PSA - 2019 Universal Registration Document

GROUPE PSA Risk factors DPEF.B

RISKS ASSOCIATEDWITH A BREAKDOWN IN THE SUPPLY CHAIN HIGHRISK

1.5.2.3.

Riskfactors

Riskmanagement andcontrolprocesses

The suppliercontributioncorrespondsto more than 80% of the productioncost of vehicles.These companies’technical,quality, logisticaland financialperformancescontributeto Groupe PSA’s overallperformance.Anybreakdownon the supplier’spart carries a serious risk of halting production or delaying commercial launches.

Groupsuppliersare evaluated,selectedandmonitoredaccording to various criteria including: competitiveness,quality, logistics performance, the ability to develop new products and manufacturethem in large quantities,sustainability,exposureto naturalrisks,and environmentalndsocialresponsibility (CSR). The PurchasingDepartment leveragesits expertisein production costing and commodity price managementand its in-depth understanding of global markets to efficiently manage competitivebiddingprocessesand supplierrelationships.These suppliers, which operate worldwide, have become leading economic players whose responsibilityweighs heavily on the subcontracting chain. Aware of this risk, the Group has established operating methods with these suppliers that guaranteethe qualityof the relationshipover the long term by involving them in the process of securing the subcontracting supply chain in light ofall the risks. Dedicated teams are responsiblefor preventive and curative management of the risksrelatedto supplies’quality,logisticsand sustainabilityand CSR for all suppliers.In 2019, the curativeor preventivemonitoringof high risk suppliersbased on financial criteriacovered43 companies representing approximately 10%of annual purchases. The PurchasingDepartmentanalysesthe financialresultsof the Group’s main suppliers and compiles informationabout their industrialstrategies,assessesthe impactof Groupe PSA’smake or buy policy,analysesthe socio-economic impactsof industrial choicesandverifiesthatsupplierscomplywiththeGroup’ssocial and environmental specifications. This analysishas the benefitof avoidingawardingnewcontracts to suppliersexperiencingfinancialdifficultiesand identifyingall suppliersat highriskof insolvency (financialsoundness,probityof shareholders,exposure to natural risks, etc.). The situation of thesesuppliersis reportedon a monthlybasisto the Purchasing Department’sRisk ManagementCommittee,whichapprovesthe actionplans(includingcashsupport,doublingproduction,search for rescuersor investors,stockpiling, etc.). Groupe PSA hasset up a flexible organisationand scalable processes to ensure that contractualpaymentterms agreed upon with its suppliersare stronglyrespected. It hasalsoputin placea dedicatedprocessto address late payments.

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GROUPE PSA - 2019 UNIVERSAL REGISTRATION DOCUMENT