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Policy

QUALITY & CONTINUOUS

IMPROVEMENT

Version 1.0
Date of effectiveness March 1, 2024

Governance Framework
Schaeffler Group Policy category: Quality, R&D & Operations
Responsible member of the Executive Board: Chief Executive
Officer
Policy Owner: Head of Quality
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Table of contents Overview 3

1 2 Objective, organizational scope and validity 4

2.1 Objective 4
2.2 Organizational scope 4
2.3 Application context 4
2.4 Policy Owner 4
2.5 Validity and coming into effect 4

3 Quality and continuous improvement 5

3.1 Quality organization and quality management system 5
3.2 Quality culture 6
3.3 Responsibility for quality in the company 6
3.4 Continuous improvement and problem solving 8

4 Risks, opportunities, and effectiveness controls 9

5 Transition regulations 9

List of figures 10

Cited documents 10

Attachments 10

Approval 10

Change history 10

Attachment 1 Stakeholder focus 11

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1
Overview

Schaeffler is a global technology company with the aim of ensuring the long-term
satisfaction of its customers by complying with legal requirements and technical
specifications and by delivering flawless products and services on time.
A high level of technical expertise, robust processes, qualified employees,
teamwork, and innovative strength are key factors in providing flawless products
and services of outstanding quality for internal and external customers in a
competitive manner.
Quality management supports the further development and continuous
improvement of the company in the long term. Based on the shared
understanding of quality "Fit for Quality", which supports a transparent error
culture and continuous improvement, all employees must work together across
all functions to achieve the target of "zero defects" in products and services.
All employees must take responsibility for quality. The Head of Quality, supported
by his quality management organization, is responsible for identifying and passing
on requirements for the quality management system. The respective process
owner must be responsible for ensuring implementation. A quality organization
with quality management, quality planning and quality technology as well as
quality assurance must be established for the implementation of quality-related
topics.
To ensure the company's long-term success, the continuous improvement of
processes, products and services in all organizational units must be geared
towards meeting the requirements of internal and external customers and
increasing customer satisfaction in the long term. Customer feedback and
performance data on Schaeffler products and services must be continuously
identified and used for corrective and improvement measures.
Quality and continuous improvement are essential factors for customer
satisfaction and long-term customer loyalty.
To protect the company from damage or loss of reputation, all employees are
obliged to comply with the guidelines on quality and continuous improvement.

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2
Objective, organizational 2.1 Objective
scope and validity The Quality & Continuous Improvement Policy regulates how Schaeffler ensures
that flawless products and services are delivered to customers. It also regulates
how continuous improvement ensures the long-term success of the company by
maximizing effectiveness and efficiency.

2.2 Organizational scope

The scope of this policy is the Schaeffler Group. The Schaeffler Group is defined as
the group of affiliated companies that are directly or indirectly majority-owned by
Schaeffler AG.

2.3 Application context

These guidelines are binding for all employees within the scope of application. In
terms of quality-related content, it is particularly relevant for employees in the
Quality Management, Quality Planning & Quality Technology and Quality
Assurance departments as well as document owners.

2.4 Policy Owner

The owner of this policy (“Policy Owner”) is the Head of the department Quality,
which is part of the CEO functions and is located in the Global Corporate Center.

2.5 Validity and coming into effect

This policy will enter into force with binding effect from March 1, 2024 and is
mandatory from this date.
With the entry into force of this policy, the following documents are withdrawn:
- P 172000 Quality Management - Principles and Control
- P 172001 Quality Functions in the Organization
- P 172010-4 Assessment of Fit for Quality (guideline)
- Quality Policy
- Stakeholder focus ISO9001:20151

1
Continued as Annex 1 to this Policy.

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3
Quality and continuous Quality management must promote a culture of quality within the company so
that all employees live and shape quality.
improvement
The basis for this is defined by the motto "Fit for Quality". The "Fit for Quality
Axioms" (see chapter 3.2) lay the foundations for the company's understanding of
quality and serve as a guide for quality-conscious thinking and action.
Based on a wide range of indicators, all managers and employees must work on
the continuous improvement of their area of responsibility.
The Executive Board sets the quality objectives annually and monitors the
progress of fulfillment through regular reporting by the Head of Quality to the
Executive Board. Documentation of the definition and fulfillment of the quality
objectives must be ensured by the Head of Quality via the management review
(see section 3.3.3).
Based on feedback and input from stakeholders (see Appendix 1), which must be
evaluated and documented at least annually in the management review (see
section 3.3.3), regulatory and customer-specific requirements and risk or SWOT2
analyses, quality management (see 3.3.1) must continuously define improvement
measures at global, divisional, regional and site level in order to achieve the
quality targets.
Implementation is monitored and controlled by central, divisional, and regional
quality management groups.
The requirements and expectations of our customers and internal and external
stakeholders with regard to quality must be met by all employees with the utmost
care and safety.

