provided, about the main terms and conditions of agreements that have been disclosed to us, without commenting on their relevance or substance. Under the provisions of section 92 of the March 23, 1967 decree, it is the responsibility of shareholders to determine whether the agreements are appropriate and should be approved. We conducted our review in accordance with the standards of our profession applicable in France. Those standards requirethat we carry out the necessary procedures to verify the consistency of the information disclosed to us with the source documents. In accordance with the authorization given by the Board of Directors on July 22, 2003, the Company was authorized to sell to Faurecia Industries the shares in Faurecia Bloc Avant and Faurecia Systèmes de Direction for their book values, of €37,846 and €37,862 respectively.Director concerned: Pierre Lévi.

Agreements authorized in previous years which remained in force in 2003

In accordance with the provisions of the decree of March 23, 1967, we were advised of the following agreements authorized in prior years which remained in force in 2003:• In accordance with the authorization given by the Board of Directors on July 22, 2002, the Company entered into a loanagreement on December 10, 2002 with various French, German and Spanish subsidiaries according to which the said companiesprovide Faurecia with a credit line of a maximum gross amount of €550 million. At December 31, 2003, an amount of €475,899,078 was outstanding, representing credit granted by Faurecia Autositze, Faurecia Kunstoffe, Faurecia Abgastechnik,SAI Automotive AG, SAI Automotive Worth, Faurecia Inneraum System, Asientos De Castilla, Asientos del Norte, Faurecia Sistemas de Escape, Faurecia Automotive de España, SAI Automotive Lignotock, Valencia Modulos de Puerta, Ecsa,Siebret, Siedoubs, Sienor, Sieto, Trécia, SAI Sandouville, Faurecia Bloc Avant and Faurecia Systèmes de Direction.• In accordance with the authorization given by the Board of Directors on September 4, 2000, Faurecia entered into a loan agreementdated November 8, 2000 with the Group’s operating companies, according to which the said companies provide Faurecia with a credit line of a maximum of €400 million. At December 31, 2003, an amount of €331,551,942 was outstanding, representingcredit granted by Faurecia Industries, Faurecia Sièges d’Automobiles, Faurecia Intérieur Industrie, Faurecia Automotive Industrie, Faurecia Systèmes d’Échappement, Sotexo, Siemar and Sielest.• The Company has given a guarantee to Agence de l’Eau Loire-Bretagne covering a loan of €237,820 made to Faurecia Sièges d’Automobile (following the merger with Cesa). At December 31, 2003, the outstanding balance due from Faurecia Sièges d’Automobile was €155,336.

Paris, March 22, 2004




Statutory Auditors’ special reporton regulated agreementsYear ended December 31, 2003“This is a free translation of the original French report.”



Extraordinary Shareholders’ Meeting of May 25, 2004(Tenth and eleventh resolutions)


In our capacity as Statutory Auditors of Faurecia SA, and in accordance with the terms of the assignment provided for in the French Commercial Code, notably articles L. 225-135, L. 228-92 and L. 228-95, we hereby report to you on the plannedissue of €61 million in shares and other marketable securities, including reserved and non-reserved portions. You are beingasked to approve this transaction.

Based on its report, the Board of Directors recommends that you delegate to it responsibility for setting the terms of this transactionand that you possibly waive your preferential subscription rights.

The maximum increase in capital stock that would result from these issues would be €61 million. If debt securities were issued, the maximum amount of resulting new debt would be €1,000 million.

We conducted our review in accordance with the standards of our profession applicable in France. Those standards require that we carry out the necessary procedures to verify the methods used to determine the issue price.

Subject to later review of the conditions governing the subsequent proposed capital increase, we have no comments as to the methods used to determine the issue price, as described in the Management report of the Board of Directors.As no issue price has been set for the shares to be issued, we make no comment on the final conditions governing the issue, nor, consequently, on the proposal that you waive your preferential subscription right which is, nevertheless, consistent with the terms of the transaction submitted for your approval.

In accordance with article 155-2 of the decree of March 23, 1967, we will issue an additional report once the securities have beenissued by the Board of Directors.





Statutory Auditors’ report on the issue of various marketable securitieswith and without preferential subscription rights for existing shareholders“This is a free translation of the original French report.”


Statutory Auditors’ report on the issue of shares reserved for employees, without preferential rights for existing shareholders“This is a free translation of the original French report.”

Ordinary and Extraordinary Shareholders’ Meeting of May 25, 2004(Twelfth resolution)


In our capacity as Statutory Auditors of Faurecia SA, and in accordance with the terms of the assignment provided for in article L. 225-135 of the French Commercial Code, we hereby report to you on the planned issue of shares, for a maximum par value of€5,083,417, reserved for the employees of Faurecia SA. You are being asked to approve this transaction.

This increase in capital stock is subject to your approval, in accordance with the terms of article L. 225-129-VII of the FrenchCommercial Code and article L. 443-5 of the French Labor Code.

Based on its report, the Board of Directors recommends that you delegate to it responsibility for setting the terms of this transactionand that you waive your preferential subscription rights.

We conducted our review in accordance with the standards of our profession applicable in France. Those standards require that we carry out the necessary procedures to verify the methods used to determine the issue price.

Subject to later review of the conditions governing the subsequent proposed capital increase, we have no comments as to the methods used to determine the issue price, as described in the Management report of the Board of Directors.

As no issue price has been set, we make no comment on the final conditions governing the increase in capital stock, nor,consequently, on the proposal that you waive your preferential subscription right which is, nevertheless, consistent with the terms of the transaction submitted for your approval.

In accordance with article 155-2 of the decree of March 23, 1967, we will issue an additional report once the increase in capitalstock has been carried out by the Board of Directors.






Shareholders’ Meeting of May 25, 2004(Thirteenth resolution)


In our capacity as Statutory Auditors of Faurecia SA, and in accordance with the terms of the assignment provided for in article L. 225-177 of the French Commercial Code and in article 174-19 of the decree of March 23, 1967, we hereby report to you on the granting of stock subscription options to the corporate officers and employees of Faurecia SA, its more than 50%-ownedsubsidiaries, and its sub-subsidiaries that are directly or indirectly more than 50%-owned.

The Board of Directors’ responsibility is to issue a report on the reasons for the granting of stock subscription options and the proposed methods for setting the subscription price. Our responsibility is to express an opinion on the proposed methods for setting the subscription price.

We conducted our review in accordance with the standards of our profession applicable in France. Those standards require that we carry out the necessary procedures to verify that the proposed methods for setting the subscription price are mentioned in the Board of Directors’ report, that they comply with the terms of applicable regulations on shareholder information and that they do not seem obviously inappropriate.

We have no comments to make regarding the proposed methods.





Statutory Auditors’ report on the granting of stock subscription options“This is a free translation of the original French report.”

86 informationThe Automobile & Faurecia

Information on the Company

I. General information

I. 1 I Faurecia

Company name and headquarters– Company name: Faurecia – Headquarters: 2, rue Hennape – 92000 Nanterre

Legal formQuoted “Société anonyme” (joint-stock corporation) governedby the French Commercial Code and the related enablinglegislation.

AuditorsThe Company’s accounts are audited by two Statutory Auditors,backed by two alternate Auditors, appointed in accordancewith section L. 225-228 of the French Commercial Code.

Date of incorporation and term– Incorporated on: July 1, 1929.– Term expires on: December 31, 2027.

Incorporation detailsThe Company is registered in Nanterre, France, under number 542 005 376. APE (business identifier) code: 741 J (company administration).

Consultation of corporate documentsThe Company’s bylaws, minutes of Shareholders’ Meetingsand Auditors’ reports are available for consultation at the Company’s headquarters. Contact: Dominique LaulanGeneral Counsel2, rue Hennape92000 Nanterre, France

Corporate purposeThe Company’s purpose, as set out in article 3 of the bylaws,is summarized below: – to establish, acquire, operate – directly or indirectly – or

invest in any and all industrial, trading or service companiesin France or abroad;

– to provide administrative, financial and technical assistanceto subsidiaries and affiliates;

– to manufacture and sell any and all products, accessories or equipment for the automotive and other industries, and generally to conduct any and all related commercial,industrial, securities and real estate transactions.

The Company’s role in relation to its subsidiaries and affiliatesFaurecia is a holding company, whose assets are primarilymade up of investments in subsidiaries and affiliates. TheGroup’s industrial assets are held by the operating subsidiaries. Faurecia provides direct and indirect financial, accounting,general management, administrative and other services to the Group companies. Group subsidiaries are financed on a centralized basis,primarily through Faurecia and Financière Faurecia – whichperforms a cash pooling role – in order to enable thesubsidiaries to benefit from the favorable market conditionsobtained from lenders by Faurecia. At December 31, 2003 net debt of the Company, correspondingto borrowings net of cash and cash equivalents and netintercompany cash advances, amounted to €1,437.8 million.Consolidated net debt totaled €1,695.7 million.

Fiscal yearThe Company’s fiscal year covers the twelve month periodfrom January 1 to December 31.



Income appropriationIncome available for distribution corresponds to net incomefor the year, less any losses carried forward from prior yearsand any amounts appropriated to reserves in compliance withthe law or the bylaws, plus any retained earnings. Out of thisincome, the Shareholders’ Meeting determines the fractionattributed to shareholders in the form of dividends and deductsthe amounts it considers appropriate to allocate to any reservefunds or to carry forward. However, except in the case of acapital reduction, no distributions may be made to shareholdersif the Company’s shareholders’ equity represents – or wouldrepresent after the planned distribution – less than its capitalstock plus any reserves which, according to the law or thebylaws, are not available for distribution. The Shareholders’Meeting may also decide to distribute amounts deductedfrom optional reserves in order to pay an ordinary dividend or increase the dividend or pay an exceptional dividend. The Company’s bylaws provide that the Ordinary Shareholders’Meeting approving the financial statements for the year mayalso decide to offer each shareholder the option between the payment of the dividend or the interim dividend in cash or in shares.

