Northvolt AB Fails to Secure Lifeline for Its Battery-Cell Business
In a significant blow to the battery hopes of Europe, Northvolt AB has filed for bankruptcy protection in the United States after failing to secure a lifeline for its battery-cell business in a faltering market for electric vehicles.
Chapter 11 Filing Provides Court Protection
The Swedish company filed for Chapter 11 in the Southern District of Texas, providing the company with court protection from creditors. This will allow operations to continue as Northvolt restructures its balance sheet during this challenging period.
Operations to Continue Uninterrupted
Northvolt has assured that its main factory will operate as usual during the reorganization process. The company will continue to make deliveries to customers, fulfill obligations to critical vendors, and pay wages to employees as per the statement released by Northvolt.
Access to Cash Collateral for Restructuring
Through the court process, Northvolt will have access to approximately US$145 million in cash collateral. Additionally, one of its customers has agreed to provide US$100 million in debtor-in-possession financing.
Failed Rescue Proposal Leaves No Alternative
The move marks the culmination of months of talks with owners, customers, and creditors to find a way for Europe’s rare homegrown maker of EV batteries to continue operations. Northvolt had slashed jobs and abandoned expansion plans in an effort to overcome a cash squeeze that intensified over the autumn after losing a key contract and being unable to access US$1.5 billion in loan guarantees.
Inability to Access Loan Guarantees Exacerbates Challenges
Northvolt’s failure to secure loan guarantees has left it struggling to maintain its operations. The company had also recently engaged in intense negotiations involving lenders, shareholders, and customers over a US$300 million rescue proposal meant to tide the company over as it sought longer-term funding.
Background on Northvolt
Established in 2016 with Ambitious Growth Plans
Northvolt was founded in 2016 with ambitious plans to become one of Europe’s leading manufacturers of battery cells for electric vehicles. The company opened its main plant in Skelleftea, near the Arctic Circle, in 2021.
Challenges Faced by Northvolt
Intense Competition from Established Manufacturers
However, Northvolt was unable to meet targets for ramping up volumes amid intense competition with established Chinese and South Korean battery-cell manufacturers. In June, shareholder BMW AG canceled a US$2 billion battery order due to quality issues.
Launch of Review into Expansion Plans
As demand slowed in the broader EV market, Northvolt soon launched a review of its sprawling growth plan. The company decided to slash 20% of its global workforce and replaced the CEO of the flagship plant.
Support from Shareholders and Customers
Volvo Car AB Initiates Proceedings to Take Over Joint Venture
Volvo Car AB initiated proceedings last month to take over their joint venture, while Volkswagen AG’s representative to Northvolt’s board stepped down in November. The government of Sweden repeatedly ruled out taking a stake to save its champion.
Future Uncertainty for Northvolt
CEO Seeks Partnerships to Secure Finances
Chief executive Peter Carlsson said this month that the company needed more than US$900 million to permanently secure its finances, and that the company was looking for partnerships, including in Asia.
