2018 Schaeffler Separate Financial Statement en

Financial statements 2018
Schaeffler AG Mobility for tomorrow
Staying in motion
Schaeffler AG I Financial Statements 2018 1
Contents
Combined management report Corporate Governance

Fundamental information about the group 3 Corporate governance report including
Overview of the Schaeffler Group 3 corporate governance declaration 89
Business activities 6 Governance structure 96
Group strategy and management 26 Remuneration report 101
Employees37 Governing bodies of the company 114
Corporate responsibility43
Report on the economic position 44 Financial statements 2018
Economic environment 44 Balance sheet 119
Course of business 49 Income statement 120
Earnings54 Notes to the financial statements 121
Financial position and finance management 64 Independent Auditors’ Report 138
Net assets and capital structure 68
Overall assessment of the 2018 business year 70 Responsibility statement by the company’s legal
Net assets, financial position, and earnings of Schaeffler AG71 representatives 143
Other components of the group management report 73
Supplementary report 74
Report on opportunities and risks 75
Risk management system 75
Internal control system 77
Risks78
Opportunities83
Overall assessment of Schaeffler Group opportunities
Navigation aid
and risks 85
Report on expected developments 86
Expected economic and sales market trends 86 Further details in the Further details online
Schaeffler Group outlook 87 report
2 Combined management report

Combined management report
1. Fundamental information about the group 3 3. Supplementary report 74

1.1 Overview of the Schaeffler Group 3
4. Report on opportunities and risks 75
1.2 Business activities 6
4.1 Risk management system 75
1.3 Group strategy and management 26
4.2 Internal control system 77
1.4 Employees 37
4.3 Risks 78
1.5 Sustainability 43
4.4 Opportunities 83
2. Report on the economic position 44 4.5 Overall assessment of Schaeffler Group
opportunities and risks 85
2.1 Economic environment 44
2.2 Course of business 49
5. Report on expected developments 86
2.3 Earnings 54
5.1 Expected economic and sales market trends 86
2.4 Financial position and finance management 64
5.2 Schaeffler Group outlook 87
2.5 Net assets and capital structure 68
2.6 Overall assessment of the 2018 business year 70
2.7 Net assets, financial position, and earnings
of Schaeffler AG 70
2.8 Other components of the group management report 73
Combined management report in accordance with section 315 (5) HGB References
(also referred to as “group management report” or “management report”). Content of websites referenced in the group management report merely
The company has chosen to integrate the management report of Schaeffler AG provides further information and is not part of the group management report.
with the following group management report of the Schaeffler Group. This does not apply to the corporate governance report including the
corporate governance declaration in accordance with section 289f HGB and
Special items 315d HGB, including the declaration of conformity pursuant to section
In order to facilitate a transparent evaluation of the company’s results of 161 AktG. The reference to the combined separate non-financial report in
operations, the Schaeffler Group reports EBIT, EBITDA, net income, net debt accordance with section 289b (3), section 315b (3), and section 298 (2) HGB
to EBITDA ratio, Schaeffler Value Added, and ROCE before special items also forms part of the group management report.
(= adjusted).
Disclaimer in respect of forward-looking statements
Impact of currency translation/constant currency This group management report contains forward-looking statements that are
Revenue figures at constant currency, i.e. excluding the impact of currency based on the Board of Managing Directors’ current estimation at the time of
translation, are calculated by translating revenue using the same exchange the creation of this report. Such statements refer to future periods or they are
rate for both the current and the prior year or comparison reporting period. designated by terms such as “estimate”, “forecast”, “intend”, “predict”,
“plan”, “assume”, or “expect”. Forward-looking statements bear risks and
Rounding differences may occur. uncertainties. A variety of these risks and uncertainties are determined by
factors not subject to the influence of the Schaeffler Group. Therefore, actual
results can deviate substantially from those indicated.
Schaeffler AG I Financial Statements 2018 Combined management report 3
Fundamental information about the group I Overview of the Schaeffler Group
1. Fundamental information about

the group
1.1 Overview of the Schaeffler Group ment of the Schaeffler Group. The program for the future, the
“Agenda 4 plus One”, was developed to ensure implementation
The Schaeffler Group (also referred to as “Schaeffler” below) of the strategy. Two of the 20 strategic initiatives comprising
is a globally leading, integrated automotive and industrial sup- this program for the future will be successfully completed in
plier. High quality, outstanding technology, and exceptionally early 2019.
innovative spirit form the basis for the continued success of
the company. With more than 92,000 employees, the Schaeffler AG’s common non-voting shares are listed on the
Schaeffler Group is one of the leading global technology compa- Frankfurt Stock Exchange and are included in Deutsche Börse’s
nies. The Schaeffler Group identifies key trends early on, invests MDAX index. The company’s main shareholder is IHO Holding, a
in researching and developing new forward-looking products, group of holding companies owned indirectly by the Schaeffler
and sets new standards in technology. In doing so, it focuses on family that holds all of Schaeffler AG’s common shares. The free
its key opportunities for the future – E-Mobility, Industry 4.0, float amounts to approximately 24.9% of Schaeffler AG’s total
and Digitalization. Extensive systems know-how enables the common and common non-voting share capital. Schaeffler AG
Schaeffler Group to offer comprehensive solutions that are tai- intends to pay a dividend of 30 to 40% of consolidated net
lored to customer and market requirements. By delivering cut- income before special items to its shareholders.
ting-edge products for the automotive and industrial sector, the
Schaeffler Group is shaping “Mobility for tomorrow” to a signifi-
cant degree. These include products both for vehicles with only
an internal combustion engine and for hybrid and electric vehi-
cles, as well as components and systems for rotary and linear
movements, and services, maintenance products, and moni-
toring systems for a large number of industrial applications.
Additionally, the global business with spare parts provides
repair solutions in original-equipment quality for the automotive
spare parts market.
Under its strategy “Mobility for tomorrow”, the Schaeffler Group

concentrates on 4 focus areas: eco-friendly drives, urban
mobility, interurban mobility, and energy chain. These 4 focus
areas are based on four megatrends that will influence the busi-
ness of the Schaeffler Group in the future: climate change,
urbanization, globalization, and digitalization. The 8 strategic
pillars developed based on these focus areas define the
scope for action under the strategy “Mobility for tomorrow”
and constitute the basis for the continuous further develop-
Schaeffler Group organizational structure No. 001

since January 1, 2019
Schaeffler Group
Divisions Functions Regions
Operations,
Automotive Automotive CEO Tech Human Greater Asia /
Industrial SCM 1) & Finance Europe Americas
OEM Aftermarket F unctions nology Resources China Pacific
Purchasing
Simplified presentation for illustration purposes.

1) Supply Chain Management
Organizational structure of Managing Directors (Chief Executive Officer – CEO), the Board
of Managing Directors comprises the CEOs of the Automotive
The Schaeffler Group is characterized by a three-dimensional OEM (CEO Automotive OEM), Automotive Aftermarket (CEO
organizational and leadership structure which differentiates Automotive Aftermarket), and Industrial (CEO Industrial) divisions
between divisions, functions, and regions. Thus, the and the Managing Directors responsible for the Schaeffler Group’s
Schaeffler Group’s business is managed based on the three divi- functions (Chief Technology Officer, Chief Operating Officer,
sions – Automotive OEM, Automotive Aftermarket, and Industrial Chief Financial Officer, and Chief Human Resources Officer).
– which also represent the reportable segments. The Automotive
OEM division organizes its business in the Engine Systems, The Board of Managing Directors is directly responsible for man-
Transmission Systems, E-Mobility, and Chassis Systems busi- aging the company, setting objectives and strategic direction,
ness divisions. The Automotive Aftermarket and Industrial divi- and managing the implementation of the growth strategy taking
sions are managed based on the regions Europe, Americas, into account the interests of shareholders, employees and other
Greater China, and Asia/Pacific. stakeholders of the company in order to add long-term value. The
CEO coordinates the management of the company and the
In addition to the divisions, the Schaeffler Group’s organizational Schaeffler Group. In addition to the divisions and the functions,
model includes five functional areas: (1) CEO Functions, the group’s matrix organization comprises the regions Europe,
(2) Technology, (3) Operations, Supply Chain Management Americas, Greater China, and Asia/Pacific, each managed by a
& Purchasing, (4) Finance, and (5) Human Resources. Distribution Regional CEO. The Regional CEOs report directly to the CEO.
is embedded directly in each of the divisions. The third dimension Together, the Board of Managing Directors and the Regional CEOs
are the group’s four regions Europe, Americas, Greater China, and represent the Schaeffler Group’s Executive Board. In this
Asia/Pacific. manner, the Schaeffler Group’s organizational structure is
reflected in its leadership structure.
Leadership structure The Supervisory Board of Schaeffler AG appoints, advises, and

oversees the Board of Managing Directors and is involved in fun-
The Schaeffler Group is managed by the Board of Managing damental decisions. The Chairman of the Supervisory Board
Directors of Schaeffler AG. Along with the Chairman of the Board coordinates the work of the Supervisory Board.
Schaeffler Group leadership structure No. 002 The Board of Managing Directors and the Supervisory Board
comply with the recommendations of the German Corporate
Governance Code in conducting their affairs and have issued the
Schaeffler Group
declaration of conformity pursuant to section 161 German Stock
Chief Executive Officer Corporations Act (“Aktiengesetz” – AktG) in December 2018. The
corporate governance report including the corporate governance
CEO CEO
CEO
Board of Automotive Automotive declaration in accordance with section 289f HGB and section
Industrial
OEM Aftermarket
Managing 315d HGB including the declaration of conformity pursuant to
Directors
Executive section 161 AktG is publicly available from the company’s website.
Chief Chief Chief Chief Human Board
Financial Technology Operating Resources
Officer Officer Officer Officer
Corporate governance report including the corporate governance
declaration in accordance with section 289f HGB and 315d HGB
Regional CEO CEO CEO CEO
Europe Americas Greater China Asia/Pacific
including the declaration of conformity pursuant to section 161 AktG
CEOs
at: www.schaeffler.com/ir
Schaeffler Group divisions and business divisions No. 003
Schaeffler Group
Automotive OEM Automotive Aftermarket Industrial
Engine Transmission Chassis Greater Asia / Greater Asia /

E-Mobility Europe Americas Europe Americas
Systems Systems Systems China Pacific China Pacific
Locations and changes in the scope of investees. The Schaeffler Group’s share of the net income of the
consolidation joint venture is presented in the consolidated income statement
under income (loss) from equity-accounted investees. The scope
The corporate head office of the Schaeffler Group is located in of consolidation underwent only minor changes overall during
Herzogenaurach. In addition, the Schaeffler Group’s network of the year.
manufacturing locations, research and development facilities,
and distribution companies consists of approximately See the notes to the consolidated financial statements beginning on
170 locations in over 50 countries. The production system is the page 130 for further details
cornerstone of the Schaeffler Group’s operations. In 2018, the
company decided to integrate its “Bearing & Components Tech-
nologies” (BCT) unit, which had previously acted as an internal Legal group structure
supplier, into the Automotive OEM and Industrial divisions.
Under this reorganization, the plants previously assigned to BCT Schaeffler AG is a publicly listed corporation domiciled in
were transferred to the Automotive OEM and Industrial divisions. Germany. Schaeffler AG’s share capital consists of a total of
As a result, the production system comprised 73 manufacturing 666 million shares. 500 million of these shares are unlisted
locations in 22 countries as at December 31, 2018. Furthermore, common bearer shares and 166 million are common non-voting
the Schaeffler Group is actively helping to shape technological bearer shares. Each common share and each common non-voting
progress for “Mobility for tomorrow” with 20 R&D centers and share represents an interest in total share capital of EUR 1.00.
additional R&D locations in a total of 24 countries. As a global
development partner and supplier, the Schaeffler Group maintains All 500 million of the common bearer shares are held by IHO
stable long-term relationships with its customers and suppliers. Verwaltungs GmbH, which is part of IHO Holding. This represents
In addition to Schaeffler AG, which acts as the group’s lead com- an approximately 75.1% interest in Schaeffler AG. The 166 million
pany, the Schaeffler Group included 152 (prior year: 151) common non-voting bearer shares in Schaeffler AG are widely
domestic and foreign subsidiaries as at December 31, 2018. As held. The free float amounted to approximately 24.9% as at
at December 31, 2018, 104 (prior year: 103) of these subsidiaries December 31, 2018. IHO Holding also holds approximately
are domiciled in the Europe region, 25 (prior year: 25) in the 46.0% of the shares in Continental AG.
Americas region, 10 (prior year: 10) in the Greater China region,
and 13 (prior year: 13) in the Asia/Pacific region.
Legal group structure No. 004
as at December 31, 2018
In 2018, the Schaeffler Group signed a master agreement with
Roland Arnold, Arnold Verwaltungs GmbH, and Paravan GmbH
for the formation of a joint venture. The joint venture is named IHO Holding
Schaeffler Paravan Technologie GmbH & Co. KG and has com- Free Free
menced operations on October 1, 2018. Schaeffler Technologies float float
AG & Co. KG has a 90% stake in the new company which is

included in the Schaeffler Group’s consolidated statement of 24.9% 75.1% 46.0% 54.0%
financial position under investments in equity-accounted
Schaeffler AG Continental AG
Schaeffler Group
Fundamental information about the group I Business activities
1.2 Business activities Schaeffler Group’s third division as at January 1, 2018 (step 2),
the company decided to integrate its “Bearing & Components
Technologies” (BCT) unit, which had previously acted as an
Divisions internal supplier, into the divisions. Under this reorganization,
the plants previously assigned to BCT were transferred to the
The Schaeffler Group is a leading global integrated automotive Automotive OEM and Industrial divisions. The Automotive
and industrial supplier. The Schaeffler Group’s business is man- Aftermarket division will continue to be supplied largely from the
aged based on the three operating divisions, which have global Automotive OEM division’s manufacturing locations as before.
responsibility and also represent the reportable segments in This realignment aims to bring the plants closer to the business
accordance with IFRS 8. and to establish consistent responsibilities for the business and
earnings worldwide in order to even better meet its customer’s
needs. The change also streamlined work flows and processes,
Schaeffler Group revenue No. 005
eliminated duplicate structures, and leveraged additional effi-
by division
in percent ciencies. The previous function of the BCT unit as a technological
bracket around development, design, and production of rolling
bearings will continue to represent a core element of the “One
Industrial 23.8 Schaeffler” approach. This bracketing function was transferred
to the Technology and Operations, Supply Chain Management &
Purchasing functions and strengthened by combining it with
Automotive Automotive OEM 63.2 these functions’ pre-existing expertise.
Aftermarket 13.0
Automotive OEM division

• Acquisition of Elmotec Statomat expands manufacturing
expertise in the field of electric motors and opens up further
Up to December 31, 2017, the Schaeffler Group divided its business potential for growth
into the two divisions Automotive and Industrial. In order to make • Joint venture Schaeffler Paravan Technologie GmbH & Co. KG
the company even more customer-oriented in a fast-changing established by Schaeffler advances and markets the Space
market and competitive environment, the Automotive Aftermarket Drive “Drive-by-Wire”-Technology
was separated from the Automotive division of Schaeffler AG
• EUR 60 m investment in new Automotive OEM headquarters
and set up as a stand-alone division with its own CEO as of
in Buehl planned: providing a boost for electric mobility
January 1, 2018. As a consequence, the Schaeffler Group has been
activities – 350 new jobs expected to be created
dividing its business into three divisions – Automotive OEM,
Automotive Aftermarket, and Industrial – since January 1, 2018.
The Automotive OEM division business is organized into the four Customers and products
business divisions (BD) Engine Systems, Transmission Systems, The Automotive OEM division partners with all major automobile
E-Mobility, and Chassis Systems. The Automotive Aftermarket manufacturers in developing and manufacturing system solu-
and Industrial divisions are managed regionally, based on the tions for the complex challenges of the automotive future. Its
regions Europe, Americas, Greater China, and Asia/Pacific. global key account management function and development col-
laborations ensure that the Automotive OEM division remains
The three divisions of the Schaeffler Group are managed from close to its customers. It is working on numerous technologies to
decentralized divisional headquarters located in Buehl, Langen, make cars cleaner and more fuel-efficient. The division’s innova-
and Schweinfurt. The Automotive OEM division is headquartered tive ideas, creative engineering, and comprehensive manufac-
in Buehl, the new Automotive Aftermarket division is managed turing expertise enable it to develop solutions for drive trains
from Langen, and the Industrial division is located in Schwein- based on an internal combustion engine as well as for hybrid and
furt. The corporate head office of the Schaeffler Group is in all-electric designs. In 2018, the division presented these solu-
Herzogenaurach. tions on various occasions including to a total of 1,500 cus-
tomers at the 11th Schaeffler Symposium held in Baden-Baden,
The Board of Managing Directors of Schaeffler AG has decided, Detroit, Tokyo, and Shanghai.
with the approval of the Supervisory Board’s executive com-
mittee, to further improve and realign the Schaeffler Group’s Since January 1, 2018, all products and system solutions for
organizational and leadership structure. Following the realign- hybrid and all-electric vehicles are managed centrally through
ment of the Industrial division effective January 1, 2017 (step 1), the new E-Mobility business division. As a result, the Automotive
and the set-up of the Automotive Aftermarket as the OEM division is subdivided into the following four business divi-
sions (BD), which in turn comprise several business units and coming years, the sector will change more extensively than in the
product lines: 130 years since the automobile was invented. Efficient internal
combustion engines, automated transmissions, diversity in
• The Engine Systems BD develops and provides components
E-Mobility, autonomous driving, interconnectedness and new
and systems for engines. These precision products are key to
mobility solutions will be the main drivers of future growth. The
helping engines consume less fuel and comply with increas-
need to lower harmful emissions results primarily from legal
ingly stringent emissions standards while also increasing
requirements: More realistic emissions test procedures such as
driving comfort and driving dynamics and extending mainte-
the WLTP cycle introduced in September 2018 have implicitly
nance intervals and service life. The portfolio includes prod-
f urther increased CO2 reduction targets. In addition, the Euro-
ucts such as valve-lash adjustment elements, variable valve
pean Union is planning to reduce the fleet limit of 95 grams of
train systems, camshaft phasing systems, and the thermal
CO2 per kilometer that will come into effect in 2021 by a further
management module.
37.5% by 2030. Many vehicle manufacturers are adding models
• The Transmission Systems BD develops and provides innova- with electric drives to their product range in order to reduce their
tive components and systems for transmissions. More and fleet average to the required CO2 target.
more, the emphasis in this business division is shifting toward
automatic transmissions which are replacing the conventional However, given the current primary energy structure, restricted
manual transmission. Applications for electrified drive con- ranges of current electric cars, and limited charging infrastruc-
cepts round out the range of transmissions for the future. The ture, demand for internal combustion engines is expected to
BD also possesses extensive expertise in the field of torsional remain high in the medium term. Therefore, further advancing
vibration dampers. the drive train based on an internal combustion engine is essen-
• The E-Mobility BD offers its customers solutions for the entire tial to meeting future CO2 targets. Furthermore, the conventional
spectrum of electrification options – from 48-volt mild hybrids internal combustion engine continues to play a significant role.
and plug-in hybrids through to all-electric vehicles. Its wide- By 2030, 70% of all newly registered cars will still be equipped
ranging know-how makes the Automotive OEM division an with an internal combustion engine, according to a scenario enti-
expert partner to its customers. The product portfolio includes tled “Schaeffler Vision Powertrain” that was developed based
hybrid modules, electric axle drives, electromechanical actua- on market analyses. This includes 30% driven exclusively by an
tors, and in the future electric motors and electric solutions for internal combustion engine and 40% hybrid vehicles powered by
the entire drive train, as well. an electric motor combined with an internal combustion engine.
• The Chassis Systems BD develops and provides components The remaining 30% of all cars are forecasted to use all-electric
and systems for chassis. Its wide variety of products ranges drive systems.
from wheel bearings through to mechatronic systems for
active chassis and will also include steering systems in the A further important automotive sector market will be autono-
future. mous driving, which, along with increased driving comfort, will
also improve road safety. Experts refer to five levels of vehicle
Sales markets automation: Starting with level 0 with “driver only” – the driver
The Automotive OEM division acts as a global supplier to the steers and drives completely without support from driver assis-
automotive sector. Demand for the Automotive OEM division’s tance systems – through to level 5, in which the vehicle is
products is primarily influenced by, along with global economic completely driverless, i.e. moves autonomously. While the
conditions, the increasing demands placed on the automobile application of level 4 “fully automated driving”, and level 5
industry, for instance to reduce fuel consumption and emissions. “autonomous driving”, remains in the future, driver assistance
These economic factors subject global automobile production, a systems representing levels 1 “assisted driving”, 2 “partly auto-
key indicator of trends in the Automotive OEM division’s relevant mated driving”, and 3 “highly automated driving”, are increas-
market, to a certain degree of short-term and regional volatility. ingly entering the market already today. A scenario developed
In the long-term, research institute IHS Markit anticipates annual by Schaeffler and entitled “Schaeffler Vision Chassis” indicates
market growth of 1 to 2%. It is currently expected that a market that by 2035, approximately 14% of passenger cars and light
for all-electric vehicles will emerge mainly in China and Europe commercial vehicles will drive in a highly automated manner,
as well as generally in urban areas, with China increasingly set- 18% in a fully automated manner, and 9% autonomously.
ting global market trends in electric mobility.
Key growth drivers

The automotive sector is currently at a turning point. Increasing
demands on automobile manufacturers to reduce fuel consump-
tion and emissions as well as new forms of mobility make new
drive concepts and innovative business models essential. In the
Levels of automation No. 006 Double-clutch transmissions offer significant potential for
increasing content per vehicle in the field of electrification as
well.
L5 Autonomous driving
The Automotive OEM division is expanding its product portfolio

with a view toward future electric and hybrid drives. These espe-
Extent of automation
Fully automated driving

L4 cially include compact hybrid modules with an integrated triple
clutch as well as a new generation of electric axle drives, wheel
hub motors, and entire transmissions optimized specifically for
L3 Highly automated driving
use in hybrids. The electric and electronic components for the
various drive trains are based on a shared platform. Further-
Partly automated driving or
more, for the position between the motor and the transmission
≤L2
less (P2 arrangement) alone, hybrid modules are offered in combina-
tion with torque converters, continuously variable transmissions
(CVT), and double clutches, for example.
Drive systems with reduced fuel consumption and emissions and
electrification: A comprehensive perspective on the drive train The acquisition of Elmotec Statomat Holding GmbH (“Elmotec
and the interaction of the electric machine, the internal combus- Statomat” below) represents a further step in the implementa-
tion engine, the transmission, and the related infrastructure is tion of the electric mobility strategy. Elmotec Statomat is one of
essential to developing commercially successful solutions for a the world’s leading manufacturers of production machinery for
wide range of mobility requirements. Based on the degree of the high-volume construction of electric motors and possesses
electrification – “micro”, “mild”, “plug-in hybrid”, or all-electric unique expertise in the field of winding technology. This acquisi-
vehicles – the Automotive OEM division develops new solutions tion will mainly expand the Automotive OEM division’s manufac-
in the engine, transmission, and electric drive subsystems within turing expertise and thus open up further potential for growth in
what is known as a “Powertrain Matrix”. These solutions include the production of electric motors and stator production facilities.
electromechanical actuators as well as 48-volt hybrid technolo- Schaeffler had previously acquired Compact Dynamics GmbH,
gies and efficient electric drives. a development specialist in the field of innovative electric drive
concepts, at the end of 2016. The acquisition of Elmotec Sta-
The need to meet legal targets renders it necessary to make the tomat, which closed on January 31, 2019, has expanded this
entire drive train system as well as its modules and components expertise by adding further know-how regarding high-volume
more efficient and to reduce the emissions they produce. This production of stators for electric motors.
also includes adding “mild” 48-volt electrification to the drive
train based on an internal combustion engine. The Automotive Autonomous driving, shared mobility, and interconnectedness:
OEM division expects particularly strong market growth for For the Automotive OEM division, developing intelligent compo-
mild-hybrid vehicles that use a 48-volt on-board electric sub- nents and systems for interconnectedness and autonomous
system. P0 drives – in which the electric motor is connected to driving is a key growth driver. The division has established the
the crankshaft of the internal combustion engine via a belt – joint venture Schaeffler Paravan Technologie GmbH & Co KG,
alone are expected to represent a market volume of approxi- giving it access to a key technology for “autonomous driving” –
mately 20 million units in 2030. a high-growth market of the future. Schaeffler Technologies AG &
Co. KG has a 90% stake in the new company, which has acquired
Advancing the internal combustion engine and the related trans- the Space Drive “Drive-by-Wire”-Technology from Paravan GmbH.
mission will continue to be essential to meeting the CO2 targets. Licensed use of this technology will enable the division to
With its switchable roller finger follower for cylinder deactivation develop its Chassis Systems business division into a chassis
in three-cylinder engines, electric clutch systems, the electric systems integrator. Space Drive is the only system of its kind to
camshaft phasing unit, the fully variable valve control system be licensed for on-road use in multiple countries worldwide,
UniAir, and the second-generation thermal management module, while at the same time having the potential for technical and
the Automotive OEM division offers a number of products ready commercial viability in large-series automobile production.
for volume production that are geared to making the conven-
tional drive train as eco-friendly as possible.
Double-clutch transmissions have become established in recent

years since they meet the high requirements regarding efficiency
and comfort while providing additional driving pleasure. Its
important transmission components such as the wet and dry
double clutches and a wide range of actuators have ensured the
Automotive OEM division’s top market position in years past.
Efficiency program “RACE” In addition, the service brand REPXPERT focuses especially on
In late 2018, the Automotive OEM division launched a program comprehensive services for repair shops.
named “RACE” aimed at improving the division’s business port-
folio. The program is designed to help increase the division’s Whether for clutches, vibration damping, or transmission compo-
earnings quality and efficiency and to safeguard them for the nents – being a specialist for the drive train, the Automotive
longterm. Aftermarket division offers intelligent repair solutions to the
spare parts market under the LuK brand. Thanks to comprehen-
sive systems expertise, these solutions enable repair shops to
Automotive Aftermarket division
perform maintenance efficiently.
• Automotive Aftermarket set up as third stand-alone division
• Cornerstone laying ceremony for the integrated European The repair solutions Schaeffler offers under the INA brand repre-
assembly and packaging center “AKO”: more flexibility, speed, sent a spectrum of products for the key engine systems that is
and delivery performance to customers unprecedented in width. Whether for the valve train, timing
drive, front end auxiliary drive, or cooling system – INA products
• Close to approximately 2,200 customers via more than
are based on the expertise gained from the development and
70 sales offices and branches worldwide
volume production of original equipment.
Customers and products The FAG brand products make the Automotive Aftermarket divi-
The Automotive Aftermarket division is responsible for the sion the specialist for chassis technology in the spare parts
Schaeffler Group’s global business with spare vehicle parts. market for every aspect of the wheel drive, axle and wheel sus-
Customers include almost all major international and national pension, stabilizers, steering systems, and engine and transmis-
trading companies which in turn supply the Schaeffler Group’s sion mounts. Top material and manufacturing quality ensure
products to other distribution levels all the way down to the well-thought-out repair solutions that are tailored to exactly suit
repair shop. The Automotive Aftermarket division is largely sup- repair shop needs.
plied from the Automotive OEM division’s manufacturing loca-
tions. In addition, the Automotive Aftermarket division success- Increasingly complex vehicle applications and the large number
fully cooperates with all relevant trade cooperatives around the of new vehicle models are constantly confronting repair shop
world in which a large number of its customers are organized. staff with challenging repair situations. The Automotive
Aftermarket division’s REPXPERT offers numerous services cov-
The management model of the Automotive Aftermarket division ering every aspect of its products and repair solutions. By uti-
follows a regional approach based on the regions Europe, lizing service hotlines, training seminars as well as installation
Americas, Greater China, and Asia/Pacific. Within each region, guides or videos, and tools tailor-made for professional repairs
products and services are sold via two distribution channels: the – repair shops benefit from the Schaeffler Group’s over 40 years
Original Equipment Service (OES) and the open (independent) of experience in the Automotive Aftermarket.
spare parts market, known as the Independent Aftermarket
(IAM). The OES comprises the automobile manufacturers’ spare Sales markets
parts business, that is, supplying original spare parts to branded The spare parts business benefits from the vehicle population
repair shops, i.e. those that are authorized by automobile manu- growing each year as well as from the rising average age and
facturers. IAM, on the other hand, supplies independent repair growing complexity of vehicles. In its forecast, research institu-
shops that are not tied to any one vehicle brand with repair tion IHS Markit expects the worldwide population of passenger
solutions and services via the various trade levels. IAM differen- cars and light commercial vehicles to grow from approximately
tiates between two types of business. In addition to the tradi- 1.4 billion in 2018 to approximately 1.6 billion in 2023 and the
tional component business consisting of replacing parts, the average vehicle age to increase from approximately 9.7 years to
Automotive Aftermarket division develops and distributes repair approximately 10.0 years. As the most significant increase for
sets and kits custom-assembled to help make vehicle repairs both parameters is expected in China, the division considers the
simple, efficient, and professional. Greater China region to hold the highest potential for growth.
Like the Automotive OEM and Industrial divisions, the The Automotive Aftermarket division considers itself very well
Automotive Aftermarket division operates under the Schaeffler positioned within the market. At the same time, it is preparing
corporate brand but distributes its products under the three for future challenges, especially those arising from the move
product brands LuK, INA, and FAG. It provides innovative repair toward new drive technologies. Networking with the Automotive
solutions in original-equipment quality for clutch and clutch OEM division within the Schaeffler Group is key to this prepara-
release systems as well as engine, transmission, and chassis tion.
applications. All components are optimally tuned to work
together and allow for fast and professional replacement.
Key growth drivers possible, as centralized as necessary”. Regional structures are

In the years ahead, the Automotive Aftermarket division’s signifi- established or strengthened on the basis of a global infrastruc-
cant growth drivers include globalization, expanding the port- ture in order to get closer to the customer. Significant activities
folio, and cross-selling. Digitalization and the continual increase include establishing local sales teams, technological customer
in operational excellence represent a strong foundation for support, and dedicated development and logistics centers.
securing opportunities for growth.
The extensive product portfolio of intelligently packaged repair
Continuing to increase operational excellence includes solutions is also slated for global expansion. The Automotive
increasing the speed and reliability of the division’s deliveries Aftermarket division is consistently following the strategy of
to customers around the world in order to further raise the being a full-range supplier, offering product coverage of approxi-
level of customer satisfaction and loyalty. To this end, the mately 95%, with a particular focus on the high-volume markets
Automotive Aftermarket division is investing extensively in Greater China and Asia/Pacific here, as well. The main theme is
expanding its logistics infrastructure. The creation of highly creating and expanding a portfolio of products and services that
automated logistics locations whose capacity can be adjusted is tailored to the specific needs of each of the markets.
flexibly is aimed at further improving processes and securing
continued revenue growth. The focus here is on efficiently sup- Cross-selling: The Automotive Aftermarket is currently gener-
plying customers with intelligent repair solutions. Construction ating more and more additional opportunities from cross-selling
of the European Aftermarket Kitting Operation (AKO) in Halle activities, i.e. by expanding the product portfolio with existing
(Saale) is currently under way, with capital expenditures totaling customers. This approach is based on the solid partnerships
approximately EUR 180 m. The AKO will commence operations in with the largest trading customers worldwide, as strongly evi-
the first half of 2020. denced by the large number of awards the Automotive
Aftermarket division regularly receives from its customers. In
Digitalization, too, is moving to the center of attention when it addition, the results of the customer satisfaction surveys con-
comes to securing opportunities for growth. The emphasis here ducted every two years are above-average, including those for
is on efficiencies gained from improving internal processes, the Net Promoter Score (NPS).
advancing and improving existing business models, as well as
developing new ones in order to meet current and future cus- One example of this strategic approach is the expansion of the
tomer needs. For instance, the Automotive Aftermarket division business in North America. A partnership in the clutch field
utilizes tools such as a global product and service platform and established in 2011 between Schaeffler and a large parts dealer
a returns portal. It is also continuing to develop its e-commerce chain has since led to a dedicated product line of wheel bearings
activities and relies on the close integration of marketing, distri- and gaskets. The portfolio comprises over 9,000 separate items
bution, and services. In addition to its own services, the and promises further growth for this product group in this region.
Automotive Aftermarket division has also co-founded important
service initiatives with industry partners, a significant contribu-
Industrial division
tion to keeping repair shops and distributors well informed digi-
tally. These initiatives include TecAlliance, a company providing • Components and systems for rotary and linear movements as
solutions for electronic catalog data, inventory management, well as services for OEMs and operators in eight sector clus-
and digitalization. In addition, the Automotive Aftermarket is ters worldwide
working to promote the issue of vehicle interconnectedness by • Expansion of the business by Industry 4.0 solutions in prog-
supporting the telematics platform CARUSO. ress; workforce expanded to approximately 300 in 2018
• Program “CORE” completed as at the end of 2018 in light of the
Globalization and expanding the portfolio: The Automotive
favorable earnings trend; remaining tasks transferred to the
Aftermarket division considers the Greater China region to pro-
line functions
vide the most significant potential for growth. The vehicle popu-
lation in the Chinese market will increase enormously in the
coming years as a result of strong growth expected in new Customers and products
vehicle registrations: While vehicles in China represented about The Industrial division distributes components and systems for
one sixth of the worldwide vehicle population in 2018, this pro- rotary and linear movements as well as services for a wide range
portion is expected to increase to one fifth in 2023. In contrast of industrial sectors. It offers goods and services ranging from
to the largely constant average vehicle age of the other regions, high-volume standard products to individual specialized solu-
the Chinese fleet is expected to be approximately one year older tions and from mechanical components through to mechatronic
on average in 2023 than in 2018 (2018: 5.4 years old; 2023: systems and digital services. The common denominator of these
6.5 years old). products and services is the technological expertise and the
know-how covering the customer’s entire system. The manage-
Therefore, the Automotive Aftermarket division is strengthening ment model of the Industrial division follows a regional approach
its global footprint especially in the Greater China as well as the based on the regions Europe, Americas, Greater China, and
Asia/Pacific growth regions, following the motto “as regional as Asia/Pacific. Within the regions, the direct business with cus-
tomers is grouped into eight sector clusters: (1) wind, (2) raw Components and mechanical systems: The cornerstone of the
materials, (3) aerospace, (4) railway, (5) offroad, (6) two-wheelers, Industrial division’s successful growth is constantly advancing
(7) power transmission, and (8) industrial automation. In addi- and improving components. Successful examples of newly devel-
tion, the business with distributors is managed by the Industrial oped products are bearings of X-life quality – a seal of quality for
Distribution unit. particularly high-performance products – or the innovative mate-
rial known as Vacrodur. The wide variety of goods and services,
Managing the business on a regional basis allows the division to which comprises standard products offering good value for
closely target its response to local customer needs and to money, technical advice, as well as solutions developed specifi-
strengthen customer loyalty. Transregional issues, such as the cally for the customer, offers the ideal balance between cost and
global technology and product strategy, are driven forward by benefit for every customer. Competitive components and an
the close network linking the regions within the division. A understanding of how they interact within the system are pre
global key account management function for key customers with requisites for success in the systems business. The Industrial
operations in more than one region ensures that their needs are division has established these prerequisites in many years of
met with the same level of quality all over the world. Thus, the cooperating with its customers and providing advice to them.
Industrial business is consistently aligned along customer and
market needs and the course for its sustainable profitable Industry 4.0: The key task of the Industry 4.0 unit of the Indus-
growth has been set. trial division is developing mechatronic products, digital ser-
vices, sector-specific solution packages, as well as new data-
The Industrial division’s product portfolio includes a wide range based business models. Examples of smart components include
of rolling and plain bearings, linear and direct drive technologies the axle box generators introduced at the InnoTrans trade show
as well as services such as maintenance products and moni- and the rolling bearings equipped with sensors (“VarioSense”)
toring systems. The focus is increasingly on smart products and presented at the Hannover Messe. Numerous Industry 4.0 prod-
on connecting components, thus increasing machine and plant ucts and solution packages in various project stages are already
efficiency. in use by customers today. These include, for instance, cloud-
based monitoring of accessory units such as electric motors
In the field of Industry 4.0, the Industrial division offers several jointly with a service provider, a complete solution for monitoring
platform designs for comprehensively improving systems. and lubricating machines that are critical to the operations of a
Whether in the drive train, in machine tools, predictive mainte- drinking water supply association, as well as an all-digital ser-
nance for wind power, or condition monitoring for trains – the vice for predicting the service life of rolling bearings in wind
Industrial division’s solution packages make Industry 4.0 very power transmissions. The next step will be using this experience
concrete. Using system integration via cloud-to-cloud communi- to further expand the range of platform-based products on offer,
cation, autonomous monitoring and lubrication of pumps, and allowing the division to respond to customer needs quickly and
electric motors that report their condition to the cloud, the flexibly.
Industrial division covers the broad range of possibilities for
jointly making intelligent maintenance a reality. These solutions Along with condition monitoring systems that can detect initial
were impressively presented at last year’s Hanover Fair. damage early on and predictive maintenance systems designed
to precisely predict a likely failure, the division is also pursuing
Sales markets other approaches. For instance, the division relies on more
The key indicator for trends in the Industrial division’s relevant efficient operation of machines via increased productivity or
market is the global market volume for rolling and plain bear- performance as well as longer up times. The skills at the core of
ings, linear technology, and service products. The Industrial divi- all Industry 4.0 solutions are the division’s mechanical expertise
sion expects market volume to increase by approximately 3% at and systems know-how that are used to develop models and
constant prices in the next five years. The growing number of interpret operating data in order to generate essential added
competitors, especially from Asia, will further intensify competi- value for the customer.
tion.
The Industrial division aims to generate 10% of its revenue from
Key growth drivers Industry 4.0 products by 2022. In the future, all Industry 4.0
The Industrial division’s success will continue to be based on its products and solutions will be offered under the Schaeffler
strong product portfolio for rotary and linear applications in the brand, with a dedicated sales team ensuring close contact with
future. Gained in many years of collaboration with customers, customers.
the know-how regarding the use of products in systems will
enable the division to grow beyond rolling bearings with complex
mechanical and mechatronic systems and Industry 4.0 products
and services. Customers need intelligent solutions and cost
reductions throughout the lifecycle of their systems, which
opens up new growth areas for the Industrial division.
Schaeffler Group functions No. 007

since January 1, 2019
Schaeffler Group
Operations, Supply Chain Man-

CEO Functions Technology Finance Human Resources
agement & Purchasing
– Quality – Corporate R&D Management – S chaeffler Production – F inance Strategy, – HR Strategy

– Schaeffler Consulting – I nnovation & Central System, Strategy & Processes Processes & Infrastructure – H R Policies & Standards
– Communications & Branding Technology – D igitalization & Operations IT – Corporate Accounting – L eadership, Recruiting &
– Investor Relations – R&D Processes, – A dvanced Production – Corporate Controlling Talent Management
– Legal Methods & Tools Technology – Corporate Treasury – Schaeffler Academy
– Internal Audit – Intellectual Property Rights – P roduction Technology – Corporate Tax & Customs – H R Systems,
– C orporate Development & – R&D Bearing – Special Machinery – Corporate Insurance Processes & Reporting
Strategy – Information Technology – S upply Chain Management & – Shared Services – S ustainability, Environment,
– C ompliance & Corporate – Strategic IT Logistics – D ivisional Controlling Health & Safety
Security – C oordination Office – P urchasing & Supplier Automotive OEM – HR Functions
– Corporate Real Estate Digitalization Management – D ivisional Controlling – HR Automotive OEM
– Q uality Operations, SCM & AAM – HR AAM
Purchasing – D ivisional Controlling – HR Industrial
Industrial
Program “CORE” completed and “FIT” established January 1, 2018, the company decided to disband its “Bearing &
The program “CORE” started by Schaeffler AG’s Board of Man- Components Technologies” (BCT) unit, which had previously
aging Directors in 2015 to revitalize the Industrial division pro- acted as an internal supplier. Under this reorganization, the
gressed on schedule. With the agreed-upon staff reduction tar- plants previously assigned to BCT were integrated into the
gets reached and the full earnings impact achieved, the first Automotive OEM and Industrial divisions. The reorganization has
wave was completed successfully. The division also worked hard eliminated duplicate structures, has brought the plants closer to
on further implementing the second wave in 2018. Given the the markets, and has established consistent responsibilities for
progress of the program “CORE” and the improved earnings the business and earnings worldwide. On this basis, it was also
trend, it was completed as at the end of 2018. In order to secure agreed that large plants currently producing for both divisions
the results of the program “CORE” and to leverage efficiencies, will be divided up and aggregated in “campus locations”. A key
the division launched a program named “FIT” in late 2018. feature of these campus locations will be the existence of sev-
eral plants at one location with shared use of support functions
such as human resources, logistics, or location planning func-
Functions tions.
The multi-dimensional structure of the Schaeffler Group includes As a first step toward implementing the change, the BCT organi-
the functional management level with five functions: (1) CEO zation was transferred to a starting organization effective
Functions, (2) Technology, (3) Operations, Supply Chain Manage- July 1, 2018, that has been replaced by the target organization
ment & Purchasing, (4) Finance, and (5) Human Resources. implemented effective January 1, 2019.
The functions are essential to securing the Schaeffler Group’s Along with integrating BCT into the divisions, the Executive
long-term competitiveness and innovative ability. In accordance Board has decided to create new “Operations & Supply Chain
with the company’s commitment to top quality, outstanding Management” departments in the four regions Europe, Amer-
technology, and exceptionally innovative spirit, the two func- icas, Greater China, and Asia/Pacific, each managed by a
tions Technology (particularly Research and Development, R&D) Regional COO, similar to the approach taken by the three divi-
and Operations, Supply Chain Management & Purchasing are sions. For this purpose, the “Operations” and “Logistics” units
discussed in more detail below. in the regions, which were previously managed separately, were
combined effective July 1, 2018. This will further harmonize and
Following the realignment of the Industrial division effective align the organizational and leadership structure at the group’s
January 1, 2017, and the set-up of the Automotive Aftermarket top level of management.
division as the Schaeffler Group’s third division as at
Quality Similar to the approach taken by the Automotive OEM division as

described above, the Industrial division has begun to establish
The Schaeffler Group’s benchmark is consistently ensuring top or expand specific structures and processes related to quality
quality and product safety across all applications. The approach vis-à-vis its key customers during the year. Additionally, in
is derived from the strategy “Mobility for tomorrow” and a accordance with the strategic direction, establishing and inte-
related package of measures, the “Quality for Tomorrow” initia- grating an Industry 4.0 quality organization was part of estab-
tive that is part of the “Agenda 4 plus One”. Aiming for products lishing the new Industry 4.0 business field in 2018.
as well as processes that are free of defects and errors, three pri-
orities were set: Well-established within the company for several years, “Fit for
Quality” is a program aimed at achieving “zero defects” and
• Continuous improvement of the core business
delivering top quality to internal and external customers. Now,
• Constant improvement of the management system and of the the focus is on changing it from being solely a quality improve-
processes ment program to representing a comprehensive quality culture.
• The preventative quality assurance measures in product The guiding principles (Fit for Quality Axioms) follow the stand
development ards of quality-oriented leadership, systematic planning and
training, the consistent use of methodologies and procedures,
The initiative is expected to be successfully completed and error detection, review of processes and measures, as well as
insight gained from the pilot projects rolled out by the end of the transfer of good solutions to other areas. The Axioms are
2020. communicated under the “FIT for Quality Academy” training
scheme which is available to plants in all regions. The training
However, the “Quality for Tomorrow” initiative is not the only way scheme has been implemented within the divisions and regions
Schaeffler is setting quality trends. In 2018, quality was again a at all locations worldwide and has also been rolled out to indi-
topic of discussion at the annual Technology Dialog, which rect areas.
included presentations on aspects of quality within the context
of key themes. One example is additive manufacturing, which is Outstanding quality is a key feature differentiating the
increasingly finding its way into the Schaeffler Group, and the Schaeffler Group from its competitors and represents the basis
related quality management. New types of quality assurance of the group’s future long-term growth. The Schaeffler Group’s
measures for this modern technology are currently being devel- high quality standards are demonstrated by, among other things,
oped. numerous awards received from customers.
As part of the Schaeffler Group’s consistent divisionalization, At this year’s GPF (Global Production Forum), Schaeffler quality
tracking quality parameter targets has now been standardized in awards were granted in the following categories:
the Automotive Aftermarket as well, in a similar manner as in the
• Outstanding quality performance in a product line
Automotive OEM and Industrial divisions, in order to be able to
run the usual improvement processes with similar efficiency. • Outstanding quality performance over many years
• Outstanding customer satisfaction
In addition, quality management was strengthened further in
2018. Global Key Account Management (Automotive OEM) was The Schaeffler Group received a total of 65 quality awards in
expanded to include the function of quality officer (GKAM-Q). As 2018 (prior year: 58). This demonstrates that the
a result, every major customer has a designated contact person Schaeffler Group’s initiatives have paid off in the Asia/Pacific
for quality issues dealing with the customer’s concerns in region, primarily in Japan and South Korea, and in the activities
accordance with the “one face to the customer” principle. related to the “Fit for Quality” program. The awards received
from customer Honda Motor Co. Ltd. in the “Best Quality Award”
The GKAM-Q organization (Automotive OEM) has been centrally category, the “Achievement Award” from Toyota Motor Europe,
managed by the Global Key Account Manager Quality since the and Mazda Motor Corporation’s “Trade Performance Excellence
beginning of 2018, with one priority being the specific quality Award” were evidence of this for the Automotive divisions, and
strategy for each individual GKAM. Furthermore, the company is the Industrial division achieved similar results. The “LG-BIQS
defining overarching standards for Schaeffler quality at the inter- Certificate” recognized Schaeffler as a successful quality sup-
face with the customer. The company has established a new plier.
GKAM-Q steering committee that meets on a regular basis to
guide these activities. All of the Schaeffler Group’s manufacturing locations are certi-
fied under globally recognized quality norms, standards, and
regulations. Following up on its activities in 2017, the
Schaeffler Group has successfully completed the rollout and Schaeffler Group R&D
implementation of the requirements of the new certification An average of 7,956 R&D staff (prior year: 7,634) at 20 R&D cen-
standards IATF 16949:2016 (Quality management system – stan- ters (prior year: 18) and additional R&D locations in a total of
dard of the automotive sector), the ISO/TS 22163 (Quality man- 24 countries represent the basis for the company’s long-term
agement system – particular requirements for application of innovative ability, which was further strengthened by evolving
ISO 9001:2015 in the rail sector), as well as the the R&D locations Erlangen and Nuremberg into F&E centers. Its
SAE AS 9100D:2016-09-20 (Quality Management Systems – 2,383 patent registrations filed with the German Patent and
Requirements for Aviation, Space, and Defense Organizations) in Trademark Office, which made the Schaeffler Group the second
all relevant Schaeffler Group plants worldwide in 2018. Compli- most innovative company for the fifth consecutive year in 2017,
ance with these standards is reviewed and confirmed using reg- are evidence of the company’s innovative ability. In addition,
ular internal and external audits at the relevant locations. more than 3,452 inventions were reported internally in 2018
(prior year: 3,294). The Schaeffler Group relies on continuous
innovation and, based on that, expects to once again rank highly
Technology
among the most innovative companies in Germany in 2018.
Globalization, urbanization, digitalization, and changing envi-
ronmental awareness are resulting in changing market require-
Research and development expenses No. 008
ments. Balancing the desire for individual mobility in times of a
surging population with the infrastructure and the environment
2014 2015 2016 2017 2018 1)
represents a fundamental challenge. This challenge creates
Research and development
enormous potential for businesses developing and offering expenses (in € millions) 622 673 751 846 847
mobility solutions. New EcoSystems open up growth areas in Research and development
many places, but also require the development of comprehen- expenses (in % of revenue) 5.1% 5.1% 5.6% 6.0% 5.9%
sive expertise ranging from energy generation through to energy Number of research and
development staff 2) 6,387 6,651 7,121 7,634 7,956
supply and energy consumption. Given the current high rate of
1) The
Schaeffler Group has initially applied the new standard IFRS 15 effective
change in the drive sector, accessing future potential requires a January 1, 2018, which requires certain development services to be included in
mindset and perspective that reflects these profound and very gross profit, among other things. The company has used the modified retrospective
approach to transition to the new requirements. Under this approach, prior year
rapid changes. amounts are not adjusted. See Note 1.5 “New accounting pronouncements” to the
consolidated financial statements for further details.
2) Averages.
In light of this, the Schaeffler Group sees its role in actively

shaping innovative and sustainable technologies. In line with the
concept of ambidexterity, Schaeffler relies on both advancing Corporate research and development: The company’s corporate
the proven and exploring the new. Protecting existing business technology, which is incremental to that of the divisions,
fields and exploring new ones in this manner is aimed at profit- develops long-term sustainable customer- and market-specific
able growth in areas with a promising future. In this context, the technical solutions and promotes interdisciplinary knowledge
Schaeffler Group relies on innovative urban mobility concepts transfer, following a systematic process that is aligned along the
and solutions for eco-friendly drive systems while consistently product lifecycle and speeds up development. The technical
advancing drive and transmission solutions based on an internal knowledge required to explore technologies is gathered, col-
combustion engine as well as smart and sustainable bearing lected, and combined in the Schaeffler Group’s competence cen-
technology solutions. ters, ensuring significant technical depth of product develop-
ment as well as quick and valid decisions.
More on the group strategy on pp. 26 et seq.
One focus of the corporate research and development activities
In order to position the organization of the Technology function is on covering the entire energy chain – from energy generation,
for current and future challenges, the structure of the Technology mainly from renewable energy sources, through to the storage
department was realigned effective January 1, 2019. The changes and consumption of energy. The global remodeling of the energy
included integrating Materials Technology and Surface Technology chain in the coming decades will be characterized by the perva-
into the Central Technology department. In addition, R&D Bearing siveness of renewable energy sources in energy generation. The
was instituted within the Technology function in order to com- extent to which their natural fluctuations can be compensated
bine, at the corporate level, the basic development activities by conventional regulation and by expanding existing power
covering all aspects of rolling bearing technology. As a result, grids is limited. Therefore, energy storage will play an increas-
starting January 1, 2019, the Technology function includes Cor- ingly important role. There will be a particular need for scalable
porate R&D Management, Innovation & Central Technology, R&D energy storage facilities that are financially viable and eco-
Processes, Methods & Tools, Intellectual Property Rights, R&D friendly.
Bearing, Information Technology, Strategic IT, Coordination
Office Digitalization, as well as Special Projects Motor Sports.
In light of this, the Schaeffler Group has entered into a develop- Schaeffler Mover No. 009
ment cooperation with CMBlu Projekt AG to develop organic
redox flow batteries to marketability and manufacture them. This
new and unique technology is largely based on renewable
resources and can be scaled to nearly any size. Hence, the tech-
nology has the potential to play an essential role in shaping the
charging infrastructure in the field of electric mobility as well as
in establishing a sustainable energy infrastructure.
Along with the energy chain, a further focus of the corporate

development activities is on urban mobility concepts. Increasing
urbanization and the resulting infrastructural challenges, such
as traffic jams and limited availability of parking, as well as a
changed legal environment for pollutant and exhaust emissions
are changing the way people move about the city and the way
they are supplied with everyday consumer goods. In this context,
autonomous and electrified mobility concepts are going to take
on an essential role in the future. Intermodal traffic in areas where space is at a premium and the
ability to change smoothly from one means of transport to
The Schaeffler Mover – the technological demonstrator for future another is increasingly gaining importance for dealing with the
autonomous vehicles – presented by the Schaeffler Group during growing volume of traffic in urban centers. Schaeffler offers an
the year is the technological basis for one of these urban innovative solution in the field of micro-mobility, the Bio-Hybrid
mobility concepts. The drive and chassis components are concept, which is a four-wheel roofed pedelec somewhere
installed in a compact assembly unit, the Schaeffler Intelligent between a pedelec and a small electric vehicle in range that
Corner Module. The system is installed in all four wheels and offers nearly emission-free mobility. In addition to the passenger
includes, along with the wheel hub motor, the suspension version, Schaeffler presented the first cargo version of the
(including springs) as well as the actuator for the electromechan- “Bio-Hybrid” for use in urban deliveries during the year. These
ical steering. The wheel module is steered by an electromechan- activities have been spun-off and concentrated in Bio-Hybrid
ical “Steer-by-Wire”-System that facilitates vehicle steering by GmbH with the aim of industrializing the Bio-Hybrid.
electronic means – a key technology for autonomous driving,
since autonomous vehicles do not have a mechanical steering Collaborations: The corporate R&D activities are founded on a
column. In order to further develop the Mover concepts, the global innovation network that contributes significantly to the
Schaeffler Group established the Schaeffler Paravan Technol- Schaeffler Group’s technological leadership. Collaborations with
ogie GmbH & Co. KG joint venture, whose objectives include fur- universities in the form of the “Schaeffler Hub for Advanced
ther expanding the company’s systems expertise in this rapidly Research” (SHARE) initiative under the unique “Company on
developing market segment. In addition, in January 2019, the Campus” concept ensure the consistent development of
company announced a technology partnership with TRE Vehicle future-oriented technologies. SHARE at KIT (Karlsruhe Institute
Dynamics GmbH aimed at advancing the “rolling chassis” of the for Technology), which was founded in 2013, concentrates on
Schaeffler Mover. electric mobility with a special focus on automated driving. In
the publicly subsidized “Omnisteer” and “SmartLoad” projects,
research teams are working on new steering concepts for autono-
mous vehicles and on the resilience of actuators. SHARE at FAU
(Friedrich-Alexander University of Erlangen-Nuremberg) focuses
its research on Digitalization along the entire value chain, while
SHARE at NTU (Nanyang Technological University, Singapore)
prioritizes personal urban mobility, and SHARE at SWJTU (South-
west Jiatong University, Chengdu) (chassis) solutions for high-
speed trains. Along with numerous other collaborations with
universities, the Schaeffler Group also has a strategic partner-
ship with Fraunhofer-Gesellschaft that has been in place since
2017.
Interconnection with start-up companies adds to this innovation Schaeffler 4ePerformance No. 010
network. The innovative strength, rapid speed, and flexibility of
start-ups are combined with Schaeffler’s experience in order to
efficiently develop ideas to the point of marketability. The
annual Schaeffler Venture Forum, where selected start-ups
present and discuss new ideas, is a key element of Schaeffler’s
start-up concept. Schaeffler extensively exchanges ideas with
start-ups via its office in Silicon Valley and collaborations with
the Munich Network, Plug-and-Play, as well as the start-up
campus Factory Berlin and the tech incubator ZOLLHOF in Nurem-
berg.
R&D in the Automotive OEM division