General Shareholders’ MeetingsGeneral Shareholders’ Meetings are held at the Company’sheadquarters or at any other venue specified in the notice of Meeting. To be entitled to attend General Shareholders’Meetings in person or to be represented by proxy, holders of registered shares must have their shares recorded in theregistered share account kept by the Company and holders of bearer shares must have their shares recorded in a shareaccount kept by their bank or broker at least five days prior to the date of the Meeting. The person who issues the noticeof Meeting may, however, reduce this period if he or shethinks fit.

Voting rightsThe Company’s bylaws do not provide for any restrictions on voting rights. Ordinary, Extraordinary and SpecialShareholders’ Meetings are exercisable by the beneficialowner of the shares.

Double voting rightsAll fully paid-up shares that have been registered in the nameof the same holder for at least two years carry double votingrights. In the case of a bonus share issue paid up by capitalizingretained earnings, income or additional paid-in capital, thebonus shares allotted in respect of registered shares carryingdouble voting rights will also carry double voting rights as fromthe date of issue. This double voting right may be withdrawnfollowing a decision of the Extraordinary Shareholders’Meetings and after having informed a Special Meeting of thebeneficiary shareholders. Any share converted into a bearershare or the ownership of which is transferred loses the doublevoting right. Nevertheless, transfers following the liquidation of a marital estate, or by way of an inheritance or in the formof an inter vivos gift to a spouse or a relative in the direct lineof succession does not entail the loss of the acquired rightand does not interrupt the period provided for in the aboveparagraph.

Disclosure thresholds (article 24 of the bylaws)Lastly, when a shareholder, acting alone or in concert, withinthe meaning of section L. 356-1-3 of the French CommercialCode, crosses the disclosure threshold of 2 % of the votingrights, whether below the 5% provided for by law or abovethe said 5%, the said shareholder must inform the Companyof the crossing of each threshold of 2%, whether by virtue ofan increase or a reduction in the shareholder’s interest, withinfifteen (15) days of the threshold being crossed, by registeredletter with return receipt requested. A proposal is beingsubmitted to the Shareholders’ Meeting of May 25, 2004 thatwould reduce to five (5) business days the lead time for informingthe Company of having crossed a disclosure threshold. In thecase of failure to comply with these disclosure rules, at therequest of one or several shareholders present or representedat the Meeting with combined holdings representing at least2% of the capital or voting rights, the undisclosed shares willbe stripped of voting rights. Said request must be recorded in the minutes of the General Shareholders’ Meeting. These rules apply in addition to the disclosure rules prescribedby law. The Company is not able to provide the market withinformation on the crossing of disclosure thresholds.



I. 2 l General information on the Company’s capital

On December 16, 2003, the Board of Directors stated thatthe Company’s capital stock amounted to €169,447,257divided into 24,206,751 common shares with a par value of €7, all in the same class and all fully paid up.

Authorized, unissued capitalAt the Combined Ordinary and Extraordinary Shareholders’Meeting of May 14, 2002, then at the Shareholders’ Meetingof May 27, 2003, the Board of Directors was given a twenty-six month authorization to issue, with or without preferentialsubscription rights for existing shareholders, securities givingdirect or indirect access to the capital that may have the effectof increasing the capital by a maximum of €61,000,000, witha maximum amount of debt securities fixed at €1,000,000,000or the foreign currency equivalent. The Company did notmake use of this authorization in 2002 or in 2003. An identical authorization will be requested for twenty-sixmonths at the Shareholders’ Meeting of May 25, 2004. Lastly, at the Shareholders’ Meeting of May 27, 2003, theBoard of Directors was given a five-year authorization to issuebonds up to a maximum nominal value of €1,000,000,000.The Company did not make use of this authorization in 2003.

Potential sharesAt December 31, 2003 a total of 782,100 employee stockoptions were outstanding. Each option is exercisable for one common share (see Employee Incentive Plans below). No other securities exist giving direct or indirect access to the Company’s capital.

Authorization to purchase Faurecia shares on the open marketThe Combined Ordinary and Extraordinary Shareholders’Meeting of May 27, 2003 gave the Board of Directors aneighteen-month authorization to trade in the Company’sshares on the open market, subject to the following restrictions:under this resolution, share purchases may not be carried out at prices in excess of €95 per share and share sales maynot be carried out at prices of less than €35. The number ofshares held could not exceed the maximum fixed by law, i.e.10%. An information memorandum was issued concerningthis authorization, which was approved by the COB undervisa no. 03-381 of May 6, 2003. No shares were purchased in 2003 based on this authorization. At December 31, 2003, the Company held 412,834 of its own shares. A similar authorization will be requested for the coming year at the Shareholders’ Meeting of May 25, 2004. Under thisresolution, share purchases may not be carried out at pricesin excess of €95 per share and share sales may not becarried out at prices of less than €35.



Changes in Faurecia’s capital over the last five years:

Year and type of transaction Amount of capital increase/ New capital New premium New number (reduction) stock of shares

Par value Premium

March 1999

Appropriation from additional paid-in capital to special reserve for long-term gains (1998 net income) (FRF133,626,745) FRF2,044,498,016.17Increase in capital through the transfer of funds fromthe special long-term capitalgains reserve to the capital account, carried out by raising value ofshares from FRF5 to FRF50 FRF889,289,865 FRF988,099,850 FRF2,044,498,016.17 19,761,997

April 1999

Increase in capital following the exercise of stock subscription options leading to the creation of 20,400 shares with a par value of FRF50 FRF1,020,000 FRF2,333,760.22 FRF989,119,850 FRF2,046,831,776.39 19,782,397

June 1999

Increase in capital following the merger-absorption of Ecia FRF648,523,800 FRF4,473,645,586.57 FRF1,637,643,650 FRF6,520,477,362.96 32,752,873Appropriation from additional paid-in capital to special reserve for long-term gains and untaxed provisions (FRF6,907,742.72) FRF6,513,569,620.24Reduction in capital by canceling the16,259,365 shares held in treasury stock following the merger with Ecia (FRF812,968,250) (FRF6,178,558,700) FRF824,675,400 FRF335,010,920.24 16,493,508Increase in capital following the merger-absorption of Ectra FRF42,150,800 FRF682,889,369.10 FRF866,826,200 FRF1,017,900,289.34 17,336,524Reduction in capital by canceling the 3,056,572 shares held in treasury stock following the merger with Ectra (FRF152,828,600) (FRF473,361,164.20) FRF713,997,600 FRF544,539,125.14 14,279,952Cancellation of Ectra shares held by Bertrand Faure after Ecia merger (FRF484,197,740.83) FRF60,341,384.31Restructuring costs charged to additional paid-in capital (FRF3,273,290.31) FRF57,068,094.00

September 1999

Increase in capital following the exercise of stock subscription options leading to the creation of 5,000 shares with a par value of FRF50 FRF250,000 FRF577,500 FRF714,247,600 FRF57,645,594.00 14,284,952

December 1999

Increase in capital following the exercise of stock subscription options leading to the creation of 28,200 shares with a par value of FRF50 FRF1,410,000 FRF3,009,480 FRF715,657,600 FRF60,655,074.00 14,313,152




Par value Premium

February 2000

Increase in capital following the exercise of stock subscription options leading to the creation of 40,000 shares with a par value of FRF50 FRF2,000,000 FRF4,256,000 FRF717,657,600 FRF65,210,074.00 14,353,152

September 2000

Increase in capital following the exercise of stock subscription options leading to the creation of 7,500 shares with a par value of €7 €52,500 €127,218.71 €100,524,564 €10,068,430.40 14,360,652

December 2000


February 2001

Increase in capital following the exercise of stock subscription options leading to the creation of 600 shares with a par value of €7 €4,200 €10,104 €100,539,264 €10,104,622.16 14,362,752

April 2001

Increase in capital following the exercise of stock subscription options leading to the creation of 17,000 shares with a par value of €7 €119,000 €302,940 €100,658,264 €10,407,562.16 14,379,752

June 2001

Increase in capital following the absorption of SIT, leading to the creation of 9,752,049 shares with a par value of €7 €68,264,343 €724,083,251.65 €168,922,607 €734,395,346.19 24,131,801Restructuring costs charged to additional paid-in capital (€95,467.62)

July 2001


November 2001





Par value Premium

February 2002

Increase in capital following the exercise of stock subscription options leading to the creation of 7,950 shares with a parvalue of €7 (including 5,950 shares with a cum-dividend date of January 1, 2001) €55,650 €140,314.50 €169,163,757 €734,912,289.07 24,166,251

July 2002

Increase in capital following the exercise of stock subscription options leading to the creation of 700 shares with a par value of €7 €4,900 €12,173 €169,168,657 €734,924,462.07 24,166,951

November 2002


July 2003


December 2003




Stock market dataFaurecia shares are traded on the Premier Marché of Euronext Paris SA (deferred settlement) under ISIN FR code 0000121147. They are included in the SBF 120 and NEXT 150 indexes.

Registrar and paying agentThe registrar and paying agent for Faurecia shares is Banque Crédit Agricole – Indosuez.

Dividend yield

Year Number of shares carrying Dividend Paid ondividend rights Net Avoir fiscal Tax credit Total revenue

1999 14,353,152 FRF6 FRF3 FRF9 July 6, 20002000 14,362,152 FRF6 FRF3 FRF9 July 5, 20012001 24,164,251 €0.91 €0.455 €1.365 July 15, 20022002 24,174,251 €0.91 €0.455 €1.365 July 11, 20032003 24,206,751 €0.91 €0.455 €1.365 July 12, 2004

Dividend distribution policyThe Company distributes dividends in line with the practices of other similar companies, based on the Group’s results for the year.

