Stockholm (AFP) – Swedish electric car battery maker Northvolt has filed for bankruptcy in Sweden after failing to secure financing to enable it to continue operations, the struggling company said Wednesday. Founded in 2016, Northvolt was once seen as a cornerstone of European attempts to catch up with Asia and the United States in the production of battery cells, the crucial component of zero-emission cars.
But the company has struggled under a mountain of debt, slow demand and production delays, which in May 2024 led car manufacturer BMW to drop an order worth two billion euros ($2.2 billion). Northvolt said in a statement Wednesday that despite pursuing “all available options to negotiate and implement a financial restructuring … the company was unable to secure the necessary financial conditions to continue in its current form.” Northvolt applied for Chapter 11 bankruptcy protection in the United States in late November to enable it to restructure its debt and reorganise its business. The battery maker said in US filings that it owed $5.8 billion.
Northvolt said “a Swedish court-appointed trustee will now oversee the process, including the sale of the business and its assets and settlement of outstanding obligations.”
In January, shareholders agreed at an extraordinary general meeting to allow the financially-strained company to continue operating. Northvolt’s two biggest shareholders are German carmaker Volkswagen — also in financial difficulty — and US investment bank Goldman Sachs. “Like many companies in the battery sector, Northvolt has experienced a series of compounding challenges in recent months that eroded its financial position,” the company said. It cited “rising capital costs, geopolitical instability, subsequent supply chain disruptions, and shifts in market demand.”
The battery maker stressed that in its attempts to secure financing it had found “significant traction with potential partners and interest from investors.” “However, with limited time and financial resources available, the company was unable to conclude the necessary agreements to secure its future,” Northvolt said. It also said that its German and North American subsidiaries were not filing for bankruptcy in their respective jurisdictions.
In September, the Swedish company said it was slashing 1,600 jobs — a quarter of its staff — and suspending the expansion of its Skelleftea site in northern Sweden. It also said it was slashing plans to expand the production capacity of its facility to 30 gigawatt-hours per year. In July of 2024, it said it hoped to reach an annual production of over one GWh this year — well below the facility’s intended capacity of 16 GWh. One GWh is enough to equip 20,000 average-sized cars.
In mid-September, Swedish Prime Minister Ulf Kristersson ruled out a government rescue, saying “there are no plans for the Swedish state to become a part owner of Northvolt or anything like that.” Europe accounts for just three percent of global battery cell production, but has set its sights on 25 percent of the market by the end of the decade. “For me personally, it remains key for Europe to have a homegrown battery industry, but it is a marathon to build such an industry. It needs patience and long-term commitment from all stakeholders,” Northvolt interim chairman Tom Johnstone said in a statement.
The company said it had recently completed its first one million battery cells to an unspecified European customer. The bankruptcy could have a severe social impact in northern Sweden, where Northvolt — which employs about 5,000 people — had concentrated its operations. “It is of course a heavy message and a very dark day for all of us who have worked hard every day and hoped that the company would get through this tough time,” Shaneika Jeffrey, a representative of the labour union Unionen, said in a comment.
© 2024 AFP
