Financial overview

(in million EUR)

	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012	Rate of Change (%)	Factors
Overall
Sales	11,205	11,125	0.7	-
EBIT	982	1,413	(30.5)	-
Automotive
Sales	8,165	7,658	6.6	1)
EBIT	736	997	(26.2)	-

Factors
1) Automotive
-In 2013, revenue increased by 6.6% from the prior year. The overall increase is primarily due to new customer projects and related production start-ups. The key growth drivers is product innovation which contributes reduction of CO2 emission.

-Revenue growth for 2013 was primarily driven by the Asia/Pacific (+12.1 %), North American (+10.4 %) and Europe (+4.6 %) regions. In South America (-3.9 %), revenue declined due to the adverse impact of currency translation.

Relations with Continental

-The Company notified Continental AG of its intention to terminate the investment agreement in place since 2008. The investment agreement will thus end in May 2014. The Company also announced that it has completed the placement of 3.9% of Continental AG shares. Following the placement, the Company's participation in Continental AG amounts to 46.0%, whereby Schaeffler AG holds 34.2% and Schaeffler Holding holds 11.8% of the outstanding share capital. The Company still holds the largest single shareholder position of Continental AG.

Purchasing

-The Company and Continental AG announced that twelve of the companies were newly appointed as premium suppliers, including Gibbs Die Casting and Hutchinson. The Company and Continental have been cooperating in purchasing for four years.

Contracts

-The Company announced that the combination of a continuously variable automatic transmission, equipped with LuK's multi-link chain, and a flat diesel engine is featured in Subaru's "Outback 2.0D" Lineartronic. In 2013, The chain will come off the production line at the Company's manufacturing location in Buhl, Germany.

-The Company's Dual clutch transmission and Electric gear actuator are introduced in the Honda "Fit Hybrid".: See Honda Fit Hybrid teardown (part 1): Battery components & brake system

Stop of production

-Schaeffler Technologies AG & Co. KG will discontinue volume production of wheel bearings in Schweinfurt, Germany by the end of 2016 and transfer it to other facilities. Approximately 400 jobs will be cut at the location. In contrast, Automotive jobs in development, design and sales will be maintained in the long term. Schaeffler will also increase the number of jobs for new Automotive products in the coming years in Schweinfurt. Around 85 jobs are already planned for specific projects.

Awards

-The Company recently won the General Motors (GM) China 2013 Supplier Quality Excellence Award for wheel bearings produced at its Taicang plant in Jiangsu Province, China. The wheel bearings supplied to General Motors are manufactured at the Company's Taicang Plant III. In addition to General Motors, Taicang Plant III also supplies Volkswagen, Changan Ford and many other important domestic and international automobile manufacturers.

-The Company has been presented with the Excellent Supplier Award 2013 for the first time during the "Geely powertrain supplier conference 2013" in Ningbo/China.

-The Company has received numerous awards from customers in Asia in the first quarter of 2013.

• In Japan, "Certificate of Achievement in Quality Performance 2012" from Toyota
• In China, "The Excellent Quality Supplier Award" from Nissan
• In China, "Excellent Supplier 2012" from Volkswagen Automotive Shanghai

Outlook for FY ending March 2014

-For 2014, revenue is expected to grow 5 - 7 % from 2013 while maintaining EBIT margin at 12 - 13 %.

R&D Expense

(in million EUR)

	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011
Overall	611	593	495
% of Sales	5.5	5.3	4.6

 

R&D Structures

-Over 6,000 R&D staffs were employed at 16 R&D centers.
-Number of R&D locations by region: Germany (5), Europe excluding Germany (4), North America (3), South America (1), Asia/Pacific (3)
-The Company has about 20,000 patents and patents applications. In 2013, 2,500 inventions are filed for patent applications.

R&D Facilities

<Germany>
-The Company announced that it has expanded its Competence Center Acoustics within the Technical Development Center in Herzogenaurach, Germany by adding an acoustic testing facility. Equipped with state-of-the-art measurement and computer technology, three test rooms and a so-called "wobble room" have been installed in 180 square meters of floor space. Typical tasks include, for example investigations of airborne sound and vibration behavior in the vehicle drive train, as well as in the chassis and its components, such as ball screw drives and roll stabilizers.

<Japan>
-The Group is poised to enhance its development partnerships with Japanese automakers, which are recently speeding up the transfer of their production operations, as well as product development and evaluation activities to overseas countries. With this move, the Group will increase the number of development staff at Schaeffler Japan Co., Ltd., its subsidiary headquartered in Yokohama, which functions as a contact point for Japanese customers. Additionally, the Group's worldwide development and research sites are accelerating steps to collaborate with Japanese automakers. The Group is looking to expand business with Japanese automakers by underlining its extensive global network capable of supplying its products to their facilities worldwide and supporting their development activities, as well.

R&D Activities

Electrification of combustion engine is a main issue
-In response to the regal requirement of significantly reduce worldwide CO2 emissions by 2020, conventional mechanical or hydraulic components are increasingly being replaced by electric solutions. The Company expects high growth rates for electrification, adding functions such as start-stop or boosting to conventional internal combustion engine, and mild hybrids.

Optimizing drive trains for the region
(1) Drive train for conventional internal combustion engine
-In North America, the drive train increases the efficiency up to 15 %, and already complies with CAFE standard by 2020. The solution includes start-stop system, thermal management module and AWD disconnect clutch.

-In India, the drive train increases the efficiency up to 7 % with relatively lower cost.

(2) Drive train for hybrid vehicles
-In Europe, the "48 Volt System" achieves outputs of up to 12 kWatts and significantly reduces CO2 emissions.The solution includes start-stop system, regenerative braking, boosting and sailing.

(3) Drive train for electric vehicles
-In R&D center in China, the concept study "eSolutions", focusing the E-Wheel electric wheel hub drive, is driven forward. Electric motor, power electronics, controller, brake, and cooling system, are integrated inside the wheel rim. The solution provides advantages in terms of maneuverability, driving dynamics, active safety and utilization of the space.

Product Development

E-Wheel electric wheel hub drive
-The Company developed its second-generation version of the E-Wheel electric wheel hub drive. All components required for drive, deceleration, and driving safety - like the electric motor, power electronics, controller, brake, and cooling system - are installed inside the wheel rim. Each hub drive delivers 40 kWatts per drive, and a continuous output of 2 x 33 kWatts. The electric drive is tested in a development vehicle based on a Ford "Fiesta". In comparison to the first-generation wheel hub drive, which was first exhibited in Opel "Corsa" - based the Company's Hybrid concept car in 2010, the E-Wheel Drive thus features an output increase of one-third, as well as 75% more torque.

Capital Expenditure

(in million EUR)

	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012	FY ended Dec. 31, 2011
Overall	573	827	846
Automotive	434	618	630

-Capital expenditure for FY2013 primarily made for production start-ups, expanding capacity and localization in customer proximity. 
-Capital expenditure for FY2014 is expected to increase to 6 - 8 % of revenue.

Investment Outside Germany

<China>
-The Company started construction of its eighth factory in China, located in Taicang, Jiangsu Province. Taicang Plant 5 is located in the Company's production base in the Taicang Economic Development Zone, close to Taicang Plant 2 to Plant 4. Construction of the new facility, which will have a gross floor area of approximately 7,400 square meters, is due to be completed by the end of 2013. Upon completion, the facility will mainly produce hydraulic torque converters and double clutches for the automotive industry.