Sweden’s Northvolt files for bankruptcy, in blow to Europe’s EV ambitions
2024.11.21 15:12
By Dietrich Knauth, Marie Mannes and Terje Solsvik
(Reuters) -Northvolt, the Swedish maker of battery cells for electric vehicles, said on Thursday it has filed for Chapter 11 bankruptcy protection in the U.S., dealing a blow to Europe’s hopes that its most developed battery player would reduce Western car makers’ reliance on Chinese rivals.
Northvolt said it has only enough cash to support its operations for about a week and said it has secured $100 million in new financing for the bankruptcy process. It said operations will continue as normal during the bankruptcy.
“Northvolt’s liquidity picture has become dire,” the company said in its Chapter 11 petition, filed in U.S. Bankruptcy Court in Houston. The company, which has operations in California, has about $30 million of cash, which can only support its operations for about a week and $5.8 billion in debts.
Northvolt said it expects to complete the restructuring by the first quarter of 2025.
Northvolt went in a matter of months from being Europe’s best shot at a home-grown electric-vehicle battery champion to racing to stay afloat by slimming down, hobbled by production problems, the loss of a major customer and a lack of funding.
Europe has been hoping that Northvolt would reduce Western car makers’ reliance on Chinese rivals such as CATL and BYD (SZ:).
Northvolt said the $100 million in a new loan is part of $245 million in financing support for the bankruptcy. Swedish truck maker Scania, a shareholder and its biggest customer, said on Thursday that it was loaning $100 million to Northvolt to support the manufacturing of electric vehicle battery cells in Skellefteå, northern Sweden.
“This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production,” Tom Johnstone, interim chairman of Northvolt’s board, said in a statement, noting the support Northvolt has received from existing lenders and customers.
As part of the restructuring, Northvolt will evaluate proposals for new money investment from strategic and financial investors, as well as existing lenders, shareholders and customers, he said.
Investment group Vargas, a co-founder of Northvolt and one of its largest shareholders, said the bankruptcy would allow the company to address its financial challenges and maintain its competitive edge in producing high-performance battery cells.
Handelsbanken analyst Hampus Engellau said the bankruptcy filing would give the company some short-term breathing space. Even so, he said, “This tells us that they haven’t found investors and raised the capital needed to restructure their business.”
Northvolt had been discussing the possibility of filing for Chapter 11 bankruptcy protection in the United States as one of several options for survival, two sources familiar with the matter told Reuters last week.
STIFF COMPETITION
With Volkswagen (ETR:) among its owners, Northvolt has led a wave of European startups investing tens of billions of dollars in battery production to serve the continent’s automakers as they switch from internal combustion engines to electric vehicles.
But growth in EV demand is moving at a slower pace than some in the industry had projected, and competition remains stiff from China, which controls 85% of global battery cell production, International Energy Agency data shows.
On Monday, Reuters reported that Northvolt has missed some in-house targets and curtailed production at its battery cells plant in northern Sweden, underscoring the challenge of ramping up output.
In October, Northvolt struck a deal that gave access to a small amount of money while talks on a bigger financing package continued, business daily DI reported.
Those talks had become more difficult in recent weeks, one of the sources familiar with the Chapter 11 plan said.
In recent years several Swedish companies have opted for filing for Chapter 11 protection such as Scandinavian airline SAS and debt collector Intrum, a process that allows management to retain control over the company and run its operations.
Deputy Prime Minister Ebba Busch said on X that the government continues to support the EV battery industry and hopes that the restructuring would help turn Northvolt’s fortunes around. Busch told Reuters on Tuesday the Swedish government did not plan to take a stake in Northvolt.