The Schaeffler Group estimates that in 2030, 30% of all newly
produced cars will be powered by an all-electric drive train, while
a further 40% of all new vehicles will be equipped with a hybrid
drive and another 30% with an internal combustion engine. The
many different types of energy storage and the current diversity Schaeffler’s experience with motor sports contributes to current
in drive units requires a high level of drive train and vehicle developments such as electric axle systems, which entered
expertise in order to develop technologically and commercially volume production during the year. A package customized in
efficient solutions. In order to live up to this challenge, 350 new terms of weight, space requirements, and cost to meet custom-
jobs are expected to be created at the Automotive OEM division’s er-specific requirements for function, maximum speed, and
headquarters in Buehl, mainly in the field of E-Mobility. driving dynamics can be developed using a flexible electric axle
configurator. The restricted design envelope of coaxial drive
The degree of vertical integration is continually being increased architectures places high demands on packaging. The highly
and the product portfolio expanded in order to establish integrated stepped planetary gear set combined with an innova-
Schaeffler as an E-Mobility systems supplier in the long run. One tive spur gear differential developed by Schaeffler offers a solu-
priority of these activities are electric motors. The acquisition of tion to this issue. The planetary gear design concept can also be
Compact Dynamics GmbH brought the integration of develop- applied to parallel axis drives, lowering development times and
ment expertise regarding highly innovative electric drives. Com- cost. Schaeffler also presented a particularly compact and light-
bining it with the expertise in high-volume, top-quality manufac- weight single-speed transmission concept with a parallel axis
turing further boosts the development of electric motors. The design. The modular systems for coaxial and parallel axis
acquisition of Elmotec Statomat, a manufacturer of production designs both enable a wide range of space requirements and
machinery for the construction of electric motors, which closed transmission ratios to be covered while utilizing a high number
on January 31, 2019, is another consistent step in this direction. of identical parts.
In the field of all-electric vehicles, the Schaeffler Group can tap One example of how transmission actuators are used in electric
into the know-how gained from the FIA Formula E-Championship. vehicles is the electric axle actuator (EAA) that entered volume
Winning the team title in 2018 crowned four successful years in production during the year. As a systems partner, Schaeffler not
Formula E and is evidence of outstanding expertise regarding the only provides the hardware but also develops the software to
electricdrive train. The technology transfer from motor racing to ensure optimum performance within the entire system.
drive concepts was also accelerated by the “Schaeffler 4ePerfor- Schaeffler’s integrated parking lock actuator (PLA) was devel-
mance” concept vehicle. The four integrated Formula E motors of oped as an efficient actuation module for the parking lock func-
this all-electric vehicle deliver a total power output of 880 kW tion in electric vehicles. Since this actuator is light-weight and
(1,200 hp). requires little installation space, it can be integrated into electric
axle systems or dedicated hybrid transmissions in an optimum
manner.
A large share of the vehicle population is assumed to be hybrid-

driven in the future. Schaeffler expects particularly strong
market growth for mild-hybrid vehicles that use a 48-volt
on-board electric subsystem. P0 drives – in which the electric
motor is connected to the crankshaft of the internal combustion
engine via a belt – make it possible to recuperate much of the Repair solutions presented during the year included the LuK
kinetic energy that is otherwise lost when braking. The arrange- RepSet CVT, a comprehensive repair solution for the CVT chain.
ment of the 48-volt electric motor on the crankshaft as a The related dampers and dual-mass flywheels complete this new
P1 hybrid module provides a direct link to the internal combus- portfolio for continuously-variable transmissions. In addition,
tion engine speed. Schaeffler presented the concept of the “repair shop of
tomorrow” at the major trade fair Automechanika in Frankfurt.
Recuperation and fuel-saving driving strategies are even more Visitors used mixed and augmented reality applications to take a
efficient with a P2 hybrid module on a 48-volt basis that is fitted look at the digitized future of the Automotive Aftermarket.
between the internal combustion engine and the transmission. Experts demonstrated how, for instance, a dual-mass flywheel
For front-transverse drives with a small axial design envelope, and a timing chain can be replaced in real time using interactive
Schaeffler has developed a version with an arrangement parallel support, facilitating even more efficient repair processes.
to the axle that acts on the transmission input shaft via a belt or
chain drive. In addition to recuperating braking energy, this R&D in the Industrial division
system permits electric driving at low speeds, such as in traffic The megatrend digitalization is a key driver of development in
jams and while parking and maneuvering. Furthermore, the Industrial division. Within the organizational unit
Schaeffler’s 48-volt hybrid module assists in accelerating as well “Industry 4.0”, the division presses ahead with intelligent net-
as in fuel-saving sailing, which means that the vehicle rolls freely works connecting product development, production, logistics,
with the internal combustion engine switched off and decoupled customers, and suppliers. Its technological basis are smart,
from the drive train. An integrated automated clutch provides a interconnected systems that will maximize the possibilities for
high level of comfort when restarting the engine by helping the largely autonomous production and optimum plant operation in
engine rev up immediately upon starting. the future. Going forward, the company will advance this exper-
tise using internal processes, use it for the benefit of these pro-
Along with electrified drives, the Schaeffler Group continues to cesses, and offer it to its customers while maintaining its
work on increasing the efficiency of internal combustion engines “classic” components business.
in order to further reduce harmful emissions. For instance,
Schaeffler has developed switchable roller finger followers for In this context, the Schaeffler Group offers specialized solution
cylinder deactivation in three-cylinder engines, which will be packages that increase machine and equipment availability and
integrated into volume-production vehicles. Furthermore, improve processes. Schaeffler’s Smart EcoSystem forms the
Schaeffler has carried out tests on a test engine with rolling cyl- basis for integrating smart components and systems, proven
inder activation. This design allows the specific fuel consump- visualization and analysis tools, and digital services. The com-
tion at low engine speeds and engine loads to be reduced pany presented several digital solutions for selected industry
without adversely affecting the engine’s emission behavior. sectors at this year’s Hanover Fair.
Technologies for increased efficiency in transmission systems
also play an important role. To reduce torsional vibrations in the As an example, a connection to the Schaeffler cloud and the
drive train during active sailing, Schaeffler has developed a new “Condition Analyzer” digital service helps improve plant moni-
couple pendulum, in which the dampers support each other via toring. The Schaeffler Group’s many years of bearing and vibra-
springs in a circumferential direction. In addition, the company tion analysis expertise has been incorporated directly into the
developed a new design for transmission bearings with particu- underlying algorithms. Mechanical failures – of electric motors
larly low friction, that is called “angular roller units” (ARU) and for instance – are reliably prevented by using pattern detection.
facilitates particularly low friction, thereby further increasing the For the service provider, the transition to the digital service
efficiency of conventional drive trains. means fewer on-site visits to the customer, planning of mainte-
nance work well in advance, and, therefore, increased machine
R&D in the Automotive Aftermarket division efficiency and availability to the customer.
The R&D activities of the Automotive Aftermarket division focus
on the specific requirements of customers in the global replace- The condition monitoring system also has applications in other
ment parts business. Thanks to the many years of experience places along the energy chain. For instance, Schaeffler is helping
with original equipment, the Automotive Aftermarket division to ensure reliable, fault-free operation at waterworks using a
possesses comprehensive systems know-how. Based on that, complete solution that comprises both monitoring and lubrica-
product specialists consisting of engineers and master tion of the machines that are critical to ensuring a secure supply.
mechanics develop intelligent and high-quality repair solutions One example of this is a water supply association employing a
allowing repair shops to perform professional repairs. complete solution that consists of a SmartQB condition moni-
toring system and a Concept8 lubricator to prevent pump system
failure. The preconfigured SmartQB detects irregularities in the
machines’ vibration behavior, identifies potential causes, and In addition to the activities around the development focus
then reports on the findings. The Concept8 ensures require- Industry 4.0, the Industrial division’s R&D activities also concen-
ments-based lubrication of the pumps’ bearings. This complete trate on advancing its portfolio of high-performance compo-
Schaeffler solution permits maintenance work to be scheduled nents. During the year, this involved, among other things, devel-
well in advance and maintenance processes to be improved. oping the asymmetric FAG spherical roller bearings for main rotor
bearing supports into a complete range that meets the X-life
standard. Improved load distribution corresponding to the load
Condition monitoring railway No. 011
profile typical for rotor bearing supports allows the width of the
bearing to be reduced. Thanks to this bearing design, the equip-
ment manufacturer can thus downsize the drive train while main-
taining the same performance capability. Further performance
enhancements can be achieved through the use of coating sys-
tems like Durotect B, which increases robustness, and Triondur,
which provides special wear protection.
For machine tool spindles, Schaeffler has developed bearings

made from a high-performance material named Vacrodur and
advanced them to application in volume production. The mate-
rial, which is manufactured using powder-metallurgic methods,
is extremely hard and tough, increasing wear resistance many
times over. This enables the spindle manufacturer or the
machine operator to significantly extend the application’s main-
tenance intervals, thus reducing its lifecycle costs. The higher
fatigue strength of this material further increases rolling bearing
The Condition Analyzer System, which was designed to be uni- strength. Bearings made from this material are ideally suited
versal, can also be applied in the railway environment. The digi- especially to high-performance aluminum machining required in
tized monitoring of motorized and trailer bogies based on sol- applications like manufacturing aerospace components.
id-borne vibrations and other sensors holds immense potential
for making the operation of passenger trains even safer and Digitalization and IT
more cost-effective. Schaeffler can offer a great deal of added The digitalization megatrend poses new challenges, but also
value here thanks to its knowledge of the application-specific offers enormous opportunities. Digitalization is changing
behavior of rolling bearings combined with decades of expertise existing processes: in research and development, purchasing,
in the field of vibration analysis gathered from a range of dif- manufacturing, logistics, distribution, as well as in the human
ferent industries. This expertise enables Schaeffler to generate resources and finance functions. Therefore, the Schaeffler Group
data analyses that provide high-quality information and can be has implemented the “Digital Agenda” as one of the 20 initia-
delivered via a range of digital interfaces. As a result, the oper- tives of its program for the future, the “Agenda 4 plus One”. The
ator no longer needs to have specific knowledge of vibration or groupwide and cross-functional implementation of the group’s
perform manual evaluations. Digitalization projects are centrally managed by the “Coordina-
tion Office Digitalization”.
The systems are also used and advanced internally. One example
of this is the intelligent maintenance system for the operationally An actual application of this is the digitalization of the group’s
critical machinery the Schaeffler Group has implemented at its supply chain management. For Schaeffler, digitalizing the supply
“European Distribution Center” (EDC) Central in Kitzingen. chain means constantly increasing transparency of Schaeffler’s
SmartCheck systems continuously monitor the lift and travel value chains. This transparency ranges from tracking products
drives in the storage and retrieval systems, lifting stations, and through to warning messages regarding imminent delays in the
spiral conveyors. Concept8 devices provide autonomous and supply chain and data-driven support for decision-makers. For
requirements-based lubrication to the pallet conveyor and instance, Schaeffler has aggregated and analyzed global value
in-floor conveyor systems. Autonomous subsystems reduce chain data in order to gain a global view of relationships and
costly manual maintenance tasks and the risk of maintenance dependencies within end-to-end value streams. This approach
measures being carried out incorrectly. This predictive mainte- provides transparency regarding product dwell time, cost, and
nance scheme was elected winner of this year’s “LOGISTRA best interrelationships of value streams based on Big Data analytics.
practice: Innovation” vote by logistics magazine LOGISTRA. It has already been piloted successfully and will be rolled out
gradually along the global value chains.
Digital Agenda of the Schaeffler Group No. 012 systems via an ecosystem of interfaces and offer a better user
experience. Implementation of Schaeffler’s IT strategy is the
Markets/customers objective of the “IT 2020” initiative. It is designed to help
actively shape the Schaeffler Group’s transformation into a digi-
tized company using the relevant IT technologies. Along with
Automotive Automotive
External: OEM Aftermarket Industrial advancing the Schaeffler Cloud Platform, proven technologies
new and IT products from the market are being integrated into
business
models
Schaeffler’s IT landscape, starting with cloud solutions and ded-
icated data processing centers through to edge computing close
Digitalization
to the physical world in factories and distribution centers. In the
Internal:
eﬃciency coming years, one of the primary projects will be the introduction
of SAP S/4 HANA as the company’s future ERP system. It will
Processes/infrastructure/systems
involve gradually and sustainably enhancing the way
Schaeffler’s business processes are mapped to the IT systems
The Digital Agenda is oriented toward the benefit of its users – and accelerating process execution. Cloud-based applications
both internal partners and external customers. To improve will be used for certain processes, complementing
internal processes and generate additional benefits for external SAP S/4 HANA.
customers, existing business models are expanded and new,
digital business models are developed and implemented. To this The transformation of the entire company – essential to being
end, the Schaeffler Group is adding sensors, actuators, and con- well-positioned for digital change – is performed using the
trollers, including the relevant software, to its components. They “Agenda 4 plus One”. Restructuring the process and IT landscape
will facilitate collecting and processing data on machine or plant represents one of the drivers of this transformation. This has
condition and behavior in the future. This data will be used in involved considerably expanding the use of agile methods and
data analytics and machine learning to generate performance integrating these methods into the underlying IT processes,
improvements throughout the company. For instance, artificially which are currently being updated and oriented toward the
intelligent models are using sensor data to learn patterns that future as part of the “Process Excellence” initiative. A key cor-
indicate the amount of tool wear. These models not only recog- nerstone of these activities is establishing an agile IT organiza-
nize known patterns, but also apply what they have learned to tion that designs, implements, and operates the IT of tomorrow
new behaviors and machines, making them very versatile. in close collaboration with the divisions, functions, and regions.
The technological basis for these data analytics and machine

Operations, Supply Chain Management & Purchasing
learning methods is the cloud-based Schaeffler Data & Analytics
Platform that can be used worldwide. It both contains the central Production
Schaeffler Data Lake that facilitates efficient storage and highly As a global automotive and industrial supplier, the
parallel processing of nearly unlimited amounts of data and pro- Schaeffler Group currently has a global production system con-
vides the newest state-of-the-art tools for company-wide data sisting of 73 plants in 22 countries. The plants, which employ
integration. This connects data silos distributed around the approximately 67,000 staff, represent the Schaeffler Group’s
world within the Schaeffler Group and external business part- “backbone” and are managed based on uniform principles. The
ners’ data sources, creating a uniform, harmonized information global network of plants, the manufacturing technologies they
repository. Thus, the Schaeffler Big Data & Analytics Platform utilize, and the high degree of vertical integration represent key
provides the basis for data-intensive analyses, artificially intelli- factors underlying the Schaeffler Group’s worldwide success.
gent solutions involving extensive calculations, and for new
data-driven products such as the Digital Twin in the Industry 4.0 In order to further strengthen the production system, all plants
environment. During the year, the platform started operating ini- were assigned to the Automotive OEM and Industrial divisions
tial pilot applications and will go live for business applications in during the year. This realignment brings the plants closer to the
2019. The platform is also available to Schaeffler’s regions markets and establishes consistent responsibilities for the busi-
worldwide. Where necessary for regulatory or technological rea- ness and earnings worldwide. In order to comprehensively imple-
sons, regional data and analytics platforms can be set up using ment the realignment, the “Bearing & Components Technologies”
the same architecture and technology designs and integrated (BCT) unit, which had previously acted as an internal supplier,
into the global Schaeffler Big Data & Analytics Platform. was integrated into the divisions and each of its plants assigned
to one of the divisions. As a result, 20 plants are producing for
The technological basis for these types of applications is pro- the Industrial division and 53 plants for the Automotive OEM
vided by Schaeffler’s IT department. The Big Data & Analytics division. The Automotive Aftermarket division will continue to be
components are part of a hybrid multi-cloud solution. Modern supplied from the Automotive OEM division’s manufacturing
and differentiating IT applications are created using it as a basis; locations as before.
they can be efficiently linked with other internal and external
Along with these reassignments, key functions within plants A tangible example of this is the improved utilization of capital
located at one production location will be combined at campus tied up in machinery. For this purpose, Schaeffler has developed
level. This results in a high level of transparency and standard- a system that helps prepare for investment decisions by pro-
ization and generates synergies. Overall, the global production viding an overview of the spare capacity of all significant
system makes it possible to maintain consistent high levels of machines of the Schaeffler Group. The data base consists of
quality and efficiency across all of the Schaeffler Group’s plants. machine-specific planning data as well as data from the Manu-
Schaeffler process management is part of the group strategy facturing Execution System, categorized into technology classes.
and, as such, represents the basis for the continuous improve- All relevant machines of the Schaeffler Group have been
ment of quality, cost efficiency, and delivery performance. assigned to one of these technology classes, which are based on
Among other things, it facilitates very rapid transfer of innova- the various manufacturing methodologies of a specific pro-
tive methods and processes within the entire network of plants. cessing step. This increases transparency regarding utilization,
Standardization accelerates production start-ups, enabling the which forms the starting point for determining appropriate meas
company to rapidly and flexibly respond to regional market fluc- ures for improvement, thus supporting capital expenditure plan-
tuations. ning and increasing overall equipment effectiveness.
Schaeffler’s technology network drives new production technol-

Additively manufactured ball bearing with No. 014
ogies, enhancements and improvements designed to expand the
cooling channels
company’s technological leadership, as well as the development
of uniform standards. The technology network is tasked with
developing volume production technologies. The technology net-
work enables the company to uniformly advance its production
and manufacturing technologies, realize synergies, and benefit
from standardization across all divisions.
In addition, digitalization provides significant opportunities for

the global production system, and the company has developed a
comprehensive approach to digitizing Schaeffler’s production.
Its objective is to improve performance and efficiency of the sen-
sor-based, interconnected, data-based enhancement of pro-
cesses, supported by artificial intelligence as applicable, beyond
what previous approaches have achieved. Another objective is to
reduce and simplify manual interfaces by providing individual
information to staff, tailored to their specific task. Following the
development of the required fundamentals and their implemen- Another example of digitalization in manufacturing is additive
tation in the form of suitable pilot projects, the company intends manufacturing (AM). The manufacturing technique colloquially
to, along with improving individual technologies, comprehen- called 3D printing refers to numerous technologies that involve
sively enhance the value stream – in planning as well as in oper- directly manufacturing components starting from a digital 3D
ation. product model, without the need for drawings, manufacturing
programs, or tools. As a result, AM provides the basis required to
successfully implement a fully digital process chain from the
Collaborative assembly robot No. 013
product model through to the finished component. The
Schaeffler Group had already created the basis for successfully
implementing AM in the manufacturing system in previous years.
In the future, the company will focus on applying AM in volume
production, starting with small-series production due to the
technological limitations AM techniques are still subject to. How-
ever, this initial application will already involve the integration of
AM into existing process chains and the development of new
hybrid process chains. An internal AM competence center is
already working on this in an interdisciplinary manner with
numerous departments as well as externally with a network of
selected partners. These measures are designed to make the
Schaeffler Group a reliable and flexible supplier of additively
manufactured products.
Schaeffler Group plants and R&D centers No. 015
World South Korea

Ansan
Russia Changwon
Canada Jeonju
Ulyanovsk
Stratford (2)
U.S. Japan
Cheraw (2) Yokohama
Danbury
Fort Mill (2) China
Mexico Anting
Joplin
Puebla Nanjing
Spartanburg
Irapuato Suzhou
Troy
Wooster Taicang (4)
Yinchuan (2)
Brazil
Sorocaba (2)
India
Hosur
South Africa Pune
Port Elizabeth Vadodara
Savli
Thailand
Chonburi
Vietnam
Biên Hòa City
1 Europe
(enlarged section) United Kingdom Germany
Llanelli Buehl
Czech Republic
Plymouth Eltmann
Lanškroun
Sheffield Erlangen
Svitavy
Gunzenhausen
Slovakia Hamm/Sieg
Kysucké Nové Mesto Herzogenaurach
Skalica Hirschaid
Hoechstadt (2)
Homburg (3)*)
France Ingolstadt
Calais Romania Kaltennordheim
Chevilly Braşov Lahr
Haguenau (2) Austria Luckenwalde
B erndorf Morbach
-St. Veit Nuremberg
Hungary Schweinfurt (2)
Debrecen Steinhagen
Portugal Szombathely Suhl
Caldas da Rainha Unna
Wuppertal
Italy
Momo
Spain
Elgoibar
Regions 1) Europe Americas Greater Asia/

China Pacific
R&D centers 12 5 1 2
Plants 46 14 8 5
Automotive 33 10 6 4
Industrial 13 4 2 1
Number of plants in brackets
1) Regions reflect the regional structure of the Schaeffler Group.
*) 2 plants Automotive, 1 plant Industrial

Plants in the regions: A total of 46 plants represent the In its Greater China region, the group operates 8 plants. The per-
Schaeffler Group in its Europe region. In addition to manufac- sistently high level of demand for Schaeffler products in China
turing locations in Germany, Western and Southern Europe, the requires a continual expansion of local production capacity. As a
group also maintains significant production plants in Central result, the location in Nanjing, China, was expanded in 2018 in
and Eastern Europe. The main plants of the Automotive OEM divi- order to meet increasing demand for rolling bearings for indus-
sion in Buehl and the Industrial division in Schweinfurt as well trial applications as well as for engine components for the
as the plant at the corporate head office in Herzogenaurach with Engine Systems business division. Additionally, the ground-
their approximately 9,100 production employees form the basis breaking ceremony was held at the new production location in
of the Schaeffler production network. Together with the R&D cen- Xiangtan, China, that follows the “Factory for Tomorrow” con-
ters and corporate functions, they guarantee the development cept. Schaeffler is constructing a plant for automotive parts and
and industrialization of new systems under the “Mobility for precision bearings approximately 200,000 square meters in size.
tomorrow” strategy and the advancement of the Schaeffler pro- The “Factory for Tomorrow” concept, an initiative under the com-
duction system. pany’s program for the future, the “Agenda 4 plus One”, is
aimed, in particular, at increasing flexibility, modularity, and
In Buehl and Herzogenaurach, several projects for electric and productivity while also raising employer attractiveness and
hybrid vehicles for international automobile manufacturers have workplace quality. Recruiting and training for the new location
entered volume production and a large number of other systems commenced in 2018, and initial machines will be installed as
are under development. For example, gears will play an early as in 2019.
important role in electric mobility and represent one of the
remaining mechanical core components of the drive train. Spe- The Schaeffler Group has 5 plants in its Asia/Pacific region. By
cial noise emission requirements apply to transmissions. In building a new plant in Biên Hòa City, Vietnam, that was com-
order to be able to directly influence the running smoothness by pleted in late 2018, the Schaeffler Group has considerably
better coordinating the interaction of gears, Schaeffler is expanded its production capacity for rolling bearings in this
building a pilot plant for gear production in Herzogenaurach. region. In this context, the existing manufacturing facility in
Volume production of the first mechatronic systems for Indus- Vietnam will move to the new production building that meets
trial customers is up and running in Schweinfurt. Meanwhile, future requirements. Biên Hòa City mainly manufactures
additional space for production, development, prototyping, and plummer blocks and needle roller bearings with an international
construction of special machinery has already been generated at design with a high degree of vertical integration.
these locations or is still partly in the planning stage.
Supply chain management
Production capacity is continually being expanded in the Europe The supply chain management function is responsible for
region due to increasing demand for Schaeffler products. For designing, operating, and continually improving the
instance, the plants in Debrecen, Hungary, Kysucké Nové Mesto, Schaeffler Group’s entire supply chain. The primary goal of
Slovakia, and Pune, India, were expanded in 2018, further supply chain management is to increase customer satisfaction
strengthening the Schaeffler Group’s network of plants in by way of timely, accurate, and efficient supply to all customers
Eastern Europe, which is already quite strong, and building and plants worldwide.
capacity for the Indian growth market. The Debrecen plant manu-
factures tapered roller and ball bearings for transmission appli- In 2018, Schaeffler started its “Global Supply Chain” initiative
cations. Products manufactured in Kysucké Nové Mesto include – part of the “Agenda 4 plus One” – to more closely align its
wheel bearings and electronic steering and brake systems. In logistics processes along its three divisions, Automotive OEM,
Pune, an expansion of manufacturing capacity for engine compo- Automotive Aftermarket, and Industrial. The initiative focuses
nents and transmission applications is under way. the process-related and structural alignment of the three divi-
sion’s supply chains on customer satisfaction and efficiency as
The Schaeffler Group operates a total of 14 plants in the well as on the comprehensive nature of efficient logistics value
Americas region, including 8 plants in the U.S. and 2 each in chains. Along with a supply chain design that optimizes supply
Canada, Mexico, and Brazil. In Wooster in the U.S., production chain inventory levels, thus helping to reduce working capital,
has been expanded and initial electric mobility projects have the initiative involves creating a platform for integrating sup-
started up in 2018. In Mexico, the Schaeffler Group operates pliers and for efficiently supplying customers. The objective of
2 plants with a total of approximately 2,600 employees. In 2018, the initiative is an increase in delivery performance and agility.
these plants were expanded once more, further increasing The initiative is cross-functional and cross-divisional in nature.
capacity for clutches, double-clutch transmission systems, and
wheel bearings. The company has also established an assembly In 2018, the supply chain management function was responsible
facility for thermal management modules for the region. The for managing approximately 210 warehousing locations with
location in Joplin is being expanded further as well in order to more than 400,000 square meters in storage space and for
increase manuf acturing capacity for bearings for industrial appli- moving approximately 300,000 tonnes in freight between the
cations. most significant destinations within the Schaeffler Group.
More than 120 shipping warehouses ensure deliveries to cus- to the continual improvement of the Schaeffler Group’s supplier
tomers. Logistics activities were expanded compared to the prior network. The key objectives of purchasing are to improve the
year. quality provided by suppliers by cooperating extensively with
suppliers, secure competitive procurement costs, and to opti-
A significant element of the strategic alignment of the mize the supply chain in order to increase the reliability of supply
Schaeffler Group’s supply chain management is the “European by utilizing better logistical connections.
Distribution Center” (EDC) project. This project is designed to
establish a high-performance logistics network for the Industrial The purchasing function consists of the departments for produc-
division. In 2018, commissioning of the “EDC Central” in tion and non-production materials, with procurement of produc-
Kitzingen was celebrated in an opening ceremony and initial tion material managed both at the corporate and at the divisional
orders were delivered to customers. The company plans to con- level. To strengthen the divisional purchasing functions, the pur-
nect all plants to the EDC and to supply all Industrial customers chasing volume under divisional responsibility was increased
in Europe exclusively from the EDC by 2020. significantly in 2018 in order to deepen the connection between
the purchasing function and the divisions and to more firmly
embed the responsibility for earnings in the divisions. In addi-
European Distribution Center (EDC) Central No. 016 tion, purchasing is divided into the Europe, Americas, Greater
China, and Asia/Pacific regions, which incorporate the pur-
chasing function for the respetive plants.
In 2018, the Schaeffler Group reported an operational increase

in the total volume of purchases compared to the prior year. The
purchasing volume of production material (raw materials and
components) included here rose, as did the purchasing volume
of non-production materials (primarily intangible assets, prop-
erty, plant and equipment, tools, supplies, and services). The
Schaeffler Group was able to ensure supply to its plants around
the world at all times in 2018. Purchases related primarily to the
Europe (65%) and Americas (15%) regions. 13% and 7% of pur-
chasing volumes related to the Greater China and Asia/Pacific
regions, respectively.
The Schaeffler Group uses various raw materials such as steel

For the Automotive Aftermarket, an assembly and packaging (flat steel or steel bar), iron and aluminum casting, as well as
center known as Aftermarket Kitting Operation (AKO) is currently non-ferrous metals in manufacturing its products. The produc-
under construction in Saxony-Anhalt near Halle (Saale). The AKO, tion materials Schaeffler uses primarily depend, directly or indi-
an initiative under the “Agenda 4 plus One”, will be the main rectly, on the trend in the price of scrap steel, coking coal, and
supply hub for all of the Automotive Aftermarket division’s other iron ore, as well as non-ferrous metals. Price changes are nor-
regional warehouses. In addition, customers in Central Europe mally either passed on indirectly with a time-lag via changes in
will be supplied directly from the AKO. Its construction started costs charged by suppliers or via new prices during contract
with a cornerstone laying ceremony during the year. The AKO will negotiations.
commence operations in the first half of 2020.
Under the strategy “Mobility for tomorrow”, the purchasing func-
In this manner, the investments in the EDC Central and in the tion is developing purchasing capabilities for new materials,
AKO will directly help improve the Schaeffler Group’s delivery especially for E-Mobility and Industry 4.0. Additionally, the pur-
performance and secure its competitiveness. chasing function is helping to harmonize and standardize pro-
cesses while reducing costs by implementing a multi-function
Purchasing shared service center organization. Furthermore, the “Working
The Schaeffler Group’s purchasing function ensures the supply Capital” initiative, which is part of the “Agenda 4 plus One”, has
of goods and services to the plants taking into account quality, harmonized purchasing terms.
cost, and delivery performance. By means including involving
suppliers in the process of establishing production, it guaran-
tees external supply even before production starts. By consoli-
dating purchasing volumes, the purchasing function contributes
Regions work and logistics activities, as well as realigning the distribu-

tion locations. In light of this, proactively localizing activities in
The Schaeffler Group’s three-dimensional matrix organization the markets of the future constitutes one of the key challenges in
divides the company’s business not only into divisions and func- implementing the strategy “Mobility for tomorrow”. It also
tions, but also groups the company’s activities into the four demands thinking even more deeply in terms of global connec-
regions Europe, Americas, Greater China, and Asia/Pacific. Each tions and delegating responsibility away from head office in the
of the Schaeffler Group’s four regions is managed by a Regional future. In addition to improved cooperation with local customers
CEO, who is a member of the Schaeffler Group’s Executive Board. and suppliers, the Schaeffler Group’s growing localization
This organizational arrangement allows for flexible management increases efficiencies in purchasing and logistics and generates
of the regions and facilitates cooperation with regional cus- several benefits regarding sustainability and the environment.
tomers. The resulting growing regional presence is also reflected in a
high degree of localization. The degree of localization describes
the relation of a region’s sales 1 to sales volume manufactured in
Schaeffler Group revenue No. 017
that region.
by region
in percent by market view
The Europe region combines the subregions Germany; Western
Asia/Pacific 10.5 Europe, Central and Eastern Europe & Middle East and Africa
(CEEMEA), as well as India. The Germany subregion represents
the Schaeffler Group’s largest sales market. The Europe region
Greater China 18.0 Europe 51.3
contributed 51.3% (prior year: 51.2%) of consolidated revenue in
2018. The degree of localization amounted to approximately
96% (prior year: 96%) in 2018. The Europe region employed a
Americas 20.2
total of 63,165 employees in 2018, representing 68.3% of the
company’s entire workforce. This figure includes the employees
of the group’s global head office in Herzogenaurach. The region
has 46 plants and 12 R&D centers. Its regional head office is
With approximately 170 locations worldwide, 73 production located in Schweinfurt.
facilities, 20 research and development centers, and a tight-knit
sales and service network, the Schaeffler Group ensures that its In 2018, the Schaeffler Group decided to expand the mecha-
customers always find it close at hand – true to its guiding prin- tronics development and manufacturing facility into a digital
ciple: “We are a global player with a local presence”. Coopera- training factory. The decision is part of the “Focus” initiative,
tion across divisions and countries thus leads to a high degree of which forms part of the “Agenda 4 plus One”. Construction and
flexibility in solving new customer requirements and the oppor- the move to the new premises, including appropriately refurbishing
tunity of anticipating emerging trends early on. as well as combining them with those of Industry 4.0 and the
vocational training facility, will be completed by the end of 2019.
Schaeffler continues to consistently work on changing its
corporate image to the “Schaeffler” corporate brand. The LuK, As part of its program for the future, the “Agenda 4 plus One”,
INA, and FAG brand emblems have already been replaced the Schaeffler Group is also strengthening the Buehl location in
with SCHAEFFLER at many locations and plants in the Europe, the Europe region by constructing a state-of-the-art development
A mericas, and Asia/Pacific regions. The new corporate design building and new headquarters for the company’s Automotive
is an important element of the “Global Branding” project, one of OEM division. This will also boost the company’s activities in the
the initiatives under the program for the future, the “Agenda 4 field of electric mobility worldwide. 350 new jobs, primarily in
plus One”. The initiative is designed to help the company con- the field of electric mobility, are expected to be created over the
tinue to press ahead with its strategy “Mobility for tomorrow”. next few years. The company will invest a total of approxi-
Hence, the group is harmonizing its worldwide brand identity mately EUR 60 m in this location.
and corporate image – in line with “One Schaeffler. One Team.
One voice”. For the Greater China region, the initiative was As part of the initiative described above, the Schaeffler Group
kicked off in September 2018 at the Anting location. decided to reorganize its UK business activities. The reorganiza-
tion calls for the consolidation of the logistics centers in Sutton
In its Global Footprint initiative, which is part of the “Agenda 4 Coldfield and Hereford and the closure of the production loca-
plus One”, the Schaeffler Group is continually working to further tions Plymouth and Llanelli. These locations’ production will be
develop its global stature. Among other things, the initiative moved to existing locations in other countries. The Sheffield
includes expanding and creating regional research and develop- location will be retained. The proposals are designed to generate
ment expertise, improving the structure of the global plant net- synergies and increase efficiency.
1 Sales by market view.

Schaeffler Group regions and subregions No. 018
Schaeffler Group
Western South Southeast

Germany CEEMEA 1) India North America South America China Japan
Europe Korea Asia
1) C EEMEA = Central and Eastern Europe & Middle East and Africa.
Following completion of the merger of INA Bearings India Private company to further expand not only E-Mobility, but also its local
Limited and LuK India Private Limited with listed company presence and to consistently raise the degree of localization in
Schaeffler India Limited during the year, the Schaeffler Group the future.
now has only one subsidiary in India, the listed company
Schaeffler India Limited. The transaction increased The Asia/Pacific region comprises the subregions South Korea,
Schaeffler AG’s indirect interest in Schaeffler India Limited from Japan, and the countries in Southeast Asia. The Schaeffler Group
approximately 51% to approximately 74%. This transaction has has been represented in this region since 1953. 10.5%
simplified the previous structure, reduced complexity, and cre- (prior year: 10.5%) of group revenue was generated by this
ated a strong Schaeffler entity in India in order to better realize region in 2018. The degree of localization amounted to approxi-
the potential for growth in India. mately 37% (prior year: 38%) in 2018. The Asia/Pacific region
had 3,199 employees. The regional head office is located in
The Americas region consists of the two subregions North Singapore. The Schaeffler Group operates a total of 5 plants and
America and South America. This region contributed 20.2% 2 R&D centers in this region. During the year, the company estab-
(prior year: 20.8%) of revenue in 2018. The degree of localization lished a research and development center for the megatrend
amounted to approximately 70% (prior year: 71%) in the Amer- 21st century urban mobility in order to identify both the needs as
icas region. A total of 13,138 staff were employed at 14 plants well as the opportunities that come with urbanization. The
and 5 R&D centers as well as at distribution locations in North “E-Mobility” initiative, which is part of the “Agenda 4 plus One”,
and South America. The Americas region has its regional head opens up completely new opportunities and business fields for
office in Fort Mill in the U.S. The Schaeffler Group has been man- the company. The Schaeffler Group develops eco-friendly vehicle
ufacturing in this region since 1953. designs and urban mobility solutions for people in the megaci-
ties and reflects on the sustainable generation and storage of
In Brazil, Schaeffler has been represented for 60 years now. energy.
Today, over 3,500 employees work at the almost 170,000 square
meter site in Sorocaba. Schaeffler manufactures products for
chassis, transmission, and engine systems for commercial vehi-
cles, motorcycles, agricultural machinery, and many other indus-
trial and automotive applications at this plant.
As China is a strategically important sales market for the

Schaeffler Group, China and, among others, Taiwan and Hong
Kong are managed together as a separate Greater China region.
The regional head office is located in Anting in metropolitan
Shanghai, China. Schaeffler’s first subsidiary in this region was
founded in Taicang, China, in 1995. The region generated 18.0%
(prior year: 17.5%) of group revenue in 2018. The degree of local-
ization amounted to approximately 70% (prior year: 73%). A total
of 12,976 staff were employed in Greater China. 8 plants and
1 R&D center are located in this region. As a consequence of the
especially dynamic trend in recent years, it is important to the
Fundamental information about the group I Group strategy and management
Schaeffler Group mission and vision No. 019
Vision
“As a leader in technology, we combine a passion for
Mission innovation with the highest standards of quality to shape
the future of mobility – for a world that will be cleaner,
“Guided by the values of a global family business, we work safer, and smarter”.
closely together with our customers as true partners to deliver
a compelling value proposition through our best-in-class
expertise in manufacturing technology and systems
know-how. In doing so, we contribute to the success
of our customers, the advancement of our employees,
and the prosperity of our society”.
1.3 Group strategy and management Vision and mission
In its mission, the Schaeffler Group describes the task it is com-

Strategy “Mobility for tomorrow” mitted to. Underlying this mission are three key concepts:
working in partnership with all customers and business part-
The Schaeffler Group is a global automotive and industrial sup- ners, top-level expertise in manufacturing technology, and
plier. Top quality, outstanding technology, and exceptionally advanced systems know-how. The Schaeffler Group’s vision and
innovative spirit form the basis for the continued success of the mission mutually complement and amplify each other, with the
company. By delivering high-precision components and systems vision describing the aspirations that will guide the group’s
in engine, transmission, and chassis applications, as well as activities in the future.
rolling and plain bearing solutions for a large number of indus-
trial applications, the Schaeffler Group is already shaping
4 Focus areas
“Mobility for tomorrow” to a significant degree.
As its fundamental assumption about the future of its markets,
In late 2016, the Schaeffler Group developed its strategy the Schaeffler Group has identified four megatrends that will sig-
“Mobility for tomorrow” to guide its way into the future and pre- nificantly influence its future business: climate change, urban-
sented it to the public. The year 2018 was all about imple- ization, globalization, and digitalization. From these mega-
menting this strategy. As an example, the Automotive OEM divi- trends, the Schaeffler Group derived 4 focus areas that form the
sion established its new “E-Mobility” business division effective basis for the company’s strategic direction.
January 1, 2018. It combines all components and system solu-
tions for hybrid and all-electric vehicles. The Industrial division Eco-friendly drives
established the Industry 4.0 strategic business field aggregating One of the primary goals of the Schaeffler Group is to develop
the entire industry-specific business with mechatronic systems energy-efficient drive systems with low or zero emissions. In the
and digital services. The comprehensive program for the future, automotive field, this means on the one hand further optimizing
the “Agenda 4 plus One”, was expanded from 16 to 20 initiatives conventional combustion engines, and on the other hand devel-
in early 2018 in order to also address issues the company has oping drive solutions in the area of E-Mobility, whether for vehi-
more recently put a sharper focus on. All 20 initiatives under the cles with hybrid drive trains or for all-electric vehicles. Key com-
“Agenda 4 plus One” are in the implementation phase. Imple- ponents such as variable valve train systems, the thermal
mentation of the program is currently 55% complete. All strategic management module, wet and dry double-clutches, and elec-
activities, ranging from design right through to implementation tronic control modules help reduce CO2 emissions of conven-
and communication, focus on the same fundamental elements: tional drives based on internal combustion engines. In addition,
one common vision and mission, 4 focus areas, 8 strategic pil- for the Schaeffler Group’s automotive customers, innovative
lars, and the 20 strategic initiatives of the “Agenda 4 plus One”. products for the field of electric mobility, such as hybrid mod-
Mobility for tomorrow – 4 focus areas No. 020
Eco-friendly drives Urban mobility
Optimized Two-wheelers
combustion engine Inner-city railways
Electric cars Micro mobiles
Industrial drives
Mobility for
Interurban mobility tomorrow Energy chain
Rail vehicles Wind power

Aircraft Solar power
Off-highway Conventional power
generation
ules and transmissions, the electric axle drive, or the wheel hub Interurban mobility
motor “E-Wheel Drive”, play an increasingly important role in The term interurban mobility means interconnecting global cen-
achieving lower CO2 emission targets. The same logic can be ters. As globalization progresses, traffic will increase signifi-
applied to modern industrial drive systems, where the cantly worldwide over the years to come, rail traffic in particular,
Schaeffler Group benefits from its wealth of knowledge in the but air traffic as well, and require a large degree of flexibility.
automotive field, enabling it to utilize synergies. Providing modern and efficient mobility solutions presents a key
challenge to both industries. The Schaeffler Group is developing
Urban mobility new product and service concepts such as online condition mon-
The shift in mobility is nowhere as noticeable as it is in mega itoring solutions for the railway sector and innovative business
cities across the globe. At the same time, it is nowhere as neces- models for the use of rolling bearing solutions.
sary. Cities like Moscow, Tokyo, or Shanghai experience a daily
traffic volume in which fast and flexible movement is almost Energy chain
impossible. At the same time, more and more cities are banning Common to all of the focus areas mentioned above is the con-
conventionally-driven cars from their downtown areas. This tinuing need for the cleanest energy possible. In light of dwin-
trend calls for new mobility solutions, whether in micro-mobility dling resources and significant climate challenges, worldwide
or by designing more efficient public transit. In order to identify demand for clean energy is growing. Schaeffler partners with the
both the needs and the opportunities that come with 21st cen- energy sector, assisting in the development of renewable energy
tury urban mobility, Schaeffler has established a research and production and focusing on wind power, hydropower, and solar
development center for urbanization in Singapore. The densely power. In conventional energy generation as well, the
populated island state is regarded as a living lab for urban Schaeffler Group sees opportunities for expanding its range of
mobility. The acquisition of the Space Drive-Technology by the products and services. After all, ultimately there is both poten-
joint venture Schaeffler Paravan Technologie GmbH & Co. KG pro- tial and a need for improvements in all segments of the energy
vided a significant technological stimulus designed to help press chain – from its production to its transport and conversion
ahead with the development of innovative mechatronic chassis through to energy consumption. Hence, the Schaeffler Group
systems through to the “rolling chassis”. The “Bio-Hybrid” micro also offers a comprehensive portfolio of products in the field of
mobile and the “E-Board” nano mobile are further evidence of renewable energy – from bearing solutions for wind turbines
the Schaeffler Group’s strong innovative ability in this area. through to solutions for solar and water power – as well as tech-
nological and systems expertise for a variety of drive types,
including even fuel cells and synthetic fuels.
8 Strategic pillars No. 021
1 We want to be the
preferred technology
2 We are an Auto-
motive and Industrial
3
We are a global
company with a local
4 We produce
components and
partner for our supplier. presence throughout systems.
customers. the world.
5 We view E-Mobility,
Industry 4.0, and Digita-
6 We strive for the highest
possible quality,
7
We want to
be an attractive
8 We live by the
values of a global
lization as key opportu efficiency, and delivery employer. family business.
nities for the future. performance.
8 Strategic pillars 3 We are a global company with a local presence

throughout the world.
The strategy “Mobility for tomorrow” defines the company’s With its approximately 170 locations worldwide, 73 production
scope for future action and constitutes the basis for the contin- facilities, 20 research and development centers and a tight-knit
uous further development of the Schaeffler Group. In order to sales and service network, the Schaeffler Group ensures that the
describe this scope for action in a manner that is specific and customer always finds it close at hand. For only those who recog-
easily understood, the company has devised 8 strategic pillars nize and understand the challenges confronting their customers
that describe what Schaeffler wishes to achieve or further can develop tailored solutions. And only those who maintain a
improve in the future. local presence are able to respond quickly.
1 We want to be the preferred technology partner for our 4 We produce components and systems.
customers. Schaeffler supplies components for products that facilitate and
For many years now, Schaeffler’s comprehensive systems promote mobility. At the same time, the company understands
know-how, cutting-edge technological expertise, and unwav- and is able to deliver complex modules and complete system
ering commitment to customer service have made the company a solutions. Schaeffler values both business segments equally.
highly sought-after development partner for its customers in the And for good reason: Those without expertise in components will
automotive and industrial sectors. On this basis, the not be able to handle the system.
Schaeffler Group will continue to shape the mobility of the future
together with its customers. 5 We view E-Mobility, Industry 4.0, and Digitalization as
key opportunities for the future.
2 We are an Automotive and Industrial supplier. As a leading technology partner, the Schaeffler Group began
The Schaeffler Group is an automotive and an industrial supplier. engaging in the topics of E-Mobility, Industry 4.0, and Digitaliza-
The two divisions are united by the Schaeffler Group’s worldwide tion years ago and has made these areas a clear priority. As a
manufacturing excellence and global platform of production supplier, Schaeffler wants to take an active role in shaping this
facilities combined with economies of scale in purchasing mate- development for its customers and considers this a key future
rials and commodities. In addition, the Schaeffler Group’s global opportunity.
research network facilitates cross-divisional technological inno-
vations. Diversification across divisions will continue to generate 6 We strive for the highest possible quality, efficiency,
synergies and promote the transfer of know-how in the future. and delivery performance.
Quality is of paramount importance for Schaeffler. It has always
had the goal to consistently ensure high quality and product
safety in all applications. Another Schaeffler goal is to serve its
customers with the highest-possible efficiency and delivery per-
formance.
7 We want to be an attractive employer. ported by a project organization. A program office was estab-
The Schaeffler Group’s employees are vital for guaranteeing its lished to coordinate the management of the strategic initiatives
success. Identifying, promoting, and retaining the best team for and thus ensure the success of the “Agenda 4 plus One”.
the Schaeffler Group in the long term is crucial for the successful
realization of the company’s strategy. The Schaeffler Group is The program is proceeding on schedule, with all 20 initiatives
not only concerned about new employees here. Rather, it wants currently in the implementation phase. Selected initiatives have
to be an attractive employer for all of its employees. already progressed to the point of being transferred to line func-
tions as at the beginning of 2019. This applies to the “Program
8 We live by the values of a global family business. CORE” initiative and, based on current plans, to the “Working
The Schaeffler Group is a listed family business. A company with Capital” initiative as well. As a result, the “Agenda 4 plus One”
a strong foundation of values, established by its founders. program will shortly be reduced to 18 initiatives. Over the course
Schaeffler particularly identifies with the corporate values “Sus- of 2019, other initiatives are expected to follow, having matured
tainable”, “Innovative”, “Excellent”, and “Passionate”. These sufficiently to be transferred to line functions.
values form the basis for the continued success of the
Schaeffler Group for the benefit and in the interest of its cus- In addition, particular progress has been made in several
tomers and business partners, employees and managers as well initiatives:
as its shareholders and family shareholders.
First and foremost, there are the E-Mobility and Industry 4.0 ini-
tiatives. Due to the growing number of customer projects and the
Four corporate values No. 022
increasing significance of the activities in these two areas, dedi-
cated business units were set up effective January 1, 2018. The
Sustainable Innovative E-Mobility business division brings together all products and
A long-term view and continuity For (nearly) every problem there system solutions for hybrid and all-electric vehicles. In addition,
will foster the growth of the is a solution. If not, we will a second competence center for electric mobility has been set up
Schaeffler Group, thereby create one!
enabling a future worth living. in China due to the significance of the Chinese market.
The Industry 4.0 business field focuses on developing rotary and

linear mechatronic products, digital services, as well as new
data-based business models. The Industrial division aims to
Excellent Passionate generate 10% of its revenue from Industry 4.0 products by 2022.
In the future, all of these products and solutions will be offered
We develop solutions that are of Our biggest driver is our passion
the highest quality based on our for innovative technologies and under the Schaeffler brand. Numerous product and solution
extensive expertise. joint success with our customers. packages in various project stages are already in use by cus-
tomers today: These include, for instance, cloud-based moni-
toring of accessory units such as electric motors jointly with a
service provider, a complete solution for monitoring and lubri-
cating machines that are critical to the operations of a drinking
20 Strategic initiatives water supply association, as well as an all-digital service for pre-
dicting the service life of rolling bearings in wind power trans-
To execute the strategy “Mobility for tomorrow”, the company missions.
launched its program for the future, the “Agenda 4 plus One”,
with the Schaeffler Group’s 16 most significant strategic initia- The Schaeffler Group’s Aftermarket Kitting Operation (AKO)
tives in 2016. The program was expanded to include four addi- breaks new ground in logistics in Europe. Occupying an area of
tional initiatives, increasing the number of initiatives to 20 effec- more than 40,000 square meters, the new facility will assemble
tive January 1, 2018. The strategic initiatives are grouped in 4+1 and package automotive aftermarket spare parts and repair
categories: Customer focus, Operational excellence, Financial solutions. The new assembly and packaging center will further
flexibility, Leadership and talent management, and – as “plus improve the Schaeffler Group’s Automotive Aftermarket pro-
One” – Securing long-term competitiveness and value creation. cesses and generate sustained increases in quality of delivery.
All initiatives have the same objective: positioning the The new center is the main supply hub for all of the division’s
Schaeffler Group for the future and making it even better. other regional warehouses. More than 40,000 different items for
cars, light and heavy commercial vehicles, and tractors will be
The stated aim is to successfully implement all initiatives by the picked, packaged, and shipped at the new assembly and pack-
end of 2020 and to ensure that their impact is sustainable by aging center. In 2018, the cornerstone of this project was laid in
transferring them to business units or line functions. Each initia- the city of Halle (Saale), and the center is scheduled to be com-
tive is the responsibility of a member of the Board of Managing missioned in 2020.
Directors as a sponsor, managed by a project manager, and sup-
The “Agenda 4 plus One” also includes the “Global Footprint” An appropriate, customer-oriented structure is essential for the
initiative that is examining the strategic and economic competi- indirect functions as well. The objective of the “Shared Services”
tiveness and long-term sustainability of all of the company’s initiative is to set up a powerful, cross-functional shared ser-
locations worldwide. Being a global business, the vices organization. Preparations were completed in the third
Schaeffler Group needs to regularly review market conditions quarter of 2018. Schaeffler has completed an important step
and strive to optimize its footprint across different regions. In toward setting up the location by founding the company
late 2018, the Schaeffler Group decided as part of this initiative “Schaeffler Global Services Europe Sp. z.o.o”. in the Polish city
to reorganize its UK business activities. Following the proposed of Wroclaw and moving the first employees into the offices there.
reorganization, the company will retain a meaningful presence in Furthermore, the implementation of initial pilot processes was
the UK but will reduce its overall footprint and relocate some of kicked-off in the fourth quarter of 2018. Among these are pro-
its UK production to other existing sites outside the country. It is cessing of invoices received for the Finance function, checking
anticipated that the reorganization plans will take up to two freight invoices for supply chain management, and providing
years to implement. internal services for IT.
Schaeffler has been at its customers’ side as an expert solution Prerequisites for the success of the shared service organization
partner for many years, a connection that has always been key to include the new group process model with clear responsibilities
innovation. The “Customer Excellence” initiative creates a global that was developed in the “Process Excellence” initiative and
infrastructure of sales expertise and closeness to the customer can now be used in a next step to optimize processes.
in order to continually advance customer communications and
customer relationship management. As part of the initiative, The “Global Reporting” initiative is aimed at improving the
Schaeffler relies on modern customer relationship management Schaeffler Group’s consolidation and reporting systems as well
(CRM) software. The company also evaluates its customer rela- as management information.
tionships using periodic customer surveys. A new survey intro-
duced under the “Customer Excellence” initiative in 2018 covers The “Leadership & Corporate Values” initiative focuses on bringing
all divisions and regions of the Schaeffler Group. the corporate values, leadership principles, and Leadership
Agenda 4 plus One – progress No. 023
10% 25% 55% 95% 100%
Initiatives Set-up Plan Implementation Line

1 Customer Excellence 65%
2 E-Mobility 60%
3 Industry 4.0 45%
4 Quality for Tomorrow 45%
5 Global Footprint 55%
6 Factory for Tomorrow 55%
7 Shared Services 55%
8 Process Excellence 35%
9 Working Capital 90%
10 Leadership & Corp. Values 65%
11 Qualification for Tomorrow 55%
12 New Work 65%
100%
13 Program CORE
14 Digital Agenda 40%
15 IT 2020 55%
16 Global Branding 70%
17 Global Supply Chain 35%
18 Aftermarket Kitting Operation 55%
19 Global Reporting 45%
20 Focus 30%
Essentials to life in order to strengthen the Schaeffler Group’s M&A strategy

leadership culture. The Leadership Essentials having been com-
municated worldwide, in 2018, the focus was on implementa- The Schaeffler Group pursues a strategy of mainly organic
tion. Various measures were taken worldwide in order to embed growth based on its existing technological expertise and innova-
a common understanding of leadership – including “leadership tive edge. Under this strategy, acquisitions will primarily be
road shows” across all regions, moderated by human resources made if they add technological value or strengthen the
staff and held at all levels of the company, starting with the Schaeffler Group’s current market position. The company will
Executive Board. A further phase of implementation was aligning generally focus on acquisitions related to the future-oriented
all human resources tools with the Leadership Essentials – this fields of E-Mobility, Industry 4.0, and Digitalization.
has largely been completed in 2018 as well.
For this purpose, the company has defined the details of key ele-
The company’s brand identity and corporate image are harmo- ments of its M&A strategy and further developed its M&A pro-
nized under the “Global Branding” initiative. In future, the cess in 2017. At the core of this approach is an M&A radar that is
Schaeffler Group, as a company with operations worldwide, will applicable groupwide and defines seven focus areas where the
focus on the “Schaeffler” corporate brand. The individual company is aiming to acquire expertise and generate inorganic
product brands, such as INA, LuK, and FAG, will remain, but will growth both within the various divisions and across divisions.
be used only in connection with the related product and in con- The company’s search for opportunities to expand the profile of
junction with the Schaeffler corporate brand. In 2018, the corpo- its expertise and its portfolio specifically targets these clearly
rate image was changed at all major locations, including the defined areas. It focuses on smaller, additive targets in the nine
head offices in Herzogenaurach, Schweinfurt, and Buehl. 70% of figure range intended to complement and strengthen the tech-
all Schaeffler employees are now working at locations that have nology spectrum, thus adding long-term value.
been converted to the new branding concept and thus exhibit the
uniform global appearance. The Schaeffler Group plans to have As part of this strategy, the Schaeffler Group founded the joint
all of its locations worldwide converted by the end of 2019. venture Paravan Technologie GmbH & Co. KG in the summer of
2018 that has acquired Paravan GmbH’s Space Drive-Tech-
The “New Work” initiative, which has also made considerable nology, one of the leading “Drive-by-Wire”-Technologies. This
progress, will contribute to a uniform appearance as well. “New technology makes the “Steer-by-Wire”-Functionality possible
Work” will create the office of the future. It will be more innova- which enables safe and reliable vehicle steering by purely elec-
tive, attractive, and also more flexible than conventional offices. tronic means. This acquisition not only provides Schaeffler with
The objective of this initiative is to improve communication as access to a key technology for autonomous driving, but also
well as to increase employee satisfaction and make the enables the company to develop its Chassis Systems business
Schaeffler Group more attractive as an employer. Productivity division into a chassis systems integrator in order to further
per area increases in the new working environment as well. diversify its drive train and chassis activities.
Employees have started moving into the new premises in
Erlangen as well as at the other pilot locations Nuremberg and Additionally, the acquisition of Elmotec Statomat has expanded
Schweinfurt. In addition, a comprehensive global strategy has the company’s manufacturing expertise in the field of electric
been approved by the Executive Board – a further step toward motors and thus opened up further potential for growth by pro-
standardizing New Work at the global level, as well, which will ducing electric motors and stator production facilities. Elmotec
help with managing a systematic roll-out in the regions. Statomat is one of the world’s leading manufacturers of produc-
tion machinery for the high-volume construction of electric
motors and possesses unique expertise in the field of winding
technology. Schaeffler had previously acquired Compact
Dynamics GmbH – a development specialist in the field of inno-
vative electric drive concepts – at the end of 2016. The acquisi-
tion of Elmotec Statomat on January 31, 2019, has expanded this
expertise by adding further know-how regarding high-volume
production of stators for electric motors.
Strategy and planning process tive business plan can be derived. As part of the process, the
various substrategies are coordinated with one another, priori-
The Schaeffler Group goes through an annual strategy and plan- tized, and added to where necessary.
ning process comprising three key components, (1) the Tech-
nology Dialog, (2) the Strategy Dialog, and (3) the Planning Strategic initiatives are uniformly evaluated and prioritized
Dialog, that sequentially build on one another. based on business cases showing their impact on key indicators.
In this manner, each business case is presented consistently and
The starting point is the Technology Dialog that primarily deals uniformly, including the funds and investments it requires. This
with the megatrends and the resulting impact on technology and serves as the basis for the strategic allocation of capital and
innovation. The time frame considered is 5 to 10 years into the resources, which is the focus of the Strategy Dialog. Additionally,
future. Based on the information developed, an “Innovation numerous initiatives are identified within the divisions, regions,
Radar” is approved containing and prioritizing the initiatives and functions, and are implemented and followed up on within
aimed at securing the Schaeffler Group’s profitable growth over the relevant units as well.
a period of 5 to 10 years. However, this requires investing in
intangible assets and property, plant and equipment and The results of the Strategy Dialog form the starting point for
starting research and development activities early on. The initia- deriving the top-down objectives for the coming budget year. In
tives approved in the Technology Dialog are further refined the subsequent bottom-up process, the objectives are defined in
during preparation for the Strategy Dialog. detail, validated on a bottom-up basis, and the overall plan
adjusted if necessary. During the Planning Dialog in October, the
The Strategy Dialog takes place mid-year. It focuses on the Executive Board approves the detailed budget for the first planning
Schaeffler Group’s business strategy (including an indicative year. The results of the strategy and planning process are presented
business plan) for the coming 5 years, the substrategies for the and approved at the following meeting of Schaeffler AG’s Super-
divisions with their strategic business units, the regions, and the visory Board. The results of the planning process represent the
functions. A detailed market analysis and an analysis of the ini- starting point for the key financial performance indicators discussed
tial internal position represent the starting point. Building on in the report on expected developments and become part of the
these, strategic initiatives are developed from which an indica- agreed objectives of the Managing Directors and management.
Strategy and planning process No. 024
Technology week Strategy week Planning week Final products
Innovation Radars
Technology Dialog
1 Horizon: 5 – 10 years
Technology
Dialog Agree/review
technology portfolio
and innovation strategy
Business portfolio
Strategy Dialog
Horizon: 5 years
2
Strategy Agree/review
Dialog group strategy,
business portfolio,
and business plan
Budget
Planning Dialog
3
Horizon: 1 year
Planning
Dialog Agree/review
Budget
forecast and budget

Schaeffler
Group
Strategic financial performance indicators No. 025
Property, plant
and equipment
EBIT Non‑current assets +

