Project Ovid and Its Impact

Around the world, a far-reaching transformation is reshaping many of the markets in which FST does business. Electric mobility, green energy, robotics and digitalization are just a few of the buzzwords reflecting this transformational process. The Ovid project found that the transformation offers the company an opportunity for considerable growth. With its core competencies – especially its materials expertise – FST is superbly equipped to enhance its product portfolio, press ahead with innovative solutions, and increase sales. But to what extent are the Ovid findings having an effect on the individual FST divisions? Their leaders report on the impact on product portfolios and strategic orientations.

The kickoff for Ovid, a strategic, transformational project, was in January, 2022. One objective was to analyze the core markets and industries that will be important to Freudenberg Sealing Technologies (FST) between now and 2035. It was also essential to consider how the company could be transformed in line with emerging market changes. After all, FST must continually develop and adapt its product portfolio to meet the market’s evolving needs. That is the only way it can respond quickly – and in a targeted way – to new trends and have an impact on technological developments in its chosen markets. This ability is a key condition for continued profitable growth.

Dr. Christian Dickopf

Corteco

“In the replacement parts market, the business related to internal combustion engines will remain stable over the next few years. Accordingly, the direct effects of Project Ovid on Corteco will be minimal. Ovid could affect us indirectly if FST decided not to produce an item currently sold to automakers or their suppliers and if we are still carrying it in the replacement parts business (aftermarket). We are currently not aware any such cases. But after a time lag of a few years, our core market will be changing as well. Starting in 2030, we expect an appreciable aftermarket for battery-electric vehicles. We are already preparing to provide solutions for it – together with our Lead Centers and our suppliers, both inside and outside Freudenberg.”

Matt Chapman

O-Rings Division

“The shift to electric mobility is certainly having a wide range of effects on the O-rings Division. Injection valve O-rings, one of our core products with a strong, unique selling proposition, will account for a much smaller share of our portfolio than they do today. The same applies to other applications in engines and transmissions. But due to their design, O-rings are used in almost any application. We are already seeing opportunities in battery systems, for example, in the form of battery cell cap seals, where we are cooperating with the Powertrain & Driveline Division. We want to get more involved with vehicle safety systems since they are becoming increasingly complex. We also expect strong growth potential in industrial applications. All in all, we see a bright future for this unique product line at FST.”

Malte Müller

Oil Seals Industry Division

“One specific result of the Ovid project is the upcoming merger of the O-Rings and Gaskets Divisions into the newly formed Static Sealing Division.
We are taking two successful divisions and merging them into a stronger one so we can put an even greater focus on the shift to battery-electric vehicles and the hydrogen economy.
Together the two divisions generate about 70 percent of their sales in the auto industry, which will undergo massive changes due to electrification. We are concentrating our strength in static seals since they will help us continue to grow while offsetting the loss of internal combustion products. We will continue to be the leader in static seals for
the automotive market. And we will grow disproportionately in general industry. Our long-term goal is to expand in both markets with a portfolio balanced at 50 percent each. And we will participate heavily in the growth market of the future – hydrogen applications and e-mobility.
The two divisions have already reached key milestones on their way to transformation. I am reminded of large, foldable seals for battery-electric vehicles and process improvements to make O-rings for electric motors competitive. We also have new materials that promote the use of climate-friendly protective and coolant gases. In the new Static Sealing Division, we can unify the core competency of FST’s static seal expertise in a stronger lineup.”

Peter Johnson

Fluid Power Division

“Thanks to the Ovid project, we have been able to develop a range of potential growth opportunities for Fluid Power in the general and heavy industry segments. They include projects in onshore and offshore wind energy and for the production, transport and storage of hydrogen.
After 2030, with the phaseout of automatic transmissions, the electrification of vehicles will have a major impact on the LC Fluid Power Automotive. We are harnessing all of our know-how, including our materials expertise, to compensate for the loss of various products. Smart thermoplastics will play a role in these efforts in the next three to five years. For example, customers are showing high interest in thermally conductive, electrically insulating (TCEI) materials.
In the LC Damper & Steering portfolio, our products are not dependent on a particular type of powertrain. Here we would like to maximize our global market opportunities with the help of innovations, for example, with products for two-wheeled vehicles. Megatrends such as a growing health consciousness, urbanization and electrification are important to this Lead Center.”

Bernd Koch

Industrial Services Division (ISD)

“Since the ISD does not supply the auto industry, the Ovid project does not affect us directly. The ISD focuses on the MRO (maintenance, repair, overhaul) business through distributors, for the process industry (food, pharmaceuticals and chemicals), and for smaller OEMs in all the general industry segments. Our customers are also working hard on decarbonization, which offers us opportunities as well. The global shift to clean energy sources such as green hydrogen is opening up possibilities. In Australia, we see significant opportunities for growth, with Fortescue Future Industries (FFI), for example. The company wants to become one of the world’s biggest hydrogen producers, which represents an enormous opportunity for FST’s seals.
Our growth and profitability are of strategic importance to FST. We help FST offset its shrinking product lineup for internal combustion engines, as fewer seals are needed, and help to generate the cash flow that the company needs. It is used to finance the restructuring of the FST portfolio.”

Paul Hailey

Gaskets Division

“The Ovid project helped to reinforce the current and future strategies of the Gaskets business. We see a significant opportunity to grow static gasket sales in our existing market segments and in new segments like energy, where critical hydrogen technologies and customers will emerge in the following decades. Gaskets will continue to find applications in automotive. Still, we will see sizable shifts towards battery-electric vehicle (BEV) applications and fully expect our traditional internal combustion engine and transmission applications will decline. Following the Ovid playbook, our business will drive up the profitability of our existing portfolio to fund our BEV and hydrogen growth. As hydrogen technologies grow, Gaskets expects that our share of General Industry sales will increase from 8 percent to nearly 50 percent. Managing this business transformation requires intensive R&D efforts and focused development priorities towards BEV and hydrogen and away from internal combustion developments as we adapt our portfolio with new materials, designs, and processes to meet the market’s needs. Our gasket products will enable the proper functioning and performance of BEV and hydrogen applications. We are excited to play a part in our customers’ business transformation while growing our sales profitably.”

Dr. Boris Jakobi

Components Division

“In many respects, the Ovid project was eye-opening. For one thing, we saw how innovative our FST organization is with regard to new products and business fields. We also saw, how important continual change is to our company, its organizational structure and its orientation to existing business. Freudenberg has often shown this over its nearly 175-year history. But when it comes to the electrification of transportation and related developments, we are talking about the greatest changes in decades. There are old sayings about the wisdom of “keeping up with the times.” The Ovid project has set the direction and provided us with the tools we need. It is also important to understand that the changes ahead of us, whether they are organizational or technical, will be with us for a long time. So effective change management has to become routine for us, as it always offers us great opportunities as we compete with other companies. For the Components Division, this means many or all new product ideas and production processes must be supported, industrialized and made available competitively before successful products can reach the market. And make the products universally available since the external customer’s exact production site has often not yet been determined.”

Tobias Chomsé

Accumulators Division

“In line with the Ovid project, we have to reduce our dependence on piston accumulators for the traditional automotive business. They are mainly used in transmissions for internal combustion vehicles. Our strategy is to develop clearly-defined growth markets, in the industrial and the New Mobility sectors. Over the past two years, we have mainly grown in the agricultural, construction and fluid power segments.
In the automotive sector, we are developing new potential applications, such as hydropneumatic suspensions. Due to the greater weight of electric vehicles, these suspensions are becoming more important, especially in the Asian market. Working with the Industrial Services Division and Corteco, we are also developing our replacement parts business and Accumulator Xpress.
To finance the transformation process, we have significantly increased the profitability of our cash cow segments. Our pricing strategies, which are closely coordinated with our sales colleagues, are an important part of this.”