The future of transportation may be electric, but Schaeffler, the German supplier that built its business around bearings, is confident there is still good money to be made in the future of internal combustion engines.
Schaeffler is heavily invested in components for internal combustion engines and their transmissions. Its $13.5 billion order book from automakers includes systems and parts for clutches, gearboxes, valvetrains and camshafts.
But the company also is keenly aware of the changing future. Like other critical suppliers, Schaeffler seeks a path to new technologies as regulations increasingly push the industry toward electrified powertrains.
"For Schaeffler and others, this means a massive transformation from an internal combustion engine-based product portfolio to a hybridized electrical one," said Matthias Zink, CEO of Schaeffler's automotive arm. Zink spoke last month at the Schaeffler Symposium in Baden-Baden, Germany, an event held every four years for customers and engineers where the company showcases its latest products and innovations. "This is where we have to, maybe not reinvent, but refine and reposition ourselves," he said.
Improving efficiency
But Schaeffler is betting heavily that components for hybrid powertrains will keep gasoline and diesel engines relevant — and emissions-compliant — for the foreseeable future.
Reasoned Martin Scheidt, Schaeffler's senior vice president for engine systems r&d, "For 2030, even if there is an aggressive scenario, 70 percent of new cars will still have an internal combustion engine. This means that it is worthwhile to continue improving the combustion engine."
Scheidt added that 90 percent of cars on the road in 2030, including existing vehicles, most likely will have some form of traditional powertrain.
Scheidt identified hybridization, improved combustion efficiency and mechanical innovations as areas in which new engine efficiencies will be found. Among the supplier's recent advances is a technology that shuts down one cylinder by using oil pressure to activate a camshaft rocker, preventing valves from opening. That system appears this year on Ford's new three-cylinder EcoBoost 1.0-liter gasoline engine, which the automaker says improves efficiency 6 percent.
In addition, Schaeffler displayed an array of components for 48-volt and high-voltage hybrid systems. The company says its new P2 48-volt module (installed between engine and transmission) can reduce fuel consumption 15 percent. The supplier also makes dedicated transmissions for hybrid vehicles.
Complexity
Zink said that increasing the efficiency of internal combustion drivetrains also means more vehicle powertrain complexity, with gasoline, diesel and electric. "We have three drive sources if diesel stays in the market, which we think it will," he said. "We have at least six hybrid installation modes. The key will be to master the complexity."
Schaeffler already is feeling the effects of that struggle. The company is financially healthy after its near-disastrous financial takeover of Continental in 2008. Last year, however, was marked by "ups and downs," Chairman Georg Schaeffler said. Annual revenue topped $16.5 billion for the first time and net income was up 14 percent to about $1.15 billion.
But last June the company lowered its earnings guidance, finishing the year with an operating profit of 11.3 percent, below 2016's level of 12.7 percent. The operating profit outlook for this year is 10.5 to 11.5 percent, which is shy of the target of 12 to 13 percent set out in the company's Mobility for Tomorrow strategic business plan.
CEO Klaus Rosenfeld said the ongoing shift to electrification and electric vehicles meant Schaeffler had to build a lot more prototypes, increasing its r&d expenditures.
"The environment will remain challenging," Rosenfeld wrote of this year's outlook in a note to shareholders and investors. Last year "made us aware of the fact that we have to take an even more forward-looking approach."