Intangible
assets
SVA ROCE
(in EUR)
– (in %)
÷ + Inventories
+ Trade receivables
Average capital
Cost of capital × 10%
employed
+ Working capital
– Trade payables
Group management Value-based management is an integral component of all plan-

ning, management, and control processes. The Schaeffler
Schaeffler AG’s Board of Managing Directors is directly respon- Group’s success-based management remuneration is directly
sible for managing the Schaeffler Group, setting objectives and linked to the economic development of the company as well.
the strategic direction, and managing the implementation of the
growth strategy. The Supervisory Board of Schaeffler AG appoints, 1 Strategic financial performance indicators
supervises, and advises the Board of Managing Directors. In order to grow profitably and create long-term value, the
company has to employ its available capital profitably. Having
In 2018, the Schaeffler Group’s management utilized a three-di- earnings sustainably exceed the cost of available debt and
mensional matrix organization consisting of three divisions, five equity capital creates the fundamental basis for this.
functions, and four regions to manage the group’s business
activities. The Schaeffler Group’s internal management system The Schaeffler Group’s internal management system consists of
consists of the annual budget developed based on the strategic several levels. The Schaeffler Group’s key value-based perfor-
framework specified by the Board of Managing Directors, mance indicator is Schaeffler Value Added (SVA) as well as
ongoing monitoring and management of financial performance return on capital employed (ROCE), which is closely linked to
indicators, regular meetings of the Board of Managing Directors SVA. Schaeffler Value Added represents a key performance crite-
and management, as well as reports provided to the Supervisory rion within the framework governing the variable short-term
Board of Schaeffler AG. Ongoing monitoring and management is remuneration of the Board of Managing Directors and the remu-
based on a comprehensive system of standardized reports on neration at the next-lower levels of management. Both indicators
net assets, financial position, and earnings. Discussions at the are determined before special items.
meetings of the Board of Managing Directors and of management
address the results of operations, including the achievement of More on special items on pp. 56 et seq.
targets and objectives, as well as the outlook for the year as a
whole and any action that may be required. Schaeffler Value Added (SVA): The Schaeffler Group’s value
added is measured using the amount of value added by the com-
pany, referred to as Schaeffler Value Added (SVA). Calculation of
Value-based management
the SVA starts with the company’s EBIT (earnings before finan-
The Schaeffler Group’s internal management system is designed cial result, income (loss) from equity-accounted investees, and
to support implementation of the group strategy. Ensuring that income taxes). EBIT has to be sufficient to cover the cost of
the Schaeffler Group continues to meet its core business objec- capital. Positive SVA means that EBIT has exceeded the cost of
tive of growing profitably and creating long-term value requires capital for the period and, therefore, that the Schaeffler Group
a value-based approach to managing its business portfolio. One has added value in this amount. Cost of capital is calculated by
important principle underlying value-based management of com- applying the minimum return of 10% p.a. (before tax) set by the
panies is the necessity to reflect the interests and needs of Board of Managing Directors and the Supervisory Board to the
investors. average capital employed during the year.
Average capital employed is calculated by adding up the fol- Management system No. 026
lowing operating balance sheet items: property, plant and equip-
ment, intangible assets, and working capital, which in turn com- Strategic financial
1
performance indicators
prises trade receivables and inventories net of trade payables.
The annual average is determined as the mathematical average
SVA
of the balance at the end of each of the four quarters.
ROCE
Return on Capital Employed (ROCE): While Schaeffler Value

Key operating financial
Added is an absolute measure of the value added by the com- 2
performance indicators 1) Revenue growth
pany, ROCE measures the relative return on capital employed in Outlook
EBIT margin Free cash flow
percent. The ROCE indicator measures the rate of return on cap-
ital and is defined as EBIT divided by average capital employed.
Additional financial
3 Capex ratio R&D ratio
The indicator shows how efficiently a company manages the use performance indicators
Net debt to EBITDA ratio
of its resources. Comparing ROCE to the cost of capital provides Effective tax rate Dividend payout ratio
information about how much value was added. If ROCE exceeds
Rating
the cost of capital, the company is adding value. Thus, ROCE Non‑financial
4 Quality Delivery performance
serves as a tool for value-based management. indicators
Headcount
Customer satisfaction Employee satisfaction
2 Key operating financial performance indicators
The two indicators SVA and ROCE serve as indicators of the 1) Revenue growth (at constant currency), EBIT margin (before special items), free cash
flow before cash in- and outflows for M&A activities.
amount of shareholder value added in 2018. However, their high
level of aggregation makes using them as a basis for targeted
operational management difficult. Therefore, these indicators
are mainly used for reporting purposes. Revenue growth (at constant currency): Since the
Schaeffler Group’s economic success is based on a long-term
Consequently, at group level, the objectives of profitable growth growth strategy, significant importance is attached to the perfor-
and adding long-term value are operationalized using key finan- mance indicator revenue growth. Revenue growth is a relative
cial performance indicators. Thus, the Schaeffler Group focuses indicator and measures the change in revenue compared to the
on continually monitoring and optimizing the following three key prior year. In order to make the evaluation of the company’s
operating financial performance indicators: results of operations as transparent as possible and to increase
the comparability over time, the Schaeffler Group reports rev-
• Revenue growth (at constant currency)
enue growth at constant currency.
• EBIT margin (before special items)
• Free cash flow before cash in- and outflows for M&A activities EBIT margin (before special items): The EBIT margin is used as
an indicator of the Schaeffler Group’s operating performance.
These three key operating financial performance indicators rep- The EBIT margin is a relative indicator calculated as the ratio of
resent the basis for operating decisions and also form the basis EBIT to revenue. This ratio measures the company’s profitability
for the outlook. Overall optimization of these indicators adds and indicates how successfully the company’s operating busi-
shareholder value for the long term by sustainably generating a ness is being managed. Thus, group management ensures that
premium over and above the cost of capital. the Schaeffler Group is growing profitably while utilizing capital
efficiently. The EBIT margin is calculated before special items in
order to make the operating performance more comparable over
time.
Free cash flow before cash in- and outflows for M&A activities:
Traditionally, the Schaeffler Group’s growth has been financed
from internal sources. The primary performance indicator of the
group’s ability to generate internal financing is free cash flow,
which is defined as the sum of cash flows from operating activities
and cash flows from investing activities. Free cash flow measures
the company’s ability to convert its operating performance to cash
inflows in order to finance ongoing operations and any required
capital expenditures from the company’s own operating activities.
Along with profitability, the key factors affecting free cash flow are • Automotive Aftermarket: For the Automotive Aftermarket, no
effective management of working capital as well as the level of comparable leading indicators can be derived from the volume
capital expenditures. In order to make the evaluation of the compa- of order intake or orders on hand. This division holds regular
ny’s results of operations as transparent as possible and improve discussions with major customers and observes its markets to
comparability over time, the Schaeffler Group reports free cash obtain leading indications of the short-term demand situation.
flow, one of its key operating financial performance indicators, • Industrial: The Industrial division uses the change in orders on
before cash in- and outflows for M&A activities. hand due within the following three months as a leading indi-
cator. This figure is monitored on a monthly basis.
As a result of the application of IFRS 16, all principal repayments
on lease liabilities will be presented as financing activities in the All financial indicators are calculated on a monthly basis using
statement of cash flows. In order to continue to present a measure standardized reports on earnings, financial position, and net
of the Schaeffler Group’s ability to convert operating performance assets. These reports contain a comparison of budget vs. actual
to cash inflows, free cash flow before cash in- and outflows for as well as a prior year comparison. The comparison of budget vs.
M&A activities will be determined net of any principal repayments actual is based on the annual budget flowing from the integrated
on lease liabilities starting in 2019. operating budget embedded in a longer-range strategic corpo-
rate plan established by the Board of Managing Directors.
More on trends in the indicators discussed above under “course of
business” on pp. 49 et seq. and on special items on pp. 56 et seq. 4 Non-financial indicators
In addition to the financial performance indicators, manage-
3 Additional financial performance indicators ment monitors additional key non-financial indicators. Such indi-
In addition to the three key operating financial performance cators are calculated using standardized reports during the year
indicators, the Board of Managing Directors also continually and include: quality, headcount, delivery performance, customer
tracks additional financial performance indicators including, satisfaction, employee satisfaction, and rating. In order to facili-
among others, the capex ratio, R&D ratio, net debt to EBITDA tate a more precise evaluation of the company’s labor capacity,
ratio, effective tax rate, and the dividend payout ratio. the number of employees will be determined in terms of full time
equivalents (FTE) for internal management purposes starting in
The company further monitors a number of leading operating 2019.
indicators in order to be able to identify trends in a multitude of
factors affecting the Schaeffler Group’s business early on and More on sustainability management on pp. 43 et seq.
take them into account in managing the company. For instance,
the company analyzes forecasts of relevant market, economic, Further non-financial measures were defined for sustainability
and sector data, such as gross domestic product, currency management purposes. Thus, the company has defined a set of
trends, as well as automobile and industrial production in order key figures for each field of action addressed in the sustain-
to gain important insight into the future of the business. Raw ability strategy, used to manage the operation of the group’s
materials prices are monitored as well in order to estimate trends sustainability measures. The company has a medium-term objec-
in significant costs. tive to define non-financial performance indicators and to incor-
porate these indicators in the value-based management of the
In order to obtain a reliable indication of the likely level of company.
capacity utilization and the probable revenue trend, Schaeffler
also monitors certain leading operating indicators specific to In managing the company, senior management considers it
each division. imperative that each individual Schaeffler Group employee act
strictly within the relevant legal limits and comply with corporate
• Automotive OEM: Multi-year master agreements won within
governance standards.
one period are measured using the indicator “lifetime sales”
on an ongoing basis and compared to current period revenue
More on corporate governance on pp. 88 et seq.
by calculating the “book-to-bill ratio” which provides an indi-
cation of the medium- to long-term utilization of the Automo-
tive OEM division’s capacity. Orders received for short-term
delivery under master agreements with customers validly
cover a period of approximately two months. Changes in this
measure of capacity utilization are monitored on a weekly
basis.
Presentation of strategic financial and key operating financial performance indicators in the group management report No. 027
Financial
position and Report on
Course of Performance finance Overall expected
2018 2017 business Earnings indicators management assessment developments
SVA
(before special items, in € millions) 556 787   
ROCE
(before special items, in %) 16.7 19.9   
Revenue growth
(at constant currency, in %) 3.9 5.9     
EBIT margin
(before special items, in %) 9.7 11.3     
Free cash flow before cash in- and
outflows for M&A activities
(in € millions) 384 515    
Remuneration model The targets largely represent the strategic and key operating
financial performance indicators, with the latter in turn repre-
A company’s success depends to a considerable extent on the senting the key performance indicators reflected in the annual
performance of its employees. In order to appropriately acknowl- outlook. As a result, operating targets are designed to be con-
edge this performance and to offer a motivating incentive, the gruent with the measures comprising the outlook. Shareholders’
company has developed a comprehensive remuneration system. interests are reflected in the remuneration system by taking into
account Schaeffler Value Added for variable short-term remuner-
The Schaeffler Group aims to consistently align its brand iden- ation and the increase in the share price for the variable long-
tity, management model, and the four corporate values with one term remuneration.
another and to focus the entire organization on common goals.
A consistent performance-based remuneration system is key to In a subsequent step, the company adjusted the remuneration
achieving this aim. Harmonizing the indicators used to determine system for its top executives in 2016, applying the same consid-
variable remuneration is one of the key objectives designed to erations as those underlying the remuneration system for the
standardize the Schaeffler Group remuneration models. Board of Managing Directors.
As a first step, the remuneration system for the Board of Man- In 2017, the company then aligned the performance indicators
aging Directors was adjusted and consistently oriented toward relevant to variable remuneration across all remuneration
the Schaeffler Value Added/increasing shareholder value and models, both at the management level and for all levels of staff
free cash flow targets when Schaeffler AG’s common non-voting below management, for instance for the profit sharing arrange-
shares were listed in October 2015. A significant change intro- ment in Germany.
duced in this amendment was the addition of a long-term vari-
able component, known as the long-term bonus, complementing The realignment is designed to create a modern, attractive and
the variable short-term component, known as the short-term motivating remuneration system that is consistent with the
bonus. The short-term bonus references a one-year period while values of a global family business and whose key performance
the long-term bonus covers a four-year period, with the share measures reflect both the current year’s performance and the
price trend acting as one of its key performance criteria. long-term and sustainable value added.
More in the remuneration report on pp. 101 et seq.

Fundamental information about the group I Employees
1.4 Employees • Employer branding & recruiting

• Talent management
Its employees represent one of the key pillars of the
• Leadership & corporate values
Schaeffler Group’s success. Their technical knowledge,
skills, commitment, and passion for innovation secure the
• Training & learning
continuous progress of the company and are essential to the • Sustainability, environment, health & safety
Schaeffler Group’s current and future success. The objective of
the company’s human resources activities is to recruit, support, The company has created specific initiatives and projects for
and retain the best employees for the longterm as an attractive each of these pillars. These projects reflect the demands of
employer in order to safeguard Schaeffler’s competitive position. demographic change, diversity, and digitalization by assessing
and appropriately taking into account their current and future
impact. Underlying the Schaeffler Group’s human resources
HR strategy activities is an HR operating model including strong HR gover-
nance and a strong HR organizational structure as well as a solid
The Schaeffler Group’s strategic human resources activities are and efficient process and systems landscape.
based on the HR strategy and the related Roadmap 2020 with a
set of strategic initiatives of Human Resources (HR).
Employer branding & recruiting
The decision to incorporate the sustainability department into HR’s employer branding & recruiting activities strengthen
the Human Resources function resulted in a realignment and pri- Schaeffler’s perception as an attractive employer with the aim of
oritization of the HR strategy in 2018. As a result, sustainability contacting the best talents worldwide and recruiting them for the
management, comprising environmental protection, health man- company.
agement, and occupational safety, now represents one of the pil-
lars of the company’s strategic human resources activities and The human resources strategy is driven by the commitment to
includes demographic aspects. The previous pillar “strategic making employment with the Schaeffler Group fit for the future
workforce planning”, which influences all significant fields of – for external candidates as much as for employees that have
action of the company’s HR activities, has been defined as a been with the company for many years. Effectively positioning
cross-sectional issue along with digitalization and diversity. the company as an attractive employer worldwide is funda-
mental to continuing to successfully compete for the brightest
talents in the future. The Schaeffler Group ranked highly in rec-
HR strategy house No. 028
ognized employer rankings in 2018. Research institution “tren-
dence” listed the company as one of the five most popular
HR Vision & Mission employers among young professionals in the automotive sup-
plier sector and among the 30 employers most attractive to engi-
Schaeffler People Strategy
neering students in Germany in 2018. Placing 23rd in the Uni-
versum employer ranking, the company ranked among the top 30
Employer Talent Leadership & Training & Sustainability,
employers for engineers in Germany for the first time in 2018.
Branding & M anagement Corporate Learning Environment,
Recruiting Values Health & Safety The group was also successful internationally. In China, the
Schaeffler Group was again named “Top Employer China 2018”
by the Top Employers Institute.
Diversity Strategic Workforce Planning Digitalization

In order to attract qualified students and graduates, the com-
pany focused on cooperative and sustainable partnerships with
HR-Operating Model
universities, student unions, student associations, and organi-
Governance & Organization Processes & Systems
zations such as Formula Student Germany in 2018 as well. As
part of its university marketing activities, the Schaeffler Group
held more than 25 events in Germany alone during the year.
Starting in 2018, the HR strategy house consists of the following Additionally, the Schaeffler Group’s technical departments
five pillars, which represent the key fields of action of HR: helped run realistic case studies at universities and assisted stu-
dents in various practical projects.
More on cooperation with universities on page 43

Having successfully established its global employer branding functions and at all levels – from the Board of Managing Direc-
and recruiting activities in 2017, the Schaeffler Group started tors to team leaders – managers had the opportunity to obtain
implementing roadmaps in 2018, focusing on standards, pro- an initial understanding of the Leadership Essentials. In addi-
cesses, and systems. tion, the Board of Managing Directors had committed to
explaining the company’s new understanding of leadership and
In 2018, activities aimed at recruiting new employees were char- to discussing various views in “leadership road shows” world-
acterized especially by the increasing need for staff and by the wide. The six Leadership Essentials and their underlying leader-
further specification of job descriptions, including those in the ship behavior have been the basis for the evaluation of all man-
fields of E-Mobility, Digitalization, and technology. agers in the annual Employment Development Dialog as well
starting in 2018. Additionally, a short, global, representative
The market for internal candidates represents a key source for employee survey offers the opportunity to capture the mood
filling open positions as well. In Germany, more than 40% of regarding leadership at Schaeffler for the first time.
vacancies were successfully filled with internal talents in 2018.
In addition, the company considers it crucial to also fill manage- Another area of focus this year was the topic of feedback. The
ment positions from within the company whenever possible. company introduced an upward feedback mechanism. This
mechanism consists of a moderated feedback meeting in which a
manager receives feedback on his or her leadership behavior
Talent management
from employees reporting directly to him or her, giving the man-
To the Schaeffler Group, talent management is a uniform and ager the chance to further improve in this area. This, too, helps
standardized global approach to identifying, supporting, and embed the Leadership Essentials in managers’ behavior.
retaining talents for the Schaeffler Group in the long term. It
helps managers to select appropriate actions to promote
Leadership essentials No. 029
employees’ individual development. Personnel development
actions are based on the 70:20:10 model for learning and devel-
opment: 70% experience on the job, 20% learning from others,
Connect
and 10% off-the-job training. For purposes of strategic succes-
for
sion management, high-potential staff are identified and their success
suitability for possible key positions discussed early on. This
takes place as part of a uniform global talent management pro-
cess which includes the dialog between managers and Take on Empower
employees. Its objective is to provide feedback to the employee r eponsibility your team
on their performance and behavior and to agree possible next Transparency

steps in their development as well as specific development
actions. Managers at each level discuss all high-potentials
during the subsequent talent review. Succession candidates for
Trust Teamwork
critical key positions are identified and individual development
actions designed for them and then implemented.
Drive the Care for
change people
Leadership & corporate values
The “Leadership & Corporate Values” initiative that is part of the
Manage
“Agenda 4 plus One” addresses the question of how the for
Schaeffler Group wants to “live” leadership and corporate values results
in the future. In 2017, the Schaeffler Group implemented a new
leadership model with six Leadership Essentials designed to pro-
vide managers with support and guidance in dealing with Sustainable Innovative Excellent Passionate
internal and external challenges. During the year, the company
focused on broad and global communication as well as on inte- Corporate values Leadership principles Leadership essentials
grating these Leadership Essentials into the relevant human

resources tools. In cascading workshops held globally in all
Training & learning Sustainability, environment, health & safety
All training and continuing education courses worldwide are con- An inseparable link between commercial success, a decidedly
solidated under the umbrella of the Schaeffler Academy. long-term focus, and awareness of the social and ecological
aspects of the company’s operations is a long-standing
The Schaeffler Academy’s “Qualification for Tomorrow” initiative Schaeffler tradition. To the Schaeffler Group, sustainability
contributes to the achievement of strategic objectives, promotes means enabling a future worth living by fostering the growth of
the culture of lifelong learning, and prepares employees for the the Schaeffler Group with a long-term view and continuity for the
challenges of the future. In light of increasingly complex value benefit of all stakeholders.
chains, shorter and shorter development cycles, and rising infor-
mation density, global networks and acting flexibly in digital Please refer to the “Sustainability” chapter on page 43 and the
work environments are becoming more and more important. Life- Schaeffler Group’s sustainability report for a detailed discussion and
long learning is the key to success in a dynamic working world. background information on sustainability.
Schaeffler Academy is a reliable and capable partner creating
the basis for modern learning to help employees achieve their Especially the demographic trend is profoundly changing the
personal and professional goals. Collaborating with various structure of the group’s workforce. The future success of the
departments of the Schaeffler Group, the Schaeffler Academy company depends on the employee’s qualification and motiva-
addresses the future-oriented focus issues related to the issue tion and on the long-term maintenance of their health. The
of learning. Schaeffler Group’s workplace health management program is
based on the principles of the Luxembourg Declaration and rep-
The introduction of a new learning management system was an resents a key element of the HR initiatives.
important initial milestone toward a modern world of learning.
The cloud-based system is easy to use and is gradually being The design of the workplace health management program
rolled out worldwide. Following its successful implementation in focuses on measures to maintain the mental and physical health
Germany, France, and China in 2017, employees in Slovakia, the of the company’s employees as well as their capacity to work and
U.S., and Canada also started enjoying its benefits in 2018. their performance capabilities. Priorities are measures regarding
the musculoskeletal system and providing individual skills for
The Schaeffler Academy supports individual competency-based coping with stress. Ergonomic measures and reducing the nega-
learning by providing tailored qualification programs with con- tive impact of shift work also contribute to prevention.
tent oriented toward the needs of the business. Trends like digi-
talization and Industry 4.0 are transforming products and orga- The company consolidates measures promoting the health of
nizational processes, resulting in new employee qualification individual employees in the “pit stop” (“Boxenstopp”) program
requirements. To meet these requirements, the Schaeffler by specific target groups. In addition to this program, the com-
Academy is continuously expanding its training portfolio to pany offers a multitude of measures for target groups with com-
include target group-specific programs on trending issues and parable tasks and similar health risks. Measures offered are
new methodologies such as agile project management. Modern based on an analysis of the requirements at each location, guar-
learning formats and state-of-the-art methodologies are com- anteeing that they are tailored.
bined in modular offerings in order to ensure successful long-
term learning outcomes. Especially digital course offerings such The workplace health management program is part of
as how-to videos or online courses with a gamification approach Schaeffler’s EnEHS (Energy Environment Health and Safety) man-
provide an attractive learning experience. agement system, which ensures that working conditions are con-
tinually reviewed and occupational safety requirements com-
The challenges of the future are also changing vocational educa- plied with. Certification takes place worldwide in accordance
tion program requirements. Advancing curriculum content and with the European EMAS (Eco-Management and Audit Scheme)
methods results in attractive training offerings worldwide to Directive. The company regularly holds target group-specific
ensure trainees are well-prepared for changing job profiles. At information days, training sessions, and continuing education
the same time, a new qualification program comprehensively seminars on occupational safety at all levels and worldwide. A
promotes the further development of vocational trainers and reduction in the accident rate by more than 10% for the second
vocational training officers. The issues it focuses on include time in a row demonstrates the sustained effectiveness of the
raising the awareness of digitalization, Generation Y & Z, diver- company’s approach to accident prevention. The accident rate
sity, and migration. The qualification program was created in (AccR) declined from 7.1 to 6.2 (AccR = lost time incidents per
2017 and is gradually being rolled out. 1 million labor hours) during the reporting period.
Diversity interaction and teamwork provided by Schaeffler CONNECT, the

company’s social collaboration intranet. The company also
Demographic, social, and political trends and developments as launched an international volunteering program in cooperation
well as the international nature of the Schaeffler Group’s busi- with international student organization AIESEC. The organization
ness relations make the diversity of its workforce essential for arranges internships at foreign non-governmental organizations.
recognizing and meeting the demands of modern markets. The Schaeffler Group funded the placement fees for co-op stu-
dents with the objective of promoting the students’ intercultural
In order to gradually embed this issue throughout the company expertise and exchange as well as to position itself as an attrac-
further, the conceptual diversity plan issued by the Board of tive employer. Schaeffler also supports intercultural exchange
Managing Directors in 2017 has been given a more strategic and the transfer of technical knowledge between the
direction. Diversity management is anchored in the HR strategy Schaeffler Group’s multinational locations by means of expats.
and, to Schaeffler, it means acknowledging, appreciating, and Expats are highly-qualified specialists on secondment to foreign
including diverse views, experiences, and technical expertise branches for a limited period of time. 331 expats were seconded
across all hierarchical and organizational units. The conceptual within the Schaeffler Group in 2018.
diversity plan focuses on the issues of gender, internationality,
demographics, and people with disabilities. Demographics
The Reverse Mentoring Program was piloted in 2018. This pro-
Schaeffler actively promotes diversity within the company: As gram helps young and old share experiences with each other and
early as in 2008, the group signed the “Charta der Vielfalt” is designed to promote intergenerational exchange, particularly
(diversity charter) and integrated diversity and the principle of in light of digitalization and ongoing debates. The program is
equal opportunity into the Schaeffler Code of Conduct, thus being further expanded and will be rolled out globally as part of
committing to advancing these concepts within the company. the Standard Mentoring Program.
This commitment was confirmed when Schaeffler AG joined the
“Charta der Vielfalt” association in 2018. People with disabilities
In Germany, companies with more than 60 employees are legally
The company is continually working on measures designed to required to fill a minimum of 5% of jobs with people with disabil-
implement a comprehensive diversity management strategy. The ities. At 5.5%, the Schaeffler Group meets this requirement. At
Schaeffler Group has also started to specifically establish the the Herzogenaurach location, the quota was 6.4%. In 2018, the
issue in the various HR processes such as employer branding, company intensified the contact between its Diversity Manage-
recruiting, onboarding, and talent management. The following ment department and the body representing its disabled
measures were initiated for the four focus issues in 2018: employees in order to strengthen the connection between them
and to move forward with joint projects.
Gender
The standard mentoring system is being expanded to include a
Strategic workforce planning
gender dimension. The aim is to identify high-potential female
staff and to explicitly nominate them for mentoring. The specifics Strategic workforce planning integrates the Schaeffler Group’s
of this concept will be developed in 2019. The issue is being strategic human resources activities into its Technology and
actively addressed within the recruiting process as well: During Strategy Dialog.
clarification of the terms of reference of a recruiting assignment,
HR staff generate awareness of diversity management by posing It provides a basis for determining quantitative and qualitative
targeted questions and analyzing the existing composition of the staffing requirements for the medium to long-term planning
department. An information brochure on the subject and a period. Being able to quickly and efficiently determine long-term
standardized assignment clarification form aid in this process. global staffing requirements is essential for responding to
The rollout of this approach and the related documents was significant changes, for instance in the future growth areas of
started during the year 2018. E-Mobility, Digitalization, and increasing globalization.
Internationality The results of strategic workforce planning serve as a basis for

The intercultural network established in 2017 was actively sup- deciding what actions are required, such as internal and external
ported in 2018 and is growing steadily. Its objective is con- recruiting, qualification programs, or in- or outsourcing strate-
necting employees around the world using the opportunities for gies. These actions enable the Schaeffler Group to identify and
Schaeffler Group employees No. 030 Schaeffler Group employees No. 031
by region by function
in percent, as at December 31, 2018 in percent, as at December 31, 2018
Asia/Pacific 3.5 General administration 4.7

Distribution 7.1
Greater China 14.0 Research Production/
Europe 68.3 and development 8.7 M anufacturing 79.5
Americas 14.2
mitigate the risk of excess personnel or a shortage of staff in due Employee structure and development
time. In late 2017, the company initiated a project to investigate
the need for future technical and commercial vocational training
Workforce – structural data No. 032
as well as cooperative degree programs in Germany. The results
have been available since early 2018 and serve as input to the Change
12/31/2018 12/31/2017 in
annual requirements-based plan.
Average age (years) 39.9 39.7 0.5 %
Average tenure (years) 11.2 11.0 1.8 %
Digitalization Labor turnover rate (%) 1) 4.8 3.9 0.9 %-pts.
Proportion of female
The rollout of Schaeffler CONNECT, the company’s new social col- employees (%) 22.0 21.7 0.3 %-pts.
laboration intranet, was completed in 2018, replacing the pre- Proportion of female
vious intranet. Schaeffler CONNECT is the global platform for managers (%) 2) 13.2 12.4 0.8 %-pts.
information, communication, and collaboration within the 1) Initiated
by employee.
2) Managers are defined as employees in a supervisory function.
Schaeffler Group. It allows employees at all divisions, regions,
and functions to obtain information about the company, collabo-
rate effectively, contact each other, and exchange knowledge. In
addition, the intranet represents a modern medium enabling the The Schaeffler Group employed an average of 92,232 employees
Board of Managing Directors and managers to communicate with (prior year: 88,697) in 2018. The number of employees as at
employees in a targeted manner and to obtain feedback. Trans- December 31, 2018, was 92,478 (prior year: 90,151), 2.6% above
parency, an open exchange, and a healthy feedback culture are the prior year level.
pivotal here.
Compared to December 31, 2017, the company primarily
Furthermore, the company introduced the HR Dashboard as a recruited new personnel in production and production-related
modern reporting tool for the Schaeffler Group’s managers areas – mainly in the Greater China and Europe regions,
during the year. The user-friendly HR Dashboard digitally pro- especially in Eastern Europe.
vides supervisors and managers with insight into key staff-re-
lated ratios and indicators within their responsibility. The new The average period employees have been with the
HR Dashboard allows its 8,000 end users worldwide to obtain, Schaeffler Group (tenure) amounted to 11.2 years in 2018
on a self-serve basis, reports on employee-related data such as (prior year: 11.0). The average age of the Schaeffler Group’s
data on the structure of the workforce and time management workforce was 39.9 years (prior year: 39.7).
data.
Schaeffler Group employees No. 033

by age group
in percent, as at December 31, 2018
>59 years 3.8
<29 years 17.6
49-59 years 22.3
29-38 years 32.0
39-48 years 24.3

Number of employees No. 034
2014 % 2015 % 2016 % 2017 % 2018 %

Europe 1) 57,607 70.0 58,600 69.6 60,127 69.4 61,554 68.3 63,165 68.3
Americas 12,229 14.9 12,625 15.0 12,480 14.4 13,056 14.5 13,138 14.2
Greater China 9,741 11.8 10,216 12.1 11,255 13.0 12,537 13.9 12,976 14.0
Asia/Pacific 2,717 3.3 2,757 3.3 2,800 3.2 3,004 3.3 3,199 3.5
Schaeffler Group 82,294 100 84,198 100 86,662 100 90,151 100 92,478 100
Figures as at December 31.
1) Incl. employees of the corporate head office.
As strategic workforce planning has to take into account new sively in the Europe and Greater China regions. Another
requirements and skills early on, supporting employees and important component is an e-learning program that was devel-
helping them gain additional qualifications is key to the oped and will be available worldwide starting in 2019.
Schaeffler Group.
Specialist and project career path
3,648 classroom training sessions (prior year: 3,514) with a As a company with operations worldwide, the Schaeffler Group
participation of 31,874 (prior year: 30,646) were held in not only requires line managers, but it also needs especially
Germany in 2018. highly motivated and qualified specialists as well as project
managers who combine extensive technical expertise and key
know-how with outstanding project management skills.
Employee qualification and continuing education No. 035
Change The specialist and project career path with its global standards,
Number in Germany 2018 2017 in %
career stages, and requirements offers specialists and project
Classroom training sessions 3,648 3,514 3.8
managers within the Schaeffler Group a framework for following
• articipations – classroom training
P
sessions 31,874 30,646 4.0 their strengths and interests in developing and establishing
E-learning courses 95 97 -2.1 themselves in a career path.
• Participations – e-learning courses 65,580 15,593 > 100
Supporting new talents
Attracting and training new talents in all areas is essential to
ensuring the company’s long-term success. 3,275 trainees (or
In addition, 95 different e-learning courses were offered to staff 3.5% of the Schaeffler Group’s workforce) were pursuing an
with worldwide participation of 65,580 (prior year: 97 e-learning apprenticeship at the Schaeffler Group (prior year: 3,185 or 3.5%
courses offered; 15,593 enrolled). As in the prior year, these of the workforce) as at the end of 2018. These future specialists
courses included mandatory e-learning courses on specific new are trained in a total of 20 specific jobs requiring formal training
issues. at various Schaeffler Group locations. In addition to technical
qualifications and Schaeffler-specific know-how, the
With the expansion of its online training program, the Schaeffler Group’s training particularly values methodological,
Schaeffler Group follows the trend toward making continuing social, and personal skills. Training at the Schaeffler Group is
education courses available to employees anytime anywhere. aimed at teaching young employees to think and act inde-
pendently, promoting their creativity, and strengthening their
Of particular note are the national and international management environmental awareness and sense of responsibility. Since
and leadership programs. The programs provide training in spe- 2016, all full-time vocational trainers have received extensive
cific intercultural management skills as well as company-specific continuing education, ranging from developing their personal
information on strategy development, making them pivotal in skills through to using modern media and methods, in order to
achieving medium- and long-term business objectives. ensure that the company’s vocational training is up to future
challenges such as Digitalization and Industry 4.0.
In 2018, a new training landscape was laid out for managers to
support the changes in the leadership culture based on the Lead-
ership Essentials. This program landscape is structured sequen-
tially and offers a global framework for all regions. A significant
offering in 2018 was the “Leadership reflections” training ses-
sion designed to offer managers worldwide the option of
addressing how the Leadership Essentials are applied on a day-
to-day basis. It is currently being rolled out especially exten-
Fundamental information about the group I Sustainability
Cooperative education programs (“Duales Studium”) play companies, as well, to make concrete contributions with a view
another important role in attracting new talents in Germany. The to their business activities. The Schaeffler Group lives up to this
Schaeffler Group offers various types of these programs of aca- obligation and its responsible corporate behavior contributes to
demic studies, such as a “Duales Studium” in cooperation with ten of the 17 United Nations SDGs.
colleges offering this type of cooperative education program
(“Duale Hochschulen”) or a “Two-in-One” program in coopera- The activities aimed at meeting the SDGs are grouped in the four
tion with universities of applied sciences in Germany. A total of fields of action set out in the “Responsibility for tomorrow” sus-
182 students were enrolled in the “Duales Studium” and 159 in tainability strategy:
“Two-in-One” bachelor programs in 2018. The company also
1. Field of action: “Sustainable management”
offers support to high-performing students earning a master’s
degree beyond that. 2. Field of action: “Customers and products”
3. Field of action: “Environment and energy”
In addition, the Schaeffler Group offers special trainee programs 4. Field of action: “Employees and society”
to university graduates that have demonstrated above-average
performance and commitment, enabling them to gain a compre- The company’s sustainability strategy centers around the
hensive overview of the group and its functional areas by doing Schaeffler Group’s significance analysis, which also provides the
rotations over a period of 12 to 24 months. The accompanying basis for selecting information to be included in the sustain-
development measures and a mentor ideally prepare these ability report. The significance analysis was developed together
trainees to take on positions carrying responsibility after they with key stakeholders in 2016 and updated in 2018. The
have completed the program. 51 young talents participated in approach follows the G4 framework for non-financial reporting of
trainee programs in Germany during the year. the GRI (Global Reporting Initiative), and therefore complies with
the current GRI standards.
1.5 Sustainability A “sustainability program” that is updated annually sets out spe-
cific objectives and measures within the four fields of action for
To the Schaeffler Group, sustainability means enabling a future the non-financial issues identified in the significance analysis;
worth living by fostering the growth of the Schaeffler Group with these objectives and measures are then used in the operating
a long-term view and continuity for the benefit of all stakeholders. and strategic measurement and management of Schaeffler’s
The Schaeffler Group has strong values: “sustainable” as well as sustainability performance. The sustainability program rep-
“innovative”, “excellent” and “passionate” – these four corpo- resents the medium-term, dynamic element of the sustainability
rate values provide orientation within the Schaeffler Group on strategy.
how to work with colleagues and fellow employees as well as
with customers and business partners. The company accepts its In accordance with section 315b (3) HGB, Schaeffler AG has pre-
corporate responsibility to operate its business as ecologically pared a combined separate group non-financial report that is not
and socially responsibly as possible - even above and beyond part of the group management report and that combines the
legal requirements. As such, the Schaeffler Group has defined a non-financial report of the parent company with that of the group
framework in the form of its sustainability strategy “Responsibility in accordance with section 289b (3), section 315b (3), and sec-
for tomorrow”. tion 298 (2) HGB. The combined separate non-financial report is
publicly available from the company’s website.
Sustainability strategy and management Combined separate non-financial report in accordance with
section 289b (3), section 315b (3), and section 298 (2) HGB at:
The sustainability strategy “Responsibility for tomorrow” is www.schaeffler.com/sustainability/nfr2018
based on the Schaeffler Group’s vision and mission and sup-
ports the objective of adding long-term shareholder value. It Additional detailed discussion, key indicators, and background
complements the strategy “Mobility for tomorrow” by adding, information on sustainability as well as the Schaeffler Group’s
inter alia, social and ecological aspects of the business based on sustainability program are published in the Schaeffler Group’s
a long-term focus. sustainability report 2018.
The 17 Sustainable Development Goals (SDGs) issued by the

United Nations as part of its “Agenda 2030” guide the company’s
sustainability focus. For the first time, the Sustainable Develop-
ment Goals reflect all three dimensions of sustainability: social
issues, the environment, and the economy. This puts the onus on
Report on the economic position I Economic environment
2. Report on the economic position
2.1 Economic environment in the second half of the year. The economic slowdown was pri-
marily attributable to weak foreign demand. Growth was also
affected by a number of temporary factors, including disruptions
in production as a result of the introduction of the new emissions
Macroeconomic environment testing methodology WLTP. The European Central Bank kept its
benchmark interest rate at 0%, but terminated its bond-buying
The global economy remained robust overall in 2018, despite program in December. The German economy lost momentum over
escalating international trade disputes. Initial estimates indicate the course of the year, growing perceptibly more slowly overall
that global gross domestic product increased by 3.7% compared than in the prior year. Along with the WLTP-related loss of pro-
to the prior year (Oxford Economics; February 2019). However, duction in the automotive sector, slower growth in exports also
toward the end of the year, economic momentum declined sig- hampered economic expansion. The Brexit process held back
nificantly across the board, reflected, among other things, in economic growth in the United Kingdom, which once again fell
markedly slower global trade. short of growth in the euro region. The economic upturn in the
U.S. continued, mainly driven by the country’s tax reform and
In the euro region, economic growth weakened perceptibly; eco- other fiscal stimuli. The Fed raised its benchmark interest rate an
nomic output fell significantly short of expectations, especially additional four times in light of the positive economic develop-
ment. GDP growth in Japan did not maintain its 2017 level since a
number of heavy rainstorms and natural disasters affected the
Growth in gross domestic product No. 036
country’s economic activity.
Change
in %
Following stronger-than-expected growth in the first quarter,
3.3
Europe economic momentum in China slowed increasingly over the
3.4
course of the remainder of the year. However, the increase in GDP
2.3
Americas
2.0
for the year still met the Chinese government’s growth target,
mainly buoyed by a number of measures the government took to
Greater 6.3
China 6.5 support the economy that counteracted the adverse conse-
3.3
quences of the trade conflict with the U.S. In India, economic
Asia/
Pacific 3.6 growth accelerated as a result of increased private consumption
3.7 and investment. The Russian economy continued to recover
World
3.7 overall, bolstered by both domestic demand and exports. In
2018 2017 Brazil, on the other hand, economic growth remained restrained
in 2018, as political uncertainty and a temporary truck drivers’
Source: Oxford Economics (February 2019).
Regions reflect the regional structure of the Schaeffler Group. strike held back economic activity there. The economies of
Currency market trends No. 037

EUR against selected currencies in percent (12/31/2016 = 100)
130
120
110
100
90
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
USD CNY KRW INR MXN
Source: Bloomberg.
c ertain other emerging countries clearly deteriorated, especially Sector-specific environment

those of Argentina and Turkey.
Trends in automobile production and vehicle population signifi-
In this context, the situation of the Schaeffler Group’s regions cantly affect the results of operations of the Schaeffler Group’s
during the year was as follows: Gross domestic product in the Automotive OEM and Automotive Aftermarket business. The
Europe region rose by 3.3%, largely driven by the 7.4% growth global trend in industrial production provides an indication of
rate in India, which is also part of the Europe region. Economic the development of the Industrial division’s business.
output in the Americas region increased by 2.3%, while the
Greater China region reported growth of 6.3%. Gross domestic
Automobile production
product in the Asia/Pacific region rose by 3.3%.
Preliminary estimates put global automobile production, mea-
Following significant increases in 2017, the global capital sured as the number of passenger cars and light commercial
markets declined during the year, with the Dow Jones Industrial vehicles produced, at just under 94.1 million, 1.1% less than in
Average (DJIA), the Deutsche Aktienindex (DAX), and the the prior year (IHS Markit, February 2019). While automobile pro-
Mid-Cap-Dax (MDAX), among others, dropping in value.
Automobile production No. 038

In the currency markets, the euro declined against the U.S.
dollar over the course of the year. Having initially fallen against Change million
in % units
the Chinese Renminbi as well, it then rose again over time,
-0.5 28.6
closing higher at year-end than at the beginning of the year. Com- Europe
4.1 28.8
paring annual averages to the prior year, the euro rose against all
-0.1 20.1
of the foreign currencies most significant to the Schaeffler Group. Americas
-1.2 20.2
Greater -3.8 27.2

See the notes to the consolidated financial statements beginning on China 2.8 28.2
page 133 for further details on foreign currency translation
Asia/ 1.0 18.2
Pacific 2.3 18.0
-1.1 94.1
World
2.2 95.2
2018 2017
Source: IHS Markit (February 2019).

Regions reflect the regional structure of the Schaeffler Group.
duction grew noticeably in the second quarter, it declined in Vehicle population and average vehicle age
each of the remaining periods, especially so in the fourth
quarter. Based on preliminary estimates, the global vehicle population,
measured as the number of passenger cars and light commercial
Automobile production in the Europe region was 0.5% below the vehicles up to 3.5 tons in weight, rose by 3.6% to just under
prior year level, with growth in the first half of the year more than 1.4 billion units in 2018 (IHS Markit, February 2019), and the
offset by a decrease in the second half of the year. The weak average vehicle age2 remained unchanged at 9.7 years.
development in this region was largely driven by the consider-
able contraction in Germany, which, in turn, was primarily attrib- In the Schaeffler Group’s Europe region, the vehicle population
utable to production delays in the third quarter as a result of the expanded by 3.0% to just under 547 million units; the mean
introduction of the new emissions testing methodology WLTP. vehicle age rose slightly to 11.6 years. India once more experi-
The United Kingdom, Turkey, and Italy – all countries with signifi- enced an above-average increase in vehicle population levels.
cant production in the region as well – reported declines as well. The vehicle population in the Americas region increased by 1.5%
Production in India and Russia, on the other hand, grew signifi- to just over 426 million units, with the average age unchanged
cantly. Automobile production in the Americas region was 0.1% at 10.2 years. In the U.S., the vehicle population growth rate
below the prior year level since growth in the second half of the amounted to 1.5% as well, above the prior year level. Growth in
year followed a contraction during the first half of the year. Brazil the Greater China region fell short of the prior year level but
reported the region’s highest growth rate although that rate fell remained high. The vehicle population grew by 10.8% to just
noticeably short of the prior year level. The U.S. and Mexico, on under 222 million units, while the average age rose to 5.4 years.
the other hand, experienced little growth, while production in The vehicle population in the Asia/Pacific region was up 2.2% at
Canada even declined considerably. Automobile production in just under 180 million units, once more mainly driven by growth
the Greater China region fell 3.8% short of the level seen in the in Southeast Asia. In Japan, on the other hand, the population
prior year. While automobile production grew noticeably in the grew by less than 1.0% once again. The region’s mean vehicle
second quarter – mainly due to the low prior level – it declined in age increased slightly to 8.6 years.
each of the other quarters, especially in the second half of the
year. The decline for the year is mostly due to two factors ham-
Vehicle population No. 039
pering domestic demand: deteriorating consumer sentiment
given the trade conflict with the U.S. and stricter lending prac-
Change million
tices. Automobile production in the Asia/Pacific region rose in % units
by 1.0%, with the decline in the first three quarters more than 3.0 547.0
Europe
offset by strong growth in the fourth quarter. Temporary impacts 3.1 531.3
contributed to a lower growth in both Japan (production stop- 1.5 426.4
Americas
pages due to natural disasters) as well as South Korea (strikes). 1.3 420.2
In Thailand, on the other hand, production increased consider- Greater 10.8 222.0
ably. China 12.3 200.3
Asia/ 2.2 179.7

Pacific 2.8 175.9
3.6 1,375.1
World
3.8 1,327.7
2018 2017
Source: IHS Markit (February 2019).

2 Average vehicle age, worldwide and for the Schaeffler Group‘s various regions, was calculated based on approx. 96% of the global vehicle population (IHS, February 2019).
Prices of selected steels No. 040

in percent (12/31/2016 = 100)
105
100
95
90
85
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
hot-rolled steel cold-rolled steel
Source: Platts, based on hot- and cold-rolled strip Northern Europe (EUR/metric ton).
Industrial production number of economic one-time impacts, particularly the produc-

tion delays in the German automotive sector which also affected
Based on preliminary estimates, global industrial production, other industrial sectors via the supply chain. In the Americas
measured as gross value added based on constant prices and region, industrial production rose by 2.9%. This growth was pri-
exchange rates, expanded by 3.4% in 2018 (Oxford Economics, marily driven by the development in the U.S., which reported the
December 2018). Except for Americas, all of the Schaeffler Group’s highest growth rate in industrial production since 2006. This
regions reported slower growth in the second half of the year. was mainly attributable to significant growth in production in the
oil sector, which also had positive knock-on effects on the
The Europe region saw a 2.3% increase in industrial production, related supplier sectors. In addition, the newly introduced tax
with India reporting a very positive development. In contrast, reform helped increase investments in the manufacturing sector
the development in the euro region fell short of expectations; across all industries. In both Canada and Brazil, industrial pro-
increased momentum in 2017 was followed by a noticeable duction grew less than in the prior year, while Mexico reported a
reduction in activity in 2018. Reasons for the weakening of in slight recovery following its previous stagnation. In the Greater
industrial production in the euro region include subdued foreign China region, industrial production once again expanded consid-
demand, especially from Asia. Growth was also affected by a erably, growing by 6.0%. Activity was stronger than expected in
the first six months of the year, primarily as a result of massive
government investment in infrastructure projects, which also
Industrial production No. 041
benefited the related supplier sectors. However, the economy
lost momentum in the second half of the year, especially in the
Change
in % fourth quarter. In the Asia/Pacific region, growth in industrial
2.3 production amounted to 2.5%. While some countries in South-
Europe
2.8 east Asia reported higher growth rates for their industrial pro-
2.9 duction than in the prior year, South Korea and especially Japan
Americas
1.7 reported declines. The slower momentum in Japan, compared to
Greater 6.0 the prior year, was mainly due to reduced demand for imports
China 6.2 from China; adverse weather conditions also factored in holding
Asia/ 2.5 back growth in industrial production.
Pacific 3.3
3.4
World
3.5
2018 2017
Source: Oxford Economics (December 2018).

Prices of aluminum, and copper No. 042

in percent (12/31/2016 = 100)
160
140
120
100
80
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
aluminum copper
Source: Bloomberg, based on London Metal Exchange (USD/metric ton).
Procurement markets Aluminum is primarily used for pressure die castings, while
copper is mainly required for use in electric motors and mecha-
The Schaeffler Group uses various materials, especially different tronic components. Prices for aluminum and copper reached
types of steel, aluminum, copper, as well as plastics and lubri- their highest level in several years during the initial months of
cants. Commodity market price trends affect the Schaeffler Group’s the year, but dropped again during the remainder of the year.
cost to varying degrees and in some instances with some delay, Annual price averages were above the prior year level throughout
depending on the terms of the relevant supplier contracts. the year: The price of aluminum rose by just over 7%, copper by
just under 6%.
Comparing annual averages to the prior year shows rising prices
for all of the Schaeffler Group’s main input materials. At the The Schaeffler Group uses plastics, for instance to produce
same time, most prices declined over the course of the year – cages for rolling bearings, and lubricants serve to reduce friction
price reductions especially during the second half of the year in components and as preservatives. Plastics and lubricants are
resulted in the prices of some input materials closing lower at often made based on crude oil. The price of Brent crude oil rose
year-end than at the beginning of the year. to more than USD 86 in October 2018, its highest level in four
years, but dropped again considerably by year-end, partly
Steel is used to manufacture rolling bearings and automotive because a number of oil-producing countries significantly
components. Depending on the source region, annual averages increased production. The annual price average was more than
of prices for cold- and hot-rolled steel increased by between just 30% higher than the prior year level. Based on the ICIS Global
under 1 to just over 34% compared to the prior year, with the Petrochemical Index (IPEX), annual price averages of processed
highest price increase occurring in the U.S. as a result of the petrochemical products, including the plastics used by the
newly-introduced punitive tariffs on steel imports. Schaeffler Group, rose by over 6% compared to the prior year
level.
Report on the economic position I Course of business
2.2 Course of business influenced by lower demand from a few major customers in the
Europe and Americas regions. This division’s revenue growth for
the full year 2018 amounted to 2.2%, excluding the impact of
Overview of results of operations 2018 currency translation.
The Schaeffler Group increased its revenue by 1.6% to EUR 14,241 m The group’s EBIT margin before special items declined to 9.7%
during the reporting period (prior year: EUR 14,021 m). The impact (prior year: 11.3%), with the Automotive OEM division’s margin
of currency translation had an unfavorable effect on the revenue falling to 7.7%, considerably below the prior year level (prior year:
trend. Excluding the impact of currency translation, revenue was 10.8%). On the one hand, the decline was attributable to weaker
up 3.9%. The divisional trends were mixed in 2018, in line with growth in global automobile production, with production figures
the relevant market conditions. With global industrial production dropping considerably in the Europe and Greater China regions,
increasing, the Industrial division expanded its r evenue by 10.1%, especially in the second half of 2018. On the other hand, the
primarily due to higher volumes in the Greater China region. company could not offset the impact of these lower volumes and
Thus, the division continued its upward prior year trend with increased pricing pressure as well as costs related to the realign-
added momentum. The Automotive OEM division, on the other ment of the business portfolio with sufficient compensating
hand, was operating in a persistently highly volatile market measures and increased efficiency. The 17.0% margin of the
environment in the global automotive business in 2018. Having Automotive Aftermarket division also fell short of its prior year
met expectations for the first six months, the Automotive OEM level (prior year: 19.0%), mainly due to adverse pricing impacts
division was unable to meet its targets in the second half of the and increased functional costs. The Industrial division, on the
year. The division reported a decline in revenue for the second other hand, considerably improved its EBIT margin before special
half of the year compared to the prior year, excluding the impact items by 3.0 percentage points to 11.0% (prior year: 8.0%).
of currency translation. This was mainly attributable to the weak Along with the clear increase in volumes, progress in imple-
market trends in the Europe (partly due to the new emissions menting the measures of the second wave and the – now full –
testing methodology WLTP) and Greater China (partly due to potential of the measures of the first wave of the program
continuing trade conflicts) regions. Compared to the prior year, “CORE” made an impact in 2018.
the Automotive OEM division reported weaker overall revenue
growth of 2.1%, excluding the impact of currency translation. Net income decreased by 10.2% from EUR 997 m to EUR 895 m.
This growth, generated under adverse market conditions, still Excluding net income attributable to non-controlling interests
exceeded average growth in global production volumes for pas- of EUR 14 m (prior year: EUR 17 m), net income attributable to
senger cars and light commercial vehicles, which declined by shareholders of the parent company of EUR 881 m was 10.1%
1.1% during the reporting period. The Automotive Aftermarket lower than in the prior year (prior year: EUR 980 m). Earnings per
division fell short of original expectations in 2018 as well. common share amounted to EUR 1.32 (prior year: EUR 1.47).
F ollowing an overall solid first six months, the Automotive Earnings per common non-voting share amounted to EUR 1.33
Aftermarket division reported a drop in revenue in the second (prior year: EUR 1.48).
half of 2018 compared to the prior year. This trend was primarily
Schaeffler Group revenue No. 043 Schaeffler Group revenue No. 044
by division by region
in percent in percent by market view
Asia/Pacific 10,5
Industrial 23,8
Greater China 18,0 Europe 51,3
Automotive Automotive OEM 63,2

Aftermarket 13,0
Americas 20,2
The Schaeffler Group generated free cash flow before cash in- One example of this is the opening of the new European Distribu-
and outflows for M&A activities of EUR 384 m in 2018, EUR 131 m tion Center (EDC) celebrated in Kitzingen on June 4, 2018. The
less than the prior year amount of EUR 515 m. The decrease Schaeffler Group invested approximately EUR 110 m in the con-
was caused by cash flow from operating activities falling from struction of this new location, which will distribute the Industrial
EUR 1,778 m to EUR 1,606 m, hampered by the decline in earn- division’s products to the European market. In addition, the
ings in 2018. The change in working capital, on the other hand, Automotive Aftermarket division started construction of its After-
made a positive impact on the cash flow trend. The working cap- market Kitting Operation (AKO) in Halle (Saale) on June 15, 2018,
ital ratio improved to 17.9% (prior year: 19.0%). Capital expendi- another milestone of the implementation of the “Agenda 4 plus
tures amounted to EUR 1,232 m or 8.7% of revenue, less than in One”. With capital expenditures totaling approximately
the prior year (prior year: EUR 1,273 m or 9.1% of revenue). EUR 180 m, the construction of this state-of-the-art assembly
and packaging center represents the Schaeffler Group’s
Schaeffler Value Added before special items (SVA) declined Automotive Aftermarket division’s largest single capital invest-
to EUR 556 m during the reporting period (prior year: EUR 787 m), ment project to date. The AKO will commence operations in the
representing a return on capital employed (ROCE) before special first half of 2020. Both of these initiatives will directly help
items of 16.7% (prior year: 19.9%). The decline was attributable improve the Schaeffler Group’s delivery performance and secure
to lower earnings in the Automotive OEM and Automotive its competitiveness.
Aftermarket divisions combined with an increase in average
capital employed. Two of the 20 strategic initiatives comprising this program for the
future will be successfully completed in early 2019.
Significant events 2018 Schaeffler AG and IG Metall sign future accord

On April 16, 2018, the company’s Board of Managing Directors,
Works Council, and the IG Metall trade union signed a Future
Schaeffler presses ahead with transformation
Accord. The parties’ intention in signing the Accord was to jointly
and collaboratively manage and drive the ongoing development
Strategy Dialog and transformation of the Schaeffler Group – with particular
The Schaeffler Group’s Strategy Dialog held from July 9 to regard to the three key future trends of E-Mobility, Industry 4.0,
11, 2018, was dedicated entirely to the implementation of the and Digitalization – in the interests of the company and of its
Schaeffler Group’s medium-term strategic objectives for the employees. Under the Future Accord, the Schaeffler Group will
strategic challenges E-Mobility and Industry 4.0. Participants make available a EUR 50 m innovation fund over a period of five
extensively discussed issues including positioning the years. The purpose of the fund is to foster innovations and
Schaeffler Group in the chassis field, the direction of the thereby to actively harness the great innovative capacity of
company’s IT infrastructure in view of the implementation of the Schaeffler’s employees and to achieve sustainable value cre-
Digital Agenda, and the implementation of the “Global Supply ation.
Chain” initiative.
Leadership roadshows
Agenda 4 plus One “Leadership road shows” were held across all regions in 2018 in
The comprehensive program for the future, the “Agenda 4 plus order to embed a common understanding of leadership. Starting
One”, was expanded from 16 to 20 initiatives in early 2018 in with the Executive Board, these roadshows were moderated by
order to also address issues the company has more recently put human resources staff and held throughout all levels of the
a sharper focus on. All 20 initiatives under the “Agenda 4 plus company. During the last four months of 2018, the focus was on
One” are in the implementation phase. Implementation of the the four major locations in Germany: Herzogenaurach, Buehl,
program is currently 55% complete. Langen, and Schweinfurt.
Schaeffler simplifies structures transaction increased Schaeffler AG’s indirect interest in

