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Northvolt files for Chapter 11 reorganisation in the US, and CEO resigns
Swedish electric vehicle (EV) battery manufacturer Northvolt has filed for Chapter 11 of the US bankruptcy code.According to some media reports, the announcement represents a significant blow to the European EV industry, as Northvolt was the most developed battery manufacturer on the continent.
However, Northvolt says the restructuring under Chapter 11 will provide it with access to approximately $145mn in cash collateral. In addition, one of the company’s existing customers has committed to provide $100mn in new financing to support Northvolt’s business operations in the form of debtor-in-possession (DIP) financing, which is a specialised type of financing for businesses that are restructuring through a Chapter 11 process.
The company says that the financing will help it secure its ‘long-term mission to establish a homegrown, Western industrial base for battery production’.
Northvolt was founded in 2016 with an aim to challenge the dominance of Asian battery manufacturers, in particular China. However, it reportedly struggled to counter the market subsidies paid in China and the US under President Joe Biden, while planning significant capacity expansion with a second plant in Sweden, and facilities in Germany and North America, at a time when its core gigafactory in Skellefteå, Sweden, was only producing at 1% of its theoretical capacity.
According to the Financial Times, Northvolt was $5.8bn in debt when it made its Chapter 11 filing and had just $30mn in cash, enough to cover a week’s operations.
Media reports also suggest the company’s financial difficulties were exacerbated earlier this year, when BMW cancelled a €2bn contract in June following Northvolt’s failure to deliver promised batteries. BMW turned instead to South Korea’s Samsung to fulfil the order. Subsequent fundraising talks are reported to have failed after investors lost confidence when the Swedish government ruled out any state help.
Northvolt reports that Northvolt Ett, the company’s flagship battery gigafactory in Skellefteå, and Northvolt Labs in Västerås, Sweden, will ‘remain operational’. Meanwhile, Northvolt Germany and Northvolt North America, subsidiaries with projects in Germany and Canada, are ‘financed separately and will continue to operate as usual outside of the Chapter 11 process as key parts of Northvolt’s strategic positioning’, according to the company.
Shortly after announcing the filing, Peter Carlsson stepped down as CEO, although he will act as a Senior Advisor and remain a Member of the Board.