Share price and trading volume (source: Euronext)

Price and trading volume Share price (in €) Trading volume

High Average Low Number of shares Value(in € millions)

2002

January 61.40 59.54 56.10 304,601 18.05February 59.85 56.72 51.60 248,316 13.96March 57.40 56.10 54.10 314,104 17.57April 58.85 55.51 53.65 310,486 17.36May 54.30 51.68 48.50 175,369 9.03June 50.00 45.35 40.05 231,637 10.34July 53.00 41.19 35.50 388,988 16.31August 52.45 48.24 45.00 170,889 8.28September 46.15 41.11 33.00 208,584 8.19October 45.20 38.95 33.02 274,460 10.39November 43.80 41.65 40.11 152,231 6.35December 48.00 43.09 39.02 203,985 8.75

2003

January 44.01 41.07 39.01 156,880 6.45February 42.65 38.46 35.10 276,564 10.58March 36.30 31.28 27.50 426,993 13.39April 39.00 34.27 27.00 386,274 13.20May 56.00 38.56 35.00 732,857 33.64June 73.90 62.76 50.15 2,643,804 169.26July 70.60 62.78 54.00 950,887 60.09August 62.90 60.34 58.70 246,716 14.89September 63.80 59.10 55.00 396,000 23.45October 61.95 56.45 54.50 411,139 23.43November 57.95 56.29 54.65 227,271 12.79December 57.05 51.74 46.30 351,072 18.07



Price and trading volume Share price (in €) Trading volume

High Average Low Number of shares Value (in € millions)

2004

January 69.60 56.81 48.00 732,403 44.60February 68.95 61.17 58.45 348,022 21.61March 65.90 59.09 55.60 409,753 24.86

Dividends – Statute of limitationsDividends not collected within five years of the payment date will be time-barred and paid over to the French Treasury.

II. Capital and voting rights

Ownership structure(at December 31, 2003)

Total number of shares issued and outstanding: 24,206,751.Total number of voting rights: 40,308,165.

Based on information taken from shareholder accounts, Faurecia’s ownership structure as of December 31, 2003 was as follows:

Shareholders Shares (%) Voting rights (%)

Double Single Total

Peugeot SA 17,285,197 71.407 16,478,397 806,800 33,763,594 83.76Faurecia Actionnariat employeestock ownership plan and Faurecia Actionnariat International fund 90,263 0.373 – 90,263 90,263 0.22Treasury stock 412,834 1.705 – – – –Other 6,418,457 26.515 35,851 6,382,606 6,454,308 16.02

Total 24,206,751 100.00 16,514,248 7,279,669 40,308,165 100.00

According to the information disclosed to the Company: – no shareholder other than Peugeot SA holds over 5% of the Company’s capital or voting rights,– 4,243,700 registered shares held by PSA, representing 17.5% of the capital, were pledged at December 31, 2003 at SOFIB

in favor of the European Investment Bank.Directors’ interests represent approximately 0.003% of the capital and voting rights.A survey conducted in September 30, 2003, covering 99% of shares, showed that the Company had approximately 32,600 shareholders. To the best of the Company’s knowledge, no shareholders’ pacts have been signed.

Changes in ownership structure over the last three years

Shareholders At December 31, 2001 At December 31, 2002 At December 31, 2003

Number % of % of Number % of % of Number % of % ofof shares capital voting of shares capital voting of shares capital voting

rights rights rights

Peugeot SA 17,285,197 71.53 78.96 17,285,597 71.50 78.63 17,285,197 71.407 83.76Faurecia Actionnariat employee stock ownership plan and Faurecia Actionnariat International fund 94,255 0.39 0.30 94,255 0.39 0.30 90,263 0.373 0.22Treasury stock 315,974 1.31 – 412,834 1.71 – 412,834 1.705Other 6,468,825 26.77 20.74 6,381,565 26.40 21.07 6,418,457 26.515 16.02

Total 24,164,251 100.00 100.00 24,174,251 100.00 100.00 24,206,751 100.00 100.00



Identification of shareholders and holders of share equivalentsThe Company is entitled to obtain from the organization responsible for clearing securities transactions the names of holders of shares carrying voting rights at General Shareholders’ Meetings and of securities convertible, redeemable, exchangeable or otherwise exercisable for shares with voting rights, as well as the number of securities held by each such holder and details of any restrictions applicable to the securities.

Exceptional events, claims and litigationNo exceptional events, claims or litigation are in progress or pending that are likely to have a material impact on the financialposition, business or results of the Company or the Group.

III. Corporate governance

III. 1 I Board of Directors

At December 31, 2003, the Board of Directors was made up of 11 members, including four independent directors as defined by the Bouton report. The Company has no employee-elected directors or non-voting directors. Each director must hold at leasttwenty Faurecia shares throughout his or her term of office.

Directorships and positions held in other companies by members of the Board of Directors during 2003

Pierre Lévi

Mr Pierre Lévi, 49, has been a director of Faurecia since the Shareholders’ General Meeting of May 22, 2000, following which he was appointed Chairman and Chief Executive Officer by the Board of Directors. At its Meeting of May 14, 2002,the Board of Directors confirmed that the Chairman of the Board would also be responsible for the general management of the Company and that Pierre Lévi would continue to hold the position of Chairman and Chief Executive Officer.

Other directorships and positions held by Mr Lévi: Chairman of Faurecia Automotive HoldingsChairman of the Managing Board of Faurecia InvestmentsChairman and Chief Executive Officer of Faurecia IndustriesDirector of RhodiaMember of the Supervisory Board of SAI Automotive AGDirector of Faurecia Exhaust Systems, Inc.

Louis Defline

Mr Louis Defline has been a director of Faurecia since November 18, 1996. His term of office will expire at the Ordinary Shareholders’ Meeting of 2007.Mr Louis Defline, 62, is Chairman and Chief Executive Officer of Gefco.

Other directorships and positions held by Mr Defline: Director of Gefco España SADirector of Port Autonome de Saint-NazaireDirector of Peugeot Motors Company PlcDirector of SNCF



Yann Delabrière

Mr Yann Delabrière has been a director of Faurecia since November 18, 1996. His term of office will expire at the Ordinary Shareholders’ Meeting of 2007. Mr Yann Delabrière, 54, is Chief Financial Officer of the PSA Peugeot Citroën Group.

Other directorships and positions held by Mr Delabrière: Chairman and Chief Executive Officer of Banque PSA FinanceChairman and Chief Executive Officer of Compagnie Générale de Crédit aux Particuliers – CrediparChairman of Pergolèse InvestissementsChairman of the Board of Directors of Peugeot Citroën Argentina SAChairman of the Supervisory Board of Peugeot Finance International (Netherlands)Vice-Chairman and Director of PSA International SA (Switzerland)Director of Automobiles CitroënDirector of GefcoDirector of Peugeot Citroën Automobiles SAPermanent representative of Peugeot SA on the Board of Directors of Société Financière de Banque – SofibLegal Manager of Peugeot Citroën Finance et Comptabilité (GIE) (Belgium)Legal Manager of PSA Services SRL (Italy)

Daniel Dewavrin

Mr Daniel Dewavrin has been a director of Faurecia since July 6, 1992. His term of office will expire at the Ordinary Shareholders’ Meeting of 2007. Mr Daniel Dewavrin, 68, is Chairman of UIMM.

Other directorships and positions held by Mr Dewavrin: Chairman of the Supervisory Board of Faurecia InvestmentsDirector of Ratier Figeac

Patrick Duverger

Mr Patrick Duverger has been a director of Faurecia since June 1, 1999. His term of office will expire at the Ordinary Shareholders’ Meeting of 2005. Mr Patrick Duverger, 65, is Honorary Chief Executive Officer of Société Générale.

Other directorships and positions held by Mr Duverger: Director of Aviva ParticipationMember of the Supervisory Board of Aviva FranceMember of the Supervisory Board of Rémy CointreauDirector of SoparexoPermanent representative of Société Générale on the Supervisory Board of Accor

Jean-Martin Folz

Mr Jean-Martin Folz has been a director of Faurecia since June 1, 1999. His term of office will expire at the Ordinary Shareholders’ Meeting of 2005. Mr Jean-Martin Folz, 57, is Chairman of the Managing Board of Peugeot SA.

Other directorships and positions held by Mr Folz: Chairman of the Managing Board of Peugeot SAChairman of the Board of Directors of Automobiles CitroënChairman of the Board of Directors of Automobiles PeugeotDirector of Banque PSA FinanceDirector of Peugeot Citroën Automobiles SADirector of Saint-GobainDirector of Solvay (Belgium)



Jean-Louis Gérondeau

Mr Jean-Louis Gérondeau has been a director of Faurecia since May 27, 2003. His term of office will expire at the Ordinary Shareholders’ Meeting of 2009. Mr Jean-Louis Gérondeau, 61, is Chairman of the Managing Board of Zodiac.

Other directorships and positions held by Mr Gérondeau: Chairman of Aerazur (Sasu) Chairman of Intertechnique (Sasu) Director of Sicma Aero Seat Representative of Zodiac SA (Director of Parachutes de France) Representative of Zodiac SA (Single Partner of Zodiac International) Representative of Zodiac SA (Single Partner of European Pools) Representative of Zodiac SA (Single Partner of Immobilière Galli) Representative of Zodiac SA (Single Partner of Zodiac Fabrics Division) Chairman of the Supervisory Board of Institut de Développement Industriel (Industrial Development Institute)

Jean-Claude Hanus

Mr Jean-Claude Hanus has been a director of Faurecia since February 21, 2000. His term of office will expire at the Ordinary Shareholders’ Meeting of 2005. Mr Jean-Claude Hanus, 57, is General Counsel of Peugeot SA.

