Financial overview

Remarks
(1) Consolidated business review
1-1 Sales: While sales with French automakers fell by 10.3%, the Group posted sales increases of 19.7% in North America and 27.2% in Asia. Sales with the majority of the Group's non-French customers were higher than the previous year. They increased with Volkswagen in Seating, with Ford for Seating and Exhaust Systems, with Daimler for Interior Modules, with BMW and Toyota for Seating, with Chrysler for all business lines, and with Hyundai for Exhaust Systems. The Group also pursued its strategy of moving to areas with lower production costs in 2006.
1-2 Operating income: The decrease in operating income was attributable to the following factors:
- a drop in business with French automakers
- persistent pressure on sales prices in a period of rising raw material and energy costs
- start-up costs related to the opening of new sites, particularly in the United States

(2) Sales by business segment
2-1 Automotive Seating
Sales for the Automotive Seating business edged up 0.4% year-on-year, to 4,812.8 million euros, while at constant exchange rates they dipped by 0.2%. The figure declined 3.9% in the first half of the year but then rose 4.0% in the second half. This second-half performance was fueled by the ramp-up in Europe of the Peugeot 207, the Ford Galaxy, the Citroen C4 Picasso, the Audi Q7 and the Toyota Yaris, as well as by the launch of the BMW Mini.
Sales to French automakers dropped 14.5% in the second half of 2006 and 16.5% over the full year. On the other hand, North American sales climbed 12.9%, spurred by business with Chrysler (Sebring) and General Motors (Malibu, Pontiac G6 and Saturn Aura), as well as the start-up of the BMW X5 in the second half of the year. Growth in Asia was 10.3%, led by sales to the Volkswagen group.

2-2 Vehicle Interiors Systems
Sales for Vehicle Interiors came in at 3,458.0 million euros, a slight decrease of 0.7%, or 1.0% at constant exchange rates. Currency adjusted sales rose 1.4% during the first six months of the year, but declined 3.4% in the second half. In Europe, following a decline in the first half of the year, sales to French automakers slipped by an even stronger 8.9% in the second half. This impact could not be offset by sales for the Peugeot 207 or the ramp-up of the Mercedes-Benz S-Class, Volkswagen Passat and Audi Q7. Sales grew 21.6% in North America, boosted by business with Chrysler due to the ramp-up of the PT Cruiser and the launch of the Chrysler Sebring and Dodge Nitro.

Instrument panels: 8.1 million/year
Door modules: 0.5 million/year
Door panels: 25.6 million/year
Acoustics: 24 million square meters/year
Cockpits via a JV with Siemens VDO: 3.6 million/year

2-3 Exhaust Systems
Sales for Exhaust Systems continued to climb steeply, increasing 35.6% to 2,659.4 million euros. This increase was partly due to a sharp 61.9% rise in sales of catalytic converter monoliths, reflecting a hike in precious metal prices - especially during the first half of the year - with platinum, palladium and rhodium. Other growth factors for sales of catalytic converter monoliths included the impact of Faurecia's market share gains, particularly for Hot End assemblies in North America, China and South Korea, as well as the requirement for all European vehicles to adopt the Euro IV standard at the beginning of 2006, which often results in a higher use of precious metals in monoliths. Excluding catalytic converter monoliths and the negative 0.7% impact of exchange rates, sales of Exhaust Systems advanced 14.4%. Excluding catalytic converter monoliths, sales for this business line climbed 21.8% in North America - boosted by an increase in business with Ford (Fusion, Explorer and Edge at the end of the year) - and rose 48.3% in Asia, spurred by higher sales of exhaust lines for various Hyundai-Kia vehicles in South Korea and for Ford, Mazda, PSA Peugeot Citroen and Volkswagen in China. In Europe, sales of Exhaust Systems rose 4.1% excluding catalytic converter monoliths, buoyed by the Audi A6 and Mercedes-Benz A-Class and B-Class.