3.1 Quality organization and quality management system

The Head of Quality and their quality organization (employees in the areas of
responsibility in accordance with section 3.3.1) must use quality audits to ensure
that the requirements relating to the quality management system are identified
and checked in accordance with the process Steering documented information3 .
Based on this, the quality organization must develop and introduce risk-based
plans for monitoring the development and production processes for products and
services globally, regionally, divisional, and locally as well as at suppliers.
In addition, the quality organization is responsible for the documented forwarding
of relevant requirements to the document owners. The quality organization must
ensure that the document owners only receive those requirements that relate to
their specific subject area. The implementation and transfer to specification
documents must be carried out by the respective document owners.
The requirements for the quality management system4 are reflected at Schaeffler
within the governance framework and the entire process landscape. The quality
management system is part of the overarching management system, Schaeffler's

2
Analysis of strengths, weaknesses, risks, and
opportunities - see P 170005 "Problem
solving" method kit.

3
PD7.21 Control of documented information

4
For example, IATF16949, ISO9001, ISO/TS
22163, DIN EN 9100, etc.

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governance framework5 . The quality management system must ensure that

products and services are delivered that meet customer requirements and thus
increase customer satisfaction in the long term.
Conformity with the requirements of the quality management system and its
implementation must be checked regularly by means of quality audits and
assessments as well as external certification audits. These systematic, formal,
independent, and documented investigations to evaluate the fulfilment of
requirements for a process or product (audits) and the process evaluation of
mechatronic products (assessment) must be planned on a risk basis and in
accordance with external requirements, both centrally and locally. Identified
deviations from the catalogue of requirements and specifications drawn up in the
audit and assessment must be consistently and sustainably corrected by means of
suitable measures (see section 3.4.2).
The corporate culture supports an open and transparent approach to errors. On
the basis of a proactive error culture (see section 3.2), all employees must take
appropriate measures when deviations occur (e. g. in the case of products
suspected of being faulty, to identify, limit and block them for further use).

3.2 Quality culture

"Fit for Quality" is the basis for Schaeffler's understanding of quality and
continuous improvement. The 8 "Fit for Quality" axioms (quality principles) form
the framework for this.

These are as follows:

- "We all live and shape quality."
- "We analyze and plan properly."
- "We master our work."
- "We apply our rules, methods and tools."
- "We ensure reliable processes."
- "We see mistakes and react immediately."
- "We verify our work and give feedback."
- "We share and act on lessons learned."

3.3 Responsibility for quality in the company

All employees must take responsibility for the production of flawless products and
services. The understanding and awareness of quality required for
implementation must be communicated at all levels and in all areas of the
company as part of the "Fit for Quality" program. This must be ensured through
mandatory "Fit for Quality" training for all new employees or, in the case of
existing employees, by assigning "Fit for Quality" training via the respective line
manager.
The Head of Quality is responsible for the strategic direction and management of
quality and quality-related issues.
In particular, the annual planning of the internal system audits and the external
certification audits of the Schaeffler locations must be carried out by the quality
audit department assigned to the Head of Quality. The annual planning is
approved by the Executive Board.
3.3.1 Areas of responsibility of the quality organization
The implementation of the quality-relevant topics must be ensured within the
following 3 areas of responsibility. The implementation of the areas of
responsibility must be ensured by the employees assigned to the quality

5
PY000001 Governance Framework Policy

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management role. The quality management role must be established in all

certified6 Schaeffler locations and in the units included in their certification scope
by the respective management.
 Quality Management
The quality management function must ensure the implementation of the
requirements from the quality strategy, the pursuit of quality objectives
and the monitoring of compliance with the quality management system
requirements implemented at Schaeffler. Rules and methods for ensuring
quality must be made available within the company and compliance must
be monitored by means of quality audits.
Furthermore, quality management must be responsible for checking the
conformity of the documents in the governance framework with regard to
the requirements of the quality management system.
Quality management is responsible for managing quality issues for
customers, suppliers, and other stakeholders across the company.
Quality management at each location is responsible for planning and
carrying out customer, process, and product audits at the location itself.
 Quality Planning & Quality Technology
Quality Planning & Quality Technology is responsible for preventive
advance quality planning during the development of products and services
as well as production processes. With the aim of avoiding risks and
safeguarding against residual risks for the entire supply chain, this area of
responsibility must develop concepts for fault-free production or service
provision. Implementation must be ensured by the respective department
responsible before placing the product or service on the market.
 Quality Assurance
The Quality Assurance department is responsible for monitoring all
production and service processes in the operational business in order to
ensure that products and services are delivered to customers free of
defects. It is the responsibility of Quality Assurance to approve all products
and services for use by the customer. In the case of products suspected of
being faulty, Quality Assurance must ensure that these are identified,
contained, and blocked for further use.