Schaeffler India Limited from approximately 51% to approxi-
Schaeffler streamlines its structures and strengthens its mately 74%. This transaction has simplified the previous struc-
plants ture, reduced complexity, and created a strong Schaeffler entity
On May 7, 2018, the company announced that the Board of Man- in India in order to better realize the potential for growth in India.
aging Directors of Schaeffler AG has decided, with the approval
of the Supervisory Board’s executive committee, to integrate the
Schaeffler continues to execute M&A strategy
company’s “Bearing & Components Technologies” (BCT) unit,
which had previously acted as an internal supplier, into the divi- Based on the group-wide M&A radar, which defines seven focus
sions. Under this reorganization, the plants previously assigned areas for the acquisition of expertise both within the various
to BCT were transferred to the Automotive OEM and Industrial divisions and across divisions, the Schaeffler Group has estab-
divisions. The reorganization has eliminated duplicate struc- lished the Schaeffler Paravan Technologie GmbH & Co. KG joint
tures, established clear responsibilities, and brought Schaeffler venture and acquired Elmotec Statomat Holding GmbH as part of
closer to the customer. As a first step toward implementing the its M&A strategy in 2018.
change, the BCT organization was transferred to a starting orga-
nization effective July 1, 2018, that has been replaced by the Schaeffler acquires “Drive-by-Wire”-Technology
target organization implemented effective January 1, 2019. On August 6, 2018, the Schaeffler Group signed a master agree-
ment with Roland Arnold, Arnold Verwaltungs GmbH, and
Schaeffler reorganizes UK business Paravan GmbH for the formation of a joint venture. The objective
On October 29, 2018, Schaeffler AG’s Board of Managing Direc- of the joint venture, which is named Schaeffler Paravan Technol-
tors decided to reorganize its UK business activities as part of ogie GmbH & Co. KG and has commenced operations on
the “Global Footprint” initiative of the company’s program for October 1, 2018, is the further development of the Space Drive
the future, the “Agenda 4 plus One”. The reorganization calls for “Drive-by-Wire”-Technology and the development and sale of
the consolidation of the logistics centers in Sutton Coldfield and mobility systems. As part of the transaction, the joint venture
Hereford and the closure of the production locations in Plymouth has acquired Paravan GmbH’s Space Drive-Technology.
and Llanelli. These locations’ production will be moved to Schaeffler Technologies AG & Co. KG has a 90% stake in the new
existing locations in other countries. The Sheffield location – the company.
Schaeffler Group’s largest location in the United Kingdom in
terms of revenue and number of employees – will be retained. Schaeffler acquires Elmotec Statomat
The proposals are designed to generate synergies and increase On November 28, 2018, the Schaeffler Group entered into a con-
efficiency. Appropriate restructuring provisions were recognized tract to acquire Elmotec Statomat Holding GmbH (referred to as
for the reorganization of the company’s UK business activities. “Elmotec Statomat” below) based in Karben near Frankfurt/
Main, Germany. Elmotec Statomat is one of the world’s leading
Schaeffler successfully completes merger of Indian manufacturers of production machinery for the high-volume con-
entities struction of electric motors and possesses unique expertise in
On March 20, 2018, the shareholders and creditors of Schaeffler the field of winding technology. With this acquisition, Schaeffler
India Limited consented to the merger of the two unlisted enti- is expanding its expertise in the construction of electric motors
ties, INA Bearings India Private Limited and LuK India Private and thereby driving forward the implementation of its electric
Limited, with listed company Schaeffler India Limited. The mobility strategy. The acquisition of Elmotec Statomat, which
merger was effective October 22, 2018. The completion of the closed on January 31, 2019, has expanded this expertise by
merger has resulted in the Schaeffler Group having only one sub- adding further know-how regarding high-volume production of
sidiary in India, the listed company Schaeffler India Limited. The stators for electric motors.
Schaeffler strengthens team Results of operations compared to

outlook 2018
At its meeting on March 2, 2018, the Supervisory Board of
Schaeffler AG appointed Andreas Schick (previously Regional On February 19, 2018, the Board of Managing Directors of
CEO Asia/Pacific) to become member of the Board of Managing Schaeffler AG approved guidance on the development of key
Directors of Schaeffler AG as of April 1, 2018. Andreas Schick operating financial performance indicators for the
has taken over the role as Chief Operating Officer of Schaeffler Group and its Automotive OEM, Automotive
Schaeffler AG from Oliver Jung, who left Schaeffler AG as Aftermarket, and Industrial divisions for 2018. On
of March 31, 2018. Congruently, the contract of Corinna October 30, 2018, Schaeffler AG decided to reduce the 2018
Schittenhelm, Chief Human Resources Officer, was extended for guidance for the Automotive OEM and Automotive Aftermarket
a term of five years ending on December 31, 2023. Helmut Bode divisions and, as a result, for the Schaeffler Group. Rather than
has replaced Andreas Schick as Regional CEO Asia/Pacific and revenue growth of 5 to 6% excluding the impact of currency
was appointed to the Executive Board effective April 1, 2018. translation, an EBIT margin of 10.5 to 11.5%, and free cash flow
before cash in- and outflows for M&A activities of approximately
At its meeting on October 5, 2018, the Supervisory Board of EUR 450 m, the Schaeffler Group was expecting to generate revenue
Schaeffler AG decided to extend the contract with Klaus growth of 4 to 5% excluding the impact of currency translation,
Rosenfeld, the Chief Executive Officer of Schaeffler AG, for a an EBIT margin of 9.5 to 10.5%, and free cash flow before cash
f urther five years to June 30, 2024. in- and outflows for M&A activities of approximately EUR 300 m.
The Schaeffler Group achieved revenue growth of 3.9% excluding
the impact of currency translation, falling just short of the
adjusted revenue guidance for the year. Its EBIT margin before
special items amounted to 9.7% and free cash flow before cash
in- and outflows for M&A activities was EUR 384 m. Thus, the
adjusted guidance for these two performance indicators was met.
With markets in the global automotive business highly volatile

(WLTP, trade conflicts), the adjustment of the full year 2018
group guidance was mainly triggered by deteriorating market
conditions for the Automotive OEM division in China. Instead of
Comparison to outlook 2018 – group No. 045
Actual 2017 Outlook 2018 Actual 2018

issued issued
02/19/2018 10/30/2018
Schaeffler Group
Revenue growth 1) 5.9% 5–6% 4–5% 3.9%
EBIT margin before special items 2) 11.3% 10.5–11.5% 9.5–10.5% 9.7%
Free cash flow 3) EUR 515 m 4) EUR ~ 450 m EUR ~ 300 m EUR 384 m
1) Compared to prior year; excluding the impact of currency translation.
2) Please refer to pp. 56 et seq. for the definition of special items.
3) Beforecash in- and outflows for M&A activities.
4) Adjusted comparative figure before cash in- and outflows for M&A activities.
revenue growth of 6 to 7% excluding the impact of currency 17 to 17.5%. The division’s revenue growth of 2.2% before the
translation and an EBIT margin of 9.5 to 10.5%, the Automotive impact of currency translation and EBIT margin before special
OEM division was anticipating revenue growth of 3.5 to 4.5% items of 17.0% were within the adjusted guidance for both per-
excluding the impact of currency translation with an EBIT margin formance indicators.
before special items of 8 to 8.5%. Revenue growth excluding the
impact of currency translation amounted to 2.1% in 2018, and In contrast, the Industrial division had raised its guidance dated
the EBIT margin before special items to 7.7%. Thus, the adjusted February 19, 2018, in light of the encouraging trend in the indus-
guidance was not met for both performance indicators. trial business. Instead of revenue growth of 3 to 4% excluding
the impact of currency translation and an EBIT margin of 9 to
Furthermore, a weaker-than-expected revenue trend in the third 10%, the division was anticipating revenue growth of 8 to 9%
quarter of 2018 resulted in an adjustment for the Automotive excluding the impact of currency translation and an EBIT margin
Aftermarket division. Instead of revenue growth of 3 to 4% before special items of 10.5 to 11%. The division generated
excluding the impact of currency translation and an EBIT margin 10.1% in additional revenue excluding the impact of currency
of 16.5 to 17.5%, the Automotive Aftermarket division was translation, exceeding the adjusted 2018 guidance. The divi-
expecting revenue growth of 1.5 to 2.5% excluding the impact of sion’s EBIT margin before special items amounted to 11.0%, at
currency translation with an EBIT margin before special items of the upper end of the adjusted guidance.
Comparison to outlook 2018 – divisions No. 046
Actual 2017 Outlook 2018 Actual 2018

issued issued
02/19/2018 10/30/2018
Automotive OEM
Revenue growth 1) 6.5% 6–7% 3.5–4.5% 2.1%
EBIT margin before special items 2) 10.8% 3) 9.5–10.5% 8–8.5% 7.7%
Automotive Aftermarket
Revenue growth 1) 3.2% 3–4% 1.5–2.5% 2.2%
EBIT margin before special items 2) 19.0% 3) 16.5–17.5% 17–17.5% 17.0%
Industrial
Revenue growth 1) 5.7% 3–4% 8–9% 10.1%
EBIT margin before special items 2) 8.0% 3) 9–10% 10.5–11% 11.0%
3) Comparative amount presented based on 2018 segment structure.
Report on the economic position I Earnings
Schaeffler Group
23.8%
Industrial
Revenue EUR 14,241 m

13.0% 63.2%
EBIT margin before special items 9.7% Automotive Aftermarket Automotive OEM
Revenue increased by 3.9% at constant currency in a challenging environment // Automotive business

EBIT margin declines, Industrial significantly improved // Earnings per common non-voting share at
EUR 1.33 (prior year: EUR 1.48) // Adjusted earnings target met
Schaeffler Group earnings No. 047

Change
in € millions 2018 2017 in %
Revenue 14,241 14,021 1.6
• at constant currency 3.9
Revenue by division 1)
Automotive OEM 8,997 8,991 0.1
Automotive Aftermarket 1,859 1,880 -1.1

Industrial 3,385 3,150 7.5

Revenue by region 2)
Europe 7,313 7,183 1.8
Americas 2,874 2,910 -1.2

Greater China 2,561 2,456 4.3

Asia/Pacific 1,493 1,472 1.4

Cost of sales -10,558 -10,175 3.8

Gross profit 3,683 3,846 -4.2
• in % of revenue 25.9 27.4 -
Research and development expenses -847 -846 0.1

Selling and administrative expenses -1,492 -1,413 5.6
Earnings before financial result, income (loss)
from equity-accounted investees, and income taxes (EBIT) 1,354 1,528 -11.4
• in % of revenue 9.5 10.9 -
Special items 3) 27 56 -51.8

EBIT before special items 1,381 1,584 -12.8
• in % of revenue 9.7 11.3 -
Financial result -155 -192 -19.3

Income (loss) from equity-accounted investees -4 0 -
Income taxes -300 -339 -11.5
Net income 4) 881 980 -10.1
Earnings per common non-voting share (basic/diluted, in €) 1.33 1.48 -10.1
1) Prior year information presented based on 2018 segment structure.
2) Based on market (customer location).
4) Attributable to shareholders of the parent company.
2.3 Earnings Automotive Aftermarket division dropped to 34.5% (prior year:

35.9%), mainly driven by the adverse impact of pricing and cur-
rency translation. The Industrial division, however, increased its
Schaeffler Group earnings EBIT margin to 30.1% in 2018 (prior year: 28.3%), buoyed espe-
cially by economies of scale. In addition, the initial application of
Effective January 1, 2018, the former Automotive Aftermarket the new financial reporting standard, IFRS 15, during the
business division was set up as the company’s third division reporting period has resulted in a change in the presentation of
with its own CEO. Since then, the Schaeffler Group has been certain development services, among other things, as the new
dividing its business into three divisions: Automotive OEM, standard requires them to be classified within gross margin (see
Automotive Aftermarket, and Industrial. Note 1.5 to the consolidated financial statements). This change
in presentation had an adverse effect on the gross margin trend
The Schaeffler Group’s revenue for 2018 amounted to compared to the prior year, but decreased research and develop-
EUR 14,241 m (prior year: EUR 14,021 m), representing an ment expenses in return.
increase of 1.6%. Excluding the impact of currency translation,
revenue grew by 3.9%. While the Industrial division grew even Functional costs rose by EUR 80 m or 3.5% to EUR 2,339 m
more dynamically than in the prior year, generating revenue (prior year: EUR 2,259 m), growing to 16.4% of revenue
growth of 10.1% excluding the impact of currency translation, (prior year: 16.1%). Research and development expenses
the Automotive OEM and Automotive Aftermarket divisions of EUR 847 m were flat with prior year (prior year: EUR 846 m),
reported weaker revenue growth compared to prior year. In the representing an R&D ratio of 5.9% (prior year: 6.0%) of revenue.
Automotive OEM division, this was attributable, in particular, Selling and administrative expenses, on the other hand, rose
to weak market trends in the Europe and Greater China regions by EUR 79 m or 5.6% to EUR 1,492 m (prior year: EUR 1,413 m),
during the latter half of 2018. Subsequent to the encouraging mainly due to higher logistics expenses and increased adminis-
revenue trend in the first half of 2018, this resulted in revenue trative expenses in connection with the program for the future,
decreasing from prior year over the remaining course of the year, the “Agenda 4 plus One”.
excluding the impact of currency translation. Overall, the
Automotive OEM division raised its revenue by 2.1% in 2018, EBIT decreased by EUR 174 m or 11.4% to EUR 1,354 m
excluding the impact of currency translation. Following a solid (prior year: EUR 1,528 m) during the reporting period. The
first six months overall, the Automotive Aftermarket division Schaeffler Group’s EBIT margin was 9.5% (prior year: 10.9%).
reported an unexpectedly weak revenue trend in the third quarter, EBIT for the year was adversely affected by special items
resulting in the division missing its original full-year guidance. of EUR 27 m (prior year: EUR 56 m). This included EUR 48 m in
The slump was specifically attributable to decreased require- restructuring expenses related to the integration of the internal
ments in the Europe and Americas regions. The Automotive supplier, “Bearing & Components Technologies”, and to the reor-
Aftermarket division’s revenue growth for the reporting period ganization of the company’s UK business activities. Income from
amounted to 2.2%, excluding the impact of currency translation. the reversal of a provision following the completion of an investi-
gation of a compliance case by the relevant authorities had an
Revenue in the Europe region was up 1.8% (+2.9% at constant offsetting effect on EBIT of EUR 21 m. The prior year included
currency). In the Americas region, revenue declined by 1.2% due EUR 17 m in special items for legal cases resulting from provisions
to the adverse impact of currency translation (+4.9% at constant for claims for damages. In addition, the company recognized
currency). The Greater China region grew its revenue by 4.3%, EUR 39 m in restructuring expenses incurred to set up a shared
once again reporting the highest growth rate (+6.7% at constant service center in Europe in 2017. Based on that, EBIT before spe-
currency). Revenue in the Asia/Pacific region was up only slightly cial items declined to EUR 1,381 m (prior year: EUR 1,584 m)
due to the adverse impact of currency translation, rising by in 2018, and the EBIT margin before special items decreased to
1.4%. Excluding the impact of currency translation, revenue 9.7% (prior year: 11.3%). The decline in gross margin described
rose by 3.3%.
Cost of sales increased by EUR 383 m or 3.8% to EUR 10,558 m

Schaeffler Group financial result No. 048
during the year (prior year: EUR 10,175 m), driven by volume in
particular. Gross profit declined by EUR 163 m or 4.2% to
in € millions 2018 2017
EUR 3,683 m (prior year: EUR 3,846 m) with a corresponding drop
Interest expense on financial debt 1) -99 -123
in gross margin by 1.5 percentage points to 25.9% (prior year:
Gains and losses on derivatives and
27.4%). The decline was mainly due to the decrease in earnings foreign exchange -1 -17
at the two Automotive divisions. The Automotive OEM division’s Fair value changes on embedded derivatives -43 -14
gross margin fell to 22.5% (prior year: 25.4%). The decline was Interest income and expense on pensions and
partly due to sales falling short of plan and the resulting partial retirement obligations -40 -38
decrease in utilization of production capacity on hand, combined Other 28 0
with compensating measures that were not yet sufficiently Total -155 -192
extensive for the rapid decline in sales. The margin of the 1) Incl. amortization of transaction costs and prepayment penalties.
above – partly due to the adverse impact of currency translation The company presents these measures in accordance with the
– and higher functional costs were partially offset by gains on Guidelines on Alternative Performance Measures issued by the
transactions denominated in foreign currency. European Securities and Markets Authority, ESMA. Therefore,
these indicators should be considered supplementary informa-
The Schaeffler Group’s financial result improved by EUR 37 m tion. They are designed to provide comparability over time and
to EUR -155 m (prior year: EUR -192 m) in 2018. across sectors and are calculated by making certain adjustments
to, or calculating ratios between, line items contained in the
Interest expense on financial debt amounted to EUR 99 m income statement, statement of financial position, or statement
in 2018 (prior year: EUR 123 m). The improvement in interest of cash flows prepared in accordance with applicable financial
expense is largely the result of the prior year’s expenses for the reporting standards.
prepayment penalty of EUR 13 m and EUR 5 m in deferred trans-
action costs derecognized not being incurred in 2018.
Performance indicators
Net foreign exchange losses on financial assets and liabilities These performance indicators include EBIT, EBITDA, the net debt
and net losses on derivatives amounted to EUR 1 m to EBITDA ratio, SVA, and ROCE. The key indicators used in evalu-
(prior year: EUR 17 m). These include the impact of translating ating the company’s operations are EBIT and the EBIT margin.
the financing instruments denominated in U.S. dollars to euros EBIT is defined as earnings before financial result, income (loss)
and hedges of these instruments using cross currency swaps. from equity-accounted investees, and income taxes. The EBIT
margin represents EBIT as a percentage of revenue. In addition to
Fair value changes on embedded derivatives, primarily prepay- EBIT, the company calculates EBITDA, which represents EBIT
ment options for external financing instruments, resulted in net before amortization of intangible assets, depreciation of prop-
losses of EUR 43 m (prior year: EUR 14 m). erty, plant and equipment, and impairment losses. It is primarily
used to calculate the net debt to EBITDA ratio. This ratio is used
Income tax expense amounted to EUR 300 m in 2018 to evaluate the financing structure and is the ratio of net finan-
(prior year: EUR 339 m), resulting in an effective tax rate of cial debt to EBITDA, where net financial debt is defined as the
25.1% (prior year: 25.4%). sum of current and non-current financial debt net of cash and
cash equivalents. The Schaeffler Group’s key value-based
Net income attributable to shareholders of the parent company performance indicator is SVA as well as ROCE, which is closely
for 2018 was EUR 881 m (prior year: EUR 980 m). Net income linked to SVA.
before special items amounted to EUR 901 m (prior year:
EUR 1,022 m). The Board of Managing Directors and the Super M ore on SVA and ROCE on pp. 33 et seq.
visory Board will propose a dividend for 2018 of EUR 0.54
(prior year: EUR 0.54) per common share and EUR 0.55 The Schaeffler Group also calculates certain additional performance
(prior year: EUR 0.55) per common non-voting share to the measures not defined in the relevant financial reporting stand
annual general meeting. This represents a dividend of 40.1% ards. These are defined and discussed in the relevant chapters.
(prior year: 35.4%) of net income attributable to shareholders
before special items.
Special items
Basic and diluted earnings per common share decreased In order to make the evaluation of the company’s results of oper-
to EUR 1.32 (prior year: EUR 1.47) in 2018. Basic and diluted ations as transparent as possible, the Schaeffler Group reports
earnings per common non-voting share amounted to EUR 1.33 the indicators described above before special items (=adjusted).
(prior year: EUR 1.48). The number of shares used to calculate Special items are items that the Board of Managing Directors
earnings per common share and earnings per common non- considers to render the financial indicators less meaningful for
voting share was 500 million (prior year: 500 million) and evaluating the sustainability of the Schaeffler Group’s profit-
166 million (prior year: 166 million), respectively. ability due to their nature, frequency, and/or size. Net income
attributable to shareholders of the parent company before spe-
cial items in EBIT is also presented in order to facilitate calcu-
Performance indicators and special items lating the dividend payout ratio.
The information on the Schaeffler Group’s earnings, net assets, In addition to presenting special items, the company also aims to
and financial position is based on the requirements of International make the evaluation of the company’s results of operations as
Financial Reporting Standards (IFRS) and, where applicable, transparent as possible by presenting its revenue figures
German commercial law and German Accounting Standards (GAS). excluding the impact of currency translation. Revenue figures at
constant currency, i.e. excluding the impact of currency transla-
In addition to the disclosures required by these standards, the tion, are calculated by translating functional currency revenue
Schaeffler Group also discloses certain performance indicators using the same exchange rate for both the current and the prior
that are not defined in the relevant financial reporting standards. year or comparison reporting period. The company also reports
free cash flow (FCF) before cash in- and outflows for M&A activi- ratio, which represents the ratio of FCF before cash in- and out-
ties. M&A activities consist of acquisitions and disposals of com- flows for M&A activities to EBITDA before special items.
panies and business units. To facilitate evaluation of the cash
conversion cycle, the company determines the FCF conversion Special items are categorized as legal cases, restructuring, and other.
Reconciliation No. 049
2018 2017 2018 2017 2018 2017 2018 2017

Income statement (in € millions) Total Automotive OEM Automotive Aftermarket Industrial
EBIT 1,354 1,528 682 951 319 333 353 244
• in % of revenue 9.5 10.9 7.6 10.6 17.2 17.7 10.4 7.7
Special items 27 56 11 22 -3 25 19 9
• Legal cases -21 17 -13 -3 -3 20 -5 0
• Restructuring 48 39 24 25 0 5 24 9
• Other 0 0 0 0 0 0 0 0
EBIT before special items 1,381 1,584 693 973 316 358 372 253
• in % of revenue 9.7 11.3 7.7 10.8 17.0 19.0 11.0 8.0
Net income 1) 881 980

Special items 27 56
• Legal cases -21 17
• Restructuring 48 39
• Other 0 0
– Tax effect 2) -7 -14

Net income before special items 1) 901 1,022
Statement of financial position (in € millions) 12/31/2018 12/31/2017
Net financial debt 2,547 2,370
/ EBITDA 2,175 2,295
Net financial debt to EBITDA ratio 1.2 1.0
Net financial debt 2,547 2,370
/ EBITDA before special items 2,202 2,351
Net financial debt to EBITDA ratio before special items 1.2 1.0
Value-based management (in € millions) 2018 2017
EBITDA 2,175 2,295
Special items 27 56
• Legal cases -21 17
• Restructuring 48 39
• Other 0 0
EBITDA before special items 2,202 2,351

Free cash flow (FCF) 222 488
-/+ Cash in- and outflows for M&A activities 162 27
(FCF) before cash in- and outflows for M&A activities 384 515
(FCF) before cash in- and outflows for M&A activities 384 515
/ EBITDA before special items 2,202 2,351
FCF conversion ratio (in %) 17.4 21.9
Value-based management (in € millions)
EBIT 1,354 1,528
– Average capital employed 825 797
Schaeffler Value Added (SVA) 529 731
EBIT before special items 1,381 1,584
– Average capital employed 825 797
SVA before special items 556 787
EBIT 1,354 1,528
/ Cost of capitall 8,246 7,966
ROCE (in %) 16.4 19.2
EBIT before special items 1,381 1,584
/ Cost of capital 8,246 7,966
ROCE before special items (in %) 16.7 19.9
1) Attributableto shareholders of the parent company.
2) Based on the group’s effective tax rate for the relevant year.
Automotive OEM division
Revenue EUR 8,997 m

63.2%
EBIT margin before special items 7.7% Automotive OEM
Growth less dynamic than prior year: revenue up 2.1% at constant currency // Lower revenue growth
mainly attributable to market-driven decrease in demand in the Europe and Greater China regions in H2 //
Decline in EBIT margin, primarily due to significantly less dynamic markets in H2 and insufficient
compensating measures to date // Adjusted revenue and earnings guidance for the division not met //
Order intake and book-to-bill ratio up from prior year
Automotive OEM division earnings No. 050

Change
Revenue 8,997 8,991 0.1
Revenue by business division

Engine Systems BD 2,783 2,786 -0.1
Transmission Systems BD 4,170 4,204 -0.8

E-Mobility BD 486 416 16.8

Chassis Systems BD 1,558 1,585 -1.7

Europe 4,014 4,004 0.2
Americas 1,938 1,932 0.3

Greater China 1,910 1,927 -0.9

Asia/Pacific 1,135 1,128 0.6

Cost of sales -6,975 -6,711 3.9

Gross profit 2,022 2,280 -11.3
• in % of revenue 22.5 25.4 -
Research and development expenses -679 -685 -0.9

Selling and administrative expenses -667 -623 7.1
EBIT 682 951 -28.3
• in % of revenue 7.6 10.6 -
Special items 2) 11 22 -50.0

EBIT before special items 693 973 -28.8
• in % of revenue 7.7 10.8 -
Prior year information presented based on 2018 segment structure.

Automotive OEM division earnings actuators, and electric wheel hub motors. The E-Mobility BD
increased its revenue for the reporting period by a total of 16.8%
The previous Automotive Aftermarket BD started operating as the
(+18.1% at constant currency). All of the BD’s product lines contrib-
third division Automotive Aftermarket on January 1, 2018. In addi-
uted to this strong growth rate.
tion, the new E-Mobility BD was created within the Automotive OEM
division effective January 1, 2018. As a result, the new Automotive Revenue in the Chassis Systems BD declined by 1.7% (+0.1% at
OEM division is subdivided into the four BDs Engine Systems, Trans- constant currency) as a result of lower demand in the Greater China
mission Systems, E-Mobility, and Chassis Systems. region. Significant revenue growth was generated by the chassis
actuators product group.
2018 held significant challenges for the Automotive OEM division.
The market environment was marked by numerous uncertainties. The Cost of sales increased by EUR 264 m or 3.9% to EUR 6,975 m during
trade conflict between the U.S. and China, the changeover to the new the year (prior year: EUR 6,711 m). Gross profit declined by 11.3% to
emissions testing methodology WLTP, and a decrease in demand in EUR 2,022 m (prior year: EUR 2,280 m). The division’s gross margin
the Chinese market had considerably adverse effect on the automo- fell by 2.9 percentage points to 22.5% (prior year: 25.4%), due espe-
tive sector, particularly during the second half of the year. The Auto- cially to a disproportionately high increase in production cost. The
motive OEM division did not escape this challenging environment; as decline was partly due to revenue falling short of plan and the
a result, it did not meet its revenue targets in the second half of the resulting decrease in utilization of production capacity on hand,
year. The division reported a 0.6% decline in revenue for the second combined with compensating measures that were not yet extensive
half of the year compared to the prior year, excluding the impact of enough given the rapid decline in sales. In addition, the division
currency translation. Automotive OEM division revenue of could not increase production efficiency sufficiently to offset the
EUR 8,997 m for the year was slightly above the prior year level adverse impact of pricing and costs. Furthermore, the delayed
(+0.1%; prior year: EUR 8,991 m). Excluding the impact of currency ramp-up of a few major projects resulted in project-related fixed
translation, revenue rose by 2.1%. Generating this growth under costs adversely affecting the margin. Earnings were also affected by
adverse market conditions, the division still outperformed global an adverse impact of currency translation. Additionally, the initial
production volumes for passenger cars and light commercial vehicles application of the new financial reporting standard, IFRS 15, during
for 2018, which declined by 1.1% during the reporting period. the reporting period has resulted in a change in the presentation of
certain development services, among other things, as the new stan-
Revenue trends varied widely across market regions in 2018.
dard requires them to be classified within gross margin. This change
Revenue in the Europe region was merely flat with prior year due to
in presentation had an adverse effect on the gross margin trend com-
the impact of currency translation (+0.2%). Excluding the impact of
pared to the prior year, but decreased research and development
currency translation revenue increased slightly by 0.9%. The low rate
expenses in return.
of revenue growth was primarily attributable to production delays
resulting from the changeover to the new emissions testing method- Functional costs increased by EUR 38 m or 2.9% to EUR 1,346 m
ology WLTP in the second half of 2018. Regional automobile produc- (prior year: EUR 1,308 m), rising to 15.0% of revenue (prior year:
tion volumes declined by an average of 0.5% in 2018. Americas region 14.5%). During the reporting period, the change in presentation
revenue was flat with prior year due to the adverse impact of currency resulted in a decline in research and development expenses by 0.9%
translation (+0.3%). Excluding the impact of currency translation, the to EUR 679 m (prior year: EUR 685 m), representing 7.5% of revenue
region generated 5.6% in additional revenue. This growth rate put the (prior year: 7.6%). Selling and administrative expenses rose consider-
division significantly ahead of regional automobile production, which ably by 7.1% to EUR 667 m (prior year: EUR 623 m), partly due to
declined by 0.1%, and made it the Automotive OEM division’s main higher logistics expenses and increased administrative expenses in
growth driver in 2018. The Greater China region reported a currency- connection with the program for the future, the “Agenda 4 plus One”.
related decrease in revenue by 0.9% (+1.2 % at constant currency).
EBIT amounted to EUR 682 m during the year (prior year:
The weaker revenue growth was due, in particular, to lower demand
EUR 951 m), and the EBIT margin was 7.6% (prior year: 10.6%). The
in the second half of 2018 as a result of consumers being cautious
share of special items recognized by the Automotive OEM division
given the trade conflict with the U.S. and stricter lending practices.
in 2018 decreased EBIT by a total of EUR 11 m. This included
Regional vehicle production dropped 3.8% during the reporting period.
EUR 24 m in restructuring expenses related to the integration of the
The Asia/Pacific region reported revenue growth of 0.6% (+2.3% at
internal supplier, “Bearing & Components Technologies”, and to the
constant currency) while vehicle production there rose by 1.0%.
reorganization of the company’s UK business activities. Income from
Engine Systems BD revenue was merely flat with prior year due to the the reversal of a provision following the completion of an investiga-
impact of currency translation (-0.1%). Excluding the impact of cur- tion of a compliance case by the relevant authorities had an offset-
rency translation, the business division generated 2.1% in additional ting effect on EBIT of EUR 13 m. In the prior year, the Automotive OEM
revenue, primarily driven by the thermal management module. division recognized its share of restructuring expenses incurred to
set up a shared service center in Europe amounting to EUR 25 m.
Transmission Systems BD revenue declined by 0.8% due to the
These expenses were partially offset by EUR 3 m in special items for
impact of currency translation. Excluding the impact of currency
legal cases which increased EBIT in the prior year. Based on that, EBIT
translation, revenue increased by 1.4%, which was mainly attribut-
before special items decreased to EUR 693 m (prior year: EUR 973 m),
able to the torque converters product group.
and the EBIT margin before special items fell considerably to 7.7%
The new E-Mobility BD combines all components and system solu- (prior year: 10.8%). The decrease in EBIT was primarily due to the dis-
tions for hybrid and purely battery-electric vehicles. The product proportionately high increase in production cost. The adverse impact
portfolio includes hybrid modules, primary components for continu- of currency translation on gross profit was partially offset by gains on
ously variable transmissions (CVTs), electric axles, hydrostatic clutch transactions denominated in foreign currency.
Automotive Aftermarket division
Revenue EUR 1,859 m

13.0%
EBIT margin before special items 17.0% Automotive Aftermarket
Growth less dynamic than prior year: revenue up 2.2% at constant currency // Slower growth in the
Europe region; declining revenue in the Americas region // Earnings quality below prior year: adverse
impact of pricing and currency translation as well as increased selling expenses, partly due to
expansion of business outside Europe // Adjusted revenue and earnings guidance met
Automotive Aftermarket division earnings No. 051

Change
Revenue 1,859 1,880 -1.1
Europe 1,393 1,375 1.3
Americas 340 403 -15.6

• at constant currency -5.2
Greater China 76 57 33.3

Asia/Pacific 50 45 11.1
Cost of sales -1,217 -1,206 0.9

Gross profit 642 674 -4.7
• in % of revenue 34.5 35.9 -

EBIT 319 333 -4.2
• in % of revenue 17.2 17.7 -
Special items 2) -3 25 -112.0

EBIT before special items 316 358 -11.7
• in % of revenue 17.0 19.0 -

Automotive Aftermarket division earnings The division continued to make good headway in developing its
Chinese market. The Greater China region generated revenue
Effective January 1, 2018, the former Automotive Aftermarket growth of 33.3% (36.5% at constant currency), partly as a result
business division was set up as a third stand-alone division of of higher OES customers’ requirements.
the Schaeffler Group with its own CEO. This step reflects the
increased significance of the Automotive Aftermarket business Revenue in the Asia/Pacific region rose by 11.1%. Excluding the
to the Schaeffler Group. The management model of the new divi- impact of currency translation, the region reported 12.5% in
sion follows a regional approach. On this basis, the Europe, additional revenue, with a positive impact coming from growth in
Americas, Greater China, and Asia/Pacific regions operate as Independent Aftermarket revenue in the Southeast Asia subre-
profit centers responsible for the Automotive Aftermarket busi- gion as well as from increased requirements of OES customers.
ness in their respective markets. Within each region and the
related subregions, the division uses two distribution channels Automotive Aftermarket division cost of sales increased
to sell its products and services: the Original Equipment Service by EUR 11 m or 0.9% to EUR 1,217 m (prior year: EUR 1,206 m)
(OES) and the open (independent) market, known as the Inde- driven by volume. Gross profit of EUR 642 m fell short of the prior
pendent Aftermarket (IAM). The OES comprises the automobile year level (prior year: EUR 674 m). The gross margin declined by
manufacturers’ spare parts business, that is, supplying original 1.4 percentage points to 34.5% (prior year: 35.9%). The favorable
spare parts and services to branded repair shops, i.e. those that impact of economies of scale and the revenue mix did not fully
are authorized by automobile manufacturers. IAM, on the other offset the adverse impact of pricing and currency translation.
hand, supplies independent repair shops that are not tied to any
one vehicle brand with spare parts and services via the various Functional costs increased by EUR 25 m or 8.0% to EUR 338 m
distribution levels. (prior year: EUR 313 m), rising considerably to 18.2% of revenue
(prior year: 16.6%). Along with the unexpectedly weak revenue
Automotive Aftermarket division revenue fell by 1.1% to EUR 1,859 m trend in 2018, the relative functional cost structure was
during the reporting period (prior year: EUR 1,880 m). Revenue adversely affected by the increase in selling expenses, which
growth excluding the impact of currency translation amounted to rose faster than revenue, partly due to the commissioning of
2.2%, less than originally anticipated. Following a solid first six several distribution centers.
months overall, the third quarter saw an unexpectedly weak
revenue trend, mainly as a result of lower demand from a few EBIT amounted to EUR 319 m in 2018 (prior year: EUR 333 m),
major customers in the Europe and Americas regions compared and the EBIT margin was 17.2% (prior year: 17.7%). EBIT for the
to the prior year. reporting period was increased by EUR 3 m in special items.
These included income from the reversal of the division’s share
Revenue in the Europe region expanded by 1.3% (2.5% at of a provision following the completion of an investigation of a
constant currency) during the reporting period. Following the compliance case by the relevant authorities. This income was
encouraging revenue trend in the first half of 2018, revenue partially offset by the Automotive Aftermarket division’s share of
declined in the second half of 2018, excluding the impact of cur- restructuring expenses recognized for the reorganization of the
rency translation. The decline was primarily due to the unexpect- company’s UK business activities. In the prior year, the division
edly weak revenue trend in the third quarter of 2018 resulting recognized EUR 5 m in restructuring expenses incurred to set up
from lower revenue from a few major customers, partly driven by a shared service center in Europe. The prior year also included
increasing consolidation in the European vehicle aftermarket. EUR 20 m in special items for legal cases resulting from provi-
sions for claims for damages. Based on that, EBIT before special
The Americas region reported considerably lower revenue for items decreased to EUR 316 m (prior year: EUR 358 m), and the
the reporting period, 15.6% less than the high prior year level – EBIT margin before special items fell to 17.0% (prior year:
a revenue trend that was affected by a substantial adverse 19.0%). The decrease in margin is attributable to the decline in
impact of currency translation. Excluding the impact of currency gross profit as well as to increased functional costs. The adverse
translation, revenue fell by 5.2%, due especially to the high prior impact of currency translation on gross profit was partially offset
year level resulting from non-recurring additional requirements by gains on transactions denominated in foreign currency and
of an OES customer. non-operating one-time items.
Industrial division
23.8%
Industrial
Revenue EUR 3,385 m

EBIT margin before special items 11.0%
Growth more dynamic than prior year: revenue up 10.1% at constant currency // Revenue growth in all regions
– Greater China maintains highly dynamic growth // Considerably higher volumes with Industrial Distribution
– double-digit growth rates in the raw materials, railway, power transmission, and offroad sector clusters //
EBIT margin increased over prior year due to favorable impact of pricing and economies of scale as well as
program “CORE” cost reduction measures // Raised guidance for revenue exceeded, earnings at the upper
end of adjusted guidance
Industrial division earnings No. 052

Change
Revenue 3,385 3,150 7.5
Europe 1,906 1,804 5.7
Americas 596 575 3.7

Greater China 575 472 21.8

Asia/Pacific 308 299 3.0

Cost of sales -2,366 -2,258 4.8

Gross profit 1,019 892 14.2
• in % of revenue 30.1 28.3 -

EBIT 353 244 44.7
• in % of revenue 10.4 7.7 -
Special items 2) 19 9 111.1

EBIT before special items 372 253 47.0
• in % of revenue 11.0 8.0 -

Industrial division earnings rials grew their revenue, with Industrial Distribution and the
offroad sector cluster acting as the main drivers of the region’s
With global industrial production increasing, the Industrial divi- revenue growth.
sion expanded its revenue by 7.5% to EUR 3,385 m (prior year:
EUR 3,150 m), continuing its upward prior year trend with added Industrial division cost of sales rose by EUR 108 m or 4.8%
momentum. Excluding the impact of currency translation, to EUR 2,366 m (prior year: EUR 2,258 m) driven by volume.
revenue for the reporting period was up 10.1%, following 5.7% Gross profit increased by EUR 127 m or 14.2% to EUR 1,019 m
in 2017. The increase was primarily driven by Industrial Distribu- (prior year: EUR 892 m). The division’s gross margin improved by
tion. The raw materials, railway, power transmission, and offroad 1.8 percentage points to 30.1% (prior year: 28.3%), primarily
sector clusters generated double-digit revenue growth and also since the favorable impact of pricing, revenue mix, and econo-
contributed to the considerable increase in revenue. mies of scale outweighed the adverse impact of currency transla-
tion, higher raw materials prices, and inflation-related cost
The Industrial business is managed based on regions. On this increases.
basis, the Europe, Americas, Greater China, and Asia/Pacific
regions operate as profit centers responsible for the Industrial Functional costs for the reporting period of EUR 655 m
business in their respective markets. All regions grew their rev- were EUR 17 m or 2.7% above the prior year level (prior year:
enue in 2018, with the Greater China region once again reporting EUR 638 m). The cost reduction measures under the program
the highest growth rate. “CORE” almost fully offset cost increases, particularly in per-
sonnel expenses, which, among other things, had a favorable
Revenue in the Europe region expanded by 5.7% (+7.3% at con- effect on the relative functional cost structure. As a result, func-
stant currency) during the reporting period. This growth was pri- tional costs as a percentage of revenue fell to 19.4% (prior year:
marily due to higher sales in Industrial Distribution. Railway 20.3%). Research and development expenses amounted to
sector cluster revenue grew at double-digit rates. Revenue also EUR 140 m (prior year: EUR 133 m), and selling and administra-
rose, excluding the impact of currency translation, in the power tive expenses were EUR 515 m (prior year: EUR 505 m).
transmission, offroad, industrial automation, two-wheelers, and
raw materials sector clusters, while the aerospace sector cluster EBIT improved to EUR 353 m in 2018 (prior year: EUR 244 m) and
reported revenue flat with prior year. Wind sector cluster revenue the EBIT margin to 10.4% (prior year: 7.7%). EBIT for the
dropped. reporting period was affected by special items totaling EUR 19 m.
This included EUR 24 m representing the share of restructuring
Americas region revenue rose by 3.7% during the reporting expenses related to the integration of the internal supplier,
period. Excluding the impact of currency translation, the region’s “Bearing & Components Technologies”, and the reorganization
revenue grew by 9.7%. This growth was largely driven by Indus- of the company’s UK business activities that was recognized by
trial Distribution as well as the power transmission, raw mate- the Industrial division. Income from the reversal of the Industrial
rials, and aerospace sector clusters. The offroad, industrial auto- division’s share of a provision following the completion of an
mation, two-wheelers, and railway sector clusters generated investigation of a compliance case by the relevant authorities
revenue growth as well, excluding the impact of currency transla- had an offsetting effect on EBIT of EUR 5 m. In the prior year, the
tion, while the wind sector cluster experienced a considerable Industrial division recognized its share of restructuring expenses
decline in demand. incurred to set up a shared service center in Europe amounting
to EUR 9 m. Based on that, EBIT before special items increased
In the Greater China region, revenue rose by 21.8% (+25.4% at by EUR 119 m or 47.0% to EUR 372 m (prior year: EUR 253 m). The
constant currency). Except for two-wheelers, all sector clusters division’s EBIT margin before special items improved by 3.0 per-
as well as Industrial Distribution generated double-digit revenue centage points to 11.0% (prior year: 8.0%). Along with the higher
growth, excluding the impact of currency translation. Especially gross profit, the improved margin was mainly attributable to the
the considerable increase in volumes in the wind, raw materials, improvements in the functional cost structure as a result of the
railway, and power transmission sector clusters contributed to program “CORE”. Progress in implementing the measures of the
this region’s growth. second wave and the – now full – potential of the measures of
the first wave of the program “CORE” made an impact in 2018. In
In the Asia/Pacific region, revenue increased by 3.0%. Excluding addition, gains on transactions denominated in foreign currency
the impact of currency translation, the region generated 5.6% in had a compensating effect on the adverse impact of currency
additional revenue due to higher volumes. Industrial Distribution translation on gross profit.
as well as all sector clusters except for aerospace and raw mate-
Report on the economic position I Financial position and finance management
2.4 Financial position and finance offset the increase in inventory levels. Sales of receivables
resulted in a cash inflow of EUR 54 m (prior year: EUR 150 m).
management The working capital ratio, defined as working capital as a per-
centage of revenue, was 17.9% as at December 31, 2018
(prior year: 19.0%).
Cash flow and liquidity
Capital expenditures on property, plant and equipment and
The Schaeffler Group generated free cash flow of EUR 222 m intangible assets (capex) amounted to EUR 1,232 m
(prior year: EUR 488 m) in 2018. (prior year: EUR 1,273 m) in 2018.
Net cash outflow for M&A activities in 2018 was EUR 162 m, with
Cash flow No. 053
outflows of EUR 161 m relating to the establishment of the joint
venture Schaeffler Paravan Technologie GmbH & Co. KG. Other
Change
M&A activities included the payment of the second tranche of
Cash flows from operating activities 1,606 1,778 -9.7
the purchase price for the acquisition of autinity systems GmbH
and the proceeds received on the disposal of PStec Automation
Cash used in investing activities -1,384 -1,290 7.3
and Service GmbH.
Free cash flow 222 488 -54.5
Cash used in financing activities -111 -830 -86.6
Net increase (decrease) in cash and
These developments resulted in free cash flow for 2018 of
cash equivalents 111 -342 - EUR 222 m (prior year: EUR 488 m). Free cash flow before cash
Effects of foreign exchange rate in- and outflows for M&A activities amounted to EUR 384 m
changes on cash and cash (prior year: EUR 515 m).
equivalents -8 -31 -74.2
Cash and cash equivalents as at
beginning of period 698 1,071 -34.8 EUR 111 m in cash was used in financing activities
Cash and cash equivalents 801 698 14.8 (prior year: EUR 830 m) during the year. EUR 361 m of
the EUR 363 m in dividends paid during the year represented the
dividends paid to Schaeffler AG’s shareholders. Cash of
EUR 310 m was provided by utilizing the Revolving Credit Facility
Cash flows from operating activities declined by EUR 172 m and obtaining a bilateral loan. EUR 150 m of this amount was
to EUR 1,606 m (prior year: EUR 1,778 m) in 2018, primarily due repaid in 2018. In 2018, an additional EUR 94 m (prior year:
to weaker earnings during the reporting period. Changes in EUR 90 m) was drawn under the capital investment loan obtained
working capital had a favorable impact totaling EUR 32 m to finance the long-term logistics projects.
(prior year: adverse impact of EUR 31 m), a trend primarily attrib-
utable to both the reduction in trade receivables and the Cash and cash equivalents increased by EUR 103 m to EUR 801 m
increase in trade payables, which, in combination, more than as at December 31, 2018 (prior year: EUR 698 m).
Change in cash and cash equivalents No. 054

in € millions
1,606 -1,384
-111
-8 801
698
12/31/2017 12/31/2018
Cash and cash Cash flows from Cash used in Cash used in Eﬀect of foreign Cash and cash
equivalents operating activities investing activities financing activities exchange rate changes equivalents
As at December 31, 2018, cash and cash equivalents consisted In the Europe region, the Schaeffler Group once again invested
primarily of bank balances. EUR 379 m (prior year: EUR 255 m) of extensively in strategically aligning its logistics activities. The com-
this amount related to countries with foreign exchange restric- pletion of the “European Distribution Center” (EDC) project in the
tions and other legal and contractual restrictions. In addition, second quarter of 2018 provided the Industrial division with a
the Schaeffler Group has a Revolving Credit Facility of EUR 1.3 bn logistics center that makes the entire global supply chain – from
(prior year: EUR 1.3 bn), of which EUR 160 m was drawn as at suppliers to the production network through to the customer –
December 31, 2018. In addition, EUR 13 m of the Revolving Credit more cost efficient, quicker, and more flexible. A further significant
Facility was utilized (prior year: EUR 12 m), primarily in the form step in the strategic alignment of Schaeffler Group logistics is the
of letters of credit. start on construction of a state-of-the-art assembly and packaging
center of the Automotive Aftermarket division known as “After-
market Kitting Operation” (AKO) in the second quarter of 2018.
Capital expenditures At this central logistics hub, automotive parts the Automotive
Aftermarket division sells as separate products as well as in the
The Schaeffler Group’s growth strategy is mainly based on form of repair solutions will be picked, assembled into kits, pack-
investments in new products and technologies as well as in aged, and shipped throughout Europe starting in 2020.
expanding the group’s global production network. Investing in
intangible assets and property, plant and equipment is key to M ore on AKO and EDC on page 23
driving the Schaeffler Group’s growth. At the same time, the
Schaeffler Group is putting a stronger focus on the efficient In addition, significant funds were invested in expanding
allocating and using its capital. capacity in the Engine and Transmission Systems business
divisions and in the standard rolling bearing business. The
Capital expenditures on property, plant and equipment and Schaeffler Group is also preparing for electric mobility. Signifi-
intangible assets (capex) declined by EUR 41 m or 3.2% to cant investments in this field related to equipment and
EUR 1,232 m in 2018 (prior year: EUR 1,273 m). Capital expendi- machinery for product start-ups of electric axles in
tures amounted to 8.7% (prior year: 9.1%) of revenue (capex Herzogenaurach and hybrid transmissions in Buehl.
ratio). By far the largest share of total capital expenditures
related to the Europe and Greater China regions. In the Americas region, the Schaeffler Group invested especially
in expanding capacity and in equipment and machinery for new
Total additions to intangible assets and property, plant and equip- product start-ups of future electrified drive concepts. The recent
ment amounted to EUR 1,275 m (prior year: EUR 1,287 m). Approxi- addition of new capacity permits the Automotive OEM division to
mately 76% of these additions related to the Automotive OEM continue to meet the high demand for components for torque
division, approximately 5% to the Automotive Aftermarket divi- converters and torque converter lockup clutches.
sion, and approximately 19% to the Industrial division. In order
to strengthen its competitive position, the Schaeffler Group pri- In the Greater China region, the company continued to make tar-
marily invested in strategically aligning its logistics activities, geted investments in expanding capacity and to realize new
expanding capacity, and in equipment and machinery for product product start-ups in the Automotive OEM division in 2018. Sig-
start-ups. nificant investments related to engine and transmission sys-
tems, mainly for products that form part of the strategy “Mobility
for tomorrow”. Key investments in the Industrial division were
Capital expenditures by region (capex) No. 055
made to expand production and logistics capacities for the stan-
Change dard rolling bearing business to be able to meet the continuing
in € millions in € millions
high demand in the high-volume business.
707
Europe -65
772
In the Asia/Pacific region, the Schaeffler Group invested pri-
159
Americas
172
-13 marily in the production location in Vietnam in 2018. By building
305
a new plant in Biên Hòa City that was completed in late 2018, the
Greater
+28 Industrial division has considerably expanded its production
China 277
Asia/ 61 capacity for rolling bearings in this region. Biên Hòa City mainly
+9
Pacific 52 manufactures standing and needle roller bearings with a high
Schaeffler 1,232 degree of vertical integration. Apart from that, the Industrial
-41
Group 1,273 division invested primarily in its standard rolling bearing busi-
2018 2017 ness in South Korea.
Financial debt On August 31, 2018, the Schaeffler Group signed an amendment
to its EUR 2.3 bn Facilities Agreement (consisting of a EUR 1 bn
The group’s net financial debt increased by EUR 177 m term loan and a EUR 1.3 bn Revolving Credit Facility). The amend-
to EUR 2,547 m (prior year: EUR 2,370 m) in 2018. ment initially does not change the facilities or terms and condi-
tions but extends the maturity by two years to September 30,
2023. Meeting certain conditions will automatically trigger a fur-
Net financial debt No. 056
ther amendment resulting in improved terms and conditions,
Change enhanced operational and financial flexibility, as well as an
in € millions 12/31/2018 12/31/2017 in %
increase in the Revolving Credit Facility from EUR 1.3 bn
Bonds 2,019 1,994 1.3
to EUR 1.5 bn. The conditions required to be met for this amend-
Facilities Agreement 1,146 983 16.6
ment to become effective include a reduction in the term loan
Capital investment loan 183 89 > 100
from EUR 1 bn to EUR 500 m.
Other financial debt 0 2 -100
Total financial debt 3,348 3,068 9.1
In addition, an amendment to the EUR 250 m capital investment
Cash and cash equivalents 801 698 14.8 loan was signed on August 31, 2018, as well. Meeting the same
Net financial debt 2,547 2,370 7.5 conditions as under the EUR 2.3 bn Facilities Agreement will
enhance the operational and financial flexibility to the same
extent.
The net debt to EBITDA ratio, defined as the ratio of net financial As a result of the rating upgrade by Standard & Poor’s, the
debt to earnings before financial result, income (loss) from equity- Schaeffler Group was able to have the remaining in rem security
accounted investees, income taxes, depreciation, amortization, under both the EUR 2.3 bn Facilities Agreement and the out-
and impairment losses (EBITDA), amounted to 1.2 as at standing bonds issued by Schaeffler Finance B.V. released on
December 31, 2018 (prior year: 1.0). The net debt to EBITDA September 15, 2018.
ratio before special items was 1.2 (prior year: 1.0) as well.
On September 28, 2018, Schaeffler AG established a EUR 5 bn
The gearing ratio, defined as the ratio of net financial debt to debt issuance program. The corresponding base prospectus was
shareholders’ equity including non-controlling interests, approved by the Luxembourg regulator, Commission de Surveil-
decreased to 83.2% as at December 31, 2018 (prior year: lance du Secteur Financier (CSSF). The debt issuance program
91.8%). provides Schaeffler with a flexible platform for obtaining funding
from the debt capital markets in the future.
On August 30, 2018, the rating agency Standard & Poor’s raised
its company rating for the Schaeffler Group from BB+ (outlook: In 2018, Schaeffler AG drew down an additional EUR 94 m under
positive) to BBB- (outlook: stable). As a result of this upgrade, the capital investment loan obtained to finance the long-term
the Schaeffler Group is now rated investment grade by all three logistics projects. As a result, a total of EUR 184 m of the credit
major rating agencies – Standard & Poor’s, Moody’s, and Fitch. facility was utilized as at December 31, 2018 (December 31, 2017:
Standard & Poor’s upgraded the rating for the outstanding bonds EUR 90 m).
issued by Schaeffler Finance B.V. to BBB- as well.
The total amount drawn under the Revolving Credit Facility as at
The following summary shows the ratings assigned to the December 31, 2018, was EUR 160 m (December 31, 2017: EUR 0 m).
Schaeffler Group by the three rating agencies Fitch, Moody’s,
and Standard & Poor’s as at December 31:
Schaeffler Group ratings No. 057

as at December 31
2018 2017 2018 2017

Company Bonds
Rating agency Rating/Outlook Rating
Fitch BBB-/stable BBB-/stable BBB- BBB-
Moody’s Baa3/stable Baa3/stable Baa3 Baa3
Standard & Poor’s BBB-/stable BB+/positiv BBB- BB+
The Schaeffler Group had the following syndicated loans out-

standing as at December 31, 2018:
Schaeffler Group loans No. 058
12/31/2018 12/31/2017 12/31/2018 12/31/2017 12/31/2018 12/31/2017

Tranche Currency Principal in millions Carrying amount in € millions Coupon Maturity
Euribor 1) Euribor 1)
Term Loan EUR 1,000 1,000 993 991 + 1.20% + 1.20% 09/30/2023
Revolving Credit Facility 2) EUR 1,300 1,300 153 -8 + 0.80% + 0.80% 09/30/2023
Capital investment loan 3) EUR 250 250 183 89 + 1.00% + 1.00% 12/15/2022
Total 1,329 1,072
1) Euribor floor of 0.00%.
2) EUR 173 m (December 31, 2017: EUR 12 m) were drawn down as at December 31, 2018, including EUR 13 m in the form of ancillary facilities such as letters of credit.
3) EUR 184 m (December 31, 2017: EUR 90 m) were drawn down as at December 31, 2018.
In addition, the Schaeffler Group had further lines of credit in the December 31, 2018. All bonds are listed on the Euro MTF market
equivalent of approximately EUR 134 m (December 31, 2017: of the Luxembourg Stock Exchange. The bonds have a contrac-
approximately EUR 154 m), primarily in the U.S. and China. tual call date after which they can be called by the issuer at any
Approximately EUR 118 m of these facilities were unutilized as at time. As at December 31, 2018, three of the four bond series
December 31, 2018 (prior year: approximately EUR 111 m). have reached this date and can be redeemed by the issuer at a
set price with notice at any time.
The following bonds issued by Schaeffler Finance B.V.,
Barneveld, Netherlands, were outstanding as at
Schaeffler Group bonds No. 059
12/31/2018 12/31/2017 12/31/2018 12/31/2017

ISIN Currency Principal in millions Carrying amount in € millions Coupon Maturity
XS1212469966 1) EUR 400 400 399 398 2.50% 05/15/2020
XS1067864022 1) EUR 500 500 499 498 3.50% 05/15/2022
US806261AM57 1) USD 600 600 525 502 4.75% 05/15/2023
XS1212470972 EUR 600 600 596 596 3.25% 05/15/2025
Total 2,019 1,994
1) Bond has reached its contractual call date and can be redeemed at any time at the issuer’s discretion.
Under its existing debt financing agreements, the Schaeffler Group Maturity profile No. 060
is subject to certain constraints including a requirement to meet Principal outstanding as at December 31, 2018, in € millions
a leverage covenant. Compliance with this financial covenant is

1,524
monitored continually and reported to the lending banks on a
1,000
regular basis. As in the prior year, the company has complied
with the leverage covenant throughout 2018 as stipulated in the
debt agreements.
684
The company’s maturity profile, which consists of the term loan, 600
184
the capital investment loan, and the bonds issued by Schaeffler
400 500 524
Finance B.V., Barneveld, Netherlands, was as follows as at
December 31, 2018:
2019 2020 2021 2022 2023 2024 2025
bonds loans
Report on the economic position I Net assets and capital structure
Finance management Centralized finance management performed by the Corporate

