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."