Traverse City conference: Auto supplier Freudenberg prepares to adapt to EV future

Moehlenkamp: Need to reinvent Photo credit: GREG HORVATH

Freudenberg Sealing Technologies is one of the many companies whose existence is threatened by the emergence of electric powertrains.

The German supplier of seals and gaskets that are used in engines, transmissions, axles and other components stands to lose as much as 70 percent of its traditional revenue if electric vehicle sales take off, CEO Claus Moehlenkamp said Wednesday at the seminars.

In an unusually frank and detailed presentation, Moehlenkamp said the company anticipated that scary future and developed a strategy to reinvent itself. Freudenberg’s transformation could be the template for other suppliers.

“Any supplier who is heavily focused on the powertrain systems derived from the internal combustion engine is at risk and will be challenged in the long run,” he said.

Freudenberg leadership met early last year to considered three options:

1. Ignore future trends and keep going, business as usual.

2. Cash out of the sealing business — a path that company executives debated and then rejected.

3. Evolve and emerge as a new and more agile company that is even more powerful.

The third option was adopted, in part, Moehlenkamp said, because prospering through disruptive change has been in the company’s history for more than 150 years.

First, the company formed a well-funded dedicated battery and fuel cell business unit focused solely on electromobility.

Freudenberg then invested in businesses outside its usual sphere of expertise — in both a fuel cell manufacturer and a battery company that also makes the power storage and management equipment.

Moehlenkamp said he has glimpsed the future. As automakers downsize and turbocharge engines, they buy fewer valve seals, fewer gaskets and smaller crankshaft seals.

“We have to come forward and convince our associates that this is the right thing to do,” Moehlenkamp said.

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