Once considered the European champion in the production of lithium-ion batteries, Sweden‘s Northvolt declares bankruptcy. The company, founded by two former Tesla employees, has filed for Chapter 11 bankruptcy protection. Its CEO, Peter Carlsson, has resigned, it was announced on Friday, November 22, 2024.
The Swede co-founded Northvolt in 2016 together with Paolo Cerutti, both from Tesla. From 2020 to 2024, the company increased fundraising, the highest of which was $5 billion in January this year. After the first Northvolt Ett plant, which opened in December 2021 in Skellefteå, Sweden, five more plants very quickly emerged or were under construction in Poland, Germany and Canada.
The “European champion” of electric battery production, the continent’s hope to compete with the Chinese (CATL, BYD), the Americans and even the Koreans (LG), who also received subsidies from the Scholz government, even intended to dominate the entire value chain of battery production, from raw material extraction to recycling. Northvolt made massive investments and numerous partnerships, but its strategy seemed premature.
The Swedish company soon became disillusioned when faced with significant financial difficulties, caused among other things by significant delays in production, weighed down by an electric vehicle market that was less dynamic than expected and, above all, by fierce Asian competition. Northvolt thus found itself with colossal debt, limited liquidity and forced to restructure its activities.
The first restructuring will take place in September 2024. This includes the freezing of expansion projects such as in the case of the Skelleftea factory, the abandonment of some activities such as cathode production and the elimination of 1,600 out of 6,500 jobs, in particular in Sweden. Even partners such as Northvolt shareholder BMW had terminated a 2 billion euro contract last summer.
The Swedish electric vehicle battery maker announced Friday that it has filed for protection under Chapter 11 of the U.S. bankruptcy law. This means that a company in financial difficulty applies for bankruptcy proceedings in the United States which allows it to temporarily suspend payments on its debts while continuing its business. According to the Swedish press, Northvolt’s debt amounts to 5.84 billion dollars. However, the manufacturer only has $30 million in cash on hand.
Its CEO, Peter Carlsson, resigned from his position. “Filing Chapter 11 allows the company to reorganize, expand its operations while meeting commitments made to its customers and suppliers, and ultimately position itself for the long term,” he recalled. “So now is the right time for me to pass the baton to the next generation of leaders.” A new restructuring is underway and the Swedish manufacturer hopes to complete it by the end of the first quarter of 2025.
Counting Volkswagen (21%), Goldman Sachs (19%) and Vargas Holding among its shareholders, Northvolt has failed to convince them to recapitalize. This “desperate situation” did not allow him to operate for more than a week, explains the manufacturer, who managed to obtain another financing of 100 million dollars from one of his main customers, the truck manufacturer Scania, owned by Volkswagen. Northvolt also obtained $145 million in loans secured by its assets.
“The current financing will allow us to last until the beginning of next year, and we have to recapitalize, but I am convinced that we will be able to do it,” added Peter Carlsson “It is very likely that whoever finances this restructuring process today is also part of of this recapitalization process,” he reveals.
However, Canada no longer plans to invest in the Swedish manufacturer, which was building a plant in the province of Quebec. This project was also one of the cornerstones of Prime Minister Justin Trudeau’s industrial and climate policies. “We don’t believe that Quebec and the federal government intend to give more money to the company,” the source told Reuters.
Northvolt stressed that its Canadian and German operations are not part of the bankruptcy proceedings.
How might Northvolt’s restructuring efforts impact the future of the European battery industry?
Interview Between Time.news Editor and Battery Industry Expert
Editor: Welcome to Time.news! Today, we’re diving into the recent bankruptcy declaration of Northvolt, once hailed as Europe’s leading battery manufacturer. Joining me is Dr. Emily Hargrove, a renowned expert in energy storage systems and sustainable technology. Thank you for being here, Dr. Hargrove.
Dr. Hargrove: Thank you for having me! It’s a crucial time for the battery industry, and I’m happy to discuss the implications of Northvolt’s situation.
Editor: Northvolt’s bankruptcy is shocking, especially considering its ambitious plans to dominate the electric vehicle battery market. What do you think went wrong?
Dr. Hargrove: Northvolt had a bold vision to become the European champion in lithium-ion battery production, but several factors played a role in its downfall. First, the delays in production timelines were significant. When a company scales quickly, as Northvolt did with six facilities in multiple countries, operational challenges can multiply, particularly when aiming for rapid growth.
Editor: That’s a good point. They did have a massive fundraising effort, including a record $5 billion this January. Was that funding perhaps misallocated?
Dr. Hargrove: It’s not uncommon for startups, especially in high-tech sectors, to experience financial strain despite what looks like strong backing. Northvolt was aggressively expanding with ambitious projects like the Skellefteå factory. Unfortunately, they faced a reality check with a less dynamic electric vehicle market than projected, alongside fierce competition from established Asian manufacturers like CATL and BYD. It’s clear that forecasts in this sector can be extremely volatile.
Editor: The article mentions that Northvolt had debts totaling around $5.84 billion, but only $30 million in cash remaining. What does Chapter 11 mean for them at this stage?
Dr. Hargrove: Chapter 11 gives Northvolt the breathing room necessary to restructure their debt and operations. It’s a strategic move that lets them negotiate with creditors while continuing to operate and fulfill commitments to customers. However, the challenge will be convincing stakeholders and investors to recapitalize, which, as we’ve seen, has become a daunting task.
Editor: Peter Carlsson’s resignation is another critical aspect. What does it signal about the company’s internal state?
Dr. Hargrove: Leadership changes can signify a pivotal shift in strategic direction, especially in crisis situations. Carlsson’s departure might indicate that the company is seeking new perspectives to navigate through these turbulent waters. It’s a common strategy to infuse new energy and ideas into an organization facing significant challenges.
Editor: Looking ahead, what do you see as the future for Northvolt and the broader European battery market given this setback?
Dr. Hargrove: Northvolt still holds a lot of potential, especially if they successfully restructure and adapt their business model to current market realities. The European battery market is still growing, especially with increased demand for electric vehicles and renewable energy storage. However, they will need to refine their strategies. This could involve focusing on niche markets or innovative partnerships. The competition will be fierce, but success is still possible.
Editor: Thank you, Dr. Hargrove, for your insights into this pressing issue. The fate of Northvolt might reflect larger trends in the battery industry, and we’ll be closely monitoring how this develops.
Dr. Hargrove: Thank you for the discussion! It’s indeed a pivotal moment for both Northvolt and the entire European battery landscape. I look forward to seeing how they navigate this.
Editor: And thank you to our readers for tuning in. Stay informed on the latest developments with Time.news!