3.3.2 Dealing with customer-specific requirements

The analysis and implementation of customer-specific requirements must be
carried out by defined functions within the company. Specifications for this can be
found in the procedure "Dealing with customer-specific requirements"7 .
Schaeffler's customer-specific requirements for suppliers must be defined in
quality assurance agreements and agreed upon by the purchasing organization
with the suppliers. Quality planning for purchased products and services is part of
supplier management.
3.3.3 Analysis and reporting
The analysis and reporting of quality targets and deviations in quality-related
performance indicators specified by customers8 must be carried out continuously
at all management levels of the company.
At least once a year, the Head of Quality and the quality management functions
defined by him as well as each certified unit of Schaeffler must prepare a

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"management review"9 on behalf of the respective management (top

management9). This systematic and regular review aims to evaluate and ensure
the functionality, effectiveness, and efficiency of the quality management system
and to identify potential for optimization. On this basis, improvement and
corrective measures must be defined by the units conducting the management
review. The effectiveness of the implemented improvement measures and the
achievement of the set quality objectives must be reviewed in the management
review of the following year. This ensures the implementation of continuous
improvement within the area of responsibility of the Head of Quality.
3.3.4 Training on Quality & Continuous Improvement
"Fit for Quality" lays the foundation for understanding quality and continuous
improvement. Mandatory training must be provided for every new employee (see
3.3).
The regulations of the Quality & Continuous Improvement Guideline and the
PDCA method (see Chap. 3.4.1) are summarized in the eLearning "Quality &
Continuous Improvement", which is provided in the Schaeffler Academy.
The eLearning will be mandatory for the following roles and positions in the
Schaeffler Group: Document Owners of guidelines of the new Governance
Framework, Process Owners of the Process Model 3.0, Process Managers,
Managing Directors of Schaeffler Group companies (excluding members of the
Executive Board), Site Managers, Managers Quality and Managers of hierarchy
level L1 of the organization.

3.4 Continuous improvement and problem solving

The continuous improvement of processes, products and services must be geared
towards meeting the requirements of internal and external customers by all those
responsible in the organizational units, thereby increasing customer satisfaction in
the long term.

3.4.1 Continuous Improvement

Continuous improvement must be applied in every process of the Schaeffler
Group. This is ensured by the tasks and powers of the process owners described
in the process management policy.10
The continuous improvement of all processes by the respective process owners
must be mapped by the constantly repeating Plan-Do-Check-Act cycle (PDCA
cycle). This cycle begins with the definition of the objective and the planning of
the measures required to achieve the objective (plan), which are consistently
implemented (do) and verified with regard to the achievement of the objective
(check). The control loop closes with the consistent implementation of measures
to further improve performance (Act).
All managers must ensure that, in their area of responsibility, products, process
and services are continuously optimized as part of the continuous improvement
process. To this end, customer feedback and performance data on Schaeffler
products and services must be used for corrective and improvement measures.

3.4.2 Problem solving and dealing with complaints

For the systematic, preventative identification of potential errors or non-
compliant procedures, all employees must use suitable problem-solving
methods11 as required.

9
According to DIN EN ISO 9001:2015-11,
chapter 9.3

10
see PY000002 Process management policy.

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An immediate response must be made to reported internal or external

complaints. Defined problem-solving methods11 and complaint handling
processes12 have been established for processing internal and external customer
complaints and supplier complaints. They are designed to eliminate errors and
the causes of errors in the long term through suitable corrective measures.
Lessons learned are also part of continuous improvement.
Schaeffler products must be subject to continuous field observation13 . Defects
and causes of defects in returned products must be systematically analyzed by the
product owner's organization. The resulting information and findings as well as
warranty data from our customers must be continuously evaluated and
appropriate measures must be initiated if necessary. They also serve to
continuously improve and further develop Schaeffler products, production
processes and services.

4 Compliance with the specifications and rules described in this guideline leads to a
Risks, opportunities, and high level of customer satisfaction. This is a basic prerequisite for long-term
customer loyalty and the awarding of new contracts.
effectiveness controls
Non-compliance can lead to high financial losses such as compensation payments
or default payments, increasing numbers of complaints, loss of certification, loss
of customer orders or customers and a general loss of trust or reputation.
Implementation of the requirements of this guideline is monitored through
quality audits and management reviews.

5 This Policy applies effective without any transitional regulations.

Transition regulations

11
See P 170005 "Problem solving" method
kit.

12
Cf. PD5.7 Complaint processing

13
Cf. P170512 Elements of field observation

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List of figures None

Cited documents P 170005 Toolbox "Problem solving"

PY000001 Governance Framework policy
DIN EN ISO 9001:2015-11 Quality management systems - Requirements
IATF16949
ISO/TS 22163
DIN EN 9100
PD7.21 Steering documented information.
P 170202 Dealing with customer-specific requirements
P 170001 - Appendix 8 KPIs to quality
PY000002 Process management policy
PD5.7 Processing of concern
P170512 Elements of field observation

Attachments Attachment 1 Stakeholder Focus

Approval Policy owner Head of Quality

Responsible member of the

Chief Executive Officer
Executive Board

Freigeber Executive Board

Change history Version 1.0

Approval date December 18, 2023

Publishing date December 20, 2023

Date of effectiveness March 1, 2024

Changes Editorial change: Correction of errors

(published on 2024/02/28)

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Attachment 1 Stakeholder focus