Seals, gaskets, and O-rings are the unsung heroes of the industrial world, especially in commercial vehicles or mobile machinery. In a world dominated by news of autonomous vehicles powered by electricity and more, Freudenberg Sealing Technologies’ message to its many stakeholders is, “Often invisible, always essential.” It is also a big business, worth $12B a year, according to CEO Claus Moehlenkamp. Now the company plans to offer components and systems of a more visible nature—battery packs and hydrogen fuel-cell stacks.
The supplier’s energy supply strategy is evident in its early-February announcement that Freudenberg Sealing Technologies has become a majority stakeholder of XALT Energy. XALT is a Midland, Mich.-based global developer and manufacturer of lithium-ion technology solutions targeted for heavy-duty mobility applications. Freudenberg has a standing agreement to acquire all remaining shares of XALT “over the next few years.” Moehlenkamp explained the reasoning behind its strategy in this edited interview with Truck & Off-Highway Engineering conducted at the 2019 Detroit auto show.
What is your motivation in expanding your technical expertise into battery cells, packs and fuel cells?
As a privately-owned company, we have both the luxury and the need to think very long term to secure our future. We know that the existing component sealing business in the internal combustion engine (ICE) world is at risk. If the internal combustion engine is replaced and transmissions are not needed that means 70% of our business is obsolete.
This is a transformation that will take a decade or more, so we are not worried. But we know also that we need to lay a foundation now in order to participate in future technologies. For that reason, we have decided from a portfolio strategy to not only stay within the component business, like shaft seals and gaskets, but broaden the scope into modules and systems including battery and fuel-cell systems. What I mean is battery systems starting from designing and manufacturing the cell itself all the way up to the module and the battery pack including the battery management system—a complete solution provider.
Developing battery cells, packs and fuel cells seems like quite a stretch from seals and gaskets?
Not as much as you might think. For decades we have concentrated on material science. We are a technology-driven company with premium products based on technology. To really own that, we decided Freudenberg needs to add most of the value in the current products we provide. Our value-add is about 70% currently. We purchase ingredients and make components rather than buy and assemble parts. 70% is a fairly high ratio. When we made the decision to develop battery packs and fuel cells, we decided we wanted to keep that high ratio of value-added and targeted 50%. In addition to our current strong base of materials science, we also decided we needed acquisitions. That is why we took a majority share in XALT Energy.
The same is true for the fuel-cell technology we are developing. The key is in the fuel-cell stack. That is probably 70 to 80% of the content of a fuel cell. Since we were already providing fuel-cell seals and gas diffusion layers, we decided to step up and provide our own fuel-cell stacks. We make both low-temperature and high-temperature fuel-cell stacks for mobile and stationary applications.
What markets do you see as key to your strategy?
We will continue to concentrate on commercial bus and truck as well as off-highway applications and deliberately not step into the passenger vehicle market. These are key segments. The volumes are quite different and we feel we are better positioned to meet the needs of commercial vehicles, like transit buses. We are currently a Tier 1 supplier to New Flyer buses in North America.
Was there a reason you are choosing to concentrate on both batteries and fuel cells?
Both are interesting, but together there seems to be great demand as a hybrid solution. All potential customers that we are talking to in the commercial or heavy-duty space—marine, rail, truck, agriculture—are all asking us when will we have a hybrid battery and fuel cell combination. They want us to do a hybrid prototype project together. Everyone sees a strong need for a combination of fuel cells and batteries.
Can you comment on the needs of the commercial vehicle market?
The commercial heavy-duty or off-highway market is completely different than passenger cars. There you are fine with 1,500 [recharge] cycles. We need a battery pack with over 4,000 cycles with very high energy density. We think we need at least 220 watt-hours/kg, which is what our generation 2 cell delivers. This is crucial for commercial applications.Continue reading »