Treasury department also ensures a uniform presence in the cap-
The objective of the Schaeffler Group’s finance management is ital markets and when dealing with rating agencies, eliminates
to ensure that sufficient liquidity is available to the group and to structural differences between the various groups of creditors,
its foreign and domestic subsidiaries at all times. Finance man- and strengthens the group’s bargaining position with respect to
agement primarily comprises capital management and liquidity banks and other market participants. In addition, centralized
management. finance management facilitates the centralized allocation of
liquidity as well as groupwide management of financial risk (for-
Corporate capital management provides the financial resources eign exchange and interest) on a net basis.
required by Schaeffler Group entities, ensures the long-term
availability of liquidity, and secures the Schaeffler Group’s credit
standing. Capital management also administers and continually 2.5 Net assets and capital structure
improves the company’s existing financial debt consisting of its
external group financing arrangements. To this end, the The Schaeffler Group had EUR 12,362 m in total assets as at
Schaeffler Group has laid the foundations for efficiently December 31, 2018 (prior year: EUR 11,537 m).
obtaining debt and equity funding via the capital markets. The
Schaeffler Group’s management will continue to focus on the
Consolidated statement of financial position No. 061
group’s ability to place financial instruments with a broad range
(abbreviated)
of investors and to further improve financing terms. To this end,
Change
the company particularly intends to maintain the investment
in € millions 12/31/2018 12/31/2017 in %
grade rating it initially gained in 2016 for the long term.
ASSETS
Total non‑current assets 6,828 6,178 10.5
External group financing is primarily provided by money and cap-
Total current assets 5,534 5,359 3.3
ital market instruments as well as syndicated and bilateral lines
Total assets 12,362 11,537 7.2
of credit from international banks. One such line of credit is a
SHAREHOLDERS’ EQUITY AND
contractually agreed RCF of EUR 1.3 bn available to cover any LIABILITIES
short- to medium-term liquidity needs. In addition, the Total shareholders’ equity 3,060 2,581 18.6
Schaeffler Group uses receivable sale programs to a limited Total non‑current liabilities 5,780 5,644 2.4
extent to manage liquidity and improve its working capital. For Total current liabilities 3,522 3,312 6.3
this purpose, the company has access to an ABCP program Total shareholders’ equity and
(asset-backed commercial paper) of revolving sales of trade liabilities 12,362 11,537 7.2
receivables with a committed volume of EUR 200 m
(prior year: EUR 150 m). Additionally, the Schaeffler Group has
the ability to selectively use a further receivable sale program Non-current assets rose by EUR 650 m to EUR 6,828 m as at
without a fixed committed volume. December 31, 2018 (prior year: EUR 6,178 m), primarily due to
property, plant and equipment increasing by EUR 453 m and
The Schaeffler Group has a policy of financing its domestic and investments in equity-accounted investees by EUR 157 m. The
foreign subsidiaries from internal sources. In accordance with increase in equity-accounted investees was largely due to the
this policy, subsidiaries’ financing needs are met using internal newly established joint venture Schaeffler Paravan Technologie
loans to the extent possible and economically justifiable. As a GmbH & Co. KG. In addition, deferred tax assets were
result, subsidiaries are primarily financed by loans provided by up EUR 28 m. Furthermore, the initial application of IFRS 9 has
Schaeffler AG and one other subsidiary. As part of the company’s increased other investments by EUR 24 m. Negative changes in
liquidity management measures, liquidity is balanced between the fair value of non-current derivatives had an offsetting effect.
group companies on a short- and medium-term basis using pri-
marily cash pools or intercompany loans. In a few cases, Corpo-
rate Treasury obtains lines of credit for subsidiaries from local
banks for legal, tax, or other reasons. Local financing is primarily
used to cover fluctuations in working capital.
Report on the economic position I Net assets and capital structure
Current assets increased by EUR 175 m to EUR 5,534 m Non-current liabilities rose by EUR 136 m to EUR 5,780 m as at
(prior year: EUR 5,359 m) in 2018. The increase was largely December 31, 2018 (prior year: EUR 5,644 m). The increase was
attributable to an increase in inventories and higher cash and mainly attributable to the utilization of an additional EUR 94 m of
cash equivalents (see “Cash flow and liquidity”, pp. 64 et seq.). the capital investment loan and an increase in pensions and sim-
Furthermore, the initial application of IFRS 15 resulted in the rec- ilar obligations by EUR 49 m.
ognition of EUR 45 m in contract assets (prior year: EUR 0 m).
Other assets and other financial assets increased as well. These Current liabilities increased by EUR 210 m to EUR 3,522 m
increases were partially offset by a reduction in trade receiv- (prior year: EUR 3,312 m) as at December 31, 2018. The increase
ables. As at December 31, 2018, trade receivables with a car- was primarily caused by EUR 160 m in drawings under the
rying amount of EUR 166 m (prior year: EUR 123 m) net of Revolving Credit Facility and higher trade payables. The initial
retained credit risk had been sold under the ABCP program recognition of EUR 45 m (prior year: EUR 0 m) in contract liabili-
(asset-backed commercial paper). ties in accordance with IFRS 15 increased current liabilities as
well, as did a higher balance of other financial liabilities
Shareholders’ equity including non-controlling interests rose resulting from changes in the fair value of derivatives. These
by EUR 479 m to EUR 3.060 m as at December 31, 2018 increases were partially offset by a reduction in income tax pay-
(prior year: EUR 2,581 m). Net income of EUR 895 m increased ables and other liabilities.
shareholders’ equity. The increase was partially offset by
EUR 361 m in dividends paid to Schaeffler AG’s shareholders. The Schaeffler Group’s significant off-balance sheet commit-
IFRS 9 and IFRS 15, the new financial reporting standards appli- ments include obligations under operating rental and lease
cable effective in 2018, increased other reserves by EUR 34 m. agreements and contingent liabilities. The Schaeffler Group’s
Reductions in accumulated other comprehensive income and, obligations under non-cancelable operating rental and lease
therefore, shareholders’ equity were largely due to the impact of agreements totaled EUR 141 m as at at December 31, 2018
cash flow hedges and of adjustments to pensions and similar (prior year: EUR 133 m); obligations under finance leases were
obligations. The equity ratio was 24.8% as at December 31, 2018 insignificant.
(December 31, 2017: 22.4%).
Structure of the consolidated statement of financial position No. 062

in %
Assets Shareholders’
equity and liabilities
Total assets in € millions 12,362 12,362
11,537 11,537
25 ___ 22 ___ Shareholders’ equity
Non-current assets ___ 54 ___ 55

including intangible assets and property,
plant and equipment of 48 48
47 ___ 49 ___ Non-current liabilities
26 27 including financial debt of
18 18 including pension obligations of
Current assets ___ 46 ___ 45

including cash
28 ___ 29 ___ Current liabilities
and cash equivalents of 6 6
1 0 including financial debt of
2017 2018 2018 2017

Report on the economic position I Overall assessment of the 2018 business year
2.6 Overall assessment of the 2018 The Schaeffler Group continued to execute its M&A strategy
in 2018 by establishing the Schaeffler Paravan Technologie
business year GmbH & Co. KG joint venture, which then acquired the “Drive-by-
Wire”-Technology, and by acquiring Elmotec Statomat – both
The Board of Managing Directors looks back on a mixed year that transactions that position the group for the “Mobility for
brought great challenges. While earnings came under pressure in tomorrow”.
the context of the challenging automotive sector environment,
the Schaeffler Group successfully pressed ahead with its trans- The Board of Managing Directors expects the environment to
formation. remain challenging in 2019 as well, and it has launched the effi-
ciency programs “RACE” for the Automotive OEM division and
The Industrial division did very well, growing profitably with rev- “FIT” for the Industrial division in response. These programs will
enue growth – excluding the impact of currency translation – of help improve and safeguard the two divisions’ earnings quality
10.1% and an EBIT margin before special items of 11.0%. These and efficiency for the long term. As well, the program for the
results are partly attributable to the consistent implementation future, the “Agenda 4 plus One”, which was 55% complete at
of the program “CORE”. The Automotive OEM division’s revenue year-end 2018, will be consistently executed in 2019.
growth (+2.2% at constant currency) and earnings (EBIT margin
before special items 7.7%) fell short of expectations in a chal-
lenging market and competitive environment. This performance 2.7 Net assets, financial position, and
was attributable, on the one hand, to a noticeable decline in
automobile production in the Greater China and Europe regions,
earnings of Schaeffler AG
especially in the second half of 2018. On the other hand, the
division could not offset the impact of these lower volumes, Schaeffler AG is a corporation domiciled in Germany with its reg-
increased pricing pressure, and costs related to the realignment istered office located at Industriestr. 1-3, 91074 Herzogenaurach.
of the business portfolio with sufficient compensating measures It acts as a management holding company and is responsible for
and increased efficiency. Operating in a highly competitive envi- directing the Schaeffler Group and managing its business as well
ronment, the Automotive Aftermarket division grew less than as its financing; it also employs the staff at the
originally expected as well. In order to strengthen its market Schaeffler Group’s corporate head office.
position, the division has commissioned several new distribu-
tion centers, which has put a strain on earnings in 2018. In light The Board of Managing Directors of Schaeffler AG is responsible
of the heterogeneous performance of the divisions, this past for the key management functions of the Schaeffler Group.
year has once more demonstrated the importance of the Schaeffler AG’s situation is largely determined by the
Schaeffler Group being both an automotive as well as an indus- Schaeffler Group’s operating performance.
trial supplier.
The following discussion relates to the separate financial state-
Integrating the “Bearing & Components Technologies” (BCT) ments of Schaeffler AG prepared in accordance with the require-
unit, which had previously acted as an internal supplier, into the ments of the German Commercial Code (HGB) and the German
Automotive OEM and Industrial divisions in 2018 represented an Stock Corporations Act (AktG).
important step toward increasing the Schaeffler Group’s effi-
ciency. In addition, the Schaeffler Group successfully completed
the merger of the Indian Schaeffler companies and decided to
reorganize its UK business activities in order to streamline the
group.
Report on the economic position I Net assets, financial position, and earnings of Schaeffler AG
Earnings Schaeffler AG Schaeffler AG performs most of the Schaeffler Group’s hedging

activities related to currency risk. Foreign exchange gains and
losses related to the group’s financing arrangements and hedges
Income statement of Schaeffler AG No. 063
of currency risk arising from operations represent a significant
(abbreviated)
proportion of net other operating income.
Change
Income from equity investments consisted entirely of with-
Revenue 35 100 -65.0
drawals from Schaeffler Technologies AG & Co. KG.
Cost of sales -31 -94 -67.0
Gross profit 4 6 -33.3
Interest expense included interest paid and accrued on the com-
General and administrative expenses -116 -60 93.3
pany’s institutional loans of EUR 18 m (prior year: EUR 16 m). The
Net other operating income 55 101 -45.5
proceeds of the bond issuance, which Schaeffler Finance B.V.
Income from equity investments 800 675 18.5
transferred to Schaeffler AG via intercompany loans, resulted in
Interest result -142 -171 -17.0
interest paid and accrued of EUR 73 m (prior year: EUR 84 m).
Income taxes -102 -98 4.1
Earnings after income taxes 499 453 10.2
Income tax expense for 2018 amounted to EUR 102 m
Net income for the year 499 453 10.2
(prior year: EUR 98 m) and consisted entirely of current tax
Retained earnings brought forward 0 0 0.0
expense of EUR 102 m (prior year: EUR 98 m). Schaeffler AG has
Retained earnings 499 453 10.2 had deferred tax assets since 2016. It has opted out of recog-
nizing deferred tax assets in accordance with section 274 (1)
sentence 2 HGB. Consequently, just as in the prior year, the com-
pany did not have any deferred tax expense or benefit in 2018.
Being the ultimate parent company of the Schaeffler Group,
Schaeffler AG exclusively performs the management functions of Net income for the year amounted to EUR 499 m
a corporate center. For this reason, employees fulfilling other (prior year: EUR 453 m) in 2018 and equaled retained earnings
functions were transferred to other subsidiaries during the year. for 2018.
As a result, Schaeffler AG has been earning only minor amounts
of revenue from services for subsidiaries since the second The Board of Managing Directors and the Supervisory Board will
quarter of 2018. In light of this, the system for recharging ser- propose a dividend for 2018 of EUR 0.54 (prior year: EUR 0.54)
vices within the group has been revised as well. Therefore, the per common share and EUR 0.55 (prior year: EUR 0.35) per
structure of revenue, cost of sales, and administrative expenses common non-voting share to the annual general meeting.
for the year has changed from that of the prior year. This struc-
ture will stabilize further in 2019, the first full year of reporting
under the new organizational structure.
In performing its function as management holding company of

the Schaeffler Group, Schaeffler AG incurred EUR 116 m
(prior year: EUR 60 m) in general and administrative expenses.
Report on the economic position I Net assets, financial position, and earnings of Schaeffler AG
Schaeffler AG financial position and net Provisions declined by EUR 20 m to EUR 294 m (prior year:
assets EUR 314 m), primarily due to lower income tax provisions for
expected income tax payments and the reversal of a provision
Fixed assets consisted primarily of shares in Schaeffler recognized for a compliance case in the past that was included in
Technologies AG & Co. KG. other provisions. These decreases were partially offset by an
increase in provisions for pending losses on financial derivatives
Short-term loans and other financial receivables included in by EUR 19 m to EUR 93 m compared to December 31, 2017.
current assets related to Schaeffler AG’s cash pooling function
and responsibility for the internal group financing of the Liabilities included primarily short-term loans payable to affili-
Schaeffler Group. Other receivables largely consisted of ated companies related to Schaeffler AG’s cash pooling function
Schaeffler AG’s claim to the net income of Schaeffler Tech and responsibility for the internal group financing of the
nologies AG & Co. KG of EUR 800 m (prior year: EUR 675 m) Schaeffler Group. Amounts payable to affiliated companies
that had not yet been paid out to Schaeffler AG as at included amounts payable to Schaeffler Finance B.V.
December 31, 2018. Schaeffler Technologies AG & Co. KG of EUR 2,106 m (prior year: EUR 2,104 m) largely relating to the
paid EUR 675 m in respect of the prior year’s net income to transfer of the proceeds from the bond issuances by Schaeffler
Schaeffler AG in 2018. Schaeffler AG in turn used these funds Finance B.V.
entirely to pay off existing liabilities due to Schaeffler Tech
nologies AG & Co. KG. The company’s bank debt increased by EUR 251 m to EUR 1,344 m
(prior year: EUR 1,093 m), mainly as a result of drawings under
Schaeffler AG managed the Schaeffler Group’s cash pool and the credit facility of a capital investment loan and under the
held bank balances of EUR 191 m (prior year: EUR 189 m) at Revolving Credit Facility.
the end of the reporting period.
M ore on financial debt on pp. 66 et seq.
On April 20, 2018, Schaeffler AG’s annual general meeting
passed a resolution to pay a dividend of EUR 361 m to
Schaeffler AG’s shareholders and to add the remaining Closing statement on the dependency report
retained earnings of EUR 92 m to revenue reserves.
Closing statement on the report on relations with affiliated com-
panies prepared by the Board of Managing Directors in accor-
Balance sheet of Schaeffler AG No. 064
dance with section 312 AktG.
(abbreviated)
Change
Schaeffler AG has been a company dependent on IHO Verwal-
in € millions 12/31/2018 12/31/2017 in %
tungs GmbH, Herzogenaurach, in accordance with section 312
ASSETS
AktG since October 24, 2014. Therefore, the Board of Managing
Fixed assets 14,282 14,302 -0.1
Directors of Schaeffler AG has prepared a report on relations
Current assets 8,920 8,744 2.0
with affiliated companies by the Board of Managing Directors in
Prepaid expenses and deferred
charges 1 0 - accordance with section 312 (1) AktG which contains the fol-
Excess of plan assets over lowing closing statement:
postemployment benefit liability 5 9 -44.4
Total assets 23,208 23,055 0.7 “In the legal transactions and measures listed in the report on
SHAREHOLDERS’ EQUITY AND relations with affiliated companies, our company has in each
LIABILITIES
legal transaction received appropriate compensation in the cir-
Shareholders’ equity 7,197 7,059 2.0
cumstances known to us at the time the legal transactions were
Provisions 294 314 -6.4
executed or the measures were executed or not executed, and
Liabilities 15,713 15,676 0.2
has not been disadvantaged by the fact that such measures were
Deferred income 4 6 -33.3 executed or not executed”.
Total shareholders’ equity and
liabilities 23,208 23,055 0.7
Report on the economic position I Other components of the group management report
2.8 Other components of the group

management report
The following chapters are also part of the combined

management report:
• “Corporate governance report including the corporate

governance declaration” beginning on page 89,
• “Governance structure” beginning on page 97,
• “Remuneration report” beginning on page 101, and
• “Governing bodies of the company” beginning on page 114.
The following references also form part of the combined

management report:
Corporate governance report including corporate governance

declaration, including the declaration of conformity pursuant
to section 161 AktG at:
www.schaeffler.com/ir
Combined separate non-financial report in accordance with section

289b (3), section 315b (3), and section 298 (2) HGB at:
www.schaeffler.com/sustainability/nfr2018
Supplementary report
3. Supplementary report
The agreement to acquire a 100% interest in Elmotec Statomat

Holding GmbH entered into on November 28, 2018, closed on
January 31, 2019, once all agreed-upon closing conditions were
met. Elmotec Statomat Holding GmbH is a manufacturer of pro-
duction machinery for the high-volume construction of electric
motors. The acquisition represents a step toward expanding the
Schaeffler Group’s manufacturing expertise in the field of con-
struction of electric motors and implementing its electric
mobility strategy.
No other material events expected to have a significant impact

on the net assets, financial position, or results of operations of
the Schaeffler Group occurred after December 31, 2018.
Report on opportunities and risks I Risk management system
4. Report on opportunities and risks
The Schaeffler Group’s risk management system is an integral of the Committee of Sponsoring Organizations of the Treadway
component of its governance structure and covers both risks and Commission (COSO). As described in this framework, the pro-
opportunities. The Schaeffler Group is exposed to a large cesses of the risk management system are linked to financial
number of potential risks that can adversely affect its business. reporting and the internal control system. The Schaeffler Group’s
To be able to appropriately respond to these risks, the company risk management process described below is based on the COSO
has a risk management system in place to ensure that risks, par- ERM framework.
ticularly those to the company’s continued existence as a going
concern and to its development, are identified on a timely basis. Responsibility for the risk management system rests with the
Board of Managing Directors of Schaeffler AG. The Board of Man-
Risks are defined as possible future developments or events that aging Directors regularly reports to the Schaeffler AG audit com-
can lead to adverse deviations from budgeted results, while mittee and ensures that necessary risk management measures
opportunities are future developments or events that can lead to are approved. Details of the risk management system are largely
favorable deviations from budgeted results. When assessing set out in a risk management guideline issued by the Board of
risks, the company considers the impact on its EBIT margin Managing Directors and published within the Schaeffler Group,
(earnings), free cash flow (financial position), and statement of making it available to all employees. It contains a description of
financial position (net assets), depending on the risk category. the process, the allocation of responsibilities, and the structure
of the risk management system. The Board of Managing Directors
has asked Corporate Risk Management to review and update the
4.1 Risk management system risk management system on an ongoing basis and to ensure that
existing uniform groupwide standards are implemented and
The Schaeffler Group intentionally takes risks in order to meet its complied with. All instructions from Corporate Risk Management
corporate objectives. The objective of the risk management are binding on all individuals responsible for risk.
system is to identify these risks on a timely basis and to manage
them in accordance with the company’s risk appetite. This The risk management system consists of a multi-phase process
applies particularly to risks to the company’s continued exis- spanning various levels and organizational units in order to
tence as a going concern and to its development, which are appropriately reflect the matrix structure of the Schaeffler Group.
responded to with appropriate action. Consciously addressing In a bottom-up process, risks are identified and analyzed at the
identified risks and regularly monitoring risk factors is designed subsidiary level. Based on this analysis, the next step is a top-
to increase risk awareness and ensure a continuous improve- down analysis by the appropriate global management of the
ment process. functions and divisions. They assess the risks identified within
the subsidiaries, taking into account all interdependencies
The groupwide risk management system is based on the man- within the Schaeffler Group. This approach ensures that all
agement-oriented enterprise risk management (ERM) approach, dimensions of the Schaeffler Group’s matrix structure are
which in turn has its basis in the globally recognized framework reflected in the risk management system. Risks are identified at
Report on opportunities and risks I Risk management system
Structure of risk management system No. 065
Supervisory Board / Audit Committee
Financial statement
Internal audit
auditors
Board of Managing Directors
Control & Reporting &

m onitoring communication
Risk
Divisions Functions
management
Analysis & Identification &

valuation documentation

region region region region
all material Schaeffler AG subsidiaries on a semiannual basis. The risk management system only deals with risks exceeding a
Operating management is responsible for identifying risks. The threshold of EUR 5 m on a net basis. Risks are assessed based
time period for identifying risks is three years, longer than the on their amount of damage and their probability of occurrence.
outlook horizon. The assessment classifies the amount of damage of each risk in
one of four categories: very low, low, medium, and high. Classifi-
Systematic identification of risks related to the issues in the cation is performed based on the amount of damage for one year.
non-financial report is performed separately and is not part of The probability of occurrence is assessed using percentages and
the risk management system described herein. is classified in the four categories improbable, possible, prob-
able, and highly probable. The combination of estimated amount
The guideline also defines a groupwide catalog of risk categories of damage and probability of occurrence determines the risk
to ensure that all risks along the value chain are identified. Iden- class, which is classified as either low, medium, or high based
tified risks have to be assigned to predefined risk categories. on its impact on net assets, the financial position, and earnings.
This catalog must be completely reviewed by all those respon- Risks are assigned to the various risk classes using the risk
sible for risk in order to ensure uniform and complete identifica- matrix.
tion of risks. To make risk assessment comparable, suggested
risk assessments have been provided for all risk categories. In assessing risks, the Schaeffler Group differentiates between
gross exposures and net exposures. Measures already in place
Subsidiaries included are selected using a defined selection pro- can reduce the gross exposure with respect to both amount of
cess based on revenue and earnings (EBIT) as well as risk factors damage and probability of occurrence. The net exposure rep-
specific to the business. This selection process ensures that all resents the amount of damage and the probability of occurrence
Schaeffler Group subsidiaries that are relevant from a materiality after taking into account any risk mitigation measures in place at
perspective are included in the risk management system. the reporting date.
In 2018, 42 of 153 Schaeffler Group entities were included, rep-
resenting 94% of revenue and 93% of the Schaeffler Group’s
EBIT. The remaining 111 entities are subject to an abbreviated
risk survey process ensuring that all risks to the existence of the
company as a going concern are identified.
Report on opportunities and risks I Internal control system
Risk matrix No. 066
Impact assessment
Amount of damage in €
Amount of damage in € millions
high
< 10 million very low
> = 10 million - < 25 million low
> = 25 million - < = 50 million medium
medium > 50 million high
Probability of occurrence in %
< 25% improbable
low 25% - < 50% possible
50% - 75% probable
> 75% highly probable
very
low
Probability of occurrence in %
Risk classes
highly
improbable possible probable low medium high
probable
Impact on net assets, financial position, and earnings
Identified risks are actively managed to achieve the company’s 4.2 Internal control system
intended level of risk mitigation. Management takes measures to
avoid or reduce risks or to provide safeguards against them. Any Paralleling the risk management system, the Schaeffler Group
risks that cannot be mitigated by taking appropriate action are has a system of internal controls over financial reporting (ICS)
classified as business risks. Risks with a low impact on the ensuring the accuracy of the accounting system and the related
Schaeffler Group are managed by operating management. Risks financial reporting.
with a medium or high impact, however, are also managed by the
Board of Managing Directors of Schaeffler AG. Within his or her Like the risk management system, the Schaeffler Group’s ICS is
area of responsibility, each member of the Board of Managing conceptually based on a COSO Framework. The components
Directors decides what measures are required and ensures that defined in the Framework are applied to all levels of the group,
they are implemented and kept up to date. The current risk especially including the compilation of the separate and consoli-
assessment is regularly reported to the Board of Managing Direc- dated financial statements of Schaeffler AG.
tors and the audit committee.
The financial statement information reported by Schaeffler AG
Corporate Risk Management reports to the Board of Managing and its subsidiaries via a uniform groupwide chart of accounts
Directors on the risk situation semiannually, which ensures that represents the base data for the compilation of the separate and
the Board of Managing Directors is continually updated on the consolidated financial statements. Many subsidiaries receive
current risk situation of the Schaeffler Group and its change over support from an internal shared services organization in this
time. All net exposures with a medium or high impact are process. The Schaeffler Group obtains assistance from external
reported to the Board of Managing Directors. These reports also specialists in dealing with certain complex issues requiring
include an aggregated summary of identified opportunities. extensive specialized knowledge (such as the valuation of pen-
Between regular reporting dates, emerging risks are reported sion obligations).
using a defined ad hoc process, ensuring timely communication
of emerging risks to the Board of Managing Directors. Conceptual and process-related requirements and deadlines as
well as analyses and reasonability checks at group and company
Internal audit regularly ensures that the risk management system level ensure that the separate and consolidated financial state-
is effective. ments of Schaeffler AG are compiled, prepared, and issued in
accordance with the law, to a high level of quality, and on time.
In response to the growing complexity of the risk management
system and to ensure data is protected, Schaeffler has captured
risks in a risk management tool developed specifically for this
purpose.
Report on opportunities and risks I Risks
The following significant features of the system of internal con- 4.3 Risks
trols over financial reporting have been implemented within the
Schaeffler Group as part of this process: The risks set out below could take on a medium or high impact
on the Schaeffler Group’s earnings, financial position, and net
• An accounting manual sets out uniform accounting policies,
assets within the planning horizon. Risks are divided into stra-
taking into account new IFRS financial reporting standards
tegic, operating, legal, and financial risks and are described in
required to be applied for the first time.
decreasing order of the magnitude of their impact on the
• Closing instructions issued quarterly provide Schaeffler AG Schaeffler Group’s net assets, financial position, and earnings.
subsidiaries with information on all relevant issues regarding Unless the extent to which one or both divisions are affected by
the content as well as the processes and deadlines for com- these risks is explicitly described, the discussion of the risks
piling the financial statements. relates to all three of the Schaeffler Group’s divisions.
• Tasks and responsibilities regarding the compilation of the
separate and consolidated financial statements are clearly
defined and assigned. Strategic risks
• The operating units and the various staff members involved in
the process stay in close contact on matters concerning The key operating risks of the Schaeffler Group are described
accounting, financial statement compilation, and quality below.
assurance with respect to financial statement compilation.
Country risks
The process for compiling the separate and consolidated financial
statements is itself secured by numerous control activities, taking Changes in the social, political, legal, or economic stability in
into account materiality. In particular, these include extensive certain markets could hamper the Schaeffler Group’s operations
systems-based reasonability checks, controls using reviews (by a or planned expansion projects. The persistent heightened polit-
second member of staff) performed on a regular basis, and anal- ical uncertainty within the EU, particularly regarding the negotia-
yses and reasonability checks of the quarterly and annual consoli- tions for the withdrawal of the United Kingdom, could make cus-
dated financial statements at the corporate level. tomers hesitant to buy and could result in additional adverse
impacts. Depending on potential reactions to likely barriers to
As at each year-end, management assesses the appropriateness trading with the EU market (assuming a hard Brexit), duties pay-
and effectiveness of the ICS in place. To this end, the able and increased administrative expenses could have a
Schaeffler Group uses a standardized methodology to identify medium impact on the net assets, financial position, and earn-
the group companies and processes relevant to ICS, define the ings of the Schaeffler Group. The Schaeffler Group continually
required controls, and document them in accordance with uni- monitors the withdrawal process and, in addition, has estab-
form requirements. This is then followed up with a review of the lished a task force to coordinate its local and global activities in
effectiveness of the defined controls that is performed using a this area.
risk-based approach, either by the reporting unit itself, by
internal audit, or as part of the audit of the consolidated finan- Growing trade protectionism outside of the EU and changes in
cial statements. This review involves evaluating and assessing the political and regulatory environment of markets in which the
risks as well as reporting on them to management with the rele- Schaeffler Group does business could have a medium impact on
vant responsibility at all organizational levels of the companies the net assets, financial position, and earnings of the
and the group. Where control weaknesses exist, actions to elimi- Schaeffler Group. In certain countries, import and export control
nate these weaknesses have to be defined. regulations, customs regulations, and other trade barriers could
bring sales to a complete halt. Environments are continually
Regardless of the assessed level of the Schaeffler Group’s monitored and modeled using scenarios in order to initiate spe-
internal control system, the effectiveness of any internal control cific actions.
system is inherently limited. No control system, no matter how
effective, can prevent or detect all inaccuracies. Protecting the environment is a high priority for the
Schaeffler Group. Since the Schaeffler Group’s production and
These arrangements as well as their continuous improvement manufacturing locations are located all over the world, they are
are designed to provide reasonable assurance that the ICS pre- subject to a wide variety of environmental standards. The loca-
vents significant misstatements of the financial statements and tions meet high environmental standards, a fact highlighted by
consolidated financial statements and to ensure quality stand the large number of locations certified under EMAS. New legisla-
ards are maintained in compilation, preparation, and issuance. tion or changes in the legal environment, both at the national
and at the international level, could entail risks jeopardizing
The Board of Managing Directors considers the system of internal
controls over the compilation of the annual and consolidated
financial statements of Schaeffler AG to be effective for 2018. In
addition, the audit committee monitors the effectiveness of the
internal control system as well.
trouble-free production that could adversely affect the Schaeffler Group has established its E-Mobility business divi-
Schaeffler Group’s value added. These risks could have a sion with the intention of further expanding a portfolio of prod-
medium impact on the Schaeffler Group’s net assets, financial ucts for this field that is designed to offset any potential future
position, and earnings. Since the group’s environmental man- losses in revenue and profitability from conventional drive
agement system, which has been rolled out worldwide, is con- trains. Should the initiatives undertaken not have the desired
stantly being improved and enhanced, occurrence of these risks effect, this could have a medium impact on the
is considered improbable. Schaeffler Group’s financial position and earnings. Initiating
cost reduction measures can reduce the amount of damage.
Strategic market and technology risks

Digitalization
Schaeffler currently relies on a high degree of vertical integra-
tion and comprehensive production expertise that facilitate Digitalization is progressing rapidly and has already completely
improvements in the production process and ultimately safe- transformed certain sectors. The Schaeffler Group recognized
guard the company’s ability to maintain its margins. The evolu- the issue of digitalization early on, has developed a Digitaliza-
tion of the company’s business from being component-driven tion strategy - its “Digital Agenda” - and is in the process of
toward being more systems-based is ongoing, and this change implementing it at a rapid pace. The pace of implementation and
could reduce the proportion of value added by Schaeffler. The adaptation represents an important success factor in this regard
company is taking a variety of measures to address this trend, and, therefore, also a risk. Digitalization is also affecting the
including, for instance, strategically enhancing its production work place and will lead to changes in the working environment.
system to be more modular and building strategic supplier rela- As part of the “Digital Agenda”, employees with varying skills
tionships. and qualifications are increasingly confronted with new prod-
ucts, processes, and structures requiring extensive training and
The Schaeffler Group’s competitiveness depends fundamentally also re-qualification. The Schaeffler Group has focused its activ-
on its ability to keep up with the technological developments ities on this issue on a timely basis. However, should the
discussed above, maintain its technology leadership, and con- Schaeffler Group nevertheless be unable to overcome these
tinue to manufacture innovative products cost effectively. Not challenges as quickly as necessary, this could have a medium
achieving this objective would represent a medium risk to the impact on the group’s financial position and earnings.
Schaeffler Group’s financial position and earnings that would
last beyond the planning horizon.
Operating risks
The Schaeffler Group operates in a highly competitive and tech-
nologically fast-paced environment. The Automotive division’s The key operating risks of the Schaeffler Group are listed below.
high-margin component business is facing considerable pricing
pressure driven by increasing demands for price reductions on
Market developments
the part of customers, purchasing cooperatives, and certain
focused and leaner competitors, especially in the emerging mar- As the Schaeffler Group is a global supplier in the automotive
kets. The company is currently not fully passing these demands and industrial sector, demand for Schaeffler products is to a
for extensive price reductions on to its own suppliers and cannot large extent driven by global economic conditions. The demand
absorb them entirely with its existing structure. for products of the Schaeffler Group depends considerably on
the overall economic trend. In addition, demand is subject to
This trend requires the Schaeffler Group to constantly improve cyclical fluctuations.
its efficiency and diversify into new lines of business in order to
safeguard and further expand its market position. The increasing In the Automotive OEM division, demand is not only affected by
pricing pressure could have a medium impact on the global economic conditions, but also by other factors such as
Schaeffler Group’s financial position and earnings. changes in consumption patterns, fuel prices, interest rate
levels, and others. Especially the persistent uncertainty
regarding the future development of the Chinese market and the
Electric mobility
political environment in Europe could continue to jeopardize
Electrification of automobiles is progressing, and as a result, the market growth. The large number of economic factors affecting
further development of conventional drive trains is coming under global demand for automobiles leads to significant volatility in
pressure. Firstly, further increases in the efficiency of conven- automobile production, which makes forecasting sales exactly
tional drive trains will become less relevant, and secondly, considerably more difficult.
existing products and applications will be replaced. The
The increasing consolidation of the customer base as well as the Information technology risks
availability of new technological alternatives to core products
represent critical factors that could considerably affect pricing at The importance of the IT systems utilized throughout the
the Automotive Aftermarket division. Schaeffler Group is growing. The operability of business pro-
cesses and, therefore, the continuity of operations depend on
Demand for Industrial products is influenced by a wide range of the availability of the IT systems. Three protection targets – con-
factors due to the large variety of business fields in which the fidentiality, integrity, and availability – underlie the company’s
Schaeffler Group operates. However, the division’s demand is IT security management and protection of data and IT systems.
subject to general and, partly, shorter market cycles, and cur- Unauthorized access to IT systems, modification and misappro-
rently no significant risks have been identified in these market priation of sensitive business data, as well as non-functional
cycles. processes or data could have a medium impact on the
Schaeffler Group’s net assets, financial position, and earnings.
A change in forecasted market trends could have a high impact
on the net assets, financial position, and earnings of both
Production risk
Automotive divisions. Markets are analyzed on an ongoing basis
in order to detect changes in market structure or regulations As the Schaeffler Group’s production is very capital-intensive,
early on. The company uses managed cost efficiency programs to a large proportion of its costs are fixed. As a result, a decrease
flexibly and dynamically reduce the amount of damage from in utilization of plant capacity increases the company’s costs
unexpected market slow-downs. Should prices deteriorate unex- and reduces its profitability. Being a global corporation, the
pectedly, the amount of damage arising from this risk is reduced Schaeffler Group regularly reviews market conditions and com-
by renegotiating with suppliers. pares them to its footprint in the region. Several factors play a
role in this process, including the economy, supply and demand,
as well as decisions made by original equipment manufacturers.
Delivery performance
An optimum global footprint could require plants or parts of
The ability to deliver and delivery performance represent a key plants to be relocated, and this could have a medium impact
competitive factor for a long-term relationship of trust with cus- on the Schaeffler Group’s net assets, financial position, and
tomers; this competitive factor is being constantly enhanced by earnings.
systematic improvements in production and delivery logistics.
The company is building high-performance distribution centers The influence of force majeure could result in delays or interrup-
for the Industrial division and the Automotive Aftermarket aimed tions in the supply chain. The period between failure at the
at improving market supply and delivery performance with fewer plant, regardless of the cause, and when alternative means of
logistics locations. Ensuring that contractual delivery dates are production are set up is key. Where necessary, alternative means
met could have a high impact on the Schaeffler Group’s financial of production can either be realized by another Schaeffler Group
position and earnings. plant with comparable production lines or provided by an alter-
native supplier. To minimize the probability of occurrence of
unplanned interruptions, the company takes extensive fire pre-
Procurement risks
cautions. Nevertheless, the consequences of force majeure
The Schaeffler Group’s purchasing function ensures optimal could have a medium impact on the Schaeffler Group’s net
supply of goods and services to the company, focusing on assets, financial position, and earnings.
quality, cost, and delivery performance. Extensive cooperation
with suppliers increases the quality of goods and services sup-
Loss of market share
plied. Improving logistics connections to suppliers helps secure
supply. The Schaeffler Group faces numerous competitors in its various
business fields. As a result, the company is exposed to the risk
Procurement risks arise mainly from fluctuations in market of being displaced by existing or new competitors and of its
prices, particularly for purchases of raw materials. Adverse fluc- products being replaced by product innovations or by new tech-
tuations in market prices could have a high impact on the nological features. The Schaeffler Group mainly competes with
Schaeffler Group’s financial position and earnings. By negoti- other international suppliers, and to some degree also with
ating prices and utilizing synergies resulting from numerous regional suppliers, on price, quality, delivery performance, and
cross-regional projects and programs, the Schaeffler Group was design, as well as on the ability to offer technological support
able to obtain competitive procurement prices. and service worldwide. Should the company become no longer
able to compete on one of these factors, customers may decide Information security risks
to obtain products and services from competitors.
A growing threat to the security of information and trade secrets
As a result of the intense competition in the automotive supply can jeopardize shareholder value. The Schaeffler Group’s infor-
sector, Schaeffler considers the Automotive OEM division to be mation security management system is based on the ISO/IEC
exposed to a risk of losing market share entailing a medium 27001 standard and reflects national and sector-specific regula-
impact on the Schaeffler Group’s earnings and financial position. tions. Its objective is to protect the intellectual property and
trade secrets of the Schaeffler Group and its business partners
Close cooperation with the Schaeffler Group’s key customers on against theft, loss, unauthorized dissemination, illegal access,
product development and strict product quality control mea- and misuse. Thus, Schaeffler is responding to the growing threat
sures reduce the likelihood of substitution. by taking specific action. Given the increasing number and pro-
fessionality of criminal attacks, an information security risk with
a medium impact on the Schaeffler Group’s net assets, financial
Warranty and liability risks
position, and earnings cannot be entirely ruled out.
One significant factor in customers’ decision to purchase the
products offered by the Schaeffler Group is their high quality. To
secure this level of quality for the long term, the Schaeffler Group Legal risks
employs a certified quality management system, supported by
additional quality improvement processes. However, there is a The Schaeffler Group’s operations give rise to legal risks, for
risk that poor quality products end up getting delivered, causing instance those resulting from non-compliance with relevant reg-
product liability risk. The use of defective products can lead to ulations. Legal risks are reflected in provisions recognized in
damage, unplanned repairs, or recalls on the part of the cus- accordance with financial reporting standards.
tomer which can result in liability claims or reputational damage.
Furthermore, deteriorating product quality can result in increased
Compliance risks
warranty and liability risk vis-à-vis the Schaeffler Group’s
customers. The Schaeffler Group responds to such risks by As a company with operations worldwide, Schaeffler has to
adopting strict quality control measures and continually comply with varying laws and regulations around the globe. It is
improving its production processes in order to minimize the possible that violations of existing law occur despite careful
probability of warranty and liability risks materializing. Indi- observance of such legal requirements. Identified instances of
vidual risks becoming reality could have a medium impact on the non-compliance are immediately addressed with appropriate
Schaeffler Group’s financial position and earnings. All product action. The consequences of these instances of non-compliance
liability risks are insured. The extent of actual reimbursements could have a medium impact on the Schaeffler Group’s net
that can be claimed from insurers can only be assessed on a assets, financial position, and earnings as well as on its reputa-
case-by-case basis. tion. The Schaeffler Group cooperates with the authorities with
respect to any current and future investigations of possible
instances of non-compliance and responds appropriately to
Product piracy risks
weaknesses identified.
The Schaeffler product brands INA, LuK, and FAG are associated
with a high standard of quality, making them increasingly sus- More on the company’s compliance management system
ceptible to product piracy. Counterfeit products are normally on pp. 98 et seq.
sold at significantly reduced prices, which causes irritation in
the trade as well as in end customers and frequently results in The company uses a material compliance management system to
requests for price reductions. Combating product piracy is a high help it meet its commitment to using only components and raw
priority for the Schaeffler Group. The Schaeffler Group protects materials that comply with the applicable laws and regulations.
intellectual property not only using global patents and industrial However, there is a risk that legal requirements and changes
property rights but also by actively combating counterfeit prod- therein are not identified in time and that products are distrib-
ucts, which damage its image as well as its revenue. Based on uted in the market in violation of the law. This could have a
the large number of counterfeit products seized, the medium impact on the Schaeffler Group’s financial position and
Schaeffler Group estimates the impact of this issue on its earn- earnings.
ings and financial position to be medium.
Antitrust proceedings Currency risks from financing activities arise mainly from the
impact of changes in the U.S. dollar exchange rate on the portion
Current and future investigations and proceedings regarding vio- of the bond issued in U.S. dollars that is not hedged.
lations of antitrust law could have an adverse impact on the
financial position and earnings of the Schaeffler Group as well Currency risks from operations and from financing activities are
as on its reputation. Possible payment obligations in connection continually monitored and reported. Currency risk is managed at
with these investigations and proceedings may result in the corporate level. Currency risks are aggregated across the
unplanned cash outflows. The Schaeffler Group cooperates with group and hedged using hedging instruments. Hedging instru-
the investigating authorities in current and future investigations ments used include forward exchange contracts and cross-cur-
as a matter of principle. The imposition of penalties cannot be rency swaps. Currency risks, market values of foreign currency
ruled out. In Spain and Korea, the company has appealed judg- derivatives, and developments in foreign exchange markets are
ments imposing penalties. continuously monitored and managed as part of the risk manage-
ment system.
In addition, claims for damages have been filed against
Schaeffler Group companies as a result of known antitrust pro- To the extent competitors from other currency areas can offer
ceedings. The Schaeffler Group has recognized appropriate pro- lower prices due to movements in exchange rates, changes in
visions for possible charges to earnings. foreign exchange rates can adversely affect the
Schaeffler Group’s competitive position. The Schaeffler Group’s
manufacturing locations are spread around the world, enabling
Financial risks the group to reduce the impact of changes in exchange rates on
its competitive position. However, exchange rate trends could
Financial risks include tax risks and pension risks as well as the have a medium impact on the Schaeffler Group’s earnings and
impact of changes in foreign exchange rates and liquidity risks. financial position.
Tax risks Liquidity risks

The Schaeffler Group is subject to tax audits worldwide. Tax The risk that the Schaeffler Group will not be able to meet its
authorities’ interpretation of the tax law or of relevant facts payment obligations as they come due is referred to as liquidity
made in current or future tax audits may differ from that of the risk. The Schaeffler Group differentiates between short-,
Schaeffler Group. This may lead to adjustments to tax bases and medium- and long-term liquidity risks.
increases in the tax liability. An additional tax payment as a
result of an adjustment to the tax base could have a high impact Liquidity risks can arise if financing needs cannot be met
on the Schaeffler Group’s financial position. by existing equity or debt financing arrangements. The
Schaeffler Group’s financing requirements were met
throughout 2018 by existing financing instruments and
Pension risks
by the refinancing arrangements completed.
The Schaeffler Group has extensive pension obligations, particu-
larly in Germany, the U.S., and the United Kingdom. The obliga- To avoid unforeseen short- or medium-term liquidity needs to the
tions in the Anglo-Saxon countries are financed by pension extent possible, short- and medium-term liquidity risk is moni-
funds. Pension obligations are measured using actuarial valua- tored and managed using a rolling liquidity budget with a fore-
tions based on assumptions regarding possible future events, casting period of up to twelve months. Short-term fluctuations in
such as the discount rate, increases in wages, salaries, and pen- cash flow are monitored daily and can be offset using lines of
sions, and statistical life expectancy. Plan assets may be credit. To this end, the Schaeffler Group has an RCF of EUR 1.3 bn
invested in various asset classes, such as equity instruments, and other bilateral lines of credit.
fixed-income securities, or real estate, which are subject to fluc-
tuations in value. A change in the parameters listed above could The Schaeffler Group’s loan and bond agreements, which are
have a medium impact on the Schaeffler Group’s net assets, par- generally long term, contain certain constraints including a
ticularly in Germany and the United Kingdom. requirement to meet certain financial covenants. The creditors
are entitled to call the debt prior to maturity under certain cir-
cumstances, including if covenants are not met, which would
Currency risks
result in the debt becoming due immediately. Compliance with
The Schaeffler Group is exposed to a wide range of currency financial covenants is monitored on an ongoing basis and regu-
risks due to its international reach. The largest such currency larly reported to the lending banks. To date, the company has
risks from operations result from fluctuations in the U.S. dollar complied with the financial covenants as stipulated in the debt
and Chinese renminbi exchange rates. agreements. The Schaeffler Group also expects to comply with
these covenants in the future.
Report on opportunities and risks I Opportunities
Any non-compliance with the covenants contained in the debt have a medium impact on the Schaeffler Group’s net assets,
agreements as well as any liquidity requirements exceeding financial position, and results of operations. It is considered
those that can be covered by the existing lines of credit could improbable that these situations will actually occur.
Risk assessment No. 067

Probability of
Amount of damage occurrence Change from
in € in % Risk class prior year
Strategic risks
• Country risks high possible medium è
• Strategic market and technology risks medium possible medium î
• Electric mobility medium possible medium î
• Digitalization medium possible medium è
Operating risks
• Market development high highly probable high ì
• Delivery performance medium highly probable high ì
• Procurement risks medium highly probable high è
• Information technology risks medium probable medium new
• Production risk low highly probable medium ì
• Loss of market share high improbable medium è
• Warranty and liability risks high improbable medium è
• Product piracy risks low probable medium è
• Information security risks low probable medium new
Legal risks
• Compliance risks high improbable medium è
Financial risks
• Tax risks high probable high è
• Pension risks high possible medium è
• Currency risks high possible medium è
• Liquidity risk high improbable medium è
ì increased è unchanged î reduced
4.4 Opportunities The Schaeffler Group’s most significant opportunities lie in stra-
tegic trends and in changes to the legal environment that may
The responsibility for identifying and utilizing opportunities lies lead to increased demand for Schaeffler products.
with operating management. Their objective is to identify these
opportunities on a timely basis and to take appropriate action to
utilize them. Opportunities identified are discussed with the Strategic opportunities
Board of Managing Directors as part of the Strategy Dialog and
strategies are then derived based on these discussions. During The Schaeffler Group with its range of products and services and
this process, the relevant opportunities for growth are priori- its global presence is in a good position to participate in the
tized, specific targets are derived, and actions and resources expected megatrends of the future.
required to achieve operating targets for the future direction of
the Schaeffler Group are determined. The Schaeffler Group’s strategic and operational opportunities
specifically result from the following factors:
An aggregated overview of the opportunities identified in the
Strategy Dialog is included in the reports regularly provided to
Globalization
the Board of Managing Directors and the Supervisory Board of
Schaeffler AG. Opportunities are documented in the risk man- Shifting activities to local markets could enable the
agement tool. Schaeffler Group to tap opportunities for reducing cost and to
improve proximity to the customer. The company also identifies
Report on opportunities and risks I Opportunities
and realizes additional potential worldwide. This also bolsters sumption are increasingly gaining in importance. The
the company’s competitive position vis-à-vis competitors from Schaeffler Group is already actively participating in these devel-
low-wage countries. opments.
Potential in emerging countries Energy chain

Increasing affluence in the emerging countries results in the People are increasingly moving to larger cities and metropolises,
development of a growing middle class there. The newly whether for their job, cultural events, or consumer spending. As
emerging group of buyers can lead to increasing demand for a result, energy and water consumption is expected to continue
automobiles and industrial goods. The Schaeffler Group is a sup- to rise in these central locations in the future. In addition, the
plier to all well-known manufacturers and suppliers, which pro- increasing electrification of automobiles will drive a growing
vides a general opportunity to participate in increased demand. need for energy. The rising demand for energy and the beginning
The company has invested in significant additional resources in transition to renewable energy both lead to an inevitable
order to increase its local presence in the emerging countries demand for energy from renewable sources. Especially in the
and plans to continue to pursue this growth strategy. wind business, the Schaeffler Group is already successfully
operating in the market. Continually expanding the existing
expertise in these business fields offers additional future oppor-
Electric mobility
tunities for growth.
Increasing demands on automobile manufacturers to reduce fuel
consumption and emissions as well as increased safety require-
Trends related to automobile manufacturers
ments provide the Schaeffler Group with an opportunity to
increase its revenue per vehicle. Reducing emissions by In the last few years, automobile manufacturers have increas-
improving the technology of conventional internal combustion ingly created global platforms aimed at standardizing compo-
engines offers further opportunities to the Schaeffler Group, as nents and vehicle systems in order to save costs by increasing
do the plug-in hybrids currently being developed, which consist efficiency. Consequently, automobile manufacturers are looking
of a highly efficient internal combustion engine and an electric for suppliers who can supply standardized components world-
drive. Hybridized vehicles require expertise in the classic field of wide. In return, they reduce the number of suppliers and concen-
engine/transmission as well as in newer product fields such as trate on a few global suppliers. Suppliers such as the
hybrid modules and electric axles. The E-Mobility business divi- Schaeffler Group benefit from this trend due to their global pres-
sion coordinates its wide range of activities relating to alterna- ence and their ability to supply products to the same technolog-
tive types of drives, allowing the Schaeffler Group to benefit ical and quality standards worldwide.
from comprehensive systems know-how.
Urban mobility
Operational opportunities
The increasing number of people living in mega-cities is making
Development of vehicle population
public transportation within cities, such as metros, rapid transit
systems, and streetcars, as well as between cities, e.g. by high- The absolute vehicle population is one of the key drivers of growth
speed train, more and more attractive and important. Especially in the Automotive Aftermarket. Growth depends on various factors,
rail vehicles represent an extremely interesting growing market such as demand (determined by kilometers driven and the compo-
for the Schaeffler Group. Reliable and innovative rolling bearing sition of the vehicle population), services offered, as well as prod-
solutions for applications ranging from bogie to the drive train ucts offered. Besides the vehicle population, increasing content
are key to modern rail vehicles – and also promise growth for per vehicle provides additional opportunities.
mechatronic products in the age of digitalization in mobility. In
addition, the high stresses and resulting wear and tear as well as
Industry 4.0
safety regulations make this market a market of the future with
respect not only to original equipment but also to the The internet of things finding its way into factories has started a
Aftermarket business. fourth industrial revolution. Future scenarios in practice often
referred to under the heading “Industry 4.0” are characterized by
highly individualized products in very flexible manufacturing con-
Interurban mobility
ditions. In the future, companies will network their machinery,
Increasing globalization is inherently associated with an warehousing systems, and equipment around the world. The
increase in the volume of air traffic. As a result, growth in the accompanying global digitalization is progressing at an enormous
aerospace sector is forecasted to be steady. In this sector, issues speed everywhere. Highly interconnected machines and plants
such as reducing CO2 and weight as well as optimizing fuel con- can facilitate progress in manufacturing, including by employing
Report on opportunities and risks I Overall assessment of Schaeffler Group opportunities and risks
this type of machine in the company’s own production. Along with Financial opportunities
production technology, Industry 4.0 also comprises digitally con-
necting components and machines. The Schaeffler Group’s prod-
Financial markets
ucts can be found wherever something is turning and primary
data can be obtained. This allows bearings to be monitored con- Favorable trends in interest and foreign exchange rates can posi-
tinually and their operation to be improved based on the results. tively impact the Schaeffler Group’s financial result and earn-
ings. The company constantly monitors the financial markets in
order to detect any possible impact on the Schaeffler Group on a
Digitalization
timely basis and identify any potential need for action.
The topic of “Digitalization” connects all divisions. It will signifi-
cantly transform the entire economy and its traditional pro-
cesses. The convergence of the real world and the digital world 4.5 Overall assessment of
will produce new business models and a lasting increase in value
creation. The Schaeffler Group’s “Digital Agenda” comprises four
Schaeffler Group opportunities and risks
key elements: Products & Services, Machines & Processes, Anal-
yses & Simulation, and User Experience and Customer Value. The Board of Managing Directors estimates that the
With its “Digital Agenda”, the Schaeffler Group is concentrating Schaeffler Group’s situation with respect to risks has deterio-
both on internal processes and on products and solutions for its rated compared to the prior year. This change is due to new risks
customers. It is not only internally that the company aims to being included and a change in the assessed impact of certain
increase the efficiency of its processes, use available data more medium and high risks.
intensively, and more effectively link production locations,
machines, and buildings. It also aims to expand on its cus- In addition to the specific risks described in the group manage-
tomers’ existing business models and help them develop new ment report, unexpected developments significantly damaging
ones. or harming the company’s production process, customer rela-
tionship, or reputation can occur at any time.
Legal opportunities The overall assessment of the significant opportunities and risks
does not indicate any risks which, either individually or in combi-
The Schaeffler Group’s legal opportunities specifically result nation with other risks, jeopardize the company’s continued
from the following factors: existence as a going concern.
Emission standards
Constantly tightening exhaust emission standards (Euronorm,
CAFE standard) are putting increased pressure on automobile
manufacturers to use energy efficient solutions in their vehicle
drives, consisting of the internal combustion engine and the
transmission. The Schaeffler Group as their development partner
can support the search for solutions with its innovative strength,
creating innovations that automobile manufacturers can turn into
a competitive edge.
Average fleet consumption

Besides emission standards, government pressure on automo-
bile manufacturers is also increasing with respect to the fuel
consumption of the vehicles they produce: Governments are pre-
scribing certain limits for fleet consumption, to be achieved via
their model mix. This also helps drive developments needed to
reduce emissions, benefitting primarily technology-oriented
suppliers like the Schaeffler Group, since the requirements
established by the market and the law make a strong develop-
ment partnership between the automobile manufacturer and its
suppliers a necessity.
Report on expected developments I Expected economic and sales market trends
5. Report on expected developments
5.1 Expected economic and sales hamper the development of certain emerging countries. Addi-
tionally, should the international equities markets experience
market trends widespread and persistent price decreases, this would adversely
affect the global economy. Furthermore, Italy’s high national
The International Monetary Fund (IMF) anticipates that the global debt in combination with that country’s fragile banking system
economy will expand more slowly in 2019 (January 2019). The harbors risks to the financial stability of the European Union.
IMF expects global gross domestic product to grow by 3.5%
(2018: 3.7%). Oxford Economics anticipates a growth rate of In addition, global economic growth might also be impaired by
3.3% (February 2019). In light of these forecasts, the an escalation of existing geopolitical conflicts.
Schaeffler Group expects global economic growth of just under
3.5% in 2019. Taking into account the forecasts of research institute IHS Markit
(February 2019), the Schaeffler Group expects automobile pro-
Risks to the global economy have increased noticeably recently. duction, measured in terms of the number of passenger cars and
Especially if a number of adverse events occur simultaneously, light commercial vehicles produced, to decrease by about 1% in
significantly less global economic growth than currently 2019 (2018: -1.1%). The Schaeffler Group anticipates a decline
expected could be the result. by about 0.5% for the Europe region and zero growth for the
Americas region. The Greater China region is expected to experi-
Further escalation of the international trade conflict represents a ence a decrease of about 2%, while automobile production in the
key risk, especially with respect to globally integrated value Asia/Pacific region is forecasted to decline by about 0.5%.
chains. In addition, China remains susceptible to an unpredicted
economic slump; both the current trade dispute with the U.S. In light of the IHS Markit forecasts (February 2019), the
and the still high level of debt in that country contribute to this Schaeffler Group expects the global vehicle population, mea-
risk. Further, a disorderly Brexit would result in significant eco- sured in terms of the number of passenger cars and light com-
nomic disruption for the United Kingdom and would affect the mercial vehicles up to 3.5 tons in weight, to grow at a lower rate
remaining EU member states as well, albeit to a lesser extent. in 2019 than in 2018, with the average vehicle age remaining
nearly unchanged (2018: 3.6% and 9.7 years, respectively).
Furthermore, global economic growth might be impaired by
disruptions in the international financial markets. If global Based on the forecast by Oxford Economics (December 2018),
financing conditions tighten faster than currently expected or the Schaeffler Group expects a slower global industrial produc-
significant currency fluctuations occur, this could especially tion growth of about 2.6% in 2019 (2018: 3.4%).
Report on expected developments I Schaeffler Group outlook
5.2 Schaeffler Group outlook The Schaeffler Group anticipates that its Automotive OEM
division will continue to outperform the global automobile
production of passenger cars and light commercial vehicles,
Outlook 2019 – group No. 068 expected to decline by about 1%, in 2019. Based on this
expected outperformance, the Schaeffler Group expects its
Outlook Automotive OEM division to generate revenue growth excluding
Actual 2018 Actual 2018 2019 the impact of currency translation of 1 to 3% in 2019 (2018,
adjusted
adjusted comparative figure: 2.1%). The company also expects
comparative
figure 4) an EBIT margin before special items of between 6 and 7% for
Schaeffler Group 2019 (2018, adjusted comparative figure: 7.5%) for the
Revenue growth 1) 3.9% 3.9% 1 to 3% Automotive OEM division.
EBIT margin before special items 2) 9.7% 9.7% 8 to 9%
Free cash flow 3) EUR 384 m EUR 384 m ~ EUR 400 m Given less growth in the global vehicle population than in 2018
1) Compared
and a nearly unchanged average vehicle age, the Aftermarket
to prior year; excluding the impact of currency translation.
2) Please refer to pp. 56 et seq. for the definition of special items. business will likely grow slightly as well. Based on its own
3) Before cash in- and outflows for M&A activities.
4) Comparative figure based on 2019 segment structure. observation of the market, the group expects the Automotive
Aftermarket division to generate revenue growth – excluding the
impact of currency translation – of 1 to 3% (2018, adjusted com-
The Schaeffler Group expects its revenue to grow by 1 to 3% parative figure: 2.2%) and an EBIT margin before special items of
excluding the impact of currency translation in 2019. 15 to 16% in 2019 (2018, adjusted comparative figure: 18.2%).
In addition, the company expects to generate an EBIT margin In the Industrial division, the economic environment suggests
before special items of 8 to 9% in 2019. slowing growth in global industrial production. Based on this
indication, the company expects its Industrial division to gen-
The Schaeffler Group also anticipates approximately EUR 400 m erate 1 to 3% (2018, adjusted comparative figure: 10.1%) in
in free cash flow before cash in- and outflows for M&A activities revenue growth in 2019, excluding the impact of currency trans-
for 2019. lation. In addition, the Industrial division anticipates generating
an EBIT margin before special items of between 10 and 11%
M ore on the definition of free cash flow before cash in- and outflows (2018, adjusted comparative figure: 10.9%) in 2019.
for M&A activities on pp. 34 et seq.
The integration of the “Bearing & Components Technologies”
The Schaeffler Group’s outlook reflects the impact of the initial (BCT) unit, which had previously acted as an internal supplier,
application of financial reporting standard IFRS 16 in 2019. into the Automotive OEM and Industrial divisions has a signifi-
cant impact on the outlook 2019 for the divisions. Under this
reorganization, the functions and plants previously assigned
to BCT were integrated directly into these two divisions. In this
Outlook 2019 – divisions No. 069
context, the risk of fluctuations in production cost during the
year will be borne exclusively by the two producing divisions
Actual 2018 Actual 2018 Outlook 2019 Automotive OEM and Industrial starting in 2019, a change
adjusted designed to strengthen divisional management. The changed
comparative allocation of costs has been reflected in the adjusted compara-
figure 3)
tive figures for 2018 presented above as well.
Automotive OEM
Revenue growth 1) 2.1% 2.1% 1 to 3%
Automotive Aftermarket Herzogenaurach, February 19, 2019
Revenue growth 1) 2.2% 2.2% 1 to 3%
Industrial
Revenue growth 1) 10.1% 10.1% 1 to 3% The Board of Managing Directors
3) Comparative figure based on 2019 segment structure.
88 Corpor ate Governance

Corporate Governance
1. Corporate governance report including corporate

governance declaration *89
1.1
Declaration of conformity pursuant to section 161 AktG89
1.2 Corporate governance principles 90
1.3 Mode of operation of the Board of Managing Directors
and the Supervisory Board and membership and mode
of operation of their committees 90
1.4 Other information on corporate governance 95
2. Governance structure *97

2.1 Compliance management system 98
2.2 Risk management system 99
2.3 Internal control system 100
2.4 Internal Audit 100
3. Remuneration report *101

3.1 Main features of the remuneration system for the
Board of Managing Directors 101
3.2 Amounts of remuneration of the Board of Managing
Directors108
3.3 Remuneration of the Supervisory Board 112
4. Governing bodies of the company *114

4.1 Supervisory Board 114
4.2 Supervisory Board committees 116
4.3 Board of Managing Directors 116
* Part of the group management report.

