21 May 2020
Schaeffler AG has been a member of FISITA since 2007, how would you summarize the changing pace in the industry, and the major advances that you have made, during that time?
With its huge network of specialists and engineers from around the globe FISITA offers a great to our employees to share and discuss ideas in regards of technological development matters. Also offering events as the biennial World Automotive Congress and the annual World Automotive Summit is perfect for the face-to-face exchange of knowledge in all areas of automotive technology topics.
Can you explain what your “Agenda 4 plus One” involves and how successful it has been since you launched it in 2015?
In 2013 Schaeffler initiated the transformation of the company in order to bring the automotive and industrial business together under a strong ‘Schaeffler’ brand umbrella, to make greater use of synergies and to focus on diversification. Next to a new strategy Schaeffler has implemented the accompanying ‘Agenda 4 plus One’ program and its 20 improvement initiatives between 2015 and 2019 to align the organization for the future. Schaeffler’s ambition is, as an automotive and industrial supplier, to shape the future of mobility. The corresponding initiatives were divided into the categories of Customer Focus, Operational Excellence, Financial Flexibility, Leadership and Talent, as well as Long-term Competitiveness and Value Enhancement. The three divisional efficiency programs, RACE, FIT and GRIP have been added to the ‘Agenda 4 plus One’ during 2019. Since 2016, Schaeffler has not only achieved a great deal but has also learned a lot. This is the foundation upon which Schaeffler is beginning to write the next chapter of its history. By the end of 2019 Agenda 4+1 has largely implemented.
Schaeffler AG and the Schaeffler family have recently made a large donation to the Red Cross to help in the fight against COVID-19. In February, Schaeffler AG also donated to Chinese first responder organisations and supported Red Cross activities in China. Schaeffler AG is a massive global enterprise with over 80,000 employees and multiple R&D Centers, Plants and campus locations across over 20 countries, what actions have you taken within your company and how is this crisis impacting your critical role in the supply chain?
The corona crisis has assumed global dimensions. In these difficult times we must all do what we can to support the fight against COVID-19. With our donations to the Red Cross and Chinese first responder organizations we want to express our gratitude and respect to the people and organizations working in the fight against Covid-19 these days. It’s part of Schaeffler’s social responsibility.
The increasing spread of the coronavirus in Europe has forced more and more companies during the past few weeks to significantly reduce or temporarily stop their production. As a result, Schaeffler will adjust its production capacities in Germany and Europe. Adjustments will be made location by location and will consider the specific requirements in the divisions. The top priorities at Schaeffler are to protect the health of our employees, keep our supply chains intact as far as possible, and minimize the impact of this crisis on our customers. Furthermore, we formed local crisis committees as soon as the first cases of COVID-19 appeared in China. These committees are now implementing their respective crisis programs and emergency plans at differing rates but in a coordinated fashion worldwide. We can already see that these plans are working well. We have also provided training for our leadership teams, so that they know exactly what to do in a crisis situation. Safety measures for example include a blanket request for people to work from home wherever possible, basic hygiene measures at all locations (regular hand-washing, 1.5 m distancing, no handshakes, and regular disinfection of PCs and desks) and physical measures, such as plexiglass distancing barriers and controlled access at plant entrances. Our top priority is to protect the health of our employees. At the same time, we must take care to keep our global supply chains intact and safeguard liquidity.
The Schaeffler Group expects its revenue to grow by minus 2 to 0 percent at constant currency in 2020. In addition, the company expects to generate an EBIT margin before special items of 6.5 to 7.5 percent in 2020. The Schaeffler Group also anticipates between 300 and 400 million in free cash flow before cash in- and outflows for M&A activities for 2020. “Our guidance for 2020 is intentionally conservative. It reflects what we know, at the beginning of March, about current environment- and market-related trends. No-one can say at this point how the corona crisis will develop. Nevertheless, we will do everything we can to meet our targets,” Klaus Rosenfeld stated.
Despite a weak market environment last year, areas of the business including Automotive OEM, E-Mobility, Wind, Railway, raw materials aerospace and industrial distribution, in some cases outperformed the global market and in some your own expectations, which areas do you see as having the greatest potential opportunity for Schaeffler?
Automotive OEM business is currently decreasing, primarily caused by the impact of the coronavirus pandemic, which considerably weakened automotive sector demand, lowering Automotive OEM division demand as well. Global automobile production for the first quarter was significantly affected by temporary production shutdowns and declined by 23 percent in the first three months of 2020.
But there are also positive developments, e.g. automotive aftermarket division is currently increasing, especially in Europe region. Within the industrial division the wind sector cluster expanded considerably, particularly in the Greater China region. Also, the power transmission and raw materials sector clusters contributed to growth as well.
Due to the worldwide spread of the coronavirus pandemic and the resulting implications for the company’s results of operations a specific guidance for 2020 currently is still not possible. Currently, neither the further course of the pandemic nor its economic implications can be reliably estimated. The Schaeffler Group currently expects its revenue growth at constant currency, EBIT margin before special items, and free cash flow before cash inflows and outflows for M&A activities for the full year 2020 to be below the corresponding prior year level.
You have recently established a Fuel Cell business unit and joined the Hydrogen Council. How quickly do you expect this unit to make a significant contribution to your business and will it increase demand for your traditional products?
As stated by Schaeffler Group CEO Klaus Rosenfeld, “We want to shape CO2-neutral, sustainable mobility with regard to the entire energy chain. We will accomplish this by using the enormous future potential of green hydrogen along the entire value-added chain, says Klaus Rosenfeld”, CEO of Schaeffler AG. “Joining the Hydrogen Council will enable us to further advance and establish hydrogen technologies together with strong partners globally.”