Other directorships and positions held by Mr Hanus: Chairman of DJ – 6Chairman of Grande Armée ParticipationsDirector of Automobiles PeugeotDirector of Compagnie Générale de Crédit aux Particuliers – CrediparDirector of Peugeot Citroën Automoviles España SAPermanent representative of Peugeot SA on the Board of Directors of Banque PSA FinancePermanent representative of Société Financière de Banque – Sofib, on the Board of Directors of Beaujon Immobilier

Gérard Hauser

Mr Gérard Hauser has been a director of Faurecia since July 22, 2003. His term of office will expire at the Ordinary Shareholders’ Meeting of 2009. Mr Gérard Hauser, 63, is Chairman and Chief Executive Officer of Nexans.

Other directorships and positions held by Mr Hauser: Director of Applix Director of Alstom Director of Electro Banque Director of Liban Câbles



Thierry Peugeot

Mr Thierry Peugeot has been a director of Faurecia since April 17, 2003. His term of office will expire at the Ordinary Shareholders’ Meeting of 2005. Mr Thierry Peugeot, 47, is Chairman of the Supervisory Board of Peugeot SA.

Other directorships and positions held by Mr Peugeot: Vice-President and director of Établissements Peugeot Frères Director of Foncière, Financière et de Participation Chairman and Chief Executive Officer of Immeubles et Participations de l’Est Director of La Française de Participations Financières Director of Société Anonyme de Participations Director of Compagnie Industrielle de Delle

Dietrich Russell

Mr Dietrich Russell has been a director of Faurecia since June 1, 1999. His term of office will expire at the Ordinary Shareholders’ Meeting of 2005. Mr Dietrich Russell, 63, is Executive Vice-President of EADS and President of Aeronautics Division.

Other directorships and positions held by Mr Russell: Chairman of the Members’ Assembly of ATR – GIEChairman of the Supervisory Board of Eurocopter SAChairman of the Supervisory Board of EFW – ELBE – FlugzeugwerkeDirector of EADS ATR Member of the Supervisory Board of Deutsche FlugsicherungMember of the Board of Directors of EMBRAERDirector of EADS Sogerma Services Member of the Supervisory Board of EADS Deutschland GmbH

Summary table of dates of joining and end of current term for members of the Board of Directors

Name Function First joined the Board Current term expires

Pierre Lévi Chairman and Board Meeting of May 22, 2000 Ordinary Shareholders’ Meeting 2006Chief Executive

Louis Defline Director Board Meeting of Nov. 18, 1996 Ordinary Shareholders’ Meeting 2007Yann Delabrière Director Board Meeting of Nov. 18, 1996 Ordinary Shareholders’ Meeting 2007Daniel Dewavrin Director Board Meeting of July 6, 1992 Ordinary Shareholders’ Meeting 2007Patrick Duverger Director Shareholders’ Meeting of June 1, 1999 Ordinary Shareholders’ Meeting 2005Jean-Martin Folz Director Shareholders’ Meeting of June 1, 1999 Ordinary Shareholders’ Meeting 2005Jean-Louis Gérondeau Director Shareholders’ Meeting of May 27, 2003 Ordinary Shareholders’ Meeting 2009Jean-Claude Hanus Director Board Meeting of Feb. 21, 2000 Ordinary Shareholders’ Meeting 2005Gérard Hauser Director Board Meeting of July 22, 2003 Ordinary Shareholders’ Meeting 2009Thierry Peugeot Director Board Meeting of April 17, 2003 Ordinary Shareholders’ Meeting 2005Dietrich Russell Director Shareholders’ Meeting of June 1, 1999 Ordinary Shareholders’ Meeting 2005



Compensation received by directors and officersThe total compensation and benefits, before tax, received in 2003 were as follows:

Pierre Lévi

Gross fixed compensation paid in 2003 to Mr Pierre Lévi, Chairman and Chief Executive Officer of Faurecia, determined in accordance with article L. 225-102-1 of the French Commercial Code, came to €589,079.The gross variable compensation paid in 2003 in respect of 2002, and determined based on Group operating income and financial or organizational indicators for 2002, came to €323,000. In 2003, Mr Pierre Lévi also received €13,000 in director’s attendancefees. The benefits received by Mr Lévi are the same as those granted to executive vice-presidents of the Faurecia Group, plus theuse of a chauffeur.Stock options granted in 2003: none. Options exercised in 2003: none.

Daniel Dewavrin

Gross compensation paid by Faurecia Investments: €18,294. Directors’ fees paid by Faurecia: €11,500. Stock options granted in 2003: none. Options exercised in 2003: none.

Lastly, the directors of belonging to the PSA Peugeot Citroën Group received the following attendance fees from the Company:Mr Louis Defline: €13,000.Mr Yann Delabrière: €21,000.Mr Jean-Martin Folz €21,000.Mr Jean-Claude Hanus: €21,000.Mr Thierry Peugeot: €11,500.

None of these directors or officers received or exercised any stock options during 2003.

As regards legal requirements set by article L. 225-102-1 of the French Commercial Code concerning the disclosure of compensationof directors and corporate officers, and taking into account expected changes in the compensation policy of the controlling entity,Faurecia specifies that no compensation or benefits other than the directors’ attendance fees mentioned above were paid in 2003to any of its directors by the Company or its subsidiaries. Faurecia’s parent company discloses the compensation and benefits paidto some of Faurecia’s directors or officers who also hold directorships within the parent company.



Chairman’s report on operation of the Board of Directors and internal auditing

In accordance with the terms of article L. 225-37 of the French Commercial Code, this report, attached to the Management reportas required by the Financial Security Act of August 1, 2003, describes the way in which the work of the Board of Directors isprepared and organized, as well as the internal control procedures implemented within the Group.

A – Work of the Board of Directors

a) Membership of the Board of DirectorsThe Board of Directors includes eleven members, four of whom are independent directors as defined by recent authoritative reports;five directors directly represent the interests of the majority shareholder. The Board considers that its membership adequatelyreflects the weight in Faurecia’s ownership structure of Peugeot SA, its key shareholder. The independent directors contribute theirvaried experience, in terms of international exposure and diverse industrial and managerial practice, to the Board’s discussions and work. With the exception of the Chairman, Pierre Lévi, no member of the Board of Directors holds an executive management or salaried position within a Group company.As indicated elsewhere, Mr Daniel Dewavrin chairs the Supervisory Board of Faurecia Investments.

b) Role of the Board of DirectorsThe Board of Directors determines overall business, financial and economic strategies for the Company and the Group and oversees their implementation. It has designed organization processes to ensure that it fulfills this role.

c) Organization of the Board of DirectorsAt its meeting of April 17, 2003, the Board of Directors adopted internal rules of operation aimed at organizing the Board’s workmore systematically, to inform directors more efficiently and facilitate their decision-making. The internal rules describe the operationof the Board and its role in the management of the Company, in line with the provisions set down by law and the Company’s bylaws.They also mention the rights and responsibilities of Board members, particularly as regards prevention of conflicts of interest, theholding of multiple directorships, and the need for strict confidentiality as well as diligence in taking part in the Board’s work. Theyalso set out rules governing transactions involving the Company’s shares, as recommended by the Autorité des marchés financiers. The Board of Directors is free to decide how the general management of the Company shall be carried out by the Chief ExecutiveOfficer. This position may either be held by the Chairman of the Board, in which case he or she shall hold the title of Chairman and Chief Executive Officer, or by another person appointed by the Board of Directors. At its Meeting of May 14, 2002, the Board of Directors confirmed that the Chairman of the Board will also be responsible for the general management of the Company and consequently that Pierre Lévi will continue to hold the position of Chairman and Chief Executive Officer. The Board of Directors has also set up an Audit Committee and extended the role of the Remunerations Committee – which hadoperated since June 15, 1999 – in order to create an Appointments and Compensation Committee. These two committees werecreated at the meeting of February 6, 2003 and began operating in 2003.

Appointments and Compensation CommitteeThe main role of this Committee is to present opinions and/or recommendations to the Board of Directors concerning:– the appointment of future directors,– compensation received by directors and officers, including the Chairman of the Board,– the granting of stock options. The Committee meets at least twice a year and reports to the Board of Directors. On April 17, 2003 the Board of Directors appointedJean-Martin Folz, Arnaud Leenhardt and Jean-Claude Hanus as members of the Appointments and Compensation Committee. On July 22, 2003, the Board of Directors took note of the resignation of Arnaud Leenhardt, and appointed Gérard Hauser as a member of this Committee, which Jean-Martin Folz chairs.



Audit CommitteeThis Committee’s role is to prepare at greater depth the review by the Board of the Company’s financial disclosures. It is thus responsible for preparing the Board Meetings held to review the interim and annual financial statements and for informingthe other Board members on these subjects. For that purpose, it reviews the financial statements before their submission to the Board and issues an opinion on:– the application and relevance of the accounting principles and methods used for the preparation of the financial statements,– the appointment, fees and audit program of the Statutory Auditors,– the Committee’s review of material risks. The Committee meets at least twice a year and reports to the Board of Directors. On April 17, 2003 the Board of Directors appointedYann Delabrière and Patrick Duverger as the members of this Committee. Jean-Louis Gérondeau was then appointed as a memberof the Committee on July 22, 2003. The Committee is chaired by Mr Delabrière.

d) Operation of the Board of DirectorsThe Board met four times during 2003, principally to review the Group’s budget, sales and results, and its major strategies. Two meetings that were specifically devoted to the review of half-yearly financial statements and results forecasts for the year were prepared by the Audit Committee. At one of its meetings, the Board decided to review the conditions governing directors’compensation. Following the recommendations of the Appointments and Compensation Committee, the Board adopted acompensation system that encourages directors’ attendance at Board meetings and takes into account the additional demandsborn out of the establishment of the Committees. These decisions are described in greater detail in the Group’s annual report. The eleven directors making up the Board of Directors had an average attendance rate of 88% in 2003. All members of thespecialized Committees attended all Committee meetings.

e) Evaluation of the Board of DirectorsFollowing a review by the Appointments and Compensation Committee, the Board approved a procedure for the evaluation of its work, using a survey to obtain feedback from each director on the workings of the Board and on whether the key issues for the Company are adequately prepared and reviewed. Directors’ responses to the survey and suggestions are then analyzed by the Chairman of the Appointments and Compensation Committee, who reports to the Board on his findings. This procedure was implemented in February 2004, and was applied to the Board’s work in 2003.

B – Internal control and reporting systems within the Group

a) Internal controlInternal control is defined within the Group as a process designed to provide reasonable assurance regarding the Company’s risks,including the reality and optimization of operations, the reliability of financial information, legal and regulatory compliance, and the preservation of assets. Like any other control system, it cannot guarantee an absolute elimination of all risks. Internal control is more than a set of standards and procedures. It is meant to involve the entire Company, from senior management (the Board of Directors, the Executive Committee and leadership of operating units) to the Audit Committee and Internal Control Department,but more importantly to each employee in his or her daily work. Group practices are documented in procedures, tailored to eachfunction while following a common framework. To promote transparency and efficiency, all procedures are accessible to allemployees on the Intranet. These regularly updated procedures are currently the object of an overall review.The Group has launched a review of the principal risk areas within its in-house operations, the aim being to either round out or setup the control system for each identified area.The two areas of program management and financial and accounting control deserve to be highlighted.



Control of program managementThe Group’s core business is designing and manufacturing modules for the automotive industry. Each such contract constitutes a program, to supply a complex assembly to an automaker. Its life span can stretch to ten years, divided into the two main phases:Development, which includes industrial production, followed by series life.Because a program can generate financial or industrial risks as early as the bidding stage, the Group has set up the ProgramManagement System (PMS) and deployed it throughout the Group. The PMS organizes a program’s life into strict successivestages from bidding to the end of product life. At each milestone, an in-depth review is performed using a series of financial andindustrial indicators and measuring performance against specific objectives of cost, deadlines and quality. If these objectives are not met or if a key indicator is not satisfied, the milestone is considered “red” and cannot be passed. In this case, an action planmust be implemented and the milestone validation must be undergone again. The program can only continue after the milestonehas become “green”. This process is designed to identify program risks on an ongoing basis, in order to design and implement the necessary action plans.

Financial and accounting controlThe Group has designed procedures for producing and processing financial and accounting information, relating to the balancesheet, the income statement and the notes to the financial statements. These procedures comply with applicable accountingprinciples. Among the most important Group procedures, the following have recently been updated: – a financial control manual, made up of audit surveys covering the Company’s key processes; – a capital expenditure authorization procedure, that determines the requirements for justifying the expenditure and identifies

authorized signatories who can commit the Company up to pre-defined thresholds; – a procedure for drafting program Business plans.

b) Financial and accounting reporting processesReporting processes provide tools for a better flow of information within the Group, enhancing management decisions and allowingrapid response to any emerging risks.

Business plansBecause Faurecia’s business revolves around program management, each program needs to be measured and evaluated based on its own business plan. This tool is the building-block of Faurecia’s economic reporting. From its inception, before the bid is filed,each program is subjected to a forward-looking financial analysis in the form of a business plan. The BP is regularly updated as assumptions change, and it contains all the information needed to assess a program at every stage, during the preparation of the estimate, contract negotiations, the development phase and series life.

Medium-term planBecause its contracts span several years, Faurecia needs a medium-term overview of its financial situation for effective riskmanagement. Towards this end, each year the Group draws up five-year plan known as the Medium-term plan, from which the half-yearly objectives used in budgets are derived.

BudgetFaurecia’s budget operates on a half-yearly schedule, exactly like the Group’s external financial communications.Group management provides the economic and financial assumptions to be used in the budget, and sets specific objectives foreach operating unit. The budget is then built for each plant, development center or administrative center. It is converted to monthlyperiods using standard schedules, then consolidated. As the budget for the upcoming half-year is produced, forecast results for the current half are issued, with explanations for anydiscrepancies with respect to the previously set budget for the current half. In a sliding continuum, the budget for the new half-yearthen serves as a basis for comparisons with current results and performance measurements.



Monthly reporting The main objectives of the monthly reporting system are speed and accuracy, to allow management teams to respond as quickly as possible based on actual data. In terms of speed, operating units are required to send, in the three days following the month-end,estimated sales and operating income data, then, at the latest five days after the monthly close, they send restated financialstatements based on Group standards. These statements are based on a common chart of accounts and include two incomestatements – by type of income and expense and based on cost-accounting principles – as well as a balance sheet showinga breakdown by type of movement of changes in each caption. As regards accuracy, the Group balance sheet, income statement and statement of cash flows are consolidated each month for management purposes. Discrepancies arising in the reconciliation of intercompany transactions are dealt with immediately, and variances in relation to the initial forecasts are analyzed. This process considerably speeds up the half-yearly and annualclosing of the accounts and publication of audited financial statements, since the monthly reporting and consolidation use strictlyidentical data, drawn from the same accounting system and based on common rules.

Three-month sliding forecastTo better anticipate short-term changes and allow greater reactiveness, the monthly reporting package includes comments and a sliding three-month forecast for the income statement and cash flows.

Off-balance sheet commitmentsThe reporting process described above does not include off-balance sheet commitments, which are handled in another, equallystrict process, under which each commitment is tracked by nature. Currency and interest-rate risks, as well as intercompanyfinancing in foreign currencies, are managed at Group level under the supervision of Group general management. If required,currency risks are hedged. Any sureties or guarantees granted by Faurecia are similarly managed at monitored at Group level.

Operations CommitteeEach business segment has an Operations Committee that meets monthly to analyze operating performance and review action plansthat are in progress or have been scheduled to meet budget goals. It includes certain members of the Executive Committee,including the Chairman, the Group Chief Financial Officer, as well as executive managers of the operating units involved. The Internal Audit Department will be devoting particular attention to the deployment of this methodology, as part of ever more efficientcontrol of the Company’s risks.

c) The Internal Audit DepartmentAt the beginning of 2003, the Group created an Internal Audit Department, which aims to guarantee an optimum level of efficiencyin all systems of internal financial control, by applying a systematic and methodical approach. The Department can interveneaccording to need in all Group processes throughout the world. It conducts its assignments in a wholly objective fashion and alwayssupports its findings with precise facts and quantitative data that have been duly verified. All of the Department’s work is madeavailable to general management, to which it reports regularly on the progress of its assignments and the meeting of its objectives.Other Company departments can also obtain detailed explanations from the Internal Audit teams concerning audit findings. In 2003, the Internal Audit Department worked on the following assignments, among others:– inventory issues for a large just-in-time manufacturing facility,– the treatment of fixed assets by German sites,– the financing needs of a joint venture.

Nanterre, March 22, 2004

The Chairman of the Board of Directors



Statutory Auditors’ report, prepared in accordance with the last paragraph of article L. 225-235 of the French Commercial Code, on the report prepared by the Chairman of the Board of Directors of Faurecia SA, on the internal control procedures relating to the preparation and processing of financial and accounting informationYear ended December 31, 2003

“This is a free translation of the original French report.”


In our capacity as Statutory Auditors of Faurecia SA, and in accordance with the terms of the last paragraph of article L. 225-235 of the French Commercial Code, we report to you on the report prepared by the Chairman of your Company in accordance with article L. 225-37 of the French Commercial Code for the year ended December 31, 2003. Under the responsibility of theBoard of Directors, it is for management to determine and implement appropriate and effective internal control procedures. It is forthe Chairman to give an account, in his report, notably of the conditions in which the duties of the Board of Directors are preparedand organized and the internal control procedures in place within the Company. It is our responsibility to report to you our observations on the information set out in the Chairman’s report on the internal controlprocedures relating to the preparation and processing of financial and accounting information. We performed our procedures in accordance with professional guidelines applicable in France. These require us to perform procedures to assess the fairness of the information set out in the Chairman’s report on the internal control procedures relating to the preparation and processing of financial and accounting information. These procedures notably consisted of: – obtaining an understanding of the objectives and general organization of internal control, as well as the internal controlprocedures relating to the preparation and processing of financial and accounting information, as set out in the Chairman’s report;– obtaining an understanding of the work performed to support the information given in the report; On the basis of these procedures, we have no matters to report in connection with the information given on the internal controlprocedures relating to the preparation and processing of financial and accounting information, contained in the Chairman of the Board’s report, prepared in accordance with article L. 225-37 of the French Commercial Code.

March 22, 2004






III. 2 I The Executive Committee

Faurecia’s Executive Committee is made up of thirteen members, as follows at December 31, 2003:

Name Position Date of appointment

Pierre Lévi Chairman and Chief Executive Officer July 19, 2000Caspar Baumhauer Executive Vice-President, Modules and Systems Business Group January 1, 2003Patrick Bikard Executive Vice-President, Group Industrial August 19, 2002Gérard Breining Executive Vice-President, Group Purchasing January 2, 2002Gérard Chochoy Executive Vice-President, Automotive Seating Business Group June 30, 2003Arnaud de David-Beauregard Executive Vice-President, Group Development July 19, 2000Jean-Michel Elter Executive Vice-President, Group Customer Development January 4, 2001Jean-Marc Hannequin Executive Vice-President, Exhaust Systems Business Group July 1, 2002Laurent Hebenstreit Executive Vice-President, Interior Systems Business Group August 26, 2002Thierry Lemâne Executive Vice-President, Group Communications September 23, 2002Jean-Marc Salvanes Executive Vice-President, Group Human Resources July 2, 2002Christophe Schmitt Executive Vice-President, Components Business Group June 30, 2003Pierre-Jean Sivignon Executive Vice-President, Chief Financial Officer April 6, 2001

The composition of the Executive Committee remained unchanged as of the date of this report. The full Executive Committee meetstwice a month in order to review the principal questions relating to the general organization of the Group. It discusses and preparesmajor operational issues concerning the Company and its subsidiaries, which are then implemented by each of the Committee’smembers in line with their functions.