Schaeffler AG I Financial Statements 2018 Corpor ate Governance 89
Corporate governance report including corporate governance declaration
1. Corporate governance report including

corporate governance declaration
Corporate governance stands for responsible management Declaration of Conformity by the Managing Board and
focused on adding long-term value. Efficient cooperation the Supervisory Board of Schaeffler AG pursuant to
between the Board of Managing Directors and the Supervisory section 161 of the German Stock Corporation Act (AktG)
Board as well as openness and transparency in corporate and Since the release of its last declaration of conformity in
financial communications are key aspects of the Schaeffler Group’s December 2017, Schaeffler AG complies with the recommenda-
corporate governance that strengthen the confidence of stake- tions of the German Corporate Governance Code in the version of
holders in the company’s management and supervision. February 7, 2017, (“Code”) with the exception described below
and will also comply with the recommendations in the future with
The following is a report by the Board of Managing Directors the exception described below:
and the Supervisory Board on the corporate governance of
Schaeffler AG in accordance with item 3.10 of the German The Code recommends in section 5.4.1 para. 2, that the Super-
Corporate Governance Code. The corporate governance report visory Board shall specify concrete objectives regarding its com-
also includes the corporate governance declaration in accordance position and also set an age limit for the members of the Super-
with section 289f HGB. The corporate governance declaration visory Board. The Supervisory Board of Schaeffler AG will not set
required by sections 289f, 315d HGB has been combined for such age limit because it is of the opinion that this criterion is
Schaeffler AG and the group. Therefore, the following discussion not informative with respect to the suitability of a person to
applies to Schaeffler AG and the group unless noted otherwise perform as a member of the Supervisory Board.
below.
Herzogenaurach, December 2018
Corporate governance report including corporate governance
declaration including the declaration of conformity pursuant to
section 161 AktG at: www.schaeffler.com/ir
For the Supervisory Board For the Board of
Managing Directors
1.1 Declaration of conformity pursuant to
section 161 AktG
In December 2018, the Board of Managing Directors and the Georg F. W. Schaeffler Klaus Rosenfeld
Supervisory Board issued the following declaration of conformity Chairman of the Supervisory Board Chief Executive Officer
pursuant to section 161 AktG:
1.2 Corporate governance principles Board of Managing Directors

The Schaeffler Group’s manner of conducting business is based The Schaeffler Group is managed by the Board of Managing
on integrity, fairness, and mutual respect. Transparency, trust, Directors of Schaeffler AG. Its actions and decisions are guided
and teamwork are the three key success factors for achieving by the company’s best interests and, therefore, take into account
this. Transparency generates trust, and trust is the foundation the interests of shareholders, employees and other stakeholders
of good teamwork. The Schaeffler Group Code of Conduct pro- of the company in order to add long-term value. The members of
vides guidance in this area. The principles set out in the the Board of Managing Directors run the business in accordance
Schaeffler Group Code of Conduct apply equally to everyone – with the law, the company’s articles of association, and the
the Board of Managing Directors, management, and all internal rules of procedure, taking into account the obligation
employees. to obtain approval set out in the Supervisory Board’s internal
rules of procedure. The Board of Managing Directors is directly
Compliance is part of the company’s culture. It is centered around responsible for managing the company, sets objectives and the
customer relationships and acting with integrity. company’s strategic direction, consults on them with the Super-
visory Board, manages the implementation of the company’s
Similarly, thinking long term and acting responsibly have always strategy, and regularly discusses the status of its implementa-
characterized the Schaeffler Group’s corporate culture as a tion with the Supervisory Board.
listed family business. It is very important to the Schaeffler Group
to combine economic success with acting responsibly toward The Board of Managing Directors also ensures that legal require-
the environment, people, and society. The corporate values, ments and internal guidelines are complied with and promotes
“Sustainable”, “Innovative”, “Excellent”, and “Passionate”, form such compliance by group companies and their employees. It
the basis for sustainable profitable growth for the benefit and puts in place appropriate measures that are tailored to the com-
in the interest of the group’s customers and business partners, pany’s risk situation and discloses their main features. A whistle
employees and managers, as well as its shareholders and family blowing system gives employees the opportunity, including
shareholders. Based on this, the Board of Managing Directors appropriate protection, to report violations of the law within the
has issued and published a sustainability strategy in 2018 that company; this opportunity is also provided to third parties.
covers the following fields of action: (1) Sustainable manage-
ment, (2) Customers and products, (3) Environment and energy, M ore on compliance on pp. 97 et seq.
(4) Employees and society.
The internal rules of procedure of the Board of Managing Direc-
M ore on the company’s corporate governance principles at: tors set out the activities of the Board of Managing Directors, the
www.schaeffler.com/sustainability issues that are the responsibility of the Board of Managing Direc-
tors, the majorities required to pass resolutions, and the areas of
responsibility of the various members of the Board of Managing
1.3 Mode of operation of the Board of Directors. Based on the Schaeffler Group’s organizational struc-
Managing Directors and the Supervisory ture, the Board of Managing Directors consists of the Group CEO
and the CEOs of the divisions and corporate functions. Under the
Board and membership and mode of internal rules of procedure, specific management responsibili-
operation of their committees ties are assigned to each member of the Board of Managing
Directors. Their responsibility for jointly managing the company
The German Stock Corporations Act requires Schaeffler AG to remains unaffected. Each member of the Board of Managing
have a two-tier board with strict separation between the execu- Directors is directly responsible for his or her assigned area of
tive body, the Board of Managing Directors, and the supervisory responsibility, taking into account the joint responsibility of the
body, the Supervisory Board, in terms of personnel and func- Board of Managing Directors.
tions. The Board of Managing Directors has direct responsibility
for managing the company. The members of the Board of Man- The Schaeffler Group is managed using a three-dimensional
aging Directors are jointly responsible for managing the com- matrix consisting of the divisions, the functions, and the regions.
pany. The Chief Executive Officer coordinates the activities of the The Regional CEOs report directly to the CEO. Together, the Board
members of the Board of Managing Directors. The Supervisory of Managing Directors and the Regional CEOs represent the
Board appoints, supervises, and advises the Board of Managing Schaeffler Group’s Executive Board.
Directors and is involved in decisions that are fundamental to the
company. The Chairman of the Supervisory Board coordinates
the work of the Supervisory Board.
Membership of the Board of Managing Directors the fields of engineering and business, they should also have
additional professional experience, especially in fields rele-
In accordance with the “Act on Equal Access for Men and Women vant to the Schaeffler Group’s future business, such as mecha-
to Leadership Positions in the Private and Public Sectors”, tronics, electrical engineering, digitalization, and IT. In making
Schaeffler AG’s Supervisory Board has set a target for the pro- appointments to the Board of Managing Directors, consider-
portion of women on the Board of Managing Directors and a ation should be given to their education and training, profes-
deadline for meeting this target. At its meeting on May 10, 2017, sional career, and their current responsibilities. The targets
the Supervisory Board established that the Board of Managing established were met in 2018.
Directors of Schaeffler AG has to have at least one female • Internationality: Sufficient international experience should be
member. The deadline for meeting this target is June 30, 2022, represented on the Board of Managing Directors to appropri-
and the Board of Managing Directors already met this target ately reflect the international nature of the Schaeffler Group’s
since Corinna Schittenhelm was appointed to the Board of Man- business. The members of the Board of Managing Directors
aging Directors on January 1, 2016. should have different nationalities. The objective should be
that all members of the Board of Managing Directors have
Consistent with the group’s international stature and wide experience working abroad and/or are experienced in
variety of sectors, the Board of Managing Directors considers international business. Having at least one member with a
diversity when making appointments to leadership positions. It non-German nationality, ideally from a market relevant to
aims to give appropriate consideration to women and has set tar- Schaeffler, on the Board of Managing Directors in the long-
gets for the proportion of women within Schaeffler AG at the two term is considered desirable. To be appointed to the Board of
levels of management immediately below the Board of Managing Managing Directors, a candidate must have international expe-
Directors in accordance with sections 76 (4) and 111 (5) AktG. rience. At the first and second level of management immedi-
At its meeting on June 19, 2017, the Board of Managing Directors ately below the Board of Managing Directors, the majority of
set targets for the proportion of women of 8% at the first level of employees should have experience working abroad and be
management and 12% at the second level of management imme- experienced in international business. The targets established
diately below the Board of Managing Directors for the period were met in 2018.
ending June 30, 2022.
At the reporting date, no member of the Board of Managing
In addition to considering the relevant technical qualifications, Directors held more than three positions on Supervisory Boards
the Supervisory Board also strives for diversity when making of non-group public companies or similarly demanding positions
appointments to the Board of Managing Directors, and adopted a on supervisory bodies of non-group companies.
diversity scheme in accordance with section 289f (2) (6) HGB for
the Board of Managing Directors of Schaeffler AG at its meeting M ore on the members of the Board of Managing Directors, their areas
on December 15, 2017. The diversity criteria selected were of responsibility, and any positions they hold on Supervisory Boards
gender, age, professional experience, and internationality: of other companies on pp. 114 et seq.
• Gender: The Board of Managing Directors should have at least

one female member. This target was met in 2018. In the long
term, it is sought to increase the number of female members
Supervisory Board
on the Board of Managing Directors beyond the established
The Supervisory Board is responsible for advising and moni-
target. The targets set by the Board of Managing Directors for
toring the Board of Managing Directors in managing the
the two levels of management immediately below the Board of
company. The Board of Managing Directors has to involve the
Managing Directors should be met.
Supervisory Board in any decisions that are fundamental to the
• Age: The Board of Managing Directors should have an appro- company. Specifically, the internal rules of procedure set out
priate age distribution. Along with several younger members, which legal transactions and measures taken by the Board of
this Board should also have members with a greater amount Managing Directors require approval by the Supervisory Board
of professional and life experience. The average age of all or the executive committee. The Supervisory Board fulfills its
members of the Board of Managing Directors should be responsibilities in accordance with the requirements of the law,
approximately 55 years. Members may serve on the Board of the company’s articles of association, and the internal rules of
Managing Directors until their 68th birthday. In making procedure. The internal rules of procedure of the Supervisory
appointments to the Board of Managing Directors, consider- Board govern the Board’s organization and activities.
ation should be given to ensuring a balanced age distribution
and promoting a greater number of younger executives. The The Supervisory Board appoints the members of the Board of
targets established were met in 2018. Managing Directors and sets their remuneration.
• Professional experience: The members of the Board of Man-
aging Directors should bring diverse professional experience M ore on the remuneration of the Board of Managing Directors on
to the Board. Along with sufficient professional background in pp. 101 et seq.
The Supervisory Board holds a minimum of two meetings during • Members of the Supervisory Board should not serve on the
each of the first and second six months of the calendar year to governing body of or in a consulting capacity to significant
discuss current issues and pass any resolutions required. Addi- competitors of the Schaeffler Group.
tional meetings are held when and if the interests of the com- • The Supervisory Board should not include more than two
pany require. For reasons of effectiveness, resolutions are at former members of the Board of Managing Directors.
times passed in writing or by telephone.
• Members of the Supervisory Board should not normally serve
on the Board for more than three terms of office.
Membership of the Supervisory Board
In addition to the objectives set out above, the Supervisory
The Supervisory Board of Schaeffler AG, which is subject to co- Board developed a profile of expertise for the Board as a whole
determination on the basis of parity, consists of 20 members. at its meeting on December 15, 2017. According to this profile,
Ten of these members are appointed by the annual general the Supervisory Board should collectively cover the following
meeting, and ten members are elected by the employees in accord areas of technical expertise. Having at least one member of the
ance with the requirements of the German Co-Determination Act. Supervisory Board cover an area of expertise is considered
sufficient. The profile of expertise assumes that every member
Since Schaeffler AG is a publicly listed company subject to of the Supervisory Board has the personal qualifications,
codetermination based on parity, its Supervisory Board consists integrity, sufficient time, commitment, and discretion required
of at least 30% female and at least 30% male members in accord to successfully carry out the responsibilities of a member of
ance with section 96 (2) AktG. Section 25 EGAktG stipulates that the Supervisory Board.
the legal gender quota is effective for new elections held on or
• Sector knowledge: The Supervisory Board should have knowl-
after January 1, 2016; current positions can be held until the end
edge of and experience with the automotive sector and with
of their regular term.
the sectors in which the Industrial division operates.
The minimum target has to be met by the Supervisory Board • Law/compliance: The Supervisory Board should have members
as a whole. If either the shareholder representatives or the with basic knowledge of stock corporation and corporate law
employee representatives object to such joint compliance by a and of the compliance field.
simple majority vote, notifying the Chairman of the Supervisory • Finance: The Supervisory Board should be knowledgeable
Board of such objection before the election, the minimum target about and experienced in finance, financial reporting,
has to be met separately by the shareholder representatives as auditing, risk management, and systems of internal controls.
well as by the employee representatives. The employee repre- • Leadership: The Supervisory Board should have members
sentatives unanimously objected to joint compliance with the experienced in leadership. This includes experience in man-
gender quota on December 10, 2015. The Supervisory Board cur- aging and supervising companies.
rently has four female members, three women are employee rep-
• Research and development: The Supervisory Board should
resentatives and one woman represents the shareholders. As a
also be knowledgeable about and experienced in research and
result, the employee representatives meet the legally required
development, preferably in future-oriented fields such as
quota. The quota on the shareholder representatives’ side is
E-Mobility and Digitalization.
currently at 10%.
The current Supervisory Board meets these objectives and
In accordance with item 5.4.1 of the German Corporate Gover- covers the areas of expertise set out above. Proposals by the
nance Code, the Supervisory Board has set the following Supervisory Board to the annual general meeting for the election
concrete targets for its membership, considering the company’s of shareholder representatives to the Supervisory Board will
specific situation and appropriately taking into account the reflect these objectives and strive to cover the fields of expertise
company’s international operations, any potential conflicts of listed above.
interest, the number of independent Supervisory Board mem-
bers, and a set limit on the length of time a member may serve Along with the objectives and the profile of expertise, the
on the Supervisory Board, as well as diversity. The Supervisory Supervisory Board also adopted a diversity scheme in accord
Board has stated the following objectives for its membership: ance with section 289f (2) (6) HGB for the Supervisory Board
of Schaeffler AG on December 15, 2017. The diversity criteria
• Members should have the knowledge, skills, and technical
selected were gender, professional experience, and internation-
experience required to properly perform their duties and be
ality. These criteria are designed to ensure, in combination with
able to devote sufficient time to these duties.
the other criteria for the membership of the Supervisory Board,
• The Supervisory Board aims to maintain the current proportion that the opinions and knowledge represented on the Supervisory
of members with an international background. Board are sufficiently diverse for the proper performance of its
• Under the assumption that all employee representatives on duties.
the Supervisory Board can be considered independent, the
Supervisory Board aims to have a minimum of 15 independent
members (as defined in item 5.4.2 of the German Corporate
Governance Code).
• Gender: Section 96 (2) AktG stipulates that the Supervisory Georg F. W. Schaeffler to be independent. These are:
Board has to consist of at least 30% female and at least 30% Prof. Dr. Hans-Jörg Bullinger, Dr. Holger Engelmann,
male members. The employee representatives unanimously Prof. Dr. Bernd Gottschalk, Dr. Siegfried Luther, Robin Stalker,
objected to joint compliance with the gender quota on Dr. Otto Wiesheu, Prof. KR Ing. Siegfried Wolf, and
December 10, 2015. The Supervisory Board currently has four Prof. Dr.-Ing. Tong Zhang.
female members, three women are employee representatives
and one woman represents the shareholders. As a result, the The Chairman of the Supervisory Board is elected by the Super-
employee representatives’ side meets the legally required visory Board from among its members. He coordinates the activi-
quota. The shareholder representatives’ quota is currently at ties of the Supervisory Board, chairs its meetings, and represents
10%. Nominees for the regular election of shareholder repre- the Supervisory Board externally. As recommended in item 5.2 (2)
sentatives in 2019 are limited to candidates whose election of the German Corporate Governance Code, the Chairman of the
will ensure that the legal requirements are met. Supervisory Board is available for discussions with investors,
• Professional experience: The members of the Supervisory in close coordination with the Board of Managing Directors and
Board should bring diverse professional experience to focusing on Supervisory Board-related issues.
the Board. The Supervisory Board should have members with
professional experience in fields that are relevant to the
Schaeffler Group’s business, especially to the group’s future Membership and mode of operation of
business in the fields of E-Mobility and Digitalization. Candi- Supervisory Board committees
dates’ professional experience is to be taken into account
when selecting the Supervisory Board’s nominees for election Under its internal rules of procedure, the Supervisory Board
to the Supervisory Board by the annual general meeting. establishes a total of five committees.
• Internationality: The Supervisory Board should have an appro-
The mediation committee established in accordance with
priate number of members with an international background
sections 27 (3) and 31 (3) of the German Co-Determination Act
(descent, professional education, or work). This being the case
is responsible for proposing to the Supervisory Board a candi-
for at least four of its members is considered adequate by
date for appointment to the Board of Managing Directors if
the Supervisory Board. In addition, further members of the
the two-thirds majority required for an appointment was not
Supervisory Board should be experienced in international
obtained initially. The members of the mediation committee
business. Internationality is to be taken into account when
are Maria-Elisabeth Schaeffler-Thumann as well as Norbert
selecting the Supervisory Board’s nominees for election by
Lenhard, Georg F. W. Schaeffler, and Jürgen Wechsler;
the annual general meeting.
Georg F. W. Schaeffler chairs the committee.
M embers of the Supervisory Board and their curricula vitae at:
www.schaeffler.com/supervisory-board The nomination committee proposes to the Supervisory Board
appropriate candidates for election to the Supervisory Board
The Supervisory Board as a whole has the knowledge, skills, by the annual general meeting. The members of the nomination
and technical experience required to properly perform its duties. committee are the Chairman of the Supervisory Board,
The Supervisory Board as a whole is familiar with the industries Georg F. W. Schaeffler, as well as Dr. Holger Engelmann,
and sectors in which the Schaeffler Group operates, and it has Prof. Dr. Bernd Gottschalk, and
the professional experience and internationality required under Maria-Elisabeth Schaeffler-Thumann; Georg F. W. Schaeffler is
the diversity scheme. Conflicts of interest related to members of the committee’s chairman.
the Supervisory Board must be disclosed to the Supervisory
Board immediately; there were no such conflicts of interest in The executive committee consists of Barbara Resch and
2018. No member of the Supervisory Board currently serves on a Maria-Elisabeth Schaeffler-Thumann as well as Norbert Lenhard,
governing body or in a consulting role with respect to a key com- Georg F. W. Schaeffler, Jürgen Wechsler, and Prof. KR Ing.
petitor or is a former member of the Board of Managing Directors. Siegfried Wolf; Georg F. W. Schaeffler is the committee’s
chairman. The executive committee advises and assists the
M ore on avoiding conflicts of interest on pp. 94 et seq. Chairman of the Supervisory Board and his Deputy in their
Supervisory Board responsibilities. It prepares the meetings of
The Supervisory Board has not set an age limit for its members, the Supervisory Board. Another significant responsibility of the
because it is of the opinion that this criterion is not informative executive committee is preparing personnel decisions to be
with respect to the suitability of a person to perform as a made by the Supervisory Board. It makes recommendations
member of the Supervisory Board. This deviation from the regarding new appointments or reappointments to and dis-
German Corporate Governance Code has been included in the missals from the Board of Managing Directors. It also prepares
declaration of conformity pursuant to section 161 AktG. the Supervisory Board’s decision regarding the remuneration
system and individual remuneration of the members of the Board
The Supervisory Board considers all shareholder representa- of Managing Directors. In addition, the executive committee
tives except for Maria-Elisabeth Schaeffler-Thumann and passes resolutions regarding the approval of certain legal trans-
actions and measures specified in the Supervisory Board’s internal Georg F. W. Schaeffler, Salvatore Vicari, Jürgen Wechsler, Prof. KR
rules of procedure on behalf of the Supervisory Board, to the extent Ing. Siegfried Wolf, Jürgen Worrich, and Prof. Dr.-Ing. Tong Zhang.
such delegation is not prohibited by section 107 (3) (3) AktG. Prof. Dr. Hans-Jörg Bullinger chairs the committee.
The audit committee is responsible for preparing the Supervisory

Board’s decision on adoption of the separate financial state- Cooperation between Board of Managing
ments and approval of the consolidated financial statements. Directors and Supervisory Board
To this end, it is responsible for the preliminary review of the
separate and consolidated financial statements, the manage- The Board of Managing Directors and the Supervisory Board coop-
ment report, the group management report and the combined erate closely for the good of the company. Thus, the Board of
management report, the proposals for the appropriation of earn- Managing Directors regularly consults with the Supervisory Board
ings, and for discussing the long-form audit report with the audi- on the strategic direction of the company and discusses the status
tors. It is also responsible for the preliminary review of the report of strategy implementation with the Supervisory Board.
on relations with affiliated companies and the non-financial
report as well as for preparing the Supervisory Board’s nomina- On a regular basis, the Board of Managing Directors provides
tion of the auditors to be appointed by the annual general comprehensive and timely information to the Supervisory Board
meeting. on all matters of relevance to the company with respect to
strategy implementation, planning and budgeting, results of
The audit committee makes a recommendation to the Super- operations, risk management, and compliance. It discusses devi-
visory Board regarding auditors to be appointed, together with ations of results of operations from budgets and targets and the
its reasons for the recommendation; where the audit has been reasons for those deviations. Documents required for decisions,
put out to tender, the recommendation includes at least two can- especially the separate financial statements, the consolidated
didates. The audit committee engages the auditors, determines financial statements, and the long-form audit report, are pro-
the areas of focus for the audit, and agrees the audit fees with vided to the members of the Supervisory Board in due time. The
the auditors. In addition, the audit committee monitors the inde- Board of Managing Directors is required to submit any funda-
pendence of the external auditors, and, as such, is responsible mental legal transactions and measures to the Supervisory
for approving engagements for non-audit services. The audit Board or the executive committee for approval. The cooperation
committee also monitors the qualifications and efficiency of the between the Board of Managing Directors and the Supervisory
auditors as well as the rotation of audit team members. The audit Board is characterized by mutual trust and a culture of open
committee is responsible for awarding the audit engagement on discussion as well as maintaining strict confidentiality.
the non-financial report. On behalf of the Supervisory Board, the
audit committee advises and oversees the Board of Managing The Chairman of the Supervisory Board regularly keeps in
Directors regarding financial reporting, the financial reporting contact with the Board of Managing Directors, particularly with
process, the effectiveness of the internal control system, the risk the Chief Executive Officer, between meetings as well, and
management system, Internal Audit, the financial statement discusses with him issues related to the company’s strategy
audit, and compliance. implementation, planning and budgeting, results of operations,
risk management, and compliance. The Chief Executive Officer
The audit committee consists of six members. His position auto- immediately informs the Chairman of the Supervisory Board of
matically makes the Chairman of the Supervisory Board a com- important events significant to evaluating the company’s situa-
mittee member. The chairman of the audit committee shall be tion and development as well as for managing the company.
independent and can be neither a former member of the Board of
Managing Directors nor the Chairman of the Supervisory Board;
he shall be particularly knowledgeable about and experienced Avoiding conflicts of interest
in the application of accounting principles as well as internal
control procedures. As the former chief financial officer of The members of the Board of Managing Directors and of the
Adidas AG, the chairman of the audit committee, Robin Stalker, Supervisory Board are required to immediately disclose any
meets these requirements. The committee includes another conflict of interest to the Supervisory Board. Significant trans
financial expert, Dr. Siegfried Luther. The other committee actions between the company and members of the Board of
members are Dr. Reinold Mittag, Georg F. W. Schaeffler, Managing Directors or parties related to them require the Super-
Salvatore Vicari, and Jürgen Worrich. visory Board’s approval. Consulting and other service contracts
as well as contracts for specific deliverables between the com-
The technology committee serves as a forum for the regular pany and members of the Supervisory Board also require
exchange of information between the Supervisory Board and approval by the Supervisory Board. The Supervisory Board
the Board of Managing Directors regarding technological reports to the annual general meeting on any conflicts of interest
developments relevant to the Schaeffler Group and for jointly and their resolution. Neither the members of the Board of Man-
deliberating on technology projects. The technology committee aging Directors nor those of the Supervisory Board have experi-
consists of Prof. Dr. Hans-Jörg Bullinger, Norbert Lenhard, enced any conflicts of interest in 2018.
1.4 Other information on corporate by the auditors and reviewed by the Supervisory Board. Before
any interim financial information is made public, the Board of
governance Managing Directors discusses such information with the Super-
visory Board or the audit committee. The consolidated financial
statements and the group management report are made publicly
Transparency available within 90 days after the end of the year, mandatory
interim financial information within 45 days after the end of the
The company provides information on the situation of the com- reporting period.
pany at the same time and on an equal footing to institutional
investors, shareholders, financial analysts, business partners, In addition, the consolidated financial statements include a dis-
employees, and the interested public by regular, transparent, cussion of transactions with shareholders considered related
and up-to-date communication. All significant information, such parties under applicable financial reporting standards.
as ad hoc releases and press releases, as well as presentations
given at analysts’ conferences, all financial reports, and the It was agreed with Schaeffler AG’s auditors that the Chairman of
financial calendar are published on the Schaeffler Group’s web- the Supervisory Board and the chairman of the audit committee
site. Investor Relations maintains close contact with share- would be informed promptly of any grounds for disqualification
holders on an ongoing basis. or indications of bias arising during the audit to the extent they
are not remedied immediately. It was also agreed that the audi-
tors would report on all findings and events coming to their
Relationships with shareholders and annual attention during the performance of their audit that are signifi-
general meeting cant to the responsibilities of the Supervisory Board. Under the
agreement, the auditors have to inform the Supervisory Board
Shareholders exercise their rights at the annual general meeting. and note in their long-form audit report if, during the course of
The annual general meeting passes resolutions on granting dis- the audit, they become aware of any facts rendering the declara-
charge to the Board of Managing Directors and the Supervisory tions on the German Corporate Governance Code issued by the
Board, appropriating retained earnings, capital transactions, Board of Managing Directors and the Supervisory Board inaccu-
amendments to the company’s articles of association, and rate. The audit committee monitors the auditors’ independence.
appointing auditors. It has to be held during the first eight The auditors have issued a binding independence letter dated
months of each year. March 1, 2018, for the year ended December 31, 2018.
The company has issued common non-voting and common

shares. Common non-voting shares do not convey voting rights,
but entitle the holder to a preferred dividend of EUR 0.01 per
share.
Shareholders have to register for the annual general meeting in

due time in order to attend the annual general meeting. An invi-
tation and other documents (e.g. annual report) containing infor-
mation on the items on the agenda of the annual general meeting
are provided to shareholders before the annual general meeting.
This information is also available from the company’s website.
Financial reporting and financial statement

audit
The main source of information for shareholders and third par-
ties are the consolidated financial statements and the group
management report as well as interim financial information.
Schaeffler AG compiles its separate financial statements in

accordance with the requirements of the German Commercial
Code (HGB) and the German Stock Corporations Act (AktG). The
consolidated financial statements and the group management
report are prepared by the Board of Managing Directors in accord
ance with the principles set out in International Financial
Reporting Standards (IFRS) as adopted by the EU and are audited
Governance structure
2. Governance structure
The Schaeffler Group considers maintaining the corporate cul- In 2018, the Schaeffler Group has continued to improve the
ture of a global family business essential and intends to play a processes within its governance structure with a view to meeting
leading role as a listed family business. In doing so, its focus is the needs of its customers while at the same time protecting
on customer relationships and acting with integrity. Its corporate the company. The governance structure is aimed at promoting
values drive the nature of its transactions. Transactions and the coordinated operation of the subsystems and, hence, the
business relationships inconsistent with the group’s corporate early identification of risks to the continued existence and devel-
values are rejected. The governance structure promotes trans- opment of the Schaeffler Group. Clearly assigned responsibili-
parency and supports the values “Sustainable”, “Innovative”, ties and a robust internal control system are in place to manage
“Excellent”, and “Passionate”. significant risks.
The components of the governance structure support the oper- The Group Compliance and Risk Committee (GCRC) represents a
ating business units in effectively identifying and managing risk. key governance component in this regard, increasing transpar-
ency in internal structures, the organization, and in responsibili-
ties. The GCRC is chaired by the Schaeffler Group’s Group Chief
Schaeffler Group governance structure No. 070
Compliance Officer. It consists of the heads of the relevant gov-
ernance functions (including Compliance, Legal, Internal Control
System, and Controlling). The GCRC is responsible for assisting
Corporate governance
the Board of Managing Directors with its organizational responsi-
bilities with respect to compliance and risk management. Among
Supervisory Board / Audit Committee
the key objectives of the GCRC are defining and delineating
Board of Managing Directors responsibilities and interfaces and preventing redundancies in
the process. In addition, it is expected to create a consistent and
complete view of the risk situation in the divisions, functions,
Compliance Risk and regions based on a uniform measurement and prioritization
Internal
management management methodology. A further objective of the GCRC is developing and
control system
system system
monitoring risk mitigation activities. The Compliance & Risk
Working Group consisting of staff representatives from the func-
tions represented on the GCRC provides operational support to
Setting objectives Risk analysis Methodologies Monitoring
the GCRC.
Internal Audit
Three lines of defense model No. 071 2.1 Compliance management system
Supervisory Board / Audit Committee Integrity is one of the mainstays of the Schaeffler Group’s
manner of conducting business. Under the Schaeffler Code of
Conduct, the Board of Managing Directors and all employees are
First line of defense Second line of defense Third line of defense required to comply with all applicable local, national, and inter-
Operating business Risk functions: Internal Audit national laws and regulations, wherever the Schaeffler Group
units • Compliance and Legal
does business. A compliance organization covering the entire
• Risk Management
• Internal Control System Schaeffler Group provides them with support in doing so.
• Controlling
supports and monitors The Schaeffler Group’s Board of Managing Directors emphati-
reviews
cally supports the underlying compliance management system
(CMS) of the Schaeffler Group and the necessity of consistently
complying with legal requirements and internal regulations.
The activities of the subsystems within the governance structure
are coordinated based on the internationally recognized three The CMS is based on the three pillars of prevention, detection,
lines of defense model. It assigns clear responsibility for dealing and reaction and is part of the second line of defense within the
with risks to the company’s continued existence and develop- Schaeffler Group’s governance structure. The CMS in its current
ment and is based on the principle that primary responsibility for state is the result of a comprehensive revision initiated by the
a risk lies with its originator. Board of Managing Directors as part of the “Compliance Fit &
Proper” program. Following the successful completion of a review
First line of defense: At the first tier, operating business units of the underlying conceptual design in accordance with the
are responsible for performing controls within all business pro- P rinciples for the Proper Performance of Reasonable Assurance
cesses to prevent risk. If prevention is not feasible, risks have to Engagements Relating to Compliance Management Systems IDW
be identified and reduced to an appropriate level. Hence, the AsS 980 by an independent audit firm, an independent audit firm
Schaeffler Group’s employees represent the first line of defense has confirmed the appropriateness and implementation of the
against potential risks. The Schaeffler Code of Conduct encour- Schaeffler Group’s compliance management system in 2018.
ages them to turn to their supervisor or the corresponding con-
trol function with any questions or concerns they might have The CMS comprises, in particular, managing and monitoring the
regarding dealing with risks and inappropriate business prac- activities necessary to prevent, or detect early on, violations of
tices. If needed, they can use an anonymous whistleblowing law in the area of corruption, money-laundering, competition and
system for reporting severe violations of the Schaeffler Code of antitrust law, and economic criminal activity. It also serves to
Conduct, especially regarding illegal business practices, that is actively manage risk and protect the company and its employees.
available for this purpose. The CMS consists of seven core components: compliance cul-
ture, compliance objectives, vulnerability analysis, compliance
Second line of defense: At the second tier, risk functions program, compliance organization, communication, and moni-
(including Internal Control System, Controlling, Risk Manage- toring and improvement.
ment, Compliance, and Legal) define global standards and con-
trols, regularly monitor compliance with them, and report on The compliance organization derives its arrangements for pre-
their effectiveness. The Risk Management function is also venting violations of antitrust and competition legislation, cor-
responsible for regular and independent risk assessment. ruption, economic crime, and money-laundering from a regular
groupwide risk analysis using a risk-based approach. The risk
Third line of defense: The third tier is the audit by Internal Audit. analysis provides information on the current situation with
Independent and objective audits are designed to ensure pro- respect to risks arising from operations and on the effectiveness
cess efficiency in risk management, internal controls, and corpo- of the preventive arrangements in place. The analysis is primarily
rate governance. based on interviews with management and employees of all
divisions and regions. Its objective is to obtain information that
With its corporate governance structure and its “three lines of is required to estimate the probability of occurrence and the size
defense model”, the Schaeffler Group fulfils its obligation to of the potential amount of damage and that is as close to the
manage the company responsibly and to maintain effective con- business processes as possible. These estimates are supple-
trols. mented with sector and expert knowledge, experience with
actual compliance violations, results of controls and audits, as
well as by using operations-, market-, and country-specific risk
criteria ranging from publicly available risk indicators, such
as the Corruption Perception Index compiled by Transparency
International, through to issues regarding the location-specific
design of the Schaeffler Group’s business model.
The Schaeffler Group’s Group Chief Compliance Officer heads up The Schaeffler Group has further expanded its arrangements
the compliance organization and reports directly to the Chief and measures for complying with legal requirements and internal
Executive Officer. The Group Chief Compliance Officer also has rules in 2018. The company continued to expand its register of
a reporting line to the Chairman of the Supervisory Board and contacts with competitors. The register is already being used
reports to the chairman of the audit committee on a regular successfully at various pilot locations worldwide. It contributes
basis. to transparency and supports the process for approving contacts
with competitors in advance. Digitalizing the process in 2018
The compliance department provides the Group Chief Compli- has significantly accelerated its groupwide implementation,
ance Officer with the support of a network of experienced com- which has started. The company also established an IT-based
pliance specialists spanning all of the Schaeffler Group’s Europe, business partner due diligence workflow that is integrated into
Americas, Greater China, and Asia/Pacific regions. He also uti- the existing business processes. The workflow, which entered
lizes a centralized team of experts located at the corporate head the pilot phase in 2018, simplifies and improves the handling of
office in Herzogenaurach that consists of the “Advisory”, “Risk business partner due diligence. Both underline the standard the
Analysis & Solutions”, and “Forensics & Investigations” depart- Schaeffler Group expects of its business partners with respect
ments. The responsibilities of this team of experts include to acting with integrity and abiding by rules.
defining and monitoring appropriate groupwide compliance stan-
dards and activities, consulting on compliance, and improving In order to comply with capital markets regulations, the company
processes and controls. The team is also responsible for inde- has established an insider committee that evaluates any (poten-
pendently investigating alleged violations and following up on tial) insider information it receives or that otherwise comes to
the necessary consequences. It analyzes the causes of miscon- its attention and determines whether that information is required
duct, derives suggestions for remedial measures, and follows up to be published. Additionally, the company maintains an insider
on their implementation. Violations of laws and regulations or list of individuals with access to insider information. As soon as
of internal rules on compliance with these are not tolerated and an individual is added to the insider list (whether event-driven or
result in disciplinary action. as a permanent insider), the individual is notified and informed
of the legal obligations and sanctions related to his or her access
Measures designed to prevent compliance violations include the to insider information.
Schaeffler Group’s Code of Conduct, guidelines on behavior in
compliance with antitrust and competition legislation as well as
on fighting corruption and protecting confidential information, 2.2 Risk management system
web-based training and classroom training sessions, and a
compliance helpdesk available for consultation on specific com- Like the compliance management system, the risk manage-
pliance issues. In addition to requirements relating to general ment system is part of the second line of defense in the
conduct, the principles and practices described in the Schaeffler Schaeffler Group’s governance structure. It comprises all activi-
Code of Conduct also cover conduct vis-à-vis business partners ties and arrangements made to identify, assess, manage, and
and third parties, dealing with sensitive information, employees monitor risk. A risk is defined as the danger that events or
and co-workers, and requirements regarding the environment, actions will prevent a company from achieving its plan or
health, and safety. In accordance with the corporate values, successfully implementing its strategies. For all identified risks,
bribery or any form of corruption are not tolerated. All the probability of occurrence and possible impact on achieving
Schaeffler Group employees are expressly prohibited from objectives are continually identified, assessed, appropriate
engaging in corruption in any way. The same applies to conduct action initiated and followed-up on.
violating competition or anti-trust laws. The Schaeffler Group
stays away from any transactions that cannot be effected or M ore on the company’s risk management system on pp. 75 et seq.
continued without unacceptable conduct.
Training sessions are continually refined and updated and

adapted to the employees’ areas of responsibility. In 2018, the
compliance training program included training on risk aware-
ness, the Schaeffler Code of Conduct, compliance in sales,
security of information including classification of information,
protection against cybercrime, and CEO fraud. In addition, the
company has also put in place arrangements for detecting
possible compliance violations; these arrangements include
audits and controls as well as a whistleblowing system which
can be used to report violations on an anonymous basis. All
such reports received are reviewed independently. Reprisals
against employees reporting concerns about misconduct within
the company in good faith are prohibited.
2.3 Internal control system The responsibilities of Internal Audit specifically include, but are
not limited to, the following activities:
The “second line of defense” also comprises the Schaeffler Group’s
• audit and assessment of the appropriateness, efficiency, and
internal control system (ICS). The ICS consists of technological
effectiveness of the internal control system
and organizational arrangements and controls that have been
systematically designed to ensure compliance with guidelines • audit and assessment of the appropriateness, efficiency, and
and to prevent loss or damage that may be caused by the compa- effectiveness of the management and supervisory processes
ny’s employees or by third parties. Controls can be performed • audit and assessment of the finance and accounting systems,
both process-dependent or independently of the process. The the information system, and the reporting system
Schaeffler Group’s internal control system is based on the COSO • audit and assessment of the effectiveness of risk and compli-
model and consists of the following components: control envi- ance management
ronment, risk assessment, control activities, information and
• audit and assessment of the effectiveness of arrangements
communication, and monitoring. It is focused on financial
for preventing and detecting fraud
reporting and represents the arrangements and controls
ensuring that the consolidated financial statements are prepared
• audit of arrangements for safeguarding assets
in accordance with financial reporting standards and ensuring • audit and assessment of the implementation of and compli-
accurate external financial reporting. ance with legal requirements and the company’s internal rules
(“orderliness“)
M ore on the company’s internal control system on pp. 77 et seq. • performance of special investigations with respect to fraud,
conflicts of interest, and other irregularities
2.4 Internal Audit In a risk analysis done in preparation for audit assignments,
Internal Audit exchanges information with other departments
Internal Audit represents the “third line of defense” of the (such as Compliance and Corporate Security, Controlling, Legal,
Schaeffler Group’s governance structure. Internal Audit provides Quality, Risk Management).
independent and objective audit and consulting services
focused on adding value and improving business processes. In order to obtain sufficient reliable, relevant, and constructive
The internal audit function contributes to meeting the corporate information to achieve its audit objectives, Internal Audit regu-
objectives the Schaeffler Group has communicated by assessing larly performs its audit assignments on location.
and helping to improve the effectiveness of the compliance
management system, risk management, controls, and manage- In its audit reports, Internal Audit communicates its findings,
ment and supervisory processes using a systematic and goal- identifies the individuals responsible for implementation, and
oriented approach. Responsibility for establishing the internal agrees remediation measures, including a timeframe for their
audit function and for its effectiveness rests with the Board of implementation. In a monitoring and follow-up process, Internal
Managing Directors and cannot be delegated. Hence, Internal Audit monitors implementation of the remediation measures
Audit reports to the entire Board of Managing Directors. The addressing identified deficiencies.
head of Internal Audit reports directly to the Chief Executive
Officer of Schaeffler AG and also reports to the chairman of the In accordance with the International Standards for the Profes-
audit committee on a regular basis. sional Practice of Internal Auditing 2016 of the Institute of
Internal Auditors (IIA), the head of Internal Audit has established
The Schaeffler Group has made the following arrangements to a quality assurance and improvement program covering all of
ensure the independence and objectivity of Internal Audit: Internal Audit’s responsibilities.
• direct organizational link to the Chief Executive Officer to

ensure there are no gaps in audit coverage
• neither the head of Internal Audit nor audit staff have any
operational responsibilities
• reports annually on potential impairment of independence to
the Chief Executive Officer, the Board of Managing Directors,
and the audit committee
• the Board of Managing Directors has to approve and appropri-
ately document the approval of the audit planning and signifi-
cant changes therein
Remuneration report
3. Remuneration report
This remuneration report describes the main features of the neration and regularly reviews the remuneration scheme.
remuneration system for the Board of Managing Directors, i.e. To ensure that the total remuneration is appropriate, the Super-
the remuneration structure and amount. In addition, the remu- visory Board takes into account customary levels of remunera-
neration report provides disclosures about benefits the company tion both in other companies of comparable size within the same
has promised to provide to the members of the Board of Man- industry and country (horizontal comparison) and the wage and
aging Directors upon termination of their employment as well as salary structure within the enterprise itself (vertical comparison
disclosures on the remuneration of the Supervisory Board. of remuneration of Board of Managing Directors to the company’s
workforce).
The remuneration report is in accordance with the requirements
of the German Commercial Code (HGB) and International Finan- The total remuneration of the Board of Managing Directors is per-
cial Reporting Standards (IFRS) and is part of the group manage- formance- and success-based and supports the Schaeffler Group’s
ment report. It also reflects the recommendations of the German operational and strategic objectives in a dynamic and interna-
Corporate Governance Code. tional environment. The remuneration of each member of the
Board of Managing Directors consists of a fixed amount as well
as short- and long-term variable components. The variable com-
3.1 Main features of the remuneration ponent is largely long-term in nature. In addition, the members
of the Board of Managing Directors receive pension commit-
system for the Board of Managing ments and the customary fringe benefits.
Directors
As stipulated in the German Corporate Governance Code (GCGC)
and section 87 AktG, the Supervisory Board sets the total remu-
Remuneration report
Remuneration of Board of Managing Directors – system and components No. 072
Components Performance metric Range of remuneration Conditions for payment Payment cycle
Non-performance-based components
Fixed remuneration Function and responsibility None Contractually agreed Monthly
Payment not
Fringe benefits Function and responsibility None Contractually agreed applicable
Performance-based components
For the CEO and the Chief Officers of the functions:
Free cash flow (FCF Group) and Schaeffler Value Added
(SVA Group) at group level (weighted equally).
For the divisional CEOs:
Free cash flow (FCF Group) and Schaeffler Value Added
(SVA Group) at group level as well as Schaeffler Value
Added (SVA Division) and cash flow (CF Division) at
Short-term bonus division level (weighted equally) 0% –150% Meeting annual targets Annually
Share price trend of Schaeffler common non-voting Maximum is the number of PSUs
Long-term bonus shares and meeting targets consisting of: granted, minimum number is nil
Performance 50% service condition and 25% relative Total- Share price cap:
Share Unit Plan Shareholder-Return-(TSR)-based performance target double the share Meeting service condition 4 years after
(PSUP) and 25% cumulative FCF-based performance target price at grant date and/or targets grant date
Retirement or Generally
Retirement benefits triggering event monthly
Non-performance-based components Performance-based components
Fixed remuneration Short-term variable component – short-term bonus

Each ordinary member of the Board of Managing Directors All members of the Board of Managing Directors receive an
receives an identical amount of fixed remuneration; the Chief annual short-term bonus if the relevant targets are met. The
Executive Officer receives twice this amount. Fixed remuneration employment contracts of the members of the Board of Managing
is paid in twelve equal instalments each month. Directors set out the individual target-based bonus based on
achievement of 100% of the targets (individual target-based
bonus).
Fringe benefits
Fringe benefits include the use of a company car, including for The Supervisory Board determines the target tiers including the
private purposes, and customary insurance benefits such as minimum and maximum targets on an annual basis. The targets
directors’ and officers’ liability insurance (D&O insurance). This underlying the remuneration reflect the strategic direction of the
D&O insurance policy includes a deductible provision that is in Schaeffler Group. The amount of the short-term bonus payable to
accordance with section 93 (2) (3) AktG. Tax on the pecuniary the CEO and the Chief Officers of the functions is determined
advantage related to fringe benefits granted is paid individually based on the extent to which the performance targets have been
by each member of the Board of Managing Directors. No loans met. The performance targets are weighted equally and consist
were granted to members of the Board of Managing Directors of free cash flow (FCF Group) of the Schaeffler Group and
in 2018. Schaeffler Value Added (SVA Group) of the Schaeffler Group.
For the divisional CEOs, the performance targets used to deter-
mine the extent to which performance targets have been met
consist of free cash flow of the Schaeffler Group (FCF Group) and
Schaeffler Value Added of the Schaeffler Group (SVA Group) and
of Schaeffler Value Added of the division (SVA Division) as well
as cash flow of the division (CF Division), again weighted equally.
Remuneration report
FCF Group is generally calculated based on the Schaeffler Group’s Vesting of PSUs is linked to the following three conditions:
cash flows from operating activities and from investing activities
• 50% of PSUs (base number) are granted subject to a service
for the relevant year. SVA Group is generally based on the
condition. The base number is only paid out if the member of
Schaeffler Group’s EBIT less its cost of capital. SVA Division is
the Board of Managing Directors remains employed as a
determined in the same manner based on measures segmented
member of a governing body of Schaeffler AG and is not under
in accordance with IFRS 8. The CF Division performance target is
notice of termination at the end of the performance period.3
calculated as the sum of EBIT plus depreciation, amortization,
and impairment losses plus change in working capital less addi- • 25% of the PSUs are granted subject to a long-term FCF-based
tions to property, plant and equipment and intangible assets. performance target which involves a comparison of cumulative
FCF for the performance period to the target FCF.
The Supervisory Board can set other strategic targets in addition • 25% of the PSUs are granted subject to a relative performance
to the FCF, SVA, and CF performance targets. target based on total shareholder return (TSR) (share price
performance including dividends). Vesting is based on the
Furthermore, the Supervisory Board can establish a multiplier extent to which the TSR for Schaeffler’s common non-voting
ranging from 0.8 to 1.2 to reflect a Managing Director’s indi- shares exceeds or falls short of the TSR of companies in the
vidual performance. benchmark group (MDAX) over the performance period.
The short-term bonus may lapse in its entirety if the minimum The Supervisory Board sets the FCF- and TSR-based target
targets are not met. amounts for each tranche when PSUs are granted.
In the event that maximum targets are exceeded, payment of all

short-term bonuses is limited to 150% of the individual target-
based bonus, regardless of whether an additional strategic
target is set or a multiplier reflecting a Managing Director’s indi-
vidual performance is applied. The short-term bonus earned
during a year is paid in a lump sum in euros once the extent to
which targets have been met has been determined.
Long-term variable component – long-term bonus

(Performance Share Unit Plan, PSUP)
The Supervisory Board has implemented a share-based remuner-
ation instrument in the form of a PSUP in order to align the inter-
ests of the Board of Managing Directors with those of the share-
holders and to promote the sustainable development of the
Schaeffler Group.
The employment contracts of the members of the Board of Man-

aging Directors set out a grant amount in euros that is based on
each member’s duties and responsibilities. To ensure the remu-
neration structure is largely oriented toward the long term, this
grant amount exceeds the individual target bonus under the vari-
able short-term remuneration. For all members of the Board of
Managing Directors, including those appointed during the year,
the grant amount is converted to PSUs at the average price of
Schaeffler’s common non-voting shares of the last 60 trading
days before the beginning of the performance period (share price
at grant date). PSUs are granted in annual tranches. Each tranche
has a performance period of four years beginning on January 1 of
the year it is granted.
3 Taking into account the rules applicable to leavers.

Remuneration report
The 2015, 2016, 2017, and 2018 tranches of PSUs subject to FCF- PSUs granted in 2018 1) No. 075
and TSR-based performance targets vest based on the following Number of
target tiers. PSUs
Grant outstanding Grant date Grant date
amount on fair value fair value
PSUP performance targets (1) No. 073 (in € D ecember per PSU (in €
thousands) 31, 2018 1) (in €) thousands)
Number of FCF PSUs
Klaus Rosenfeld (CEO) 1,300
Cumulative FCF for the performance period vested in %
Cumulative FCF compared Base number of PSUs 46,363 12.48 579
to target FCF >~ 6.01% 100% FCF PSUs 23,181 12.48 289
2.01% < cumulative FCF compared TSR PSUs 23,181 7.92 184
to target FCF < ~ 6.00% 75%
Prof. Dr. Peter Gutzmer 950
-2.00% < cumulative FCF compared
to target FCF < ~ 2.00% 50% Base number of PSUs 33,880 12.48 423
-6.00% < cumulative FCF compared FCF PSUs 16,940 12.48 211
to target FCF < ~ -2.01% 25% TSR PSUs 16,940 7.92 134
Cumulative FCF compared Dietmar Heinrich 650
to target FCF < ~ -6.01% 0%
Base number of PSUs 23,180 12.48 289
FCF PSUs 11,591 12.48 145
TSR PSUs 11,591 7.92 92
Andreas Schick 2) 488
PSUP performance targets (2) No. 074
Number of TSR PSUs
FCF PSUs 8,693 10.63 92
TSR outperformance over the performance period vested in %
TSR PSUs 8,693 6.00 52
> 25% 100%
Corinna Schittenhelm 650
5% < TSR outperformance ≤ 25% 75%
-5% < TSR outperformance ≤ 5% 50%
FCF PSUs 11,591 12.48 145
-25% < TSR 0utperformance ≤ -5% 25%
TSR PSUs 11,591 7.92 92
≤ -25% 0%
Michael Söding 3) 650
FCF PSUs 11,591 12.48 145
Target amounts for the FCF-based performance target are derived
from the Schaeffler Group’s medium-term plan. PSUs earned are TSR PSUs 11,591 7.92 92
calculated at the end of the performance period at the average Dr. Stefan Spindler 800
price of Schaeffler’s common non-voting shares of the last 60 Base number of PSUs 28,531 12.48 356
trading days before the end of the performance period. The pay- FCF PSUs 14,265 12.48 178
ment under a PSU is capped at double the share price at the TSR PSUs 14,265 7.92 113
grant date. Matthias Zink 650
The underlying share price of the 2018 tranche is EUR 14.02. The FCF PSUs 11,591 12.48 145
PSUs granted to each individual and the related fair values in TSR PSUs 11,591 7.92 92
2018 are as follows: Managing Directors who left the company in 2018
Oliver Jung 4) 713
FCF PSUs 12,705 12.48 159
TSR PSUs 12,705 7.92 101
Prof. Dr. Peter Pleus 5) 950
FCF PSUs 16,940 12.48 211
TSR PSUs 16,940 7.92 134
Total 7,801 556,346 - 6,245
1) Equals
the number of PSUs granted on January 1, 2018 (on March 2, 2018 for
Andreas Schick).
2) Andreas
Schick has been a member of the Board of Managing Directors of
Schaeffler AG since April 1, 2018.
3) Michael
Söding has been a member of the Board of Managing Directors of
Schaeffler AG since January 1, 2018.
4) Oliver Jung left the Board of Managing Directors of Schaeffler AG as at March 31, 2018.
His employment agreement remained in effect until September 30, 2018.

5) Prof. Dr. Peter Pleus left the Board of Managing Directors of Schaeffler AG as at
December 31, 2018.

