Hacker attack on production, missing annual figures, descent from the third stock market league, missed revenue targets. Observers witnessed how the traditional company from Ellwangen continued to slip into crisis. And this, despite the fact that batteries are considered future products.
The struggle for survival seems to be over for now. Over the weekend, the company announced an agreement with financial creditors and investors. However, the restructuring plan has several bitter pills in store. And questions arise: What will happen next for the Swabians? And how did it come to this?
Debt cut and Porsche’s entry as salvation
The plan primarily involves two steps: a debt cut and the extension of loans, which should reduce liabilities from almost half a billion euros to 200 million euros. Then, the share capital of Varta AG is to be reduced to zero euros. The effect: current shareholders exit without compensation, and the company loses its stock exchange listing. Investor representatives have already announced resistance.
In addition to a company from the previous majority owner Michael Tojner, the Stuttgart sports car manufacturer Porsche will also invest in Varta. Both are investing 30 million euros each. Additional loans of 60 million euros will come from the creditors. If everything goes as planned, the endeavor is expected to secure the financing of Varta AG until the end of 2027. The battery company had filed for pre-insolvency restructuring in July.
Company with a long history
The beginnings of Varta – the name consists of the initial letters of “Vertrieb, Aufladung, Reparatur transportabler Akkumulatoren” (Distribution, Charging, Repair of Portable Batteries) – date back to 1887. Researcher Fridtjof Nansen had Varta batteries with him during a polar expedition. Today, Varta has little in common with the company that was founded as an accumulator factory in Hagen. The reason: Varta fell into crisis as early as the 1990s, was split up, and sold off piece by piece.
Boom from batteries for wireless headphones
Austrian Tojner entered in 2007. He bought the microbattery division and took it public ten years later. Tojner seemed to have a good instinct: the IPO was considered a success. The development was mainly driven by the rapidly increasing demand for rechargeable lithium-ion batteries – for example, for wireless headphones and smartwatches.
In 2019, Varta also bought back the household battery division. Within a few years, the company nearly quadrupled its revenue. Millions were invested to expand production – and debts were taken on. During this time, the Swabians also ventured into the development of battery cells for electric cars.
From a hopeful candidate to a restructuring case
In 2022, the first cracks appeared: Varta had evidently become too dependent on one of its main customers – Apple. The US company had used the batteries from Ellwangen in its wireless earbuds at that time. When Apple sought another supplier, the business came under pressure. The then Varta CEO Herbert Schein scrapped the sales and profit targets – and soon after resigned.
In the following period, the global economic downturn and high inflation hit the consumer electronics sector hard. Demand for small batteries decreased. Competition from the Far East and supply chain problems additionally troubled Varta.
E-car battery in a niche
Additionally, Varta’s e-car battery remained a niche product. The battery is designed for hybrid vehicles and can store very little electricity. It recharges energy generated during driving, such as when braking. This powers an electric motor that supports the combustion engine.
While Varta’s management repeatedly expressed that there were many interested parties, the only known customer is Porsche. For this reason, Porsche also wants to take a majority stake in the Varta subsidiary V4Drive Battery. Porsche urgently needs the batteries for the hybrid drive of the Porsche 911 Carrera GTS.
Tojner: “We set the bar too high”
Operational difficulties, high debts, deep red numbers – Varta continued to slide deeper into crisis. Employees had to go on short-time work, and later hundreds of jobs were cut. On top of everything, a hacker attack brought production at the German locations to a standstill in spring.
Employee and shareholder representatives primarily blame management mistakes for the misery. Tojner, who is also the chairman of Varta’s supervisory board, recently admitted in the “Frankfurter Allgemeine Zeitung”: “We set the bar too high. We launched various projects, invested heavily, expanded production.”
Too much money was invested too carelessly, Tojner said. By the time the crash came – due to inadequate risk assessment and overloading of the organization. “In retrospect, the supervisory board, with me at the helm, must also admit mistakes. I should have insisted much earlier on sustainable risk analyses,” he confessed.
What’s next?
Varta wants to maintain all locations in Germany. According to a spokesperson, there will be a moderate job reduction in administration. However, production will seek new workers. What this will ultimately mean for the workforce – currently around 4,000 people work at Varta – is still uncertain.
The agreement must be documented in the coming weeks and submitted to the restructuring court. This requires the approval of the bodies of the involved parties and the green light from the Federal Cartel Office. It is expected to take months before the plan is finalized. They hope that the process will be completed this year, it was stated.
The stock price plummeted to as low as 0.76 euros; the Varta shares were last quoted via XETRA at 2.16 euros, down 44.21 percent.
/jwe/DP/ngu
ELLWANGEN (awp international)