Agreements involving directors and major shareholdersAt the date of this report, no agreements have been entered into between the Company and members of the Board of Directors orshareholders holding over 5% of the Company’s capital, other than routine agreements entered into in the ordinary course of business.

Management compensationThe total compensation paid or allocated to directors and officers of the Company and Group in respect of 2003 amounted to €5,405,104, including a total of €195,500 in directors’ fees. Compensation of directors is paid in the form of attendance fees,which are designed to take into account the regularity of Board members’ attendance at meetings, as well as the additionaldemands born out of the establishment of committees. Directors therefore receive a fixed portion in recognition of their function and a variable portion based on the number of Board meetings attended. They also receive additional compensation if they are a member of one of the Board’s committees. Compensation received by the members of the Executive Committee includes an objective-related bonus which represents between 0 and 45% of their basic salary (with a target percentage of 30%), based on both the Group’s results and individual performance. No Faurecia stock subscription or purchase options were granted to members of the Executive Committee in 2003.



III. 3 I Auditors

Terms of office of Auditors

Date of first appointment Term of office expires

Statutory Auditors

PricewaterhouseCoopers Auditrepresented by Christian Martin32, rue Guersant – 75017 Paris May 27, 2003 Ordinary Shareholders’ Meeting 2007Ernst & Young Auditrepresented by Patrick LhommeFaubourg de l’Arche – 92400 Courbevoie June 17, 1983 Ordinary Shareholders’ Meeting 2007

Alternate Auditors

Catherine Sabouret May 27, 2003 Ordinary Shareholders’ Meeting 2007Christian de Chastellux May 3, 1995 Ordinary Shareholders’ Meeting 2007

Fees paid to the Statutory Auditors at December 31, 2003

(in € thousands) PWC Ernst & Young

2003 2002 2003 2002

Statutory audit services

Audit of the accounts 2,587 2,370 825 791Issuance of shares, mergers 27 25 1 0Technical analyses 51 54 9 3Analyses of new systems 0 0 0 0Other statutory audit services 103 88 8 21Other audit services

Acquisition, valuation audits 53 168 1 0Technical assistance 152 1, 389 1 0Other 74 89 52 22Other services (advisory)

Tax and legal 867 857 255 265IT 15 2 0 15Internal audit 41 0 0 76Other 10 6 21 104

Total fees 3,980 5,048 1,174 1,301



III. 4 I Employee incentive plans

a) Stock subscription optionsThe Company has a policy of issuing stock options to the management of Group companies and their subsidiaries allowing them to subscribe for newly-issued Faurecia shares. These stock option plans concern subsidiaries that are over 50%-owned. The Ordinary and Extraordinary Shareholders’ Meeting of May 14, 2002 granted the Board of Directors a thirty-eight monthauthorization to grant, on one or several occasions, a maximum of 400,000 stock subscription options to the management andemployees of Group companies and their over 50%-owned subsidiaries.This authorization was not used in 2003. A similar authorization will be requested for thirty-eight months at the Shareholders’Meeting of May 25, 2004. As of December 31, 2003, a total of 782,100 stock subscription options were outstanding.

The details of the outstanding stock purchase option plans are as follows:

At December 31, 2003:

Date Date Exercise Number o/w granted to Start Expiry date Stock Options Numberof Shareholders’ of Board price of options senior executive of exercise of exercise options forfeited of options Meeting Meeting (in €) granted management/ period period exercised outstanding

Executive at Dec. 31,Committee 2003

June 18, 1992 April 7, 1994 25.06 115,000 75,000 April 8, 1999 April 6, 2009 73,200 0 41,800May 31, 1994 Oct. 20, 1994 23.84 125,000 30,000 Oct. 21, 1999 Oct. 19, 2009 109,000 0 16,000May 31,1994 May 3, 1995 26.07 71,000 15,000 May 4, 2000 May 2, 2010 64,500 1,000 7,500May 3, 1995 Sept. 12, 1996 24.39 125,000 40,000 Sept. 13, 2001 Sept. 11, 2011 71,400 0 53,600May 31, 1994 June 26, 1997 40.25 54,000 15,000 June 27, 2002 June 25, 2012 24,000 1,500 28,500June 5, 1997 June 26, 1997 42.38 35,500 15,000 June 27, 2002 June 25, 2007 8,000 8,500 19,000June 5, 1997June 1, 2001 Feb. 22, 2002 55.00 351,700 69,500 Feb. 23, 2006 Feb. 22, 2012 0 4,000 347,700June 1, 2001May 14, 2002 Nov. 28, 2002 41.71 269,500 101,000 Nov. 29, 2006 Nov. 27, 2012 0 1,500 268,000

Total 782,100

b) Stock purchase optionsBetween 1999 and 2001, the Company granted stock options to the management of Group companies and their over 50%-ownedsubsidiaries, allowing them to purchase Faurecia shares. As of December 31, 2003, a total of 439,900 stock purchase options wereoutstanding.

The details of the outstanding stock purchase option plans are as follows:

At December 31, 2003:

Date Date Exercise Number o/w granted to Start Expiry date Stock Options Numberof Shareholders’ of Board price of options senior executive of exercise of exercise options forfeited of options Meeting Meeting (in €) granted management/ period period exercised outstanding

Executive at Dec. 31,Committee 2003

June 1, 1999 Sept. 6, 1999 52 200,000 53,100 Sept. 6, 2004 Sept. 5, 2009 0 16,500 183,500June 1, 1999May 22, 2000 Sept. 4, 2000 40 254,000 54,900 Sept. 4, 2005 Sept. 3, 2010 0 41,100 212,900May 22, 2000 April 26, 2001 54.5 43,500 40,000 April 26, 2005 April 25, 2011 0 0 43,500

Total 439,900



c) Information concerning the ten employees who received the largest number of options

Stock options granted to the ten employees who received Plan Total number of options Weighted average the largest number of options, and options exercised by those employees granted/shares purchased exercise price

(in €)

Options granted to the top ten employee grantees during the year, by the Company and other Group companies entitled None – –to grant options (total).

Options exercised during the year by the top ten employee grantees 4 6,800 25.06of the Company and other Group companies entitled 6 4,250 26.07to grant options (total). 7 2,000 24.39

8A 5,500 40.258B 5,500 42.38

d) Applicable procedure for the allocation of stock subscription and purchase optionsAt its Meeting of February 6, 2003, the Board of Directors adopted a strict procedure in relation to the allocation of stocksubscription and purchase options. The Board of Directors may only decide upon the principle of granting stock subscription or purchase options once a year, during the Board Meeting held in February in order to approve the annual financial statements. The list of beneficiaries, the number of options granted to each beneficiary and the price of the options – which is based on the average of the opening prices quoted for the Company’s shares over the twenty trading days preceding the effective date of grant – will be determined during April, at the Board Meeting which issues the notice of the Annual General Meeting.

e) Employee profit-sharing plans

Automotive Seating division subsidiaries (mainly Faurecia Sièges d’Automobile – FSA)

“Intéressement” profit-sharing plan

A new three-year agreement was signed within FSA in June 2003, setting up the possibility of a half-yearly payment provided that operating margin reaches or exceeds 2.5%. The profit-sharing payment is composed of two portions:• a company-level portion based on the company’s financial performance, determined half-yearly based on gross margin;• site-level portion linked partly to financial performance and partly to the site’s ongoing progress indicators.Total “intéressement” profit-sharing can reach 6% of payroll when objectives have been fully achieved. Financial performance canaccount for up to 3.6% – 1.8% at company level and 1.8% at site level – and progress indicators can contribute a maximum of 2.4%.Other companies of the Automotive Seating division, notably Siedoubs, Sielest and Sieto, also signed “intéressement” profit-sharingagreements, most of them in June 2003, that included similar conditions to those indicated for FSA. The current agreement at Ecsaexpired at the end of 2003.Individual allocations are made as follows:• 35% of the total is allocated by a hierarchical method based on individual salary;• 65% of the total is allocated on a non-hierarchical basis, by applying a formula that takes into account the indicator of

the personal contribution to performance. These agreements will give rise to payments only beginning in the first quarter of 2004. “Intéressement” profit-sharing in this divisionamounted to €0.3 million in 2002.The “participation” employee profit-sharing agreement signed by FSA SA on February 8, 1995, as well as those of the othercompanies, stipulate that employee profit-sharing calculated in accordance with the legal formula is allocated among employeespro rata to their compensation for the year in question, subject to compliance with regulatory limits. The amounts awarded underthe “participation” profit-sharing plan may be either invested in the corporate mutual fund set up in connection with the Group Employee Stock Ownership Plan or paid into an escrow account, according to the choice made by each employee. Total “participation” profit-sharing for 2001 amounted to €0.3 million. No amounts were awarded under the “participation”profit-sharing plan in 2002.



Exhaust Systems (Faurecia Systèmes d’Échappement)

In June 2003, FSE signed a new “intéressement” profit-sharing agreement for 2003 to 2005. It provides for the possibility of half-yearly payments, as long as the Company posts a pre-tax profit. The profit-sharing is calculated based on the past trackrecord (using first-half 2003 as a baseline) and on the objectives for the current half-year, which include:• a business performance indicator:• progress indicators related to safety, quality, productivity.Total “intéressement” profit-sharing can reach 6% of payroll when objectives have been fully achieved. Business performance can account for up to 3.0% of gross payroll. Each progress indicator can potentially contribute up to €280 per person for the year(a maximum of 1% of gross payroll). Individual allocations will be made as follows:• the business performance-related part is allocated proportionally to the salary received during the year in question;• the part related to progress indicators is allocated across the board proportionally to hours worked. No “intéressement” profit-sharing distributions were made in 2001 and 2002. An advance corresponding to €500 was paid in July 2003. The “participation” profit-sharing scheme applies the conditions set out in regulations. Following the separation of Faurecia Industries into the two distinct legal entities of FSE and FI, a rider to the “participation” agreement was signed in April 2001, pooling profit-sharing data across the two companies. It was extended in 2002 and 2003, with the same basis of calculation. Total “participation” employee profit-sharing for 2001 and 2002 amounted to €3.2 million and €4.0 million respectively.

Interior Systems subsidiaries

These subsidiaries include the following French companies: Faurecia Intérieur Industrie (formerly Allibert), Faurecia AutomotiveIndustrie (formerly Sommer), Automotive Sandouville, Faurecia Automotive Holdings and Faurecia Industries. In 1994 Sommer Allibert,SAI Automotive Allibert Industrie and SAI Automotive Sommer Industrie entered into a group “participation” employee profit-sharingagreement, with retroactive effect as from 1993. This agreement was terminated in 2002. Beginning in January 2003, each of the companies applied the system provided by regulations, without pooling. Total “participation” profit-sharing paid in 2001 was €0.8 million. No amounts were paid under these companies’ plans in 2002. Employees’ rights are allocated to FAIF, a money-market mutual fund. Faurecia Intérieur Industrie (SNC) did not renew its “intéressement” profit-sharing agreement since 2001.

Faurecia Industries (FI)

In June 2003, FI signed a new “intéressement” profit-sharing agreement for 2003 to 2005. It provides for the possibility of half-yearlypayments, as long as the operating margin exceeds 3%. The calculation is based on: • a business performance indicator;• progress indicators calculated within each site and chosen among the reference indicators within the Excellence System (FES).Total “intéressement” profit-sharing can reach 6% of payroll when objectives have been fully achieved. Business performance,shared among all sites, can account for up to 3.0% of gross payroll. Results based on progress indicators can also account for upto 3% of gross payroll. Each progress indicator represents a minimum of 0.75% and a maximum of 1.25% of the reference payroll.Individual allocations are made half based on the employee’s hours worked and half based on compensation earned during the same period.



Faurecia Automotive Industrie (FAI)

The “intéressement” profit-sharing agreement of Faurecia Automotive Industrie (SNC), which had expired at the end of 2002, was renewed for three years in March 2003. The new agreeement includes the same terms as the previous one, but applied on a half-yearly schedule. The calculation is based on: – business performance indicators,– progress indicators related to criteria of quality and safety, – one indicator selected by each site.Total “intéressement” profit-sharing can reach 8% of payroll when objectives have been fully achieved. Business performance canaccount for up to 3.0% of gross payroll, as can the quality and safety indicators. Results based on site-selected progress indicatorscan account for up to 2% of gross payroll. Individual allocations are made half based on the employee’s hours worked and halfbased on compensation earned during the same period. €0.7 million was paid out under the “intéressement” profit-sharing plan for 2001, €1.8 million for 2002, and €0.8 million for the first half of 2003.

f) Group Employee Stock Ownership PlanA Group Employee Stock Ownership Plan has been set up for the employees of Faurecia SA and its direct and indirect subsidiariesthat are at least 50%-owned. Plan contributions by employees who are resident in France for tax purposes are invested in the“Faurecia Actionnariat” corporate mutual fund and contributions by non-resident employees are invested in ”the Faurecia ActionnariatInternational” fund. At December 31, 2003, the “Faurecia Actionnariat” and “Faurecia Actionnariat International” funds held 0.373% ofthe Company’s capital.



IV. Statement by the person responsible for the “Document de référence”

Person responsible for the “Document de référence”M. Pierre LéviChairman and Chief Executive Officer

To the best of my knowledge, the information contained in the Faurecia “Document de référence” is correct and includes all the information required to allow investors to form an opinion on the assets, operations, financial position, results and outlook of Faurecia. No information has been omitted that would be likely to alter the meaning of the document.

Pierre Lévi

Information officerMr Pierre-Jean SivignonChief Financial Officer



V. Statement by the Auditors Free translation of the original French report

In our capacity as Statutory Auditors of Faurecia SA (the Company) and as required by the Commission des Opérations de Bourseregulation 98-01, we have examined in accordance with French professional standards the information about the financial positionand the historical accounts included in the “Document de référence”.The “Document de référence” is the responsibility of Pierre Lévi, Chairman and Chief Executive Officer. Our responsibility is to express an opinion on the fairness of the information about the financial position and the accounts containedin the “Document de référence”.Our procedures, which were performed in accordance with French professional standards, consisted of assessing the fairness of the information about the financial position and the accounts, verifying that this information agrees with the audited financialstatements, reading the other information contained in the “Document de référence” in order to identify any material inconsistencieswith the information about the financial position and the accounts, and reporting any manifestly incorrect information that came toour attention based on our overall knowledge of the Company, as acquired during our audit. The “Document de référence” does notcontain any forward looking information determined according to a structured process. We also audited the financial statements of the Company and the Group for the years ended December 31, 2001, 2002 and 2003as approved by the Board of Directors, in accordance with standards generally accepted in France. Our reports on these financialstatements were free of qualifications and observations. In accordance with the requirements of article L. 225-235 of the French Commercial Code, introduced by the Financial Security Act of August 1, 2003 and which came into effect for the first time this year, we mentioned in our reports the following justification of our assessments:

For the parent company financial statements: Note 1.2 to the financial statements presents the rules and methods applied to investments. Investments in subsidiaries andaffiliates are stated at the lower of cost and fair value. Fair value is based on the subsidiary’s net assets, profitability and futureoutlook. As part of our assessment of the accounting rules and methods, we verified the appropriateness of the accountingmethods mentioned above, ensured that they had been correctly applied and that reasonable estimates had been used.

For the consolidated financial statements:Note 2.18 to the consolidated financial statements, concerning corporate income taxes, specifies that deferred tax assets arerecognized in the accounts except in cases where the future recovery of the deferred tax assets seems uncertain. Our work consisted in verifying that this method had been correctly applied and assessing whether the forecast data and assumptionssupporting the probability of recovery for these deferred tax assets were reasonable. Note 10 to the consolidated financial statements, concerning goodwill, presents the methods used to compare the value of the assetsof each Group business, including goodwill, with discounted future cash flows derived from the most recent forecasts. We verified that the approach used complied with accounting standards applicable in France. Our work also consisted in verifying thatthe methods described in this note had been correctly applied, assessing whether the data and assumptions used were reasonable,and double-checking the calculations.

Paris, April 26, 2004



Additional information:As required by law, page 103 of the “Document de référence” includes the Report of the Statutory Auditors – prepared in accordancewith the final paragraph of article L. 225-235 of the French Commercial Code – on the Report of the Chairman of the Board of Directors of Faurecia SA which describes the internal control procedures relating to the preparation and processing of financialand accounting information.


Cross-reference table


The French version of this annual report has been registered as a “Document de référence”. The following table lists the disclosuresrequired under Autorité des marchés financiers regulations and guidelines, and indicates the corresponding pages of this report.

Pages

I. Information

II. Statements by the person responsiblefor the “Document de référence” and the Auditors

– Statement by the person responsible for the “Document de référence” Volume 2 : p. 110– Statement by the Auditors Volume 2 : p. 111– Information policy Volume 1 : p. 33

III. General information1. Faurecia

– Applicable regulations Volume 2 : p. 86

2. Capital– Specific rights and restrictions Volume 2 : p. 88– Authorized capital Volume 2 : p. 88– Potential shares Volume 2 : p. 88– Changes in capital over the last five years Volume 2 : p. 89 to 91

3. Market for the Company’s shares– 18-month share price and trading data Volume 2 : p. 92– Dividends Volume 1 : p. 32 and Volume 2 : p. 58, 79 and 92

IV. Capital and voting rights– Current ownership structure Volume 1 : p. 32 and Volume 2 : p. 93– Changes in ownership structure Volume 2 : p. 93– Shareholders’ pact Volume 2 : p. 93

V. General information about the Group– Group organization Volume 1 : p. 6 to 29 and Volume 2 : p. 2, 3 to 86– Group key figures Volume 1 : p. 30 to 31– Segment information Volume 2 : p. 31, 32 and 33– Market and competition Volume 1 : p. 14 to 27– Capital expenditure policy Volume 2 : p. 7, 32 and 33


Pages

VI. Analysis of Group risks1. Risk factors

– Market risks Volume 2 : p. 8, 9 and 48– Specific business-related risks Volume 2 : p. 9– Legal risks Volume 2 : p. 8 et 9– Industrial and environmental risks Volume 2 : p. 9

2. Insurance and hedging Volume 2 : p. 8 and 9

VII. Assets and liabilities, financial position and results of operations

– Consolidated financial statements Volume 2 : p. 23 to 53– Off-balance sheet commitments Volume 2 : p. 10 and 48– Fees paid to the Auditors Volume 2 : p. 105– Company financial statements Volume 2 : p. 65 to 80

VIII. Corporate governance– Membership and operation of the Board of Directors Volume 2 : p. 94 to 102– Membership and operation of the Committees of the Board Volume 2 : p. 99 and 100– Executive Directors Volume 2 : p. 94 to 98– Compensation paid to the ten highest earning employees

(excluding corporate officers) Volume 2 : p. 104– Agreements involving Directors Volume 2 : p. 82

IX. Recent developments and outlook– Recent developments Volume 1 : p. 8 to 25 and Volume 2 : p. 31 and 70– Outlook Volume 2 : p. 7


The French version of this “Document de référence” was filed with the Autorité des marchés financiers on April 28, 2004, in accordance with COB regulation 98-01. It may not be used in connection with a financial transaction unless it is accompanied by an information memorandum approved by the Autorité des marchés financiers.