Remuneration report
The underlying share price of the 2017 tranche is EUR 13.18. The The PSUs granted are classified and measured as cash-settled
PSUs granted to each individual and the related fair values in share-based compensation. The fair value for PSUs subject to
2017 are as follows: the TSR-based performance target was determined using a bino-
mial model. The fair value of the base number and of the PSUs
PSUs granted in 2017 1) No. 076
subject to the FCF-based performance target was determined
based on the price of the company’s common non-voting shares
Number of
as at the measurement date. The valuation model takes into
PSUs
Grant outstanding Grant date Grant date account the terms of the contract under which the PSUs were
amount on fair value fair value granted (including payment floors and caps, target tiers,
(in € D ecember per PSU (in €
expected dividend payments, as well as the volatility of the com-
thousands) 31, 2017 1) (in €) thousands)
pany’s common non-voting shares and of the benchmark index).
Klaus Rosenfeld (CEO) 1,300
The valuation as at the grant date of the 2018 tranche (prior year:
FCF PSUs 24,659 11.84 292
2017 tranche) reflects the following input parameters:
TSR PSUs 24,659 6.99 172
Prof. Dr. Peter Gutzmer 950 • risk-free interest rate for the remaining performance period
Base number of PSUs 36,039 11.84 427 of -0.29% (prior year: -0.16%) for a January 1, 2018, grant date,
FCF PSUs 18,020 11.84 213 -0.28% for a March 2, 2018, grant date (prior year: -0.04% for
TSR PSUs 18,020 6.99 126 a July 17, 2017, grant date);
Dietmar Heinrich 2) 271 • expected dividend yield of Schaeffler AG common non-voting
Base number of PSUs 10,275 10.67 110 shares over the performance period of 3.38% (prior year: 2.49%)
FCF PSUs 5,137 10.67 55 for a January 1, 2018, grant date, 3.92% for a March 2, 2018,
TSR PSUs 5,137 4.58 24 grant date (prior year: 4.01% for a July 17, 2017 grant date);
Oliver Jung 950 • expected volatility of Schaeffler AG common non-voting shares
Base number of PSUs 36,039 11.84 427 of 28.90% (prior year: 34.27%) for a January 1, 2018, grant date,
FCF PSUs 18,020 11.84 213 32.59% for a March 2, 2018, grant date (prior year: 28.78% for
TSR PSUs 18,020 6.99 126 a July 17, 2017 grant date);
Prof. Dr. Peter Pleus 950 • expected volatility of the benchmark index of 10.32% (prior
Base number of PSUs 36,039 11.84 427 year: 18.75%) for a January 1, 2018, grant date, 12.03% for a
FCF PSUs 18,020 11.84 213 March 2, 2018, grant date (prior year: 10.62% for a July 17, 2017
TSR PSUs 18,020 6.99 126 grant date);
Corinna Schittenhelm 650
• expected correlation coefficient between the benchmark
index and Schaeffler AG common non-voting shares of 0.45
FCF PSUs 12,329 11.84 146
(prior year: 0.61) for a January 1, 2018, grant date, 0.50 for a
TSR PSUs 12,329 6.99 86
March 2, 2018, grant date (prior year: 0.48 for a July 17, 2017
Dr. Stefan Spindler 800 grant date).
FCF PSUs 15,175 11.84 180
TSR PSUs 15,175 6.99 106
Matthias Zink 650
FCF PSUs 12,329 11.84 146
TSR PSUs 12,329 6.99 86
Managing Directors who left the company in 2017
Dr. Ulrich Hauck 3) 800
FCF PSUs 15,175 11.84 180
TSR PSUs 15,175 6.99 106
Total 7,321 555,450 - 5,873
1) Equals
the number of PSUs granted on January 1, 2017 (on July 17, 2017 for
Dietmar Heinrich).
2) Dietmar
Heinrich has been a member of the Board of Managing Directors of
Schaeffler AG since August 1, 2017.
3) Dr.
Ulrich Hauck left the Board of Managing Directors of Schaeffler AG as at
July 31, 2017. His employment agreement remained in effect until March 31, 2018.
Remuneration report
Retirement benefits Service cost for 2017 and defined benefit obligations No. 078
as at December 31, 2017 in accordance with IAS 19
All current members of the Board of Managing Directors hold Defined
retirement benefit commitments. The pension resulting from the Service benefit
in € thousands Year cost obligation
various individual retirement benefit commitments is generally
Klaus Rosenfeld (CEO) 2017 1,331 10,952
calculated as a percentage of pensionable remuneration based
Prof. Dr. Peter Gutzmer 2017 0 4,569
on the duration of the individual’s service on the Board of Man-
Dietmar Heinrich 1) 2017 114 117
aging Directors. Individual percentages vary between 1.5% and
Oliver Jung 2017 307 2,891
3.0% per year of membership on the Board of Managing Direc-
tors. Pension commitments for each member of the Board of Prof. Dr. Peter Pleus 2017 383 6,097
Managing Directors are tailored individually. Corinna Schittenhelm 2017 326 651
Dr. Stefan Spindler 2017 308 680
Pension payments commence in the form of retirement benefits Matthias Zink 2017 317 323
if employment ends before or upon attainment of the age of 65, Managing Directors who left the company in 2017
and in the form of disability benefits if employment ends due to Dr. Ulrich Hauck 2) 2017 -949 0
disability. Beneficiaries are entitled to claim a reduced pension Total 2,137 26,280
early as a retirement benefit beginning at age 60. Upon the death 1) D ietmar Heinrich has been a member of the Board of Managing Directors of
Schaeffler AG since August 1, 2017.
of the member of the Board of Managing Directors, the spouse is 2) D r. Ulrich Hauck left the Board of Managing Directors of Schaeffler AG as at
entitled to between 50% and 60% of the pension as a surviving July 31, 2017. His employment agreement remained in effect until March 31, 2018.
dependants’ pension. Surviving dependent children are entitled

to 10% or 20% of the pension as a half- or full-orphan’s pension,
respectively.
Change in remuneration system
The pension increases by 1.0% each year beginning at retire-
ment. The pension of one member of the Board of Managing When the remuneration system was changed in 2015, the com-
Directors is subject to annual increases by the same percentage pany committed to pay two Managing Directors advances of
as the consumer price index in Germany. This also applies to EUR 300 thousand each for 2017 and advances of
disability, widows’, and orphans’ pensions. EUR 300 thousand and EUR 225 thousand, respectively, for 2018,
and also committed to pay an advance of EUR 300 thousand to
The following tables summarize the service cost and defined one of these Managing Directors for 2019; these advances will
benefit obligation of pension benefits earned up to be offset against payment of the long-term bonuses granted
December 31, 2018, calculated in accordance with IAS 19 and in 2017, 2018, and 2019. In the tables required by the German
based on the beneficiary’s current age and years of service. Corporate Governance Code, advances are already shown as
received, in accordance with the approach for tax purposes.
Service cost for 2018 and defined benefit obligations No. 077
as at December 31, 2018 in accordance with IAS 19
Defined
Benefits granted in connection with the
Service benefit termination of membership on the Board of
in € thousands Year cost obligation
Managing Directors
Klaus Rosenfeld (CEO) 2018 1,244 12,205
Prof. Dr. Peter Gutzmer 2018 0 4,498 Payments made to a member of the Board of Managing Directors
Dietmar Heinrich 2018 279 404 upon early termination of their employment agreement without
Andreas Schick 1) 2018 242 246 due cause are limited to two years’ remuneration (severance cap)
Corinna Schittenhelm 2018 325 968 and must not represent compensation for more than the remaining
Michael Söding 2) 2018 278 289 term of the employment agreement. The severance cap is gener-
Dr. Stefan Spindler 2018 252 942 ally calculated based on the total remuneration for the last full
Matthias Zink 2018 323 649 financial year and also on the expected total remuneration for
Managing Directors who left the company in 2018 the current year where applicable.
Oliver Jung 3) 2018 289 2,697
Prof. Dr. Peter Pleus 4) 2018 0 6,401
Members of the Board of Managing Directors whose employment
Total 3,232 29,299
has terminated are generally subject to a non-competition clause
1)
for a period of two years following termination of their employ-
ndreas Schick has been a member of the Board of Managing Directors of
A
Schaeffler AG since April 1, 2018. ment agreement. In return, they are entitled to compensation in
2) M ichael Söding has been a member of the Board of Managing Directors of
Schaeffler AG since January 1, 2018.

the amount of 50% of the average contractual remuneration
3) O liver Jung left the Board of Managing Directors of Schaeffler AG as at
granted to the member of the Board of Managing Directors for the
March 31, 2018. His employment agreement remained in effect until
September 30, 2018. last 12 months before the end of their employment. Such con-
4) P rof. Dr. Peter Pleus left the Board of Managing Directors of Schaeffler AG as at
December 31, 2018.

tractual remuneration includes both performance-based and
Remuneration report
non-performance-based remuneration components. Income from External activities of members of the Board
other employment of the member of the Board of Managing of Managing Directors
Directors is deducted from the compensation payment in accord
ance with section 74c HGB. Where employment ends on grounds The members of the Board of Managing Directors have agreed to
of age, a non-competition clause for a period following termina- work exclusively for the company. External activities, whether
tion of employment does not apply. paid or unpaid, require prior approval by the executive com-
mittee of the Supervisory Board. This ensures that neither the
The employment agreements of Andreas Schick and Michael time commitment involved nor the related remuneration conflict
Söding, who were appointed to the Board of Managing Directors with the individual’s responsibilities toward Schaeffler AG.
in 2018, and Dietmar Heinrich and Matthias Zink, appointed to External activities representing a position on legally required
the Board of Managing Directors in 2017, include post-contract Supervisory Boards or similar supervisory bodies of commercial
non-competition clauses calling for corresponding compensa- enterprises are listed in section 5 “Governing bodies of the
tion. company”.
Oliver Jung left Schaeffler AG’s Board of Managing Directors early

effective March 31, 2018. His employment agreement remained Appropriateness of the remuneration of the
in effect until September 30, 2018. The fixed remuneration Board of Managing Directors
including fringe benefits he will continue to receive amounts to
a total of EUR 304 thousand and his proportionate short-term In accordance with section 87 AktG, the Supervisory Board of
bonus for 2018 is EUR 321 thousand. Dr. Ulrich Hauck left Schaeffler AG ensures that the remuneration of individual mem-
Schaeffler AG’s Board of Managing Directors early effective bers of the Board of Managing Directors bears a reasonable
July 31, 2017. His employment agreement remained in effect relationship to the duties and performance of such member as
until March 31, 2018. The fixed remuneration including fringe well as the condition of the company. The Supervisory Board
benefits he will continue to receive amounts to a total of engaged Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft
EUR 403 thousand and his proportionate short-term bonus for to review the appropriateness of the Managing Directors’ remu-
2017 is EUR 291 thousand. In addition, the company agreed to neration, most recently in 2016. Ernst & Young concluded that
pay Dr. Hauck the proportionate short-term bonus for 2018 and the total remuneration of the members of the Board of Managing
a proportionate long-term bonus for 2018. The post-contract Directors is customary and appropriate in comparison to that of
non-competition clause was waived. In connection with the other companies of comparable size within the same industry
waiver of the post-contract non-competition clause, the company and country in terms of the amount, structure, and features of
will make payments for the period of approximately four months remuneration instruments.
in the amount of 50% of the average monthly contractual remu-
neration granted for the last 12 months before the end of
Dr. Hauck’s employment.
Remuneration report
3.2 Amounts of remuneration of the

The fixed and variable components of remuneration are dis-

closed below. The following tables show the benefits granted
and received for 2017 and 2018.
Benefits granted for 2018
Klaus Rosenfeld Prof. Dr. Peter Gutzmer Dietmar Heinrich

Deputy Chief Executive Officer
Chief Executive Officer and Chief Technology Officer Chief Financial Officer
since October 24, 2014 since October 24, 2014 since August 01, 2017
2018 2018 2018 2018 2018 2018
in € thousands 2017 2018 (Min) (Max) 2017 2018 (Min) (Max) 2017 2018 (Min) (Max)
Fixed remuneration 1,200 1,200 1,200 1,200 600 600 600 600 250 600 600 600
Fringe benefits 28 28 28 28 29 29 29 29 9 20 20 20
Total 1,228 1,228 1,228 1,228 629 629 629 629 259 620 620 620
One-year variable remuneration 1,200 1,200 0 1,800 900 900 0 1,350 250 600 0 900
Multi-year variable remuneration
• Long-term bonus: PSUP (4 years) - 2015 tranche - - - - - - - - - - - -
• Long-term bonus: PSUP (4 years) - 2016 tranche - - - - - - - - - - - -
• Long-term bonus: PSUP (4 years) - 2017 tranche 1,048 - - - 766 - - - 189 - - -
• Long-term bonus: PSUP (4 years) - 2018 tranche - 1,052 0 2,600 - 768 0 1,900 - 526 0 1,300
Total 3,476 3,480 1,228 5,628 2,295 2,297 629 3,879 698 1,746 620 2,820
Pension expense 1,331 1,244 1,244 1,244 0 0 0 0 114 279 279 279
Total remuneration 4,807 4,724 2,472 6,872 2,295 2,297 629 3,879 812 2,025 899 3,099
Benefits received for 2018
Klaus Rosenfeld Prof. Dr. Peter Gutzmer Dietmar Heinrich

Deputy Chief Executive Officer
Chief Executive Officer and Chief Technology Officer Chief Financial Officer
since October 24, 2014 since October 24, 2014 since August 01, 2017
in € thousands 2018 2017 2018 2017 2018 2017
Fixed remuneration 1,200 1,200 600 600 600 250
Fringe benefits 28 28 29 29 20 9
Total 1,228 1,228 629 629 620 259
One-year variable remuneration 856 1,116 642 837 428 233
• Long-term bonus: PSUP (4 years) - 2015 tranche 0 0 0 0 0 0
Total 2,084 2,344 1,571 1,766 1,048 492
Pension expense 1,244 1,331 0 0 279 114
Total remuneration 3,328 3,675 1,571 1,766 1,327 606
Remuneration report
No. 079
Andreas Schick Corinna Schittenhelm Michael Söding Dr. Stefan Spindler Matthias Zink
Chief Human
Chief Operating Officer Resources Officer CEO Automotive Aftermarket CEO Industrial CEO Automotive OEM
since April 01, 2018 since January 01, 2016 since January 01, 2018 since May 01, 2015 since January 01, 2017
2018 2018 2018 2018 2018 2018 2018 2018 2018 2018
2017 2018 (Min) (Max) 2017 2018 (Min) (Max) 2017 2018 (Min) (Max) 2017 2018 (Min) (Max) 2017 2018 (Min) (Max)
- 450 450 450 600 600 600 600 - 600 600 600 600 600 600 600 600 600 600 600
- 19 19 19 25 25 25 25 - 30 30 30 24 24 24 24 24 26 26 26
- 469 469 469 625 625 625 625 - 630 630 630 624 624 624 624 624 626 626 626
- 450 0 675 600 600 0 900 - 600 0 900 750 750 0 1,125 600 600 0 900
- - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - -
- - - - 524 - - - - - - - 645 - - - 524 - - -
- 329 0 975 - 526 0 1,300 - 526 0 1,300 - 647 0 1,600 - 526 0 1,300
- 1,248 469 2,119 1,749 1,751 625 2,825 - 1,756 630 2,830 2,019 2,021 624 3,349 1,748 1,752 626 2,826
- 242 242 242 326 325 325 325 - 278 278 278 308 252 252 252 317 323 323 323
- 1,490 711 2,361 2,075 2,076 950 3,150 - 2,034 908 3,108 2,327 2,273 876 3,601 2,065 2,075 949 3,149
No. 080
Andreas Schick Corinna Schittenhelm Michael Söding Dr. Stefan Spindler Matthias Zink
Chief Human
Chief Operating Officer Resources Officer CEO Automotive Aftermarket CEO Industrial CEO Automotive OEM
since April 01, 2018 since January 01, 2016 since January 01, 2018 since May 01, 2015 since January 01, 2017
2018 2017 2018 2017 2018 2017 2018 2017 2018 2017
450 - 600 600 600 - 600 600 600 600
19 - 25 25 30 - 24 24 26 24
469 - 625 625 630 - 624 624 626 624
321 - 428 558 500 - 704 608 376 518
0 - 0 0 0 - 0 0 0 0
0 - 0 0 0 - 0 0 0 0
0 - 0 0 0 - 0 0 0 0
0 - 0 0 0 - 0 0 0 0
790 - 1,053 1,183 1,130 - 1,328 1,232 1,002 1,142
242 - 325 326 278 - 252 308 323 317
1,032 - 1,378 1,509 1,408 - 1,580 1,540 1,325 1,459
Remuneration report
Benefits granted for 2018 – No. 081

Oliver Jung Prof. Dr. Peter Pleus

Chief Operating Officer CEO Automotive OEM
from October 24, 2014 from October 24, 2014
to March 31, 2018 to December 31, 2018
2018 2018 2018 2018
in € thousands 2017 2018 (Min) (Max) 2017 2018 (Min) (Max)
Fixed remuneration 600 150 150 150 600 600 600 600
Fringe benefits 28 7 7 7 42 43 43 43
Total 628 157 157 157 642 643 643 643
One-year variable remuneration 900 225 0 338 900 900 0 1,350
• Long-term bonus: PSUP (4 years) - 2015 tranche - - - - - - - -
• Long-term bonus: PSUP (4 years) - 2016 tranche - - - - - - - -
• Long-term bonus: PSUP (4 years) - 2017 tranche 766 - - - 766 - - -
• Long-term bonus: PSUP (4 years) - 2018 tranche - 577 0 1,425 - 768 0 1,900
Total 2,294 959 157 1,920 2,308 2,311 643 3,893
Pension expense 307 289 289 289 383 0 0 0
Total remuneration 2,601 1,248 446 2,209 2,691 2,311 643 3,893
Benefits received for 2018 – No. 082

Oliver Jung Prof. Dr. Peter Pleus

from October 24, 2014 from October 24, 2014
to March 31, 2018 to December 31, 2018
in € thousands 2018 2017 2018 2017
Fixed remuneration 150 600 600 600
Fringe benefits 7 28 43 42
Total 157 628 643 642
One-year variable remuneration 160 837 564 778
• Long-term bonus: PSUP (4 years) - 2015 tranche 0 0 0 0
Total 542 1,765 1,207 1,420
Pension expense 289 307 0 383
Total remuneration 831 2,072 1,207 1,803
Remuneration report
The total remuneration for 2018 and 2017 is broken down by The total expenses and income resulting from the PSUP for 2018
individual and by its various components in accordance with are broken down by individual in accordance with section 314 (1)
section 285 (9a) HGB and section 314 (1) (6a) HGB below. (6a) (8) HGB in connection with IFRS 2.51a below.
Total remuneration (HGB) No. 083 PSUP expenses and income in 2018 No. 085
for 2018 by individual
Expenses and
Remuneration components in € thousands income (IFRS)
variable, variable, Total remu- Klaus Rosenfeld (CEO) -288
in € thousands fixed short-term long-term 1) neration
Prof. Dr. Peter Gutzmer -102
Klaus Rosenfeld (CEO) 1,228 856 1,052 3,136
Dietmar Heinrich 55
Prof. Dr. Peter Gutzmer 629 642 768 2,039
Andreas Schick 1) 27
Dietmar Heinrich 620 428 526 1,574
Corinna Schittenhelm -32
Andreas Schick 2) 469 321 329 1,119
Michael Söding 2) 45
Corinna Schittenhelm 625 428 526 1,579
Dr. Stefan Spindler -131
Michael Söding 3) 630 500 526 1,656
Matthias Zink 32
Dr. Stefan Spindler 624 704 647 1,975
Matthias Zink 626 376 526 1,528
Oliver Jung 3) -241
Prof. Dr. Peter Pleus 4) 173
Oliver Jung 4) 157 160 577 894
Total -462
Prof. Dr. Peter Pleus 5) 643 564 768 1,975 1) Andreas
Schick has been a member of the Board of Managing Directors of
Total 6,251 4,979 6,245 17,475 Schaeffler AG since April 1, 2018.
2) Michael
Söding has been a member of the Board of Managing Directors of
1) Share-based
payment in the form of the PSUP. Schaeffler AG since January 1, 2018.
2) Andreas
Schick has been a member of the Board of Managing Directors of 3) Oliver
Jung left the Board of Managing Directors of Schaeffler AG as at
Schaeffler AG since April 1, 2018. March 31, 2018. His employment agreement remained in effect until
3) Michael
Söding has been a member of the Board of Managing Directors of September 30, 2018.
Schaeffler AG since January 1, 2018. 4) Prof.
Dr. Peter Pleus left the Board of Managing Directors of Schaeffler AG as at
4) Oliver
Jung left the Board of Managing Directors of Schaeffler AG as at December 31, 2018.
March 31, 2018. His employment agreement remained in effect until
September 30, 2018.
5) Prof. Dr. Peter Pleus left the Board of Managing Directors of Schaeffler AG as at
December 31, 2018.
The total expenses resulting from the PSUP for 2017 are broken
down by individual in accordance with section 314 (1) (6a) (8) HGB
Total remuneration (HGB) No. 084 in connection with IFRS 2.51a below.
for 2017 by individual
Remuneration components
PSUP expenses in 2017 No. 086
variable, variable, Total remu- Expenses
in € thousands fixed short-term long-term 1) neration in € thousands (IFRS)
Klaus Rosenfeld (CEO) 1,228 1,116 1,048 3,392 Klaus Rosenfeld (CEO) 669
Prof. Dr. Peter Gutzmer 629 837 766 2,232 Prof. Dr. Peter Gutzmer 489
Dietmar Heinrich 2) 259 233 189 681 Dietmar Heinrich 1) 21
Oliver Jung 628 837 766 2,231 Oliver Jung 837
Prof. Dr. Peter Pleus 642 778 766 2,186 Prof. Dr. Peter Pleus 489
Corinna Schittenhelm 625 558 524 1,707 Corinna Schittenhelm 196
Dr. Stefan Spindler 624 608 645 1,877 Dr. Stefan Spindler 355
Matthias Zink 624 518 524 1,666 Matthias Zink 101
Managing Directors who left the company in 2017 Managing Directors who left the company in 2017
Dr. Ulrich Hauck 3) 366 407 645 1,418 Dr. Ulrich Hauck 2) 1,090
Total 5,625 5,892 5,873 17,390 Total 4,247
1) Share-based
payment in the form of the PSUP. 1) Dietmar
Heinrich has been a member of the Board of Managing Directors of
2) Dietmar
Heinrich has been a member of the Board of Managing Directors of Schaeffler AG since August 1, 2017.
Schaeffler AG since August 1, 2017. 2) Dr.
Ulrich Hauck left the Board of Managing Directors of Schaeffler AG as at
3) Dr.
Ulrich Hauck left the Board of Managing Directors of Schaeffler AG as at July 31, 2017. His employment agreement remained in effect until March 31, 2018.
July 31, 2017. His employment agreement remained in effect until March 31, 2018.
Remuneration report
3.3 Remuneration of the Supervisory Supervisory Board remuneration for 2018 1) No. 087
Board Remune
ration for
Fixed committee Total
remune member Attendance remune
The description of the remuneration of the Supervisory Board in € thousands ration ship fees 2) ration
includes the disclosures required by German commercial law and Bullinger, Prof. Dr.
is consistent with the recommendations of the GCGC. The remu- Hans-Jörg 50 6 56
neration of the Supervisory Board was set by a resolution passed Engelmann, Dr. Holger 50 6 56
by the general meeting on December 1, 2014. Gottschalk,
Prof. Dr. Bernd 50 5 55
Grimm, Andrea 3) 50 8 58
The members of the Supervisory Board of Schaeffler AG receive
Lau, Susanne
fixed remuneration of EUR 50,000 per year. The Chairman of
(since August 08, 2018) 3) 20 5 25
the Supervisory Board receives twice this amount, his Deputies
Lenhard, Norbert 3) 50 20 14 84
1.5 times this amount. In addition, membership on committees
Luther, Dr. Siegfried 50 30 14 94
is remunerated as follows:
Mittag, Dr. Reinold 3) 50 20 14 84
• Executive committee; committee remuneration of EUR 20,000 Resch, Barbara 3) 50 20 11 81
for each ordinary member, twice this amount for the chairman. Schaeffler,
Georg F. W. 100 40 15 155
• Audit committee; committee remuneration of EUR 20,000 for
Schaeffler-Thumann,
each ordinary member, twice this amount for the chairman. Maria-Elisabeth 75 20 0 95
Where a member of the Supervisory Board chairs several Schmidt, Stefanie
(until June 30, 2018) 3) 25 3 28
committees or chairs both the Supervisory Board and one or
Spindler, Dirk 50 8 58
more committees, no remuneration is paid for the additional
Stalker, Robin 50 30 12 92
chairmanship. Where the term of office of a member of the
Stolz, Jürgen 3) 50 6 56
Supervisory Board or the position entitling the Supervisory
Vicari, Salvatore 3) 50 20 14 84
Board member to increased remuneration begins or ends during
Wechsler, Jürgen 3) 75 20 14 109
the year, the remuneration or increased remuneration paid to
the Supervisory Board member is prorated. Wiesheu, Dr. Otto 50 6 56
Wolf, Prof. KR Ing.
Siegfried 50 20 3 73
In addition, each member of the Supervisory Board receives an
Worrich, Jürgen 3) 50 20 14 84
attendance fee of EUR 1,500 for each meeting of the Supervisory Zhang, Prof. Dr.-Ing.
Board or its committees he or she attends in person. No atten- Tong 50 8 58
dance fees are paid where meetings of the Supervisory Board or Total 1,095 260 186 1,541
its committees are attended via telephone. 1) All
amounts shown exclude any value-added tax applicable on remuneration. The
positions held by the Supervisory Board members are listed in section 5 “Governing
bodies of the company”.
Members of the Supervisory Board are reimbursed for expenses 2) No
attendance fees are paid where meetings of the Supervisory Board or its
committees are attended via telephone.
incurred in connection with the performance of their duties and 3) These
employee representatives have declared that their board remuneration is
for any value-added tax on their remuneration and expenses. transferred to the Hans Böckler Foundation in accordance with the guidelines issued
by the German Federation of Trade Unions.
The company has obtained directors’ and officers’ liability insur-

ance (D&O insurance) for all members of the Supervisory Board;
the features of the policy’s deductible provision are in accord
ance with section 93 (2) (3) AktG.
No advances or loans were granted to members of the Super-

visory Board in 2018 or 2017. The following tables summarize
the amount of remuneration of each member of the Supervisory
Board.
Remuneration report
Supervisory Board remuneration for 2017 1) No. 088

Remune
ration for
Fixed committee Total
remune member Attendance remune
in € thousands ration ship fees 2) ration
Bullinger, Prof. Dr.
Hans-Jörg 50 8 58
Engelmann, Dr. Holger 50 6 56
Gottschalk, Prof. Dr.
Bernd 50 6 56
Grimm, Andrea
(since April 08, 2017) 3) 36 6 42
Lenhard, Norbert 3) 50 20 12 82
Luther, Dr. Siegfried 50 40 14 104
Mittag, Dr. Reinold 3) 50 20 14 84
Münch, Yvonne
(until March 07, 2017) 3) 9 2 11
Resch, Barbara 3) 50 20 12 82
Schaeffler,
Georg F. W. 100 40 15 155
Schaeffler-Thumann,
Maria-Elisabeth 75 20 3 98
Schmidt, Stefanie 3) 50 8 58
Spindler, Dirk 50 8 58
Stalker, Robin 50 20 14 84
Stolz, Jürgen 3) 50 8 58
Vicari, Salvatore 3) 50 20 14 84
Wechsler, Jürgen 3) 75 20 11 106
Wiesheu, Dr. Otto 50 8 58
Wolf, Prof. KR Ing.
Siegfried 50 20 11 81
Worrich, Jürgen 3) 50 20 14 84
Zhang, Prof. Dr.-Ing.
Tong 50 6 56
Total 1,095 260 200 1,555
1) All
amounts shown exclude any value-added tax applicable on remuneration. The
positions held by the Supervisory Board members are listed in section 5 “Governing
bodies of the company”.
2) No
attendance fees are paid where meetings of the Supervisory Board or its
committees are attended via telephone.
3) These
employee representatives have declared that their board remuneration is
transferred to the Hans Böckler Foundation in accordance with the guidelines issued
by the German Federation of Trade Unions.
Members of the Supervisory Board have not received any

compensation for personal services, especially consulting
and agency services, in 2018 or 2017.
Governing bodies of the company
4. Governing bodies of the company
4.1 Supervisory Board Prof. Dr. Hans-Jörg Bullinger

Senator of Fraunhofer-Gesellschaft zur Förderung angew.
The Supervisory Board consists of 20 members. Ten of these Forschung e.V.
members are appointed by a resolution of the annual general Appointed: December 1, 2014
meeting, and ten members are elected by the employees in accord Committee memberships: chairman of the technology committee
ance with the requirements of the German Co-Determination Act. (since October 5, 2018)
The term of office of the shareholder representatives on the Seats on supervisory and similar boards: chairman of the
Supervisory Board ends at the conclusion of the annual general Supervisory Board of ARRI AG, Munich; member of the
meeting 2019. The term of office of the employee representatives Supervisory Board of Bauerfeind AG, Zeulenroda-Triebes;
ends at the conclusion of the annual general meeting 2020. chairman of the Supervisory Board of TÜV SÜD AG, Munich;
deputy chairman of the Supervisory Board of WILO SE, Dortmund;
member of the board of directors of Kärcher GmbH & Co. KG,
Georg F. W. Schaeffler Winnenden
Shareholder of INA-Holding Schaeffler GmbH & Co. KG
Chairman of the Supervisory Board of Schaeffler AG
Dr. Holger Engelmann
Appointed: December 1, 2014
Chairman of the Management Board of Webasto SE
Committee memberships: chairman of the mediation, executive,
and nomination committees and member of the audit committee, Appointed: December 1, 2014
member of the technology committee (since October 5, 2018) Committee memberships: member of the nomination committee
Seats on supervisory and similar boards: member of the Seats on supervisory and similar boards: chairman of the
Supervisory Board of Continental AG, Hanover; chairman of the Supervisory Board of Webasto Thermo & Comfort SE, Gilching
advisory board of Atesteo GmbH (April 20, 2018 to October 1, 2018);
chairman of the advisory board of Atesteo Management GmbH
(since September 27, 2018)
Prof. Dr. Bernd Gottschalk
Owner and Managing Partner of AutoValue GmbH
Maria-Elisabeth Schaeffler-Thumann Appointed: December 1, 2014

Shareholder of INA-Holding Schaeffler GmbH & Co. KG Committee memberships: member of the nomination committee
Deputy Chairperson of the Supervisory Board of Schaeffler AG Seats on supervisory and similar boards: deputy chairman of the
Supervisory Board of JOST-Werke AG, Neu-Isenburg; member of
the remuneration committee of the Supervisory Board of
Committee memberships: member of the mediation, executive,
Plastic Omnium SA, Levallois-Perret, France; chairman of the
and nomination committees
advisory board of Woco Industrietechnik GmbH, Bad Soden-
Seats on supervisory and similar boards: member of the
Salmuenster
Supervisory Board of Continental AG, Hanover
Jürgen Wechsler* Andrea Grimm*

Former Regional Director of IG Metall Bavaria Member of the Works Council
Deputy Chairman of the Supervisory Board of Schaeffler AG Appointed: April 8, 2017
Appointed: November 19, 2015
Committee memberships: member of the mediation and Susanne Lau* (since August 8, 2018)
executive committees, member of the technology committee Industrial management assistant Chairperson of the IBR
(since October 5, 2018) Deputy Chairperson of the GDR Schaeffler AAM
Supervisory Board of BMW AG, Munich; deputy chairman of the Appointed: August 8, 2018
Supervisory Board of Siemens Healthcare GmbH, Erlangen
* Employee representative on the Supervisory Board.

Norbert Lenhard* Salvatore Vicari*

Chairman of the Group Works Council Schaeffler AG Chairman of the Works Council at the Homburg/Saar plant
Appointed: November 19, 2015 Appointed: November 19, 2015

Committee memberships: member of the mediation and Committee memberships: member of the audit committee,
executive committees, member of the technology committee member of the technology committee (since October 5, 2018)
(since October 5, 2018) Seats on supervisory and similar boards: member of the
Supervisory Board of GEW-Management GmbH, Homburg
Dr. Siegfried Luther
Management Consultant Dr. Otto Wiesheu
Lawyer
Committee memberships: chairman of the audit committee (until Appointed: December 1, 2014
June 30, 2018), member of the audit committee (since July 1, 2018)
Seats on supervisory and similar boards: member of the Prof. KR Ing. Siegfried Wolf
Supervisory Board of Evonik Industries AG, Essen; member of the
Chairman of the Supervisory Board of OJSC Gaz Group
board of directors of Sparkasse Gütersloh-Riethberg, Guetersloh
Committee memberships: member of the executive committee,
Dr. Reinold Mittag*
member of the technology committee (since October 5, 2018)
Trade Union Secretary of IG Metall
Appointed: November 19, 2015 Supervisory Board of Banque Eric Sturdza SA, Geneva,
Committee memberships: member of the audit committee Switzerland; member of the Supervisory Board of Continental AG,
Hanover; member of the Supervisory Board of Miba AG,
Barbara Resch* Mitterbauer Beteiligungs AG, Laakirchen, Austria; chairman of the
board of directors of Russian Machines LLC (until April 30, 2018);
Wage secretary
chairman of the Supervisory Board of SBERBANK Europe AG,
Appointed: November 19, 2015 Vienna, Austria; member of the Supervisory Board of UC RUSAL Plc,
Committee memberships: member of the executive committee Nicosia, Cyprus (until June 28, 2018)
Dirk Spindler* Jürgen Worrich*

Senior Vice President R&D Processes, Methods and Tools of Chairman of the European Schaeffler Works Council
Schaeffler AG Member of the Works Council at Herzogenaurach plant
Appointed: November 19, 2015 Appointed: November 19, 2015
Committee memberships: member of the audit committee,
Robin Stalker member of the technology committee (since October 5, 2018)
Chartered Accountant

Prof. Dr.-Ing. Tong Zhang
Committee memberships: member of the audit committee (until Director of the Academic Committee of Automotive Studies at
June 30, 2018), chairman of the audit committee (since July 1, 2018) Tongji University in Shanghai, China
Seats on supervisory and similar boards: deputy chairman of the Appointed: December 1, 2014
Supervisory Board of Schmitz Cargobull AG, Horstmar; member Committee memberships: member of the technology committee
of the audit and risk committee of the Supervisory Board of (since October 5, 2018)
Commerzbank AG, Frankfurt (since May 8, 2018)
Jürgen Stolz* The following member left the Supervisory

Member of the Works Council at the Buehl plant Board in 2018
Member of the European Schaeffler Works Council
Appointed: November 19, 2015 Stefanie Schmidt* (until June 30, 2018)
Ergonomics specialist at the Wuppertal location

Term of office ended: June 30, 2018

4.2 Supervisory Board committees Klaus Rosenfeld

Chief Executive Officer
Responsible for: Quality; Schaeffler Consulting;

Mediation committee
Communications & Branding; Investor Relations; Legal;
Internal Audit; Corporate Development & Strategy;
Georg F. W. Schaeffler (Chairman), Norbert Lenhard,
Compliance & Corporate Security; Corporate Real Estate
Maria-Elisabeth Schaeffler-Thumann, and Jürgen Wechsler
Appointed: October 24, 2014
Term of office ends: June 30, 2024
Executive committee
Supervisory Board of Continental AG, Hanover; chairman of the
advisory board of Schaeffler Consulting GmbH, Herzogenaurach
Georg F. W. Schaeffler (Chairman), Norbert Lenhard,
(since January 18, 2018); member of the advisory board of
Barbara Resch, Maria-Elisabeth Schaeffler-Thumann,
Schaeffler Bio-Hybrid GmbH, Herzogenaurach (since July 31, 2018);
Jürgen Wechsler, and Prof. KR Ing. Siegfried Wolf
member of the board of directors of Schaeffler Holding (China) Co. Ltd.,
Shanghai, China; member of the board of directors
of Schaeffler India Ltd., Vadodara, India; member of the board
Audit committee
of directors of Siemens Gamesa Renewable Energy S.A.,
Zamudio, Spain
Audit committee: Robin Stalker (Chairman since July 1, 2018),
Dr. Siegfried Luther (Chairman until June 30, 2018),
Dr. Reinold Mittag, Georg F. W. Schaeffler, Salvatore Vicari, Prof. Dr.-Ing. Peter Gutzmer
and Jürgen Worrich Deputy CEO and Chief Technology Officer
Responsible for: Corporate R&D Management; Innovation &

Central Technology; R&D Processes, Methods & Tools;
Nomination committee Intellectual Property Rights; R&D Bearing; Information
Technology; Strategic IT; Coordination Office Digitalization
Georg F. W. Schaeffler (Chairman),
Dr. Holger Engelmann, Prof. Dr. Bernd Gottschalk,
Term of office ends: December 31, 2019
and Maria-Elisabeth Schaeffler-Thumann
Seats on supervisory and similar boards: member of the advisory
board of Compact Dynamics GmbH, Starnberg (since April 3, 2018);
member of the supervisory board of Continental AG, Hanover;
Technology committee (since October 5, 2018) chairman of the advisory board of Schaeffler Bio-Hybrid GmbH,
Herzogenaurach (since July 31, 2018); chairman of the advisory
Prof. Dr. Hans-Jörg Bullinger (Chairman), Norbert Lenhard,
board of Schaeffler Paravan Technologie GmbH & Co. KG,
Georg F. W. Schaeffler, Salvatore Vicari, Jürgen Wechsler,
Herzogenaurach (since September 21, 2018)
Prof. KR Ing. Siegfried Wolf, Jürgen Worrich, and
Prof. Dr.-Ing. Tong Zhang.
Dietmar Heinrich
Chief Financial Officer
4.3 Board of Managing Directors Responsible for: Finance Strategy, Processes & Infrastructure;
Corporate Accounting; Corporate Controlling; Corporate Treasury;
The Schaeffler Group is managed by the Board of Managing Corporate Tax and Customs; Corporate Insurance; Shared
Directors of Schaeffler AG. The Board of Managing Directors Services; Divisional Controlling Automotive OEM, AAM, and
currently has eight members: the Chief Executive Officer (CEO), Industrial divisions
the CEOs of the Automotive OEM, Automotive Aftermarket, and Appointed: August 1, 2017
Industrial divisions, and the Managing Directors responsible Term of office ends: July 31, 2020
for the functions (1) Technology, (2) Operations, Supply Chain Seats on supervisory and similar boards: member of the
Management & Purchasing, (3) Finance, and (4) Human Resources. supervisory board of LuK Savaria Kft., Szombathely, Hungary
Together, the Board of Managing Directors and the Regional CEOs (until January 8, 2018); member of the supervisory board
represent the Schaeffler Group’s Executive Board. of Schaeffler Austria GmbH, Berndorf-St. Veit, Austria
(until March 21, 2018); member of the board of directors of
Schaeffler India Ltd., Vadodara, India (until April 17, 2018);
member of the advisory board of Schaeffler Bio-Hybrid GmbH,
Herzogenaurach (since July 31, 2018); member of the advisory
board of Schaeffler Consulting GmbH, Herzogenaurach
(since February 6, 2018)

Andreas Schick (since April 1, 2018) Matthias Zink

Responsible for: Schaeffler Production System, Strategy & Responsible for: Business Development & Strategy
Processes; Digitalization & Operations IT; Advanced Production Automotive OEM; Global Key Account Management
Technology; Production Technology; Special Machinery; Automotive OEM; Engine Systems, Transmission Systems,
Supply Chain Management & Logistics; Purchasing & Supplier E-Mobility, and Chassis Systems business divisions; R&D
Management; Quality Operations, SCM & Purchasing Automotive OEM; Operations & Supply Chain Management
Appointed: April 1, 2018 Automotive OEM; Quality Automotive OEM
Term of office ends: March 31, 2021 Appointed: January 1, 2017
Seats on supervisory and similar boards: member of the Term of office ends: December 31, 2019
supervisory board of SupplyOn AG, Munich (May 15, 2018 to Seats on supervisory and similar boards: member of the
December 31, 2018) advisory board of Compact Dynamics GmbH, Starnberg (since
April 3, 2018); member of the advisory board of Schaeffler
Corinna Schittenhelm Paravan Technologie GmbH & Co. KG, Herzogenaurach (since
September 21, 2018); member of the Supervisory Board of
Chief Human Resources Officer
Schaeffler Savaria Kft., Szombathely, Hungary; member of the
Responsible for: HR Strategy; HR Policies & Standards; board of directors of Schaeffler (China) Co. Ltd., Shanghai, China
Leadership, Recruiting & Talent Management; Schaeffler
Academy; HR Systems, Processes & Reporting; Sustainability,
Environment, Health & Safety; Human Resources Functions;
The following members left the Board of
Human Resources Automotive OEM; Human Resources AAM; Managing Directors in 2018
Human Resources Industrial
Appointed: January 1, 2016
Oliver Jung (until March 31, 2018)
Chief Operating Officer
advisory board of Schaeffler Consulting GmbH, Herzogenaurach Responsible for: Operations Strategy & Processes; Production
(since January 18, 2018) Technology; Special Machinery; Tool Management & Prototyping;
Industrial Engineering; Bearing & Components Technologies;
Michael Söding (since January 1, 2018) Logistics; Purchasing; MOVE
CEO Automotive Aftermarket
Term of office ended: March 31, 2018
Responsible for: Business Development & Strategy AAM; Seats on supervisory and similar boards: member of the
Sales & Marketing AAM; Product Management/R&D AAM; Supervisory Board of FAG Magyarorszag Ipari Kft., Debrecen,
Operations & Supply Chain Management AAM; Quality AAM Hungary (until April 11, 2018); member of the Supervisory
Appointed: January 1, 2018 Board of Heidelberger Druckmaschinen AG, Heidelberg;
Term of office ends: December 31, 2020 chairman of the Supervisory Board of Schaeffler Austria GmbH,
Berndorf-St. Veit, Austria (until March 31, 2018); member of the
Dr. Stefan Spindler Supervisory Board of SupplyOn AG, Munich (until May 15, 2018);
CEO Industrial member of the Supervisory Board of Leistritz AG, Nuremberg
(since July 27, 2018)
Responsible for: Business Development & Strategy Industrial;
Global Key Account Management Industrial; Sales & Marketing
Industrial; Strategic Business Field Industry 4.0; R&D Industrial;
Prof. Dr. Peter Pleus (until December 31, 2018)
Operations & Supply Chain Management Industrial; Quality CEO Automotive OEM
Industrial Responsible for: Strategy & Business Development Automotive OEM;
Appointed: May 1, 2015 Global Key Account Management Automotive OEM;
Term of office ends: April 30, 2023 Engine Systems and Chassis Systems business divisions
Seats on supervisory and similar boards: deputy chairman of the Appointed: October 24, 2014
supervisory board of Schaeffler Austria GmbH, Berndorf-St. Veit, Term of office ended: December 31, 2018
Austria (until March 20, 2018) Seats on supervisory and similar boards: member of the
Supervisory Board of IAV GmbH, Berlin (until December 31, 2018)
118 Financial statements 2018

Financial statements 2018
1. Balance sheet 119
2. Income statement 120
3. Notes to the financial statements 121

Schaeffler AG I Financial Statements 2018 Financial statements 2018 119
Balance sheet
1. Balance sheet
Balance sheet of Schaeffler AG No. 089
Change
in € 12/31/2018 12/31/2017 in %
ASSETS
Intangible assets 63,261.00 1,781.00 > 100
Property, plant and equipment 287,056.00 369,787.00 -22.4
Shares in affiliated companies 14,108,811,258.16 14,108,811,258.16 0.0
Loans receivable from affiliated companies 172,988,197.93 193,003,287.57 -10.4
Long-term financial assets 14,281,799,456.09 14,301,814,545.73 -0.1
Fixed assets 14,282,149,773.09 14,302,186,113.73 -0.1
Trade receivables 0.00 17,888.94 - 100
Receivables from affiliated companies 8,559,563,794.71 8,402,230,883.87 1.9
Receivables from entities to which the company is linked by equity ownership 733.04 0.00 -
Other assets 168,776,090.22 153,102,602.20 10.2
Receivables and other assets 8,728,340,617.97 8,555,351,375.01 2.0
Cash at banks 190,853,595.88 188,839,236.42 1.1
Current assets 8,919,194,213.85 8,744,190,611.43 2.0
Prepaid expenses and deferred charges 893,805.09 86,475.33 > 100
Excess of plan assets over post-employment benefit liability 5,470,791.47 8,727,482.54 -37.3
Total assets 23,207,708,583.50 23,055,190,683.03 0.7
SHAREHOLDERS’ EQUITY AND LIABILITIES
Share capital 666,000,000.00 666,000,000.00 0.0
Capital reserves 2,359,000,000.00 2,359,000,000.00 0.0
Revenue reserves 3,672,955,806.81 3,580,931,810.50 2.6
Retained earnings 499,458,949.24 453,323,996.31 10.2
Shareholders’ equity 7,197,414,756.05 7,059,255,806.81 2.0
Provisions for pensions and similar obligations 47,972,117.25 44,961,717.43 6.7
Tax provisions 124,661,073.39 140,774,149.54 -11.4
Other provisions 120,983,159.36 128,114,474.64 -5.6
Provisions 293,616,350.00 313,850,341.61 -6.4
Bank debt 1,344,000,000.00 1,092,564,770.62 23.0
Trade payables 6,168,886.03 8,117,563.71 -24.0
Amounts payable to affiliated companies 14,352,253,321.64 14,564,909,705.15 -1.5
Other liabilities 10,055,456.78 10,192,682.13 -1.3
• including taxes of EUR 1,942,171.92 (prior year: EUR 2,024,030.16)
Liabilities 15,712,477,664.45 15,675,784,721.61 0.2

Deferred income 4,199,813.00 6,299,813.00 -33.3
Total shareholders’ equity and liabilities 23,207,708,583.50 23,055,190,683.03 0.7
Income statement
2. Income statement
Income statement of Schaeffler AG No. 090
Change
in € 2018 2017 in %
1. Revenue 35,484,285.44 100,154,924.52 -64.6
2. Cost of sales -31,518,488.18 -94,364,369.55 -66.6
3. Gross profit 3,965,797.26 5,790,554.97 -31.5
4. General and administrative expenses -115,673,190.26 -59,708,859.57 93.7
5. Other operating income 352,697,763.01 382,425,812.25 -7.8
6. Other operating expenses -297,753,843.81 -280,188,940.92 6.3
7. Income from equity investments 800,000,000.00 675,000,000.00 18.5
• affiliated companies EUR 800,000,000.00 (prior year: EUR 675,000,000.00)
8. Income from other securities and long-term loans receivable 1,283,203.75 747,440.62 71.7
• affiliated companies EUR 1,283,203.75 (prior year: EUR 747,440.62)
9. Other interest and similar income 34,398,691.14 36,506,450.56 -5.8

10. Interest and similar expenses -177,560,106.62 -209,003,378.87 -15.0

11. Income taxes -101,855,730.30 -98,197,012.15 3.7

12. Earnings after income taxes 499,502,584.17 453,372,066.89 10.2
13. Other taxes -43,634.93 -48,070.58 -9.2
14. Net income for the year 499,458,949.24 453,323,996.31 10.2
15. Retained earnings brought forward 0.00 0.00 0.0
16. Retained earnings 499,458,949.24 453,323,996.31 10.2
Notes to the financial statements I General information on the financial statements
3. Notes to the financial statements
3.1 General information on the financial 3.2 Accounting policies

statements
Details of the company’s accounting policies are as follows:
Schaeffler AG, Herzogenaurach, is a corporation domiciled in
Germany with its registered office located at Industriestr. 1-3, Intangible assets consist of purchased rights and licenses that
91074 Herzogenaurach. It is registered in the Commercial Reg- are recognized at acquisition cost or, where there is a lasting
ister B of the Fürth Local Court under No. HRB 14738. impairment, at their lower fair value. Intangible assets with a
definite useful life are amortized over their expected useful life.
These financial statements were prepared in accordance with
sections 242 et seq. and 264 et seq. of the German Commercial Property, plant and equipment is recognized at acquisition or
Code (“Handelsgesetzbuch” – HGB) and the supplementary pro- manufacturing cost and depreciated over its expected useful life
visions of the German Stock Companies Act (“Aktiengesetz”). using either the straight-line or the declining balance method.
The company is subject to the requirements for large corpora- Depreciation is determined based on normal useful lives. Write-
tions as defined in section 267 (3) HGB in connection with sec- downs to the lower fair value are recognized when an impairment
tion 264 d HGB. has occurred that is not reflected in regular depreciation and is
expected to be permanent.
Comparability with prior year financial statements:
Write-downs are reversed when the cause of the write-down no
Being the ultimate parent company of the Schaeffler Group, longer exists.
Schaeffler AG exclusively performs the management functions of
a corporate center. For this reason, employees fulfilling other Long-term financial assets are recognized at acquisition cost or,
functions were transferred to other subsidiaries during the year. where there is a permanent impairment, at their lower fair value.
of revenue from services for subsidiaries since the second Write-downs to the lower fair value are recognized when the
quarter of 2018. In light of this, the system for recharging ser- impairment is expected to be permanent. Write-downs are
vices within the group has been revised as well. Therefore, the reversed to the extent the cause for the write-down no longer
structure of revenue, cost of sales, and administrative expenses exists.
for 2018 has changed from that of the prior year. This structure
will stabilize further in 2019, the first full year of reporting under
the new organizational structure.
Notes to the financial statements I Accounting policies
Receivables are recognized at face value. 3.25%, pension increases of 1.0 to 1.75%, and an employee
turnover rate of 2.1%. The forecasted interest rate used to dis-
Other assets are recognized at face or fair value, settlement count pension obligations as at December 31, 2018, amounts to
amount, or present value. 3.21%, which is the forecast of the average market interest rate
for an assumed term of 15 years determined and published by
Derivative financial instruments in the form of cross-currency the German Central Bank (“Deutsche Bundesbank”). Provisions
swaps and forward exchange contracts are measured separately. for pension obligations with a remaining term of more than one
Their book value is capped at acquisition cost. Negative market year are discounted using the ten-year average discount rate.
values are reflected in provisions for pending losses. Fair value
is measured using discounted cash flow valuation models and Tax provisions reflect all identifiable risks and uncertain liabili-
the exchange rates in effect at the end of the reporting period, as ties and are recognized at the amount payable, estimated based
well as risk-adjusted interest and discount rates appropriate to on reasonable business judgment. Provisions due in more than
the instruments’ terms. Embedded derivatives are measured one year are discounted at the average of the previous seven
using a Hull-White model. The key inputs to this model are years’ market interest rate appropriate to their term to maturity.
interest rates, volatilities, and credit default swap rates. Provisions due in less than one year are not discounted.
Some of the cross-currency swaps entered into to hedge cur- Other provisions reflect all identifiable risks and uncertain liabil-
rency risk related to financing arrangements are accounted for ities. These provisions are recognized at the amount required to
using hedge accounting together with the underlying amounts settle the expected expenditures related to uncertain liabilities
payable to affiliated companies. Similarly, cross-currency swaps as determined using reasonable business judgment. Future
with parties external to the group are accounted for using hedge increases in prices and costs are reflected in the calculation to
accounting, together with intragroup hedging instruments with the extent sufficient objective evidence of their occurrence
identical but opposite features that are used to hedge highly exists. Provisions due in more than one year are discounted at
probable forecasted sales transactions of an affiliated company. the average of the previous seven years’ market interest rate
The company uses the net hedge presentation method of hedge appropriate to their term to maturity using the present value
accounting, which involves fixing the amounts of the separate method. Provisions due in less than one year are not discounted.
components as at the date hedge accounting commences. Sub-
sequent effective changes in their value with respect to the Schaeffler AG’s Performance Share Unit Plan (PSUP) is accounted
hedged risk are not recognized. for as a cash-settled share-based payment plan. The company
recognizes a provision in the amount of the fair value of the pay-
Cash at banks is measured at face value. ment obligation attributable to the period up to the reporting
date. The liability is remeasured at the end of each reporting
Prepaid expenses and deferred charges are recognized at the period from the grant date until settlement. The fair value per
amount that is reasonably attributable to periods subsequent to Performance Share Unit (PSU) is determined using generally
the balance sheet date. accepted financial valuation models. The fair value of PSUs
with a TSR-based performance target is determined using a
Excess of plan assets over post-employment benefit liability is binomial model. The valuation model used takes into account
the net amount of retirement benefit obligations and assets that the terms of the contract under which the PSUs were granted
are protected from access by all other creditors and whose exclu- (including payment floors and caps, target range for the TSR-
sive purpose is settling these liabilities and similar long-term based performance target, and dividends expected to be paid on
obligations. Schaeffler AG common non-voting shares, as well as the vola-
tility of Schaeffler AG common non-voting shares and the bench-
Deferred taxes are recognized on temporary differences between mark index MDAX). The fair value is recognized as personnel
amounts recognized for financial reporting and for tax purposes expense over the relevant vesting period and presented under
for assets, liabilities, prepaid expenses, and deferred charges, administrative expenses.
as well as deferred income. Deferred tax assets have not been
recognized in the balance sheet. Bank debt, trade payables, amounts payable to affiliated com-
panies, and other liabilities are recognized at their settlement
Provisions for pensions and similar obligations are determined amount.
by actuarial calculations using the projected unit credit method
(PUC) based on the “Heubeck-Richttafeln 2018 G” (prior year: Deferred income is recognized at the amount that is reasonably
“Heubeck-Richttafeln 2005 G”) mortality tables. The valuation of attributable to periods subsequent to the balance sheet date.
pension provisions reflects future annual salary increases of
Notes to the financial statements I Notes to the balance sheet
With respect to currency translation, receivables and liabilities 3.3 Notes to the balance sheet
in foreign currency are recognized at the exchange rate appli-
cable at the time of the transaction, and re-translated at the
mean spot exchange rate on the balance sheet date. Gains are Fixed assets
only recognized to the extent they relate to receivables and lia-
bilities due in up to one year. Foreign exchange losses on Long-term loans receivable from affiliated companies classi-
hedging instruments are recognized in appropriate provisions for fied as fixed assets consist of EUR 90,000 thousand due
expected losses. from Schaeffler LuK Savaria Kft. and EUR 82,988 thousand due
from FAG Magyarorszag Ipari Kft.
Cash at banks in foreign currency is translated at the mean spot
exchange rate applicable on the balance sheet date.
Fixed assets of Schaeffler AG (HGB) No. 091

Property, Shares in Long-term
Intangible Furniture and plant and affiliated Other loans financial
in € thousands Licenses assets fixtures equipment companies receivable assets Total
Historical cost
Balance as at January 01, 2018 110 110 770 770 14,108,811 193,003 14,301,814 14,302,694
Additions 74 74 203 203 0 39,985 39,985 40,262
Disposals 0 0 -108 -108 0 -60,000 -60,000 -60,108
Transfers 0 0 0 0 0 0 0 0
Balance as at December 31, 2018 184 184 865 865 14,108,811 172,988 14,281,799 14,282,848
Accumulated amortization,
depreciation, and write-downs
Balance as at January 01, 2018 108 108 400 400 0 0 0 508
Additions 13 13 275 275 0 0 0 288
Disposals 0 0 -97 -97 0 0 0 -97
Transfers 0 0 0 0 0 0 0 0
Balance as at December 31, 2018 121 121 578 578 0 0 0 699
Net book values
as at January 01, 2018 2 2 370 370 14,108,811 193,003 14,301,814 14,302,186
as at December 31, 2018 63 63 287 287 14,108,811 172,988 14,281,799 14,282,149
Receivables and other assets
Receivables and other assets No. 092
12/31/2018 12/31/2017
Due in up to Due in Due in more Due in up to Due in Due in more
in € thousands one year 1 to 5 years than 5 years one year 1 to 5 years than 5 years
Trade receivables 0 0 0 18 0 0
Receivables from affiliated companies 8,559,564 0 0 8,402,231 0 0
• including short-term loans of 7,722,217 0 0 7,513,380 0 0
• including other financial receivables of 12,966 0 0 174,261 0 0
• including trade receivables of 23,526 0 0 37,554 0 0
• including other receivables of 800,855 0 0 677,036 0 0
Receivables from entities to which the company is linked by
equity ownership 1 0 0 0 0 0
Other assets 105,531 63,245 0 89,858 0 63,245
Other receivables from affiliated companies largely consist Excess of plan assets over post-employment
of Schaeffler AG’s claim to the net income of Schaeffler benefit liability
Technologies AG & Co. KG of EUR 800,000 thousand (prior year:
EUR 675,000 thousand), which has not yet been paid. Schaeffler The company holds assets to partially fund its obligations under
Technologies AG & Co. KG paid EUR 675,000 thousand in respect pension commitments and similar long-term obligations. The
of net income for the prior year to Schaeffler AG in 2018. exclusive purpose of these assets is settling pension obligations
Schaeffler AG in turn used these funds entirely to pay off existing and similar long-term obligations, and they are protected from
liabilities due to Schaeffler Technologies AG & Co. KG. access by other creditors. The assets were offset against the
related obligations in accordance with section 246 (2)(2) HGB
Other assets include the positive initial value of cross-currency in 2018 and consist mainly of reimbursement insurance policies
swaps used to hedge currency risk of EUR 63,245 thousand and units of equity, fixed income, and money market funds. The
(prior year: EUR 63,245 thousand). Since these cross-currency fair value shown in the table below for assets that are interests
swaps are subject to hedge accounting under the net hedge pre- in funds was derived from market prices of the funds’ assets as
sentation method, they have not been written down to their lower at the balance sheet date.
fair value. The fair value of this proportional notional amount
of EUR 349,345 thousand (prior year: EUR 305,460 thousand) Net amount of pensions and similar obligations No. 093
is EUR 28,555 thousand (prior year: EUR 13,176 thousand).
in € thousands 12/31/2018 12/31/2017
Due to the imparity principle, the company has not capitalized Settlement amount of pensions and similar
forward exchange contracts with positive market values obligations 26,317 26,854
of EUR 83,448 thousand (prior year: EUR 108,558 thousand) Fair value of plan assets offset 31,788 35,581
used to hedge currency risk from operations. The total notional Net amount of pensions and similar obligations 5,471 8,727
amount of these contracts is EUR 3,528,694 thousand Acquisition cost of plan assets offset 31,794 35,544
(prior year: EUR 3,394,864 thousand).
in € thousands 2018 2017

Interest income on plan assets offset 484 1,552
Interest expense on pensions and similar
obligations 1) -9,220 -6,160
Net interest income (expense) -8,736 -4,608
1) Interest
expense relates to all of the company’s pensions and similar obligations.
Shareholders’ equity Other provisions
Share capital Other provisions No. 094

Schaeffler AG’s share capital of EUR 666 m remains unchanged.
in € thousands 12/31/2018 12/31/2017
Provisions for pending losses on open
It is divided into 666 million no-par-value bearer shares, each
transactions 93,259 74,612
representing an interest in share capital of EUR 1.00. The no-par- Provisions for profit sharing, other bonuses, and
value shares are divided into 500 million common shares and share-based payments 14,897 20,967
166 million common non-voting shares. The common non-voting Miscellaneous other provisions 12,827 32,535
shares carry a preferential right to profits consisting of a pre- Total other provisions 120,983 128,114
ferred dividend of EUR 0.01 per common non-voting share.
The common shares are held by IHO Verwaltungs GmbH. The

common non-voting shares are widely held. Share capital is fully The company has recognized EUR 93,259 thousand
paid up and Schaeffler AG had no authorized or contingent cap- (prior year: EUR 74,612 thousand) in provisions for pending
ital or any resolutions with respect to these types of capital as at losses for negative market values of forward exchange contracts
December 31, 2018. used to hedge currency risk from operations. The total notional
amount of these contracts is EUR 4,246,204 thousand
(prior year: EUR 3,256,024 thousand).
Capital reserves
Capital reserves of EUR 2,359 m as at the reporting date are On July 25, 2018, the relevant authorities completed their
unchanged from prior year. investigation of a compliance case for which Schaeffler AG
has recognized a provision reported in other provisions.
EUR 21,000 thousand of this provision has been reversed to
Retained earnings
profit or loss.
In 2018, a dividend of EUR 361 m was paid to the shareholders
from retained earnings, and the remaining EUR 92 m was added
to other revenue reserves. The company’s net income for 2018
of EUR 499 m was added to retained earnings.
For 2018, the Board of Managing Directors will propose to the

Schaeffler AG annual general meeting a resolution to pay a divi-
dend of EUR 361 m and to add the remaining retained earnings to
revenue reserves.
Liabilities
Liabilities No. 095
12/31/2018 12/31/2017
Due in up to Due in Due in more Due in up to Due in Due in more
in € thousands one year 1 to 5 years than 5 years one year 1 to 5 years than 5 years
Bank debt 160,000 1,184,000 0 2,565 1,090,000 0
Trade payables 6,169 0 0 8,118 0 0
Amounts payable to affiliated companies 12,283,640 1,469,039 599,574 12,496,297 900,000 1,168,613
• including loans of 10,421,323 1,469,039 599,574 7,449,365 900,000 1,168,613
• including other financial debt of 1,754,206 0 0 4,914,269 0 0
• including trade payables of 3,594 0 0 4,807 0 0
• including other liabilities of 104,517 0 0 127,856 0 0
Other liabilities 10,055 0 0 10,192 0 0

