Below, Formula E racing exemplifies the innovation Peter Gutzmer, above, sought at Schaeffler.

NEW YORK — The electric race cars zooming here behind Peter Gutzmer's head are the perfect backdrop for explaining what's speeding through his company these days.

No surprise: It's electrification.

In fact, the same transformation that's moving through Germany's Schaeffler Group, a family-owned supplier of high-precision engine parts with 2018 sales to automakers of an estimated $10.1 billion, also hangs over the head of suppliers all over the world at this moment.

The colored banners that proclaimed the names of participants in the all-electric powertrain Formula E race through south Brooklyn in July testified to the widespread industry change. Among them: Bosch, ZF Friedrichshafen, Magna International and McLaren Applied Technologies.

"When you look at the long history of the auto industry, change is how you succeed," mused Gutzmer, Schaeffler's chief technology officer, who plans to retire at the end of this year at 65. "Anticipating future technologies is what we do."

Anticipating this change is something that Gutzmer did for Schaeffler, a company that, despite its low profile in the industry, boasts that the average car around the world contains 60 of its parts. Schaeffler in 2001 recruited Gutzmer from Porsche, where he had been managing engine development. Immediately upon taking his place at Schaeffler, he made his case to the company's management that a new wave of innovation needed to be fostered. Engines of the future would be increasingly electrified, said Gutzmer — not exactly music to the ears of a company that had grown wealthy supplying transmissions, rolling bearing supports for engine shafts, valvetrains, camshafts and belt drives. He admits that the idea got its share of pushback.

"I am an internal combustion engine engineer," Gutzmer declared during the Formula E race as an Audi whined down the straightaway behind him with "Schaeffler" emblazoned in green on its side. "But we had to recognize that a new day was coming — even then."

For the next 18 years, Schaeffler pursued a cautious, methodical path to the revolution.

First, it focused solely on building up a competence in electric drives for hybrid powertrain solutions. Electrification was part of that stage, but Schaeffler kept its eye on mechanical solutions and on learning how to take a more comprehensive systems approach than it had in the previous half-century of business.

It also began building prototype vehicles with electrified power systems, and it developed an E-Axle that packaged an electric motor, gearbox and power electronics into one compact unit.

After seven years of that focus, satisfied that it was on the right path, Schaeffler began creating what Gutzmer, who also holds the title of deputy CEO, calls a "dedicated competence centre." That centre within the organization, with engineers assigned to the new direction, began commercializing the advanced solutions. As a result, the supplier now has hybrid systems and a growing number of electrification components, such as e-motors and torque converters, in production in Europe, China and its manufacturing hub in Wooster, Ohio.

The new Audi e-tron electric crossover relies on a one-gear transmission for each of its two electric motors. Chinese automaker Great Wall Motors will be using the supplier's E-Axle in a hybrid vehicle marketed by its premium brand, Wey. The system also will go onto a vehicle from the Chinese maker Changan Automobile. According to Matthias Zink, CEO of Schaeffler's global automotive business, the units can fetch up to about $1,500 per vehicle.

This year, Ford Motor Co. is launching a new-generation Explorer that comes with a Schaeffler hybrid-drive system. The supplier is also behind Ford's new ultrafast hybrid-drive Interceptor police car, which can reach 137 mph.

"People used to think of hybrid vehicles as slow, tree-hugger cars," said Patrick Lindemann, president of Schaeffler's North American e-mobility business in Wooster. "But look how fast Ford's hybrid police car is. So the image is changing."

MAKING IT OFFICIAL

Two years ago, Schaeffler took the next step for its emerging technologies and created the E-Mobility Division as a separate business unit. The company hired BMW veteran Jochen Schroeder as E-Mobility president, reporting directly to Zink.

Now, Schroeder is building future business that goes ever deeper into electrification.

Schaeffler Chairman Georg Schaeffler, a onetime lawyer in the U.S., with the pit team.

But not at the expense of the technologies that provide the company's foundations, said Gutzmer.

