Freudenberg sees electrification as opportunity

MUNICH—Freudenberg Sealing Technologies is preparing for a shift in automotive engine requirements.

The firm has placed an emphasis on adding battery and fuel cell technologies into its portfolio, laying the foundation to brace for big changes within the automotive industry. As major auto makers begin rolling out more electric vehicle platforms in the coming years, Freudenberg wants to ensure it isn't left behind.

CEO Claus Moehlenkamp has said previously that, if the projected growth for electric vehicles comes to fruition, the firm could lose up to 70 percent of its automotive sales—more than $1 billion—if it doesn't embrace new opportunities within electric engines.

"Most of that business will evolve and disappear with the advancement of E-mobility, battery-electric and fuel cell technology," Moehlenkamp said. "This is our assumption, it's the worst-case assumption, but I think it's a good thesis to really be challenged and take great steps to counter that dynamic."

FST generates about 55 percent of its sales from automotive activities, and while this transformation to an electric-majority fleet is not imminent, the firm is using the time to set the foundation for its arrival.

It made two strategic acquisitions, both in 2018, and combined them with its existing competence at the component level to form its Battery and Fuel Cell Division.

The first was a deal for Munich-based fuel cell system manufacturer Elcore, and the other for a significant interest in Midland, Mich.-based Xalt Energy, a developer and manufacturer of lithium ion battery cells, power electronics and battery management systems. Moehlenkamp said Xalt had about $15 million in business for 2018 and, with Freudenberg's support, is projected to do $50 million in 2019 and $100 million in 2020.

Elcore's technology has been mirrored at Freudenberg's site in Plymouth, Mich., to give it fuel-cell component and system, testing and simulating capabilities in North America.

"There is tremendous growth opportunity," Moehlenkamp said. "There are plenty of opportunities for us, as a component supplier, for us to engage in this space. But we also know that this might not be enough to cover the strategic gap that will come because the complexity in these electric cars are much simpler than a combustion engine. We have less seals to deliver and the sealing environment is not as challenging as highly aggressive engine oils."  

E-mobility will eliminate two key car applications over time—the internal combustion engine and the transmission. Moehlenkamp said Freudenberg supplies 13 major sealing technologies to these applications. Replacing the ICE engine will be E-powertrain, power electronics, batteries and fuel cell technologies.

Thanks to its acquisitions, Freudenberg can serve customers with the E-powertrain, battery and fuel cell applications. It also will bring its existing capabilities at the material and components levels into these spaces to develop more advanced solutions.

Initially, Freudenberg intends to focus on the heavy-duty segments—like truck, bus, marine and rail—of the transportation industry.

"We don't want to be in the passenger car segment quite yet," Moehlenkamp said. "We have tremendous respect for those players in that area and believe we should stay in the heavy-duty applications to begin with. Our product capabilities are really designed for long-load, heavy-duty applications.

Freudenberg intends to bring its fuel cell system to mass production by 2024 and already has its first fuel cell bus project in the pipeline. The firm also is developing a maritime fuel cell system as the cruise industry strives to hit zero emissions with its ships.

Moehlenkamp added that the firm's fuel cell stack is designed with resource protection and recycling in mind, and its pouch cells are one of the most recycling friendly battery cells.

"Climate change measures are very present to all of us," Moehlenkamp said. "We, at Freudenberg, definitely take that challenge of supporting and underlining those long-term targets. It's a big challenge, but we believe it's doable and we have a great opportunity to evolve as business leaders in the new business model."