Cooperation between PSA Peugeot Citroen and BMW Group

Contents: THE INDUSTRIAL ASPECTS OF THE COOPERATION 1.....AN EFFICIENT INDUSTRIAL ORGANIZATION 1i....An ambitious industrial base in Western Europe 1ii....Purchasing and logistics 1iii...A 'modular' industrial organization structure 1iv...The PSA Peugeot Citroën manufacturing system: Convergence 2.....PLANTS USING THE STATE OF THE ART TECHNOLOGIES 2i... Française de Mécanique (PSA PEUGEOT CITROËN) 2ia. Machining, Machining processes, Industrial challenges for machining 2ib..Assembly, A new assembly philosophy, Industrial challenges for assembly 2ii...Hams Hall (BMW Group) 3.....INNOVATIONS AT EVERY STAGE OF PRODUCTION 3i....The Lost Foam Process in Charleville 3ii....Mulhouse Metallurgical Group of Activities 4.....A LONG-TERM COMMITMENT TO QUALITY AND THE ENVIRONMENT 4i....Quality 4ii...Environmental protection APPENDICES

In 2002, PSA Peugeot Citroën and BMW Group officially announced their intention
to join forces in developing and producing a new family of small gasoline
engines for use in vehicles in both groups.

This agreement has made it possible to develop a new range of small high-tech
gasoline engines in large volumes and in competitive economic conditions. The
aim is to share development costs and to combine the expertise and facilities
of the partners in applying the economies of scale that are essential for the
operation to succeed. This cooperation also benefits from access to different
company cultures and industrial techniques. The two basic principles
underlying an agreement of this kind are joint organizational decisions (a
steering committee with a balanced number of representatives as well as a
balanced exercise of powers; a single project manager and joint project teams
involving engineers from both Groups) and sharing the costs : 50-50 for the
development costs, then apportioned to the volumes for the industrial
investments, engineering and launching costs.

To make that partnership program successful, both Groups had to share common
objectives in terms of timing. As of 2006, these new engines will be used in
small and medium-size cars produced by Peugeot and Citroën. The engines will
also be used for future models of the Mini. They will have a power output
ranging from 55 kW (75 hp) to 125 kW (170 hp) and will set new standards both
in performance and drivability, as well as reducing fuel consumption and carbon
dioxide (CO2) emissions. In a first time, the Project team responsible for the
engine development was based in Münich as part of the BMW Group?s Research &
Development Division. As of today, the PSA Peugeot Citroën Group is in charge
of manufacturing engineering, manufacturing and purchasing. Once at its
maximum production capacity, the overall annual engine production will reach 1
million units.

This cooperation makes use of the technological know-how of both groups and
their expertise in mass production methods.