"It has been an 18-year effort to arrive where we are," he said during the Formula E race. "But we have decided that, in the future, we will have a two-track strategy.

"One is around combustion engines. Internal combustion will still be around for two or three more decades. And we will improve them, and of course, they will become increasingly electrified.

"And the second track will be electrification and e-mobility. We'll continue widening our spectrum of products."

WHOA?

Gutzmer confides that he feels great pride as he prepares to retire, stepping down after helping Schaeffler's management reposition the company for a new era of technology.

But after he leaves, the industry's future is far from certain.

This summer, global consulting and forecasting firm AlixPartners published a less-than-comforting outlook on auto industry electrification. It calculated that the world's automakers are currently spending $255 billion (all figures USD) on electrification. That will result in the creation of more than 200 new electric models, "many of which will lose money," the AlixPartners report concluded.

At the same time, consumers told researchers that they would be willing to pay a premium of about $2,300 to acquire an electric vehicle — far less than what current EV options cost.

Such outlooks have not dented the industry's enthusiasm. Audi alone, Schaeffler's partner in the Formula E racing series, said late last year that it has earmarked $16 billion for introducing EVs by 2023.

To add more suspense, that timeline is rolling out as suppliers face tougher financial times as the industry leans into a downturn in key markets, including North America.

Last year, Schaeffler reported flat revenue for its global automotive business, the biggest part of the German company. And net income for the entire corporation dropped 10 per cent to about ?881 million ($977 million). Part of Schaeffler's reality is a growing overhead, including the addition of more than 2,300 employees in 2018.

But the company has muscled through challenging times before. Its principal shareholders, Chairman Georg Schaeffler, 54, and his mother, Maria-Elisabeth Schaeffler-Thumann, the 77-year-old widow of company co-founder Georg Schaeffler, sidestepped financial troubles in 2008-09. At that time, the billionaire Schaeffler-Thumann made a play to buy a minority stake in fellow German supplier Continental, a multinational automotive giant more than twice Schaeffler's size. But when Continental's share price sank with the rest of the auto industry at the beginning of the Great Recession, she unexpectedly found herself on the hook to buy 75 per cent of Continental's stock. The $15 billion bill for that purchase put her in a precarious financial situation personally.

Schaeffler-Thumann recruited her son back to the family business from his career as an attorney in Dallas to guide Schaeffler. The company hired a European banking executive, Klaus Rosenfeld, as CFO to restructure the family's empire and make it financially secure.

A decade later, Rosenfeld serves the Schaefflers as CEO. The family is one of Europe's wealthiest, with Georg Schaeffler listed by Forbes as the world's 96th richest individual, with a net worth of $12.6 billion. And while Schaeffler Group has reduced its ownership stake in Continental to 46 per cent, the investment has proved to be a windfall beyond Schaeffler-Thumann's original vision, and Continental is still operated separately from its smaller owner.

SUPPLIER SOLUTIONS

The good news for a company like Schaeffler, along with a host of other global large parts companies around the world that are pursuing similar ideas, is that suppliers are the muscle that automakers need to make electrification happen.

Magna, for example, is developing entire new EV platforms for customers. Bosch is similarly serving as a one-stop EV technology supplier for automotive startups such as Byton Automotive.

The Formula E racetrack is more than entertainment. It has suppliers competing to make innovations in the power systems, motors and inverters inside the cars. The 5-year-old international series still draws far smaller crowds than traditional Formula One events, but it has become an important arena for testing ideas that will make their way to the marketplace as electrification takes shape.

"Formula E racing is, for us, the first level of prototypes," Lindemann, the North American e-mobility business president, said during the race. "It's the opportunity to test our parts and push them to extremes. We want to see what happens when we push electric batteries to very high levels and subject it to high heat at very fast speeds.

"We call it a playground for engineers," he said. "But it's more than that. It's the place where we learn how to take components from a very expensive racing environment and design and manufacture them someday for the ordinary passenger vehicle business."