Main addresses

Argentina

Automotive SeatingRuta 197 n° 2999, El Talar 1617 Pacheco (Buenos Aires)Tel.: (54) 11 4726 9400Fax: (54) 11 4726 8463

Exhaust SystemsCarlos Pellegrini Y Viamonte Lanus – Placia de Buenos Aires 1824 LanusTel.: (54) 11 4208 8035Fax: (54) 11 4218 1811

BelgiumInterior SystemsMai Zetterlingstraat 70 9042 GhentTel.: (32) 9 255 84 51Fax: (32) 9 255 84 10

Brazil

Automotive SeatingAvenida Prefeito Domingos Mocelin Neto, 777 Borda do Campo km 77, Parque Industrial Renault CEP 830420 Quatro Barras Tel.: (54) 41 671 8000Fax: (55) 41 672 1560

Exhaust SystemsAv Nossa senhora do bom sucesso, 3344, Mod 3&4, Campo Allegre 124 PindamonhangabaTel.: (55) 12 245 5627Fax: (55) 12 243 1424

Interior SystemsAvenida Dom Pedro II, 288 8° andar – Bairro Jardim 09080-000 Santo André Tel.: (55) 11 4993 7900 Fax: (55) 11 4432 0525

Canada

Automotive Seating6141 Vipond Drive Mississauga, ON L5T 2B2 Tel.: (1) 905 670 0218Fax: (1) 905 670 1415

China

Automotive Seating1015 Heshun Street Jilin Province China 130031 Changchun Tel.: (86) 431 492 1118 Fax: (86) 431 492 1108

Exhaust Systems220, Zhuanyang Street Wuhan Technical and EconomicDevelopment Zone 430056 WuhanTel.: (86) 27 84 89 1745 Fax: (86) 27 84 89 2261

FaureciaHead Office2, rue Hennape92735 Nanterre CedexTel.: (33) 1 72 36 70 00Fax: (33) 1 72 36 70 07http://www.faurecia.comCorporate communications contact: Thierry LemânePress contact: Dorothée Mandonnet

Main addresses


Main addresses

Czech Republic

ComponentsMesickà 276 39002 Tàbor Tel.: (420) 381 494 111 Fax: (420) 381 259 782

Exhaust SystemsHorka 34 29401 Bakov Nad Jizerou Tel.: (420) 326 799 111 Fax: (420) 326 799 120

Interior SystemsPlazy 100 29301 Mlada Boleslav Tel.: (420) 326 370 111 Fax: (420) 326 370 100

France

2, rue Hennape 92735 Nanterre Cedex Tel.: (33) 1 72 36 70 00 Fax: (33) 1 72 36 70 07

Germany

Automotive SeatingNordsehler Strasse 38 31655 Stadthagen Tel.: (49) 5721 702 0 Fax: (49) 5721 702 370

Exhaust SystemsHerboldshofer Strasse 35 90765 FürthTel.: (49) 911 76 100Fax: (49) 911 76 10 466

Interior SystemsFaureciastraße 1 76767 Hagenbach Tel.: (49) 72 73 80 10 Fax: (49) 72 73 80 15 55

Interior SystemsWerk Wörth Daimlerstrasse 1 76744 WörthTel.: (49) 72 71 130 800Fax: (49) 72 71 130 811

India

Automotive SeatingPlot n°19, 2nd Main, 2nd Cross, KIADB Attibele Industrial Area Anekal Taluk, Bangalore District, Karnataka State 562107 AttibeleTel.: (91) 80 7820 553 Fax: (91) 80 7820 245

Japan

Automotive SeatingSogo Kudan Minami Bldg., 2F 2-7-6, Kudan Minami, Chiyoda-ku, 102-0074 TokyoTel.: (81) 3 3556 8750Fax: (81) 3 3556 8751

Interior SystemsSogo Kudan Minami Bldg., 2F 2-7-6, Kudan Minami, Chiyoda-ku, 102-0074 TokyoTel.: (81) 3 3556 8770Fax: (81) 3 3556 8771

Luxembourg

Modules and SystemsOp der Sang 14 Z.I. Eselborn-LentzweilerL-9779 EselbornTel.: (352) 94 90 90 Fax: (352) 94 90 81

Mexico

Interior SystemsParque Industrial Finsa Nave 17 Autopista México – Puebla 72710 PueblaTel.: (52) 222 219 87 00Fax: (52) 222 210 54 62

Netherlands

Interior SystemsIndustriestraat 12 6135 KH Sittard (Born) Tel.: (31) 464 201 756 Fax: (31) 464 201 751

Poland

ComponentsUl. Spoldzielcza 4 05-600 Grójec Tel.: (48) 48 665 01 13 Fax: (48) 48 664 37 11

Interior SystemsUl. Szczecinska 31 66-400 Gorzow Wielkopolski Tel.: (48) 95 72 19 304Fax: (48) 95 72 19 309

Portugal

ComponentsRua Comendador Rainho 44 – Apartado 61 3701-953 São João da Madeira Tel.: (351) 256 839 200 Fax: (351) 256 839 207

Interior SystemsParque Industrial Autoeuropa Quinta da Marquesa I CCI 10207 2950 – 678 PalmelaTel.: (351) 21 213 51 00 Fax: (351) 21 210 80 36

Slovakia

Interior SystemsOpletalova 73 84107 Bratislava Tel.: (421) 2 6930 7714 Fax: (421) 2 6930 7735


Main addresses

South Africa

Exhaust SystemsCnr Henry Ford & Nicoll Road Elmosa Park, Nieve Township PO Box 995 6000 Port ElizabethTel.: (27) 41 451 0936Fax: (27) 41 451 0948

Interior SystemsCnr Larch avenue & Wattle square Holland ParkPO Box 770 6000 Port ElizabethTel.: (27) 41 393 4200Fax: (27) 41 393 2216

South Korea

Exhaust Systems1264, Jeongwang-Dong429-849- Shiheung CityTel.: (82) 31 499 7971Fax: (82) 31 432 0781

Spain

ComponentsCalle 2, n° 20-22, Sector A. Pol. Ind. Zona Franca 8040 BarcelonaTel.: (34) 932 239 970Fax: (34) 932 234 688

Exhaust SystemsCamiño do Caramuxo 33 36213 VigoTel.: (34) 986 213 838 Fax: (34) 986 214 600

Interior SystemsAutovia A-3, Madrid-Valencia, Km. 334,5 Apartado de Correos 180 46930 Quart de Poblet (Valencia) Tel.: (34) 96 196 00 00 Fax: (34) 96 196 00 69

Sweden

Automotive SeatingTöpelsgatan 5A 41655 Gothenburg Tel.: (46) 31 703 3442 Fax: (46) 31 703 4715

Exhaust SystemsNya Bergkvaravägen 15-17 Box 501 385-25 TorsasTel.: (46) 486 13000Fax: (46) 486 10401

Interior SystemsKärrlyckegatan 11 418 78 Gothenburg Tel.: (46) 31 758 01 00 Fax: (46) 31 758 01 99

Tunisia

ComponentsSociété Tunisienne d’Équipements Automobile Route de Mornag km 6 ZI de Bata2013 Ben ArousTel.: (216) 71 38 30 06Fax: (216) 71 38 40 43

Turkey

ComponentsTeknik Malzeme Geçit Köyü Giripi 471 16150 Bursa Tel.: (90) 224 244 73 00 Fax: (90) 224 244 65 87

Interior SystemsSAI Automotive Polifleks AS Hürriyet Mahallesi Harmansazi mevki 16800 OrhangaziTel.: (90) 224 573 60 60 Fax: (90) 224 573 60 65

United Kingdom

Automotive SeatingPO Box 200, Humber Road, Stoke CV3 1LU CoventryTel.: (44) 2476 885 700Fax: (44) 2476 885 075

Interior SystemsCommon Lane Fradley Business Park WS13 8NQ Fradley (Lichfield) Tel.: (44) 1543 445 200Fax: (44) 1543 444 434

United States

Automotive Seating2380 Meijer Drive Troy, MI 48084 Tel.: (1) 248 288 1000 Fax: (1) 248 288 1074

Interior Systems2050 Auburn Road Auburn Hills, MI 48326 Tel.: (1) 248 409 3500 Fax: (1) 248 409 3501

Exhaust Systems543 Matzinger Road Toledo, OH 43612 Tel.: (1) 419 727 5000 Fax: (1) 419 727 5025

Board of Directorsat December 31, 2003


DirectorsLouis DeflineYann DelabrièreDaniel DewavrinPatrick DuvergerJean-Martin FolzJean-Louis GérondeauJean-Claude HanusGérard HauserThierry PeugeotDietrich Russell

Executive Committeeat December 31, 2003


Caspar BaumhauerModules and Systems Business Group

Patrick BikardGroup Industrial

Gérard BreiningGroup Purchasing

Gérard ChochoyAutomotive Seating Business Group

Arnaud de David-BeauregardGroup Development

Jean-Michel ElterGroup Customer Development

Jean-Marc HannequinExhaust Systems Business Group

Laurent HebenstreitInterior Systems Business Group

Thierry LemâneGroup Communications

Jean-Marc SalvanèsGroup Human Resources

Christophe SchmittComponents Business Group

Pierre-Jean SivignonChief Financial Officer

AuditorsStatutory AuditorsPricewaterhouseCoopers Auditrepresented by Christian Martin32, rue Guersant – 75017 Paris

Ernst & Young Auditrepresented by Patrick LhommeFaubourg de l’Arche 92400 Courbevoie

Alternate AuditorsCatherine Sabouret32, rue Guersant – 75017 Paris

Christian de ChastelluxTour Ernst & Young – 11, allée del’Arche92037 Paris-La Défense Cedex

Photo credits:A. Gonin, S. Muratet and C. Peus.

Design and publishing:


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