• including taxes of 1,942 0 0 2,024 0 0
The increase in financial debt compared to December 31, 2017, is The hedged items are intragroup liabilities denominated in for-
primarily attributable to EUR 160,000 thousand drawn under the eign currency with a book value of EUR 379,075 thousand
Revolving Credit Facility and an additional EUR 94,000 thousand (prior year: EUR 379,075 thousand).
drawn under the capital investment loan.
The hedge covers the entire term to maturity of the hedged items
Bank debt secured by liens or similar rights (primarily long-term (up to 2023).
financial assets) amounts to EUR 1,344,000 thousand
(prior year: EUR 1,090,000 thousand). There is an additional micro-hedge relationship between cross-
currency swaps with a notional amount of EUR 105,852 thousand
Schaeffler Finance B.V., a direct subsidiary of Schaeffler AG, (prior year: EUR 114,017 thousand). The hedging instrument
issued the Schaeffler Group’s bonds. Amounts payable to affili- has a positive fair value of EUR 1,991 thousand (prior year:
ated companies include EUR 2,105,788 thousand (prior year: EUR 5,176 thousand), the hedged item has a n egative fair value
EUR 2,104,357 thousand) payable to Schaeffler Finance B.V., of EUR 2,123 thousand (prior year: EUR 5,333 thousand). The
largely relating to the transfer of the proceeds from the bond hedge covers the entire term to maturity of the hedged item
issuance by Schaeffler Finance B.V. (up to 2024).
As in the prior year, amounts payable to affiliated companies The hedging relationships are considered to be highly effective,
do not include any amounts payable to shareholders as at the since the key drivers of the value of the hedged items and the
reporting date. hedging instruments are identical. Effectiveness is tested pro-
spectively using sensitivity analysis and retrospectively using
the dollar offset method.
Hedge accounting
Based on the net hedge presentation method, a total
Cross-currency swaps with a notional amount totaling of EUR 27,607 thousand (prior year: EUR 40,242 thousand) in
EUR 349,345 thousand (prior year: EUR 305,460 thousand) have changes in the value of hedged items and EUR -34,972 thousand
been designated as hedging instruments in micro-hedges of the (prior year: EUR -52,654 thousand) in changes in the value of
risk of changes in cash flows due to changes in foreign exchange hedging instruments have not been recognized in the balance
rates related to financing arrangements. These hedging instru- sheet.
ments include cross-currency swaps with positive fair values
totaling EUR 28,555 thousand (prior year: EUR 13,176 thousand).
Notes to the financial statements I Notes to the income statement
Deferred taxes Disclosures required for the cost of sales

format
The deferred taxes of the entire income tax group are allocated
to Schaeffler AG, the tax group’s controlling company.
Disclosures required for the cost of sales format No. 097
Deferred tax liabilities significant in amount result from differ-

ences between amounts recognized in accounting and tax bal-
Wages and salaries 78,444 88,701
ance sheets with respect to non-current assets. Deferred tax
Social security, post-employment, and other
assets offset against these deferred tax liabilities also result employee benefit costs 10,358 10,983
from differences between amounts recognized in accounting and • including post-employment benefits of 2,911 2,858
tax balance sheets with respect to non-current financial assets. Personnel expense 88,802 99,684
The company has chosen not to recognize a deferred tax asset
for the total net future tax benefit in accordance with section 274
(1)(2) HGB.
Income and expenses from discounting/
Deferred taxes on differences between amounts recognized in compounding provisions and foreign
accounting and tax balance sheets are measured using a tax rate
exchange gains and losses
of 28.6%.
Other operating income includes foreign exchange gains
of EUR 321,989 thousand (prior year: EUR 374,140 thousand).
3.4 Notes to the income statement Other operating expenses include foreign exchange losses
of EUR 297,753 thousand (prior year: EUR 257,535 thousand).
Analysis of revenue Other interest and similar income includes EUR 674 thousand
(prior year: EUR 5 thousand) in income from discounting
Analysis of revenue No. 096 provisions. Other interest and similar expenses includes
EUR 12,572 thousand (prior year: EUR 11,151 thousand) in
expenses from compounding provisions.
Domestic 32,349 96,438
Foreign 3,135 3,717
Total revenue 35,484 100,155
Expenses and income related to prior years
Expenses and income related to prior years No. 098

As Schaeffler AG is the ultimate parent company of the
Schaeffler Group and provides services as part of managing the in € thousands 2018 2017
group; these services include public relations activities,
Tax expense and benefits related to prior years -11,523 12,977
t reasury, legal consulting, tax consulting, compliance, human
Gains on reversal of provisions 26,094 2,079
resources, internal audit, quality management, and general
Income related to prior years 14,571 15,056
management.
Schaeffler AG exclusively performs the management functions

of a corporate center. For this reason, employees fulfilling other
functions were transferred to other subsidiaries during the year.
of revenue from services for subsidiaries since the second
quarter of 2018. In light of this, the system for recharging ser-
vices within the group has been revised as well. Therefore, the
structure of revenue, cost of sales, and administrative expenses
for 2018 has changed from that of the prior year. This structure
will stabilize further in 2019, the first full year of reporting under
the new organizational structure.
The company has recognized EUR 5,891 thousand in revenue

related to the prior year in 2018 due to a one-month timing differ-
ence.
Notes to the financial statements I Other disclosures
3.5 Other disclosures Governing bodies of the company

Contingent liabilities
The members of the Board of Managing Directors of
The company has the following contingent liabilities, largely Schaeffler AG, Herzogenaurach, are as follows:
arising from bond issuances of Schaeffler Finance B.V.:
Contingent liabilities No. 099 Klaus Rosenfeld

Change
in € thousands 12/31/2018 12/31/2017 in % Responsible for: Quality; Schaeffler Consulting;
From granting security for third-
Communications & Branding; Investor Relations; Legal;
party liabilities 2,035,196 2,022,649 0.6
• including amounts secured by liens of 2,035,196 2,022,649 0.6
Internal Audit; Corporate Development & Strategy;
• i ncluding security granted for liabilities Compliance & Corporate Security; Corporate Real Estate
of affiliated companies of 2,035,196 2,022,649 0.6 Appointed: October 24, 2014
Term of office ends: June 30, 2024
The company had guarantees outstanding of EUR 136,295 thousand Supervisory Board of Continental AG, Hanover; chairman of the
(prior year: EUR 125,149 thousand) at December 31, 2018, advisory board of Schaeffler Consulting GmbH, Herzogenaurach
largely for the benefit of affiliated companies. (since January 18, 2018); member of the advisory board of
Schaeffler Bio-Hybrid GmbH, Herzogenaurach (since July 31, 2018);
Given the earnings of the Schaeffler Group, the company con- member of the board of directors of Schaeffler Holding (China)
siders the risk of claims under its guarantees for liabilities of Co. Ltd., Shanghai, China; member of the board of directors
others to be low. of Schaeffler India Ltd., Vadodara, India; member of the board
of directors of Siemens Gamesa Renewable Energy S.A.,
The company is the general partner of the following companies: Zamudio, Spain
• Schaeffler Technologies AG & Co. KG, Herzogenaurach,
• Schaeffler Immobilien AG & Co. KG, Herzogenaurach. Prof. Dr.-Ing. Peter Gutzmer
Deputy CEO and Chief Technology Officer
Responsible for: Corporate R&D Management; Innovation &

Other financial obligations Central Technology; R&D Processes, Methods & Tools;
Intellectual Property Rights; R&D Bearing; Information
Other financial obligations No. 100 Technology; Strategic IT; Coordination Office Digitalization
Change
in € thousands 2018 2017 in % Term of office ends: December 31, 2019
Off-balance-sheet payment Seats on supervisory and similar boards: member of the
obligations 2,839 2,679 6.0 advisory board of Compact Dynamics GmbH, Starnberg
• i ncluding obligations under multi-year
leases of 2,121 1,961 8.2
(since April 3, 2018); member of the supervisory board of
• i ncluding obligations to affiliated Continental AG, Hanover; chairman of the advisory board of
companies of 718 718 0.0 Schaeffler Bio-Hybrid GmbH, Herzogenaurach
(since July 31, 2018); chairman of the advisory board of
Schaeffler Paravan Technologie GmbH & Co. KG, Herzogenaurach
(since September 21, 2018)
Average number of employees for the year
Average number of employees No. 101

Change
2018 2017 in %
Salaried employees 560 627 -10.7
Temporary staff 24 20 20.0
Total 584 647 -9.7
Dietmar Heinrich Dr. Stefan Spindler

Chief Financial Officer CEO Industrial
Responsible for: Finance Strategy, Processes & Infrastructure; Responsible for: Business Development & Strategy Industrial;
Corporate Accounting; Corporate Controlling; Corporate Global Key Account Management Industrial; Sales & Marketing
Treasury; Corporate Tax and Customs; Corporate Insurance; Industrial; Strategic Business Field Industry 4.0; R&D Industrial;
Shared Services; Divisional Controlling Automotive OEM, AAM, Operations & Supply Chain Management Industrial, Quality
and Industrial divisions Industrial
Appointed: August 1, 2017 Appointed: May 1, 2015
Term of office ends: July 31, 2020 Term of office ends: April 30, 2023
Seats on supervisory and similar boards: member of the Seats on supervisory and similar boards: deputy chairman of the
supervisory board of LuK Savaria Kft., Szombathely, Hungary supervisory board of Schaeffler Austria GmbH, Berndorf-St. Veit,
(until January 8, 2018); member of the supervisory board Austria (until March 20, 2018)
of Schaeffler Austria GmbH, Berndorf-St. Veit, Austria
(until March 21, 2018); member of the board of directors of Matthias Zink
Schaeffler India Ltd., Vadodara, India (until April 17, 2018);
CEO Automotive OEM
member of the advisory board of Schaeffler Bio-Hybrid GmbH,
Herzogenaurach (since July 31, 2018); member of the advisory Responsible for: Business Development & Strategy
board of Schaeffler Consulting GmbH, Herzogenaurach Automotive OEM; Global Key Account Management
(since February 6, 2018) Automotive OEM; Engine Systems, Transmission Systems,
E-Mobility, and Chassis Systems business divisions; R&D
Automotive OEM; Operations & Supply Chain Management
Andreas Schick (since April 1, 2018)
Automotive OEM
Chief Operating Officer
Responsible for: Schaeffler Production System, Strategy & Term of office ends: December 31, 2019
Processes; Digitalization & Operations IT; Advanced Production Seats on supervisory and similar boards: member of the
Technology; Production Technology; Special Machinery; advisory board of Compact Dynamics GmbH, Starnberg
Supply Chain Management & Logistics; Purchasing & Supplier (since April 3, 2018); member of the advisory board of Schaeffler
Management; Quality Operations, SCM & Purchasing Paravan Technologie GmbH & Co. KG, Herzogenaurach
Appointed: April 1, 2018 (since September 21, 2018); member of the Supervisory Board of
Term of office ends: March 31, 2021 Schaeffler Savaria Kft., Szombathely, Hungary; member of the
Seats on supervisory and similar boards: member of the board of directors of Schaeffler (China) Co. Ltd., Shanghai, China
supervisory board of SupplyOn AG, Munich (May 15, 2018 to
December 31, 2018) The following members left the Board of Managing
Directors in 2018
Corinna Schittenhelm
Chief Human Resources Officer
Oliver Jung (until March 31, 2018)
Responsible for: HR Strategy; HR Policies & Standards; Chief Operating Officer
Leadership, Recruiting & Talent Management; Schaeffler
Responsible for: Operations Strategy & Processes; Production
Academy; HR Systems, Processes & Reporting; Sustainability,
Technology; Special Machinery; Tool Management & Prototyping;
Environment, Health & Safety; Human Resources Functions;
Industrial Engineering; Bearing & Components Technologies;
Human Resources Automotive OEM; Human Resources AAM;
Logistics; Purchasing; MOVE
Human Resources Industrial
Term of office ended: March 31, 2018
Supervisory Board of FAG Magyarorszag Ipari Kft., Debrecen,
advisory board of Schaeffler Consulting GmbH, Herzogenaurach
Hungary (until April 11, 2018); member of the Supervisory
(since January 18, 2018)
Board of Heidelberger Druckmaschinen AG, Heidelberg;
chairman of the Supervisory Board of Schaeffler Austria GmbH,
Michael Söding (since January 1, 2018) Berndorf-St. Veit, Austria (until March 31, 2018); member of the
CEO Automotive Aftermarket Supervisory Board of SupplyOn AG, Munich (until May 15, 2018);
member of the Supervisory Board of Leistritz AG, Nuremberg
Responsible for: Business Development & Strategy AAM;
(since July 27, 2018)
Sales & Marketing AAM; Product Management/R&D AAM;
Operations & Supply Chain Management AAM
Prof. Dr. Peter Pleus (until December 31, 2018) Prof. Dr. Hans-Jörg Bullinger
CEO Automotive OEM Senator of Fraunhofer-Gesellschaft zur Förderung angew.
Forschung e.V.
Responsible for: Strategy & Business Development Automotive OEM;
Global Key Account Management Automotive OEM; Appointed: December 1, 2014
Engine Systems and Chassis Systems business divisions Committee memberships: chairman of the technology committee
Appointed: October 24, 2014 (since October 5, 2018)
Term of office ended: December 31, 2018 Seats on supervisory and similar boards: chairman of the
Seats on supervisory and similar boards: member of the Supervisory Board of ARRI AG, Munich; member of the
Supervisory Board of IAV GmbH, Berlin (until December 31, 2018) Supervisory Board of Bauerfeind AG, Zeulenroda-Triebes;
chairman of the Supervisory Board of TÜV SÜD AG, Munich;
Supervisory Board deputy chairman of the Supervisory Board of WILO SE,
Dortmund; member of the board of directors of Kärcher GmbH &
Co. KG, Winnenden
In accordance with section 11 of its articles of incorporation,
the company has a twenty-member supervisory board. The
Supervisory Board consists of the following individuals: Dr. Holger Engelmann
Chairman of the Management Board of Webasto SE
Georg F. W. Schaeffler Appointed: December 1, 2014

Committee memberships: member of the nomination committee
Seats on supervisory and similar boards: chairman of the
Chairman of the Supervisory Board of Schaeffler AG
Supervisory Board of Webasto Thermo & Comfort SE, Gilching
Committee memberships: chairman of the mediation, executive,
Prof. Dr. Bernd Gottschalk
and nomination committees and member of the audit committee,
Owner and Managing Partner of AutoValue GmbH
Seats on supervisory and similar boards: member of the Appointed: December 1, 2014
Supervisory Board of Continental AG, Hanover; chairman of Committee memberships: member of the nomination committee
the advisory board of Atesteo GmbH (April 20, 2018 to Seats on supervisory and similar boards: deputy chairman of the
October 1, 2018); chairman of the advisory board of Atesteo Supervisory Board of JOST-Werke AG, Neu-Isenburg; member of
Management GmbH (since September 27, 2018) the remuneration committee of the Supervisory Board of
Plastic Omnium SA, Levallois-Perret, France; chairman of the
Maria-Elisabeth Schaeffler-Thumann advisory board of Woco Industrietechnik GmbH, Bad Soden-
Salmuenster
Deputy Chairperson of the Supervisory Board of Schaeffler AG
Andrea Grimm*
Member of the Works Council
Committee memberships: member of the mediation, executive,
and nomination committees Appointed: April 8, 2017
Supervisory Board of Continental AG, Hanover Susanne Lau* (since August 8, 2018)
Industrial management assistant Chairperson of the IBR
Jürgen Wechsler* Deputy Chairperson of the GDR Schaeffler AAM
Former Regional Director of IG Metall Bavaria
Appointed: August 8, 2018
Deputy Chairman of the Supervisory Board of Schaeffler AG
Appointed: November 19, 2015 Norbert Lenhard*

Committee memberships: member of the mediation and
Chairman of the Group Works Council Schaeffler AG
executive committees, member of the technology committee
(since October 5, 2018) Appointed: November 19, 2015
Seats on supervisory and similar boards: member of the Committee memberships: member of the mediation and
Supervisory Board of BMW AG, Munich; deputy chairman of the executive committees, member of the technology committee
Supervisory Board of Siemens Healthcare GmbH, Erlangen (since October 5, 2018)

Dr. Siegfried Luther Dr. Otto Wiesheu

Management Consultant Lawyer
Appointed: December 1, 2014 Appointed: December 1, 2014

Committee memberships: chairman of the audit committee (until
June 30, 2018), member of the audit committee (since July 1, 2018) Prof. KR Ing. Siegfried Wolf
Chairman of the Supervisory Board of OJSC Gaz Group
Supervisory Board of Evonik Industries AG, Essen; member of
the board of directors of Sparkasse Gütersloh-Riethberg, Appointed: December 1, 2014
Gütersloh Committee memberships: member of the executive committee,
Dr. Reinold Mittag*
Supervisory Board of Banque Eric Sturdza SA, Geneva,
Trade Union Secretary of IG Metall
Switzerland; member of the Supervisory Board of
Appointed: November 19, 2015 Continental AG, Hanover; member of the Supervisory Board of
Committee memberships: member of the audit committee Miba AG, Mitterbauer Beteiligungs AG, Laakirchen, Austria;
chairman of the board of directors of Russian Machines LLC (until
Barbara Resch* April 30, 2018); chairman of the Supervisory Board of SBERBANK
Europe AG, Vienna, Austria; member of the Supervisory Board of
Wage secretary
UC RUSAL Plc, Nicosia, Cyprus (until June 28, 2018)
Committee memberships: member of the executive committee
Jürgen Worrich*
Chairman of the European Schaeffler Works Council
Dirk Spindler* Member of the Works Council at Herzogenaurach plant
Senior Vice President R&D Processes, Methods and Tools of
Schaeffler AG
Appointed: November 19, 2015 member of the technology committee (since October 5, 2018)
Robin Stalker Prof. Dr.-Ing. Tong Zhang

Chartered Accountant Director of the Academic Committee of Automotive Studies at
Appointed: December 1, 2014 Tongji University in Shanghai, China
Committee memberships: member of the audit committee (until Appointed: December 1, 2014
June 30, 2018), chairman of the audit committee (since July 1, 2018) Committee memberships: member of the technology committee
Seats on supervisory and similar boards: deputy chairman of the (since October 5, 2018)
Supervisory Board of Schmitz Cargobull AG, Horstmar; member
of the audit and risk committee of the Supervisory Board of
Commerzbank AG, Frankfurt (since May 8, 2018) The following member left the Supervisory Board
in 2018
Jürgen Stolz*
Member of the Works Council at the Buehl plant
Stefanie Schmidt* (until June 30, 2018)
Member of the European Schaeffler Works Council
Ergonomics specialist at the Wuppertal location
Term of office ended: June 30, 2018
Salvatore Vicari*
Chairman of the Works Council at the Homburg/Saar plant

Supervisory Board of GEW-Management GmbH, Homburg

Total remuneration of the company’s Information about the excess of plan

governing bodies assets over the post-employment benefit
liability and about amounts not available for
Total remuneration of the Board of Managing Directors in accor-
dance with section 285 (9a) (1-3) HGB amounted to EUR 18 m
distribution
(prior year: EUR 17 m) in 2018.
The difference between the amount recognized under section
The following share-based remuneration was granted to mem- 253 (6) HGB for the provision for pensions and similar obliga-
bers of the Board of Managing Directors in 2018 under the Per- tions based on the relevant average market interest rate for the
formance Share Unit Plan (PSUP) implemented in 2015: 252,760 past ten years and the amount that would have been recognized
Performance Share Units (PSU) subject to a service condition based on the relevant average market interest rate for the past
(fair value per PSU at grant date of EUR 12.48 and EUR 10.63, seven years amounts to EUR 13,104 thousand (prior year:
respectively), 126,383 PSUs subject to an FCF-based perform EUR 10,740 thousand).
ance target (fair value per PSU at grant date of EUR 12.48
and EUR 10.63, respectively), and 126,383 PSUs with a TSR- Under section 268 (8) HGB, EUR 0 thousand (prior year:
based performance target (fair value per PSU at grant date EUR 1,205 thousand) is not available for distribution, as they
of EUR 7.92 and EUR 6.00, respectively). Please refer to the relate to assets recognized at fair value.
remuneration report for a detailed discussion of the PSUP.
Gains are only available for distribution to the extent that
In addition, the company committed to pay two Managing Direc- distributable reserves remaining after such distribution plus
tors advances of EUR 300 thousand each for 2017 and advances any retained earnings brought forward less any losses brought
of EUR 300 thousand and EUR 225 thousand, respectively, forward are at least equal to the amounts not available for
for 2018, and also committed to pay an advance of EUR 300 distribution.
thousand to one of these Managing Directors for 2019; these
advances will be offset against payment of the long-term
bonuses granted in 2017, 2018, and 2019. Declaration of conformity with the German
Corporate Governance Code
Short-term benefits paid to members of Schaeffler AG’s Super
visory Board amounted to EUR 1.5 m (prior year: EUR 1.6 m). Schaeffler AG’s Board of Managing Directors and the Supervisory
Board issued the declaration of conformity with the German
The remuneration system for the Board of Managing Directors Corporate Governance Code pursuant to section 161 AktG in
and the Supervisory Board of Schaeffler AG is outlined in the December 2018 and have made it publicly available on the
remuneration report. The remuneration report also includes Schaeffler Group’s website (www.schaeffler.com/ir).
information on the remuneration of individual members of the
Board of Managing Directors and additional information required
by section 285 (9) HGB. Auditors’ fees
Former members of the Board of Managing Directors of The information on auditors’ fees required by section 285 (17)
Schaeffler AG and its legal predecessors (and their surviving HGB is disclosed in the consolidated financial statements of
dependants) received remuneration of EUR 2 m in 2018 Schaeffler AG, Herzogenaurach.
(prior year: EUR 4 m).
Provisions for pensions and similar obligations for former mem- Group affiliation
bers of the Board of Managing Directors (and their surviving
dependants) of Schaeffler AG and its legal predecessors, before The company prepares consolidated financial statements and,
netting of related plan assets, amounted to EUR 21 m at in addition, is consolidated in the consolidated financial state-
December 31, 2018 (prior year: EUR 13 m). ments of INA-Holding Schaeffler GmbH & Co. KG, Herzogenau-
rach. Both of these are filed with the operator of the Electronic
Federal Gazette (Bundesanzeiger Verlag GmbH, Cologne) and
published in the Electronic Federal Gazette.
Events after the reporting period

No material events expected to have a significant impact on the
net assets, financial position, or results of operations of
Schaeffler AG occurred after December 31, 2018.
List of shareholdings
List of shareholdings of Schaeffler AG as at 12/31/2018 No. 102
Ownership Equity in Net income in

Entity Location Country code interest in % € thousands € thousands
A. Affiliated companies
I. Germany
CBF Europe GmbH Wuppertal DE 100.00 -3,865 0
Compact Dynamics GmbH Starnberg DE 100.00 4,624 1,030
CVT Beteiligungsverwaltungs GmbH Buehl DE 100.00 49 2
CVT Verwaltungs GmbH & Co. Patentverwertungs KG Buehl DE 100.00 1,636 -14
FAG Aerospace GmbH Schweinf urt DE 100.00 47 2
FAG Aerospace GmbH & Co. KG Schweinf urt DE 100.00 80,774 9,960
FAG Industrial Services GmbH 2) Herzogenr ath DE 100.00 816 0
INA - Drives & Mechatronics AG & Co. KG Suhl DE 100.00 4,388 669
INA Automotive GmbH 2) Herzogenaurach DE 100.00 18 0
Industriewerk Schaeffler INA-Ingenieurdienst GmbH 2) Herzogenaurach DE 100.00 558,435 0
LuK GmbH & Co. KG Buehl DE 100.00 1,142,246 295,670
LuK Management GmbH Buehl DE 100.00 95,097 0
LuK Truckparts GmbH & Co. KG Kaltennordheim DE 100.00 37,495 762
LuK Unna GmbH & Co. KG Unna DE 100.00 19,482 265
PD Qualifizierung und Beschäftigung GmbH 2) Schweinf urt DE 100.00 122 0
Schaeffler AS Auslandsholding GmbH 2) Buehl DE 100.00 20,369 0
Schaeffler Automotive Aftermarket GmbH & Co. KG Langen DE 100.00 644,849 195,774
Schaeffler Beteiligungsgesellschaft mbH Herzogenaurach DE 100.00 418 -7
Schaeffler Beteiligungsverwaltungs GmbH 2) Herzogenaurach DE 100.00 40,841 0
Schaeffler Bio-Hybrid GmbH Herzogenaurach DE 100.00 11,025 -1,455
Schaeffler Bühl Auslandsholding GmbH 2) Buehl DE 100.00 59,029 0
Schaeffler Bühl Beteiligungs GmbH 2) Buehl DE 100.00 56,928 0
Schaeffler Bühl Holding GmbH 2) Buehl DE 100.00 34,342 0
Schaeffler Bühl Verwaltungs GmbH 2) Buehl DE 100.00 1,809,970 0
Schaeffler Consulting GmbH 2) Herzogenaurach DE 100.00 2,025 0
Schaeffler Digital Solutions GmbH Chemnitz DE 100.00 622 371
Schaeffler Engineering GmbH 2) Werdohl DE 100.00 5,348 0
Schaeffler Europa Logistik GmbH 2) Herzogenaurach DE 100.00 25 0
Schaeffler Friction Products GmbH 2) Morbach DE 100.00 5,131 0
Schaeffler Friction Products Hamm GmbH Hamm/Sieg DE 100.00 9,527 637
Schaeffler Friction Verwaltungs GmbH Buehl DE 100.00 63,898 9,246
Schaeffler Grundstückverwaltungs GmbH Buehl DE 100.00 247 -9
Schaeffler IAB Beteiligungs GmbH 2) Herzogenaurach DE 100.00 4,567,977 0
Schaeffler IAB Verwaltungs GmbH 2) Herzogenaurach DE 100.00 1,322,860 0
Schaeffler IDAM Beteiligungs GmbH Herzogenaurach DE 100.00 26 -1
Schaeffler Immobilien AG & Co. KG Herzogenaurach DE 100.00 136,504 11,619
Schaeffler Invest GmbH 2) Herzogenaurach DE 100.00 100 0
Schaeffler KWK Verwaltungs GmbH Langen DE 100.00 30 -1
Schaeffler Paravan Management GmbH Herzogenaurach DE 100.00 25 1
Schaeffler Raytech Verwaltungs GmbH 2) Morbach DE 100.00 15,781 0
Schaeffler Schweinfurt Beteiligungs GmbH 2) Herzogenaurach DE 100.00 726,565 0
Schaeffler Technologies AG & Co. KG Herzogenaurach DE 100.00 13,580,785 273,909
Schaeffler Versicherungs-Vermittlungs GmbH 2) Herzogenaurach DE 100.00 8,282 0
Schaeffler Verwaltungsholding Drei GmbH 2) Herzogenaurach DE 100.00 1,893,562 0
Schaeffler Verwaltungsholding Eins GmbH 2) Herzogenaurach DE 100.00 5,910,725 0
Schaeffler Verwaltungsholding Sechs GmbH 2) Herzogenaurach DE 100.00 1,248,248 0
Schaeffler Verwaltungsholding Vier GmbH Herzogenaurach DE 100.00 23 0

Schaeffler Verwaltungsholding Zwei GmbH 2) Herzogenaurach DE 100.00 1,748,118 0
Unterstützungskasse der FAG Kugelfischer e.V. Schweinf urt DE 100.00 6,113 -1,403
WPB Water Pump Bearing Beteiligungsgesellschaft mbH Herzogenaurach DE 100.00 67 2
WPB Water Pump Bearing GmbH & Co. KG Herzogenaurach DE 100.00 91,067 26,130
II. Foreign
Schaeffler Middle East FZE Jebel Ali AE 100.00 16,275 1,135
Schaeffler Argentina S.R.L. Buenos Aires AR 100.00 733 -176
Schaeffler Austria GmbH Berndorf-St. Veit AT 100.00 73,858 8,330
Schaeffler Australia Pty Ltd. Frenchs Forest AU 100.00 11,888 437
Schaeffler Belgium SPRL Braine L'Alleud BE 100.00 46,116 379
Schaeffler Bulgaria OOD Sofia BG 100.00 2,683 192
LuK do Brasil Embreagens Ltda. Sorocaba BR 100.00 335 -22
Schaeffler Brasil Ltda. Sorocaba BR 100.00 153,210 26,214
Schaeffler Belrus OOO Minsk BY 100.00 476 187
Schaeffler Aerospace Canada Inc. Stratford CA 100.00 101,602 14,828
Schaeffler Canada Inc. Oakville CA 100.00 59,129 8,376
Schaeffler Schweiz GmbH Romanshorn CH 100.00 23,747 2,375
Schaeffler Chile Rodamientos Ltda. Santiago CL 100.00 1,796 -102
Schaeffler (China) Co., Ltd. Taicang CN 100.00 713,332 137,246
Schaeffler (Nanjing) Co., Ltd. Nanjing City CN 100.00 119,026 16,501
Schaeffler (Ningxia) Co., Ltd. Yinchuan CN 100.00 51,099 1,321
Schaeffler (Xiangtan) Co., Ltd. Xiangtan CN 100.00 7,760 -3,589
Schaeffler Aerospace Bearings (Taicang) Co., Ltd. Taicang CN 100.00 603 -32
Schaeffler Friction Products (Suzhou) Co., Ltd. Suzhou CN 100.00 86,759 5,259
Schaeffler Holding (China) Co., Ltd. Shanghai CN 100.00 607,458 73,348
Schaeffler Trading (Shanghai) Co., Ltd. Shanghai CN 100.00 255,996 73,635
Schaeffler Colombia Ltda. Bogota CO 100.00 402 -16
Schaeffler CZ s.r.o. Prague CZ 100.00 10,422 1,289
Schaeffler Production CZ s.r.o. Lanskroun CZ 100.00 37,315 10,207
Schaeffler Danmark ApS Aarhus DK 100.00 9,061 319
Schaeffler Iberia, S.L.U. Elgoibar ES 100.00 93,523 4,914
Schaeffler Finland Oy Espoo FI 100.00 10,104 289
Schaeffler Chain Drive Systems SAS Calais FR 100.00 7,198 -1,810
Schaeffler France SAS Haguenau FR 100.00 105,061 11,407
LuK (UK) Limited Sheffield GB 100.00 0 0
LuK Leamington Limited Sheffield GB 100.00 0 39
Schaeffler (UK) Limited Sutton Coldfield GB 100.00 7,367 -2,088
Schaeffler Automotive Aftermarket (UK) Limited Sheffield GB 100.00 1 0
Stocklook Limited Swansea GB 100.00 1 4
The Barden Corporation (UK) Ltd. Plymouth GB 100.00 19,733 434
Schaeffler Greece Automotive and Industrial Products and Services M.E.P.E. Athens GR 100.00 324 244
Schaeffler Hong Kong Company Limited Hong Kong HK 100.00 33,642 8,248
Schaeffler Hrvatska d.o.o. Zagreb HR 100.00 675 295
FAG Magyarorszag Ipari Kft. Debrecen HU 100.00 29,488 1,394
Schaeffler Magyarorszag Ipari Kft. Budapest HU 100.00 4,786 797
Schaeffler Savaria Kft. Szombathely HU 100.00 118,672 47,005
Schaeffler Bearings Indonesia, PT Jakarta ID 100.00 2,943 561
Schaeffler Israel Ltd. Yokneam Illit IL 100.00 336 65
Schaeffler India Ltd. Mumbai IN 74.13 338,897 31,033
INA Invest S.r.L. Momo IT 100.00 35,945 34,135
Schaeffler Italia S.r.l. Momo IT 100.00 96,595 8,368
Schaeffler Railway Products G.e.i.e. Milan IT 75.00 0 0

Schaeffler Water Pump Bearing Italia S.r.l. Momo IT 100.00 5,202 2,609
Schaeffler Japan Co., Ltd. Yokohama JP 100.00 50,429 7,070
Schaeffler Ansan Corporation Ansan-shi KR 100.00 52,429 11,396
Schaeffler Korea Corporation Changwon-si KR 100.00 371,394 42,382
SIA “Schaeffler Baltic” Riga LV 100.00 638 189
LuK Puebla, S. de R.L. de C.V. Puebla MX 100.00 87,105 18,063
Rodamientos FAG S.A. de C.V. Puebla MX 100.00 678 -77
Schaeffler Automotive Aftermarket Mexico, S. de R.L. de C.V. Cuautitlan Izcalli MX 100.00 30,180 5,028
Schaeffler Mexico Holding, S. de R.L. de C.V. Puebla MX 100.00 112,577 -10
Schaeffler Mexico Servicios, S. de R.L. de C.V. Guanajuato MX 100.00 5,279 998
Schaeffler Mexico, S. de R.L. de C.V. Guanajuato MX 100.00 38,067 -29,091
Schaeffler Bearings (Malaysia) Sdn. Bhd. Kuala Lumpur MY 100.00 7,968 221
Radine B.V. Barneveld NL 100.00 1,296 430
Schaeffler Finance B.V. Barneveld NL 100.00 15,503 -40,871
Schaeffler Nederland B.V. Barneveld NL 100.00 9,193 1,296
Schaeffler Nederland Holding B.V. Barneveld NL 100.00 12,225 2,744
LuK Norge AS Kongsberg NO 100.00 23,988 9,382
Schaeffler Norge AS Sandnes NO 100.00 4,871 71
Schaeffler Peru S.A.C. Lima PE 100.00 372 31
Schaeffler Philippines Inc. Makati City PH 100.00 1,999 -436
Schaeffler Global Services Europe Sp. z o.o. Wroclaw PL 100.00 20 -26
Schaeffler Polska Sp. z.o.o. Warsaw PL 100.00 18,860 9,494
Schaeffler Portugal, Unipessoal, Lda. Caldas da Rainha PT 100.00 25,763 1,480
Schaeffler Romania S.R.L. Brasov RO 100.00 193,474 11,377
Schaeffler SR d.o.o. Belgrade RS 100.00 193 163
Schaeffler Manufacturing Rus ooo Ulyanovsk RU 100.00 7,120 -2,137
Schaeffler Russland GmbH Moscow RU 100.00 12,153 3,789
Schaeffler Sverige AB Arlandastad SE 100.00 10,295 1,202
FAG Aerospace (Singapore) Pte. Ltd. Singapore SG 100.00 -2,802 -769
Schaeffler (Singapore) Pte. Ltd. Singapore SG 100.00 36,481 5,325
Schaeffler Slovenija d.o.o. Maribor SI 100.00 616 113
Schaeffler Kysuce, spol. s.r.o. Kysucke Nove Mesto SK 100.00 183,751 13,948
Schaeffler Skalica spol. s.r.o. Skalica SK 100.00 116,419 10,566
Schaeffler Slovensko spol s.r.o. Kysucke Nove Mesto SK 100.00 2,924 431
Schaeffler (Thailand) Co., Ltd. Bangkok TH 100.00 1,509 0
Schaeffler Holding (Thailand) Co., Ltd. Bangkok TH 100.00 2,852 -5
Schaeffler Manufacturing (Thailand) Co., Ltd. Rayong TH 100.00 11,664 129
Schaeffler Turkey Endüstri ve Otomotiv Ticaret Limited Sirketi Istanbul TR 100.00 3,419 1,515
Schaeffler Taiwan Co., Ltd. Taipei TW 100.00 2,901 386
Schaeffler Ukraine GmbH Kiev UA 100.00 1,427 404
FAG Bearings LLC Danbury US 100.00 4,661 5,241
FAG Interamericana A.G. Miami US 100.00 26,592 1,769
LMC Bridgeport, Inc. Danbury US 100.00 11,736 701
LuK Clutch Systems, LLC Wooster US 100.00 126,957 2,688
LuK-Aftermarket Services, LLC Valley City US 100.00 4,315 0
Schaeffler Aerospace USA Corporation Danbury US 100.00 174,766 12,281
Schaeffler Group USA, Inc. Fort Mill US 100.00 657,656 14,399
Schaeffler Holding LLC Danbury US 100.00 0 0
Schaeffler Transmission Systems, LLC Wooster US 100.00 317,432 56,920
Schaeffler Transmission, LLC Wooster US 100.00 127,486 2,794
Schaeffler Venezuela, C.A. Caracas VE 100.00 3 11
Schaeffler Vietnam Co., Ltd. Bien Hoa City VN 100.00 20,562 -6,918
INA Bearing (Pty) Ltd. Port Elizabeth ZA 100.00 85,435 4,768

Schaeffler South Africa (Pty.) Ltd. Johannesburg ZA 100.00 37,580 6,505
B. Investments
I. Germany
Contitech-INA Beteiligungsg esellschaft mbH Hanover DE 50.00 33 -5
Contitech-INA GmbH & Co. KG Hanover DE 50.00 211 -2
Schaeffler Paravan Technologie GmbH & Co. KG 3) Herzogenaurach DE 90.00 0 0
II. Foreign
Eurings Zrt. 1) Debrecen HU 37.00 5,023 285
Colinx, LLC 1) Greenville US 20.00 3,977 -118
1) Values from 2017.
2) There is a profit and loss transfer agreement.
3) Newly established. Financial statements not yet prepared.
Preparation of financial statements

The Board of Managing Directors of Schaeffler AG prepared the
financial statements on February 19, 2019, and released them
for submission to the Supervisory Board of Schaeffler AG. The
Supervisory Board of Schaeffler AG is responsible for examining
and approving the financial statements.
Herzogenaurach, February 19, 2019
Schaeffler Aktiengesellschaft
The Board of Managing Directors
Klaus Rosenfeld Prof. Dr.-Ing. Peter Gutzmer

Dietmar Heinrich Andreas Schick
Corinna Schittenhelm Michael Söding
Dr. Stefan Spindler Matthias Zink

138 Independent auditors’ report
Independent Auditors’ Report
To Schaeffler AG, Herzogenaurach • the accompanying management report as a whole provides an

appropriate view of the Company’s position. In all material
respects, this management report is consistent with the
Report on the Audit of the Annual Financial annual financial statements, complies with German legal
Statements and of the Management Report requirements and appropriately presents the opportunities
and risks of future development. Our opinion on the manage-
ment report does not cover the content of the corporate gover-
Opinions nance declaration mentioned above.
We have audited the annual financial statements of Pursuant to Section 322 (3) sentence 1 HGB [Handelsgesetz-
Schaeffler AG, which comprise the balance sheet as at December buch: German Commercial Code], we declare that our audit has
31, 2018, and the statement of profit and loss for the financial not led to any reservations relating to the legal compliance of the
year from January 1, 2018 to December 31, 2018, and notes to annual financial statements and of the management report.
the financial statements, including the recognition and measure-
ment policies presented therein. In addition, we have audited
Basis for the Opinions
the management report of Schaeffler AG for the financial year
from January 1, 2018 to December 31, 2018. In accordance with We conducted our audit of the annual financial statements and
the German legal requirements, we have not audited the content of the management report in accordance with Section 317 HGB
of the corporate governance declaration which is included in the and the EU Audit Regulation No. 537/2014 (referred to subse-
“Corporate governance” section of the management report. quently as “EU Audit Regulation”) and in compliance with
German Generally Accepted Standards for Financial Statement
In our opinion, on the basis of the knowledge obtained in the Audits promulgated by the Institut der Wirtschaftsprüfer [Insti-
audit, tute of Public Auditors in Germany] (IDW). Our responsibilities
under those requirements and principles are further described in
• the accompanying annual financial statements comply, in all
the “Auditors’ Responsibilities for the Audit of the Annual Finan-
material respects, with the requirements of German commer-
cial Statements and of the Management Report” section of our
cial law applicable to business corporations and give a true
auditors’ report. We are independent of the Company in accor-
and fair view of the assets, liabilities and financial position of
dance with the requirements of European law and German com-
the Company as at December 31, 2018, and of its financial per-
mercial and professional law, and we have fulfilled our other
formance for the financial year from January 1, 2018, to
German professional responsibilities in accordance with these
December 31, 2018, in compliance with German Legally
requirements. In addition, in accordance with Article 10 (2) point
Required Accounting Principles, and
(f ) of the EU Audit Regulation, we declare that we have not pro-
vided non-audit services prohibited under Article 5 (1) of the EU
Audit Regulation. We believe that the evidence we have obtained
is sufficient and appropriate to provide a basis for our opinions
on the annual financial statements and on the management
report.
Schaeffler AG I Financial Statements 2018 Independent auditors’ report 139
Key Audit Matters in the Audit of the Annual Financial Our Audit Approach We conducted our audit using a risk-based
Statements approach. We assessed whether there are any indications of a
need for impairment of investments in affiliates based on evi-
Key audit matters are those matters that, in our professional dence obtained throughout our audit. Our audit procedures
judgment, were of most significance in our audit of the annual included evaluating the forecast of future revenue and earnings
financial statements for the financial year from January 1, 2018, growth for each component. We discussed the individual compo-
to December 31, 2018. These matters were addressed in the con- nents’ forecasts with management. In addition, we assessed
text of our audit of the annual financial statements as a whole, whether Schaeffler Group’s expectations for market growth were
and in forming our opinion thereon, we do not provide a separate reasonable as compared to peer-group industry metrics and
opinion on these matters. other publicly available information, as well as whether the
Company’s budgeted amounts, underlying assumptions, and
company-specific growth rates were reasonable. We assessed
Recoverability of Financial Assets
the appropriateness of the assumptions used in determining the
For information on the accounting and valuation methods used, discount rate, including the weighted average cost of capital, as
please refer to Note 2 to the Annual Financial Statements. well as whether the methodology used to determine them was
appropriate. We consulted with KPMG Deal Advisory and Valua-
The Financial Statement Risk As of December 31, 2018, tion specialists in order to assess the appropriateness of the
Schaeffler AG’s financial statements include investments in affil- Company’s valuation method, the discount rate, and the Compa-
iated companies in the amount of EUR 14.109 m. The Company’s ny’s budget.
financial assets represent 61% of the total amount of assets, and
therefore have a significant impact on the Company’s financial Our Observations The assumptions and estimates used by the
position. Company are appropriate.
Financial assets are stated at the lower of acquisition cost or, in

Other Information
the case of expected permanent impairment, the fair value. The
Company determines the fair value of shares in affiliated compa- Management is responsible for the other information. The other
nies using a valuation model based on a discounted cash flow information comprises:
method.
• the corporate governance declaration, and
The cash flows used in the discounted cash flow method are • the remaining parts of the annual report, with the exception of
based on individual forecasts for the three to five years following the audited annual financial statements and management
the balance sheet date, which are adjusted for company-specific report and our auditors’ report.
growth rates. The respective discount rates are derived from the Our opinions on the annual financial statements and on the man-
rate of return for an alternative investment of similar risk. If the agement report do not cover the other information, and conse-
fair value is lower than the carrying value, qualitative and quanti- quently we do not express an opinion or any other form of assur-
tative criteria are used to determine whether the impairment is ance conclusion thereon.
likely to be permanent.
In connection with our audit, our responsibility is to read the
The impairment test, including the calculation of the fair value other information and, in so doing, to consider whether the other
using the discounted cash flow method, is complex and depends information
to a large extent on the Company’s estimates and judgements
• is materially inconsistent with the annual financial statements,
with regard to the assumptions used. These assumptions and
with the management report, or our knowledge obtained in the
estimates include, but are not limited to, the estimation of future
audit, or
cash flows and the company-specific growth rates, the determi-
nation of the discount rates and the assessment of the perma- • otherwise appears to be materially misstated.
nence of the impairment.
Responsibilities of Management and the Supervisory Auditors’ Responsibilities for the Audit of the Annual
Board for the Annual Financial Statements and the Financial Statements and of the Management Report
Management Report
Our objectives are to obtain reasonable assurance about
Management is responsible for the preparation of the annual whether the annual financial statements as a whole are free from
financial statements that comply, in all material respects, with material misstatement, whether due to fraud or error, and
the requirements of German commercial law applicable to busi- whether the management report as a whole provides an appro-
ness corporations, and that the annual financial statements give priate view of the Company’s position and, in all material
a true and fair view of the assets, liabilities, financial position, respects, is consistent with the annual financial statements and
and financial performance of the Company in compliance with the knowledge obtained in the audit, complies with the German
German Legally Required Accounting Principles. In addition, legal requirements, and appropriately presents the opportuni-
management is responsible for such internal controls as they, in ties and risks of future development, as well as to issue an audi-
accordance with German Legally Required Accounting Principles, tors’ report that includes our opinions on the annual financial
have determined necessary to enable the preparation of annual statements and on the management report.
financial statements that are free from material misstatement,
whether due to fraud or error. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Section
In preparing the annual financial statements, management is 317 HGB and the EU Audit Regulation and in compliance with
responsible for assessing the Company’s ability to continue as a German Generally Accepted Standards for Financial Statement
going concern. They also have the responsibility for disclosing, Audits promulgated by the Institut der Wirtschaftsprüfer (IDW)
as applicable, matters related to going concern. In addition, they will always detect a material misstatement. Misstatements can
are responsible for financial reporting based on the going con- arise from fraud or error and are considered material if, individu-
cern basis of accounting, provided no actual or legal circum- ally or in the aggregate, they could reasonably be expected to
stances conflict therewith. influence the economic decisions of users taken on the basis of
these annual financial statements and this management report.
Furthermore, management is responsible for the preparation of
the management report that as a whole provides an appropriate We exercise professional judgment and maintain professional
view of the Company’s position and is, in all material respects, skepticism throughout the audit. We also:
consistent with the annual financial statements, complies with
• Identify and assess the risks of material misstatement of the
German legal requirements, and appropriately presents the
annual financial statements and of the management report,
opportunities and risks of future development. In addition, man-
whether due to fraud or error, design and perform audit proce-
agement is responsible for such arrangements and measures
dures responsive to those risks, and obtain audit evidence
(systems) as they have considered necessary to enable the
that is sufficient and appropriate to provide a basis for our
preparation of a management report that is in accordance with
opinions. The risk of not detecting a material misstatement
the applicable German legal requirements, and to be able to pro-
resulting from fraud is higher than for one resulting from error,
vide sufficient appropriate evidence for the assertions in the
as fraud may involve collusion, forgery, intentional omissions,
management report.
misrepresentations, or the override of internal controls.
The Supervisory Board is responsible for overseeing the Compa- • Obtain an understanding of internal control relevant to the
ny’s financial reporting process for the preparation of the annual audit of the annual financial statements and of arrangements
financial statements and of the management report. and measures (systems) relevant to the audit of the manage-
ment report in order to design audit procedures that are appro-
priate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of these systems of
the Company.
Schaeffler AG I Financial Statements 2018 Independent auditors’ report 141
• Evaluate the appropriateness of accounting policies used by We communicate with those charged with governance regarding,
management and the reasonableness of estimates made by among other matters, the planned scope and timing of the audit
management and related disclosures. and significant audit findings, including any deficiencies in
• Conclude on the appropriateness of the management’s use of internal control that we identify during our audit.
the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists We also provide those charged with governance with a statement
related to events or conditions that may cast significant doubt that we have complied with the relevant independence require-
on the Company’s ability to continue as a going concern. If we ments, and communicate with them all relationships and other
conclude that a material uncertainty exists, we are required to matters that may reasonably be thought to bear on our indepen-
draw attention in the auditors’ report to the related disclosures dence, and where applicable, the related safeguards.
in the annual financial statements and in the management
report or, if such disclosures are inadequate, to modify our From the matters communicated with those charged with gover-
respective opinions. Our conclusions are based on the audit nance, we determine those matters that were of most signifi-
evidence obtained up to the date of our auditors’ report. How- cance in the audit of the annual financial statements of the cur-
ever, future events or conditions may cause the Company to rent period and are therefore the key audit matters. We describe
cease to be able to continue as a going concern. these matters in our auditors’ report unless law or regulation
precludes public disclosure about the matter.
• Evaluate the overall presentation, structure, and content of the
annual financial statements, including the disclosures, and
whether the annual financial statements present the under-
lying transactions and events in a manner that the annual
financial statements give a true and fair view of the assets, lia-
bilities, financial position, and financial performance of the
Company in compliance with German Legally Required
Accounting Principles.
• Evaluate the consistency of the management report with the
annual financial statements, its conformity with law, and the
view of the Company’s position it provides.
• Perform audit procedures on the prospective information pre-
sented by management in the management report. On the
basis of sufficient appropriate audit evidence we evaluate, in
particular, the significant assumptions used by management
as a basis for the prospective information, and evaluate the
proper derivation of the prospective information from these
assumptions. We do not express a separate opinion on the
prospective information and on the assumptions used as a
basis. There is a substantial unavoidable risk that future
events will differ materially from the prospective information.
Other Legal and Regulatory Requirements German Public Auditor Responsible for the
Engagement
Further Information pursuant to Article 10 of the EU
The German Public Auditor responsible for the engagement is
Audit Regulation
Angelika Alt-Scherer.
We were elected as auditor by the annual general meeting on
April 20, 2018. We were engaged by the Supervisory Board on
July 4, 2018. We have been the auditors of Schaeffler AG without
interruption since the financial year 2015. Munich, February 20, 2019
We declare that the opinions expressed in this auditors’ report

are consistent with the additional report to the audit committee
pursuant to Article 11 of the EU Audit Regulation (long-form audit KPMG AG
report). Wirtschaftsprüfungsgesellschaft
[Original German version signed by:]
In addition to the financial statement audit, we have provided to
the Company or its subsidiaries the following services that are
not disclosed in the annual financial statements or in the man-
agement report: gez. Alt-Scherer gez. Koeplin
Wirtschaftsprüferin Wirtschaftsprüfer
In addition to the annual financial statements, we have audited [German Public Auditor] [German Public Auditor]
the consolidated financial statements of Schaeffler AG and con-
ducted various audits of the annual financial statements of sub-
sidiaries. We performed a review of interim financial statements,
as well as audited parts of the internal control system (ICS). In
addition, we audited the combined separate non-financial con-
solidated information of Schaeffler AG as well as performed stat-
utory and contractual audits, such as audits in accordance with
the EEG, EMIR audits in accordance with section § 20 WpHG a.F.
(§ 32 Abs. 1 WpHG) and confirmations of compliance with con-
tractual conditions. We provided a coaching in connection with
the non-financial statement. We also provided tax advice to cer-
tain employees of Schaeffler AG in connection with their reloca-
tion to foreign subsidiaries of Schaeffler AG.
Schaeffler AG I Financial Statements 2018 Responsibilit y statement by the company’s legal representatives 143
Responsibility statement by the

company’s legal representatives
To the best of our knowledge, and in accordance with the appli- report includes a fair review of the development and perform
cable reporting principles, the financial statements provide a ance of the business and the position of the company, together
true and fair view of the assets, liabilities, financial position, and with a description of the principal opportunities and risks asso-
profit or loss of the company, and the combined management ciated with the expected development of the company.
Herzogenaurach, February 19, 2019
Schaeffler Aktiengesellschaft
The Board of Managing Directors
Klaus Rosenfeld Prof. Dr.-Ing. Peter Gutzmer

Dietmar Heinrich Andreas Schick
Corinna Schittenhelm Michael Söding
Dr. Stefan Spindler Matthias Zink

144 Additional information
Contact details/imprint
Contact details/imprint
Date of publication Forward-looking statements

Wednesday, March 6, 2019 This document contains forward-looking statements that reflect
management’s current views with respect to future events. Such
Published by statements are subject to risks and uncertainties that are
Schaeffler AG, Industriestr. 1-3 beyond Schaeffler AG’s ability to control or estimate precisely,
91074 Herzogenaurach, Germany such as future market and economic conditions, the behavior of
other market participants, the ability to successfully integrate
Responsible for content acquired businesses and achieve anticipated synergies, and the
Corporate Accounting, Schaeffler AG actions of government regulators. If any of these or other risks
and uncertainties occur, or if the assumptions underlying any of
Investor Relations these statements prove incorrect, then actual results may be
phone: +49 (0)9132 82 -4440 materially different from those expressed or implied by such
fax.: +49 (0)9132 82 -4444 statements. Schaeffler AG does not intend or assume any
e-mail: [email protected] obligation to update any forward-looking statements to reflect
events or circumstances after the date of this report.
Schaeffler online
www.schaeffler.com Variances for technical reasons
For technical reasons (e.g. conversion of electronic formats)
there may be variances between the accounting documents con-
tained in this annual report and those submitted to the Federal
Gazette (Bundesanzeiger). In that case, the version submitted to
the Federal Gazette shall be binding.
You can find up-to-date news about Schaeffler on our website at The reporting period comprises the financial year 2018, which
www.schaeffler.com/ir. You can also download all documents runs from January 1 to December 31, 2018. This report reflects
from this site. relevant information available by the editorial deadline on
February 19, 2019.
Design and layout
Publicis Pixelpark, Erlangen, Germany Rounding differences may occur.
Speedpool GmbH, Hamburg (image section), Germany
This English version of the annual report is a translation of the
Photographers original German version; in the event of variances, the German
Andreas Pohlmann, Munich, Germany version shall take precedence over the English translation.
Torsten Pross, Jürgen Jeibmann Photographik, Leipzig, Germany
Zuo ZHU, Shanghai, China For better readability, this report generally uses only the mascu-
line form when referring to groups of persons. Unless indicated
Printed by otherwise, these statements should not be construed to refer to
Eberl Print GmbH, Immenstadt/Allgäu, Germany a specific gender.
Printed on FSC® -certified paper. By using FSC® paper we are

actively supporting the preservation of our forests, promoting
plant and wildlife protection, and are taking a stand against the
exploitation of human beings in the forestry industry.
Schaeffler in Social Media

Schaeffler AG
Industriestr. 1-3
91074 Herzogenaurach
Germany
www.schaeffler.com

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Financial statements 2018

Schaeffler AG Mobility for tomorrow

Combined management report Corporate Governance

Combined management report

1. Fundamental information about the group 3 3. Supplementary report 74

1. Fundamental information about

Under its strategy “Mobility for tomorrow”, the Schaeffler Group

Schaeffler Group organizational structure No. 001

Divisions Functions Regions

Simplified presentation for illustration purposes.

Leadership structure The Supervisory Board of Schaeffler AG appoints, advises, and

Schaeffler Group divisions and business divisions No. 003

Automotive OEM Automotive Aftermarket Industrial

Engine Transmission Chassis Greater Asia / Greater Asia /

Simplified presentation for illustration purposes.

AG & Co. KG has a 90% stake in the new company which is

Automotive OEM division

Key growth drivers

The Automotive OEM division is expanding its product portfolio

Fully automated driving

Double-clutch transmissions have become established in recent

Key growth drivers possible, as centralized as necessary”. Regional structures are

Schaeffler Group functions No. 007

Operations, Supply Chain Man-

– Quality – Corporate R&D Management – S chaeffler Production – F inance Strategy, – HR Strategy

Simplified presentation for illustration purposes.

Quality Similar to the approach taken by the Automotive OEM division as

In light of this, the Schaeffler Group sees its role in actively

Along with the energy chain, a further focus of the corporate

R&D in the Automotive OEM division

A large share of the vehicle population is assumed to be hybrid-

For machine tool spindles, Schaeffler has developed bearings

The technological basis for these data analytics and machine

Schaeffler’s technology network drives new production technol-

In addition, digitalization provides significant opportunities for

Schaeffler Group plants and R&D centers No. 015

World South Korea

Regions 1) Europe Americas Greater Asia/

*) 2 plants Automotive, 1 plant Industrial

In 2018, the Schaeffler Group reported an operational increase

The Schaeffler Group uses various raw materials such as steel

Regions work and logistics activities, as well as realigning the distribu-

1 Sales by market view.

Schaeffler Group regions and subregions No. 018

Europe Americas Greater China Asia/Pacific

Western South Southeast

As China is a strategically important sales market for the

Schaeffler Group mission and vision No. 019

1.3 Group strategy and management Vision and mission

In its mission, the Schaeffler Group describes the task it is com-

Mobility for tomorrow – 4 focus areas No. 020

Eco-friendly drives Urban mobility

Rail vehicles Wind power

8 Strategic pillars No. 021

8 Strategic pillars 3 We are a global company with a local presence

The Industry 4.0 business field focuses on developing rotary and

Agenda 4 plus One – progress No. 023

10% 25% 55% 95% 100%

Initiatives Set-up Plan Implementation Line

1. Fundamental information about the group 3 3. Supplementary report 74

– Quality – Corporate R&D Management – S chaeffler Production – F inance Strategy, – HR Strategy

1 Sales by market view.

USD CNY KRW INR MXN

c ertain other emerging countries clearly deteriorated, especially Sector-specific environment

hot-rolled steel cold-rolled steel