2-4 Front End Modules
Over full-year 2006, Front End sales dipped 2.9% to 718.5 million euros at constant exchange rates. However, the second half saw growth of 2.0% thanks to the start-up of operations with Chrysler in the United States and the ramp-up of the Peugeot 207 and Renault Clio in Europe.

-Front end modules: 1 million/year, Sales 392 million euros, Customers: Audi, BMW and Chrysler
-Front end carrier: 2.6 million/year, No. 1 in Europe, Customers: Audi, BMW. Chrysler, VW, PSA, Renault
-Bumpers: 4 million/year, No. 4 in Europe, Sales: 224 million euros, Customers: PSA, Renault, VW
-Engine ventilation: 2.3 million/year, No. 3 in Europe, Sales: 73 million euros, Customers: PSA, Renault, Nissan

Contracts
In 2006:
- On May 2, 2006, the Company announced that it has developed front and rear bumpers with improved safety jointly with Citroen, which are installed on Citroen C6. This model was rated as the highest four-star in the pedestrian protection test rating included in the crash test conducted by Euro NCAP, the European New Car Assessment Programme. C6 is the first four-star winner in the pedestrian testing. Front bumpers of Citroen C6 meet the requirements for pedestrian protection, crashworthiness, and repairability. The bumper can protect leg segment of the pedestrian irrespective of a contact position with the bumper, which was the reason for the highest rating. The bumper is also equipped with a censor to detect a contact with a pedestrian. Upon detecting a contact, the shock absorber automatically lifts the bonnet by 65mm in 0.1 second, which significantly reduces the risk caused by the crash.

- In November, 2006, the Company announced to step up its marketing activities targeting Japanese automakers' plants in North America. The company intends to start providing the customers with profitable module units in addition to maintaining supply of mere components. In efforts to absorb new needs and requirements from Japanese carmakers, which are planning to boost North American production, the French supplier will focus its sales activities on front-end modules and door modules as its core technologies. Leveraging its highly capable development structure in engineering module units in short lead time, the company aims to win new businesses for next-generation models coming to the market in some four years' time.

>>>See "Major Supply Agreements"

Business in USA
- In January 2006, the Company announced it plans to open six new facilities throughout the US. Faurecia North America is scheduled to open additional plants in Michigan, Ohio and South Carolina. This expansion of the North American footprint will support production for new programs with several OEMs. In addition to the 17 plants currently operating in North America, the Company will produce automotive modules for interior systems in Fraser and Sterling Heights, Michigan, and in Northwood, Ohio; seats on a just-in-time basis in Sterling Heights, Michigan, and Fountain Inn, South Carolina; and exhaust systems on a just-in-time basis in Toledo, Ohio. It also will produce its first front end module for the North American market at the interior systems plants in Fraser and Sterling Heights, Michigan. In North America, the Company is on target to exceed $2.5 billion in sales by the end of 2009.

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Business in Japan
- In February 2006, the Company announced the merger between its two Japanese subsidiaries, Faurecia Japon and Faurecia Interior System, to establish a new company, Faurecia Japan. The predecessor Faurecia Japon supplied seats and exhaust systems and Faurecia Interior System supplied modules as cockpits, instrument panels and doors. The new company will seek for synergy effects of the merger beyond differences of the products to improve services and quality and will review management efficiency by integration of indirect departments.

R&D Expenditure

R&D Structure
Faurecia holds 28 Research & Development and Design & Development centers:
- During 2005, the Company continued to develop its R&D network, comprising 4,000 engineers and technicians, with the expansion of development centers in North America, China and Japan, thus extending its geographic reach.
The Company strengthened its resources in three of its R&D centers in France, with the launch of an international seating mechanism center in Flers, an international center for complete seat units in Brieres, and a center specialized in foam trim in magny-en Vernois.
Its R&D policy is to focus on expanding R&D capacities in low-cost countries, as witnessed through the Seat development center in Poland and the Interiors development center in India.