Schaeffler Begins Industrial Revolution
Schaeffler, the specialist car parts maker that almost buckled under the weight of the acquisition of its rival Continental, now wants to focus on its long-neglected industrial division, bringing precision bearings and components into the digital age
Schaeffler, the privately owned firm best known for producing precision car parts, wants to revive its languishing industrial division, Handelsblatt has learned.
Klaus Rosenfeld, who has been in charge of the company since 2013, wants to intensify a modernization program, titled the Core program, which will see some 500 job cuts and the launch of a range of new products.
Schaeffler has until recently been loaded down with debt, the result of an over-ambitious debt-financed takeover of tire-maker Continental in 2008, a deal badly hit by the financial crisis.
As a result, its recent industrial performance has been grim. Partly because the automotive division has soared, the industrial division now generates only 25 percent of company earnings, down from 40 percent not long ago. Insiders hint that long-serving former chief executive Jürgen Geissinger was very much a car man. Over the years, its other business, as a precision manufacturer of industrial components, has fallen into decline.
Schaeffler is many ways the archetypal company of the German Mittelstand—the swath of mid-sized, family-owned companies, seen as the backbone of the industrial economy.
Mr. Rosenfeld wants to change that.
Stefan Spindler, the head of Schaeffler Industrial, told Handelsblatt it is a tough moment to launch a revival in his sector. “Classic industrial sectors are displaying ongoing weak growth,” he said.
Low commodity prices are holding back investment in extractive industries, and this means less demand for things like Schaeffler conveyor systems. “In the coming years, overall market growth is likely to be subdued,” said Mr. Spindler.
But Schaeffler hopes to overcome obstacles with a dual-pronged approach. On the one hand, rigorous implementation of the Core plan, meaning about 500 job losses in Germany and Europe. It does not plan any more substantial investment in Europe. “But we will really be sharpening up outside Europe — above all in China and the USA,” Mr. Spindler said.
On the other hand, it will also aim to grow through innovation.
Schaeffler has defined eight sectors as key areas of operation. These include classic areas such as wind power, raw materials, aerospace, and railways, but also more exotic and surprising choices, like bicycles. The company has just developed an automatic gearing system for bicycles. “We want to expand the business across urban mobility as a whole: and that’s not just about cars,” Mr. Spindler said.
Schaeffler managers are excited to see if new areas, like bikes, can actually take off. But the wind industry is no experiment: it has central strategic significance. In the southern German city of Schweinfurt, Schaeffler has built a testing facility for the enormous bearings used in wind turbines: these weigh in at seven tons, and are nearly 3 meters (10ft) in diameter.
At this year’s WindEnergy exhibition in Hamburg, the company presented further technical advances, including extra-robust spherical roller bearings. The company is also developing a method for calculating the remaining lifespan of antifriction bearings. For owners of wind farms, these inventions promise real improvements in turbine maintenance.
The wind power sector is consolidating quickly, with the recent merger of Gamesa and Siemens only one example of an industry-wide trend. The sector has flourished in recent years, though Mr. Spindler said the growth will inevitably level off. The most interesting growth potential may ultimately lie in areas such as maintenance and services.
Schaeffler is many ways the archetypal company of the German Mittelstand — the swath of mid-sized, family-owned companies viewed as the backbone of the industrial economy.
With roots in the 19th-century invention of ball-bearings, it is now a high-tech company employing 85,000 people in 50 countries, but still based in the small Bavarian towns of Herzogenaurach and Schweinfurt, and still majority owned by the Schaeffler family.
Like other German industrial companies, Schaeffler faces the challenges of rapid globalization, industrial digitization, and a volatile financial environment
At first glance, Schaeffler’s Schweinfurt factory looks very Old Economy indeed: a tall brick chimney, a lot of steel and heavy trucks. But behind the scenes, digitization is a crucial theme for Schaeffler’s industrial division.
“We see great potential in digitization-related services,” Mr. Spindler said. The company is working on bearings with inbuilt digital sensors, which can be hooked up to a separate monitoring system. The idea is no longer to sell a product-in-a-box, but instead to offer a complete package with service, and where possible, performance guarantees.
We want industry to be a second pillar of strength for Schaeffler.
STEFAN SPINDLER
CEO, SCHAEFFLER INDUSTRIAL
At InnoTrans, the rail industry fair, Schaeffler exhibited a monitoring system with cloud connectivity, developed for rail transportation. Here too, sensors in the bearings measure noise, temperature and rotation speed. As well as in-house innovation, the company is considering takeovers in these sectors: “We are currently working on some smaller acquisitions,” said Mr. Spindler.
Mr. Rosenfeld recently told Handelsblatt the company was again open to acquisitions. In recent years, the focus was very much on reducing the enormous debt burden from the Continental takeover. “We are now in a situation where we have genuine financial flexibility,” said Mr. Rosenfeld. In terms of strategic orientation it was important, he added, to strengthen the company’s technology and make some purchases here and there. But Schaeffler will not be forking out billions: industry insiders suggest acquisitions would be at the level of hundreds of millions of euros.
Mr. Spindler clearly shares his boss’s optimism about the industrial division. He wants to see it restored to its rightful place in the company: “We want industry to be a second pillar of strength for Schaeffler,” he said