“Our core expertise in materials technology, forming technology, and surface technology will enable the efficient high-volume production of key components for the future hydrogen economy and will make a significant contribution to the company’s success.”
Schaeffler has been focusing on the value-added chain of key components for fuel cells for some time. Bipolar plates are produced by precise forming and coating in the thin-layer range, which once stacked form an important component of the fuel cell system. The fuel cell stacks are energy converters, which let H2 react with O2 to form water. The electricity generated during this process can be used to power the vehicle’s electric motor. Schaeffler’s portfolio for optimized fuel cell systems is expanded by additional areas of expertise, such as electronic control systems, special high-performance bearings, smart thermal management modules or components for passive hydrogen recirculation.
Schaeffler has also joined the Clean Intralogistics Net (CIN) with the aim of pushing forward the development of fuel cell technology in the intralogistics sector. The CIN innovation cluster subsidized by Germany’s Federal Ministry for Transport and Digital Infrastructure comprises 14 companies with a total sales volume of around 500 billion euros and a total workforce of one million employees. The objective of this network is to launch conveying trucks using fuel cells, e.g. fuel cell forklifts and airport tow tractors, and the corresponding hydrogen infrastructure on the market and to promote their market penetration.
You have demonstrated several examples of innovation to make mobility sustainable and autonomous. When do you expect to see these being made available to consumers?
One of the innovations is the Space Drive technology by Schaeffler Paravan. Space Drive is a key enabling technology for tomorrow’s automated, autonomous, and connected vehicles that is currently being developed with a view to volume production. It is a leading drive-by-wire technology comprising a triple-redundant electronic interface that operates vehicle steering, accelerator, and braking functions and thus enables autonomous driving in a wide range of application scenarios. By the year 2021, Schaeffler Paravan aims to have this system ready for volume production. In 2019, Schaeffler also signed an investment agreement with China’s Hunan province. The aim of this collaboration is firstly to enhance the autonomous technologies available in China for application in the country’s giant metropolitan centers, and secondly to establish a new R&D center in the region.
Another technology demonstrator is the 4ePerformance concept vehicle. The Schaeffler 4ePerformance provides a good example of the technology transfer from motor racing into a near-production drive concept. The fully electric vehicle is propelled by four Formula e motors delivering a total power output of 880 kW (1,200 hp). They have been adopted from the ABT Schaeffler FE01 Formula E race car and, like the power electronics in the concept, were developed by Schaeffler’s subsidiary Compact Dynamics, which shows that electric mobility has nothing to do with sacrificing driving pleasure.
Similarly, other innovative concepts like the electric wheel hub drives, 48-volt systems, hybrid systems, steering systems are in various stages of going into production.
As vehicle hardware develops and becomes more autonomous, connectivity, security. processing and software challenges loom. Can you say anything about the software platforms you are working with and how you see the adoption of open source platforms versus proprietary?
Together with its technology partner XTRONIC, Schaeffler develops customer-specific software and electronics solutions for innovative networking in and around the vehicle. The service portfolio also includes applications in the field of automated driving and electric mobility through to functional safety as well as methods, tools and test systems. The XTRONIC Control Unit combines safety, monitoring, operating and comfort functions in just one system. The innovative system also makes a convincing case thanks to its wide range of interlinked, integrated components – from entertainment systems through to condition monitoring for vehicle components. The reliable interlinking of innovative driver assistance systems together with radar, lidar, ultrasound, and even artificial intelligence thus provides the technological basis for autonomous driving. The XTRONIC Control Unit allows digital control and monitoring to be combined in a single application for smartphones, tablet PCs, and smartwatches. The most important data are thus always available in the cloud and can be accessed from anywhere via mobile device. It doesn’t matter what type of vehicle platform is used for the implementation of the connectivity tools based on the control unit. Applications include not only (partly) autonomous vehicles but also commercial vehicles and motorhomes. The control unit recently went into volume production for several global OEMs to use in these fields of application.
In common with all companies in this space, recruiting top talent is a key priority and you have programs such as the Schaeffler Top Student Program. Are you finding particular areas in which the supply of qualified candidates cannot meet your demand? Do you expect this to get better or worse over the next few years?
Finding and continually developing efficient and motivated employees are core elements of human resources work at Schaeffler. In the past few years we have been able find the right employees for our vacancies without any problems. It is quite possible that it will become more difficult for the entire industry in the next few years. We are coming into the low-birth cohorts, at the same time there is great competition on the labor market for skilled workers. In addition, there are young people who no longer want to work in an industrial company. Therefore, we have to work even more on our external image as an automotive and industrial supplier and as an attractive employer and communicate our good work to the outside world.
At the same time, we must continuously update and upgrade on in-house training capabilities and facilities. As part of the Qualification for Tomorrow strategic education initiative, the Schaeffler Academy has created new target group-specific training opportunities for all employees in close cooperation with the strategic business fields. This is achieved via modern and global qualification programs, for example on agile project management and digitalization, as well as offerings for the Sales & Key Account Management target group. The Schaeffler Academy also has the task of identifying training needs and designing subject-specific training and educational programs together with the respective business divisions. These offerings are increasingly made available digitally, for example in the form of explanatory videos or online training with a gamification approach. Employees can then learn at any time and at any location.
Earlier this year, Schaeffler opened a new, state-of-the-art training center in Germany. The center is an integral part of our location in Schweinfurt and is available to all employees. They can continue their education there, especially with a view to the future topics of Industry 4.0, digitalization and electromobility. This also influences the trainees. As you can see: I work in a company that continues to train me after my apprenticeship and prepares me for everything that may come up. We not only want to train, we also want to train further and in the same premises. I also believe that the younger generation has this willingness to continue training.
FISITA thanks Schaeffler for their insights. For more information on Schaeffler please visit their membership page: