After being unable to obtain funding necessary for continued operation, Swedish electric vehicle battery manufacturer Northvolt declared bankruptcy in Sweden on Wednesday, as stated by the financially troubled firm.
Established in 2016, Northvolt was considered a key player in Europe’s efforts to close the gap with Asia and the U.S. in manufacturing battery cells, which are essential for electric vehicles.
However, the firm has faced difficulties due to substantial debts, sluggish demand, and manufacturing delays. This culminated in May 2024 with automobile maker BMW canceling an order valued at two billion euros ($2.2 billion).
In a statement released on Wednesday, Northvolt mentioned that even though they explored all possible avenues for negotiation and implementation of a financial restructuring, the company couldn’t obtain the required financial terms to proceed as currently structured.
In late November, Northvolt filed for Chapter 11 bankruptcy protection in the U.S., aiming to facilitate the restructuring of its debts and overhaul its operations.
In documents filed with U.S. authorities, the battery manufacturer stated that it had debts amounting to $5.8 billion.
Northvolt stated that “a trustee appointed by a Swedish court will now manage the proceedings, which include overseeing the sale of the company’s operations and assets as well as resolving any remaining liabilities.”
‘Compounding challenges’
At an exceptional general assembly in January, stakeholders consented to permit the economically challenged firm to carry on with its operations.
The two largest stakeholders of Northvolt are the financially troubled German automaker Volkswagen and the American investment firm 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 mentioned “increasing capital expenses, political unrest, ensuing supply chain disturbances, and changes in consumer preferences.”
The manufacturer of the batteries emphasized that during their efforts to obtain funding, they discovered considerable progress with possible collaborators and expressed significant interest from potential investors.
“Nevertheless, due to restricted timeframes and financial constraints, the firm couldn’t finalize the required accords to ensure its long-term stability,” stated Northvolt.
The statement also indicated that neither its German nor its North American subsidiaries were seeking bankruptcy protection in their own countries.
No state rescue-
In September, the Swedish firm announced it would cut 1,600 positions, which represents one-fourth of its workforce, and halt the development at its facility in Skelleftea, located in northern Sweden.
The company also announced that it was cutting back on its plans to increase the production capacity of its facility to 30 gigawatt-hours annually.
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 late September, Swedish Prime Minister Ulf Kristersson dismissed the possibility of governmental aid, stating, “There are no intentions for the Swedish state to acquire an ownership stake in Northvolt or similar ventures.”
Europe currently makes up only three percent of worldwide battery cell manufacturing, yet aims to capture 25 percent of the market by the end of the decade.
Personally, I believe it’s crucial for Europe to develop its own battery sector; however, establishing this kind of industry is a lengthy process,” stated Tom Johnstone, the interim chairperson of Northvolt, in a release. “It requires endurance and sustained dedication from everyone involved.
The firm mentioned that it has recently finished producing its initial one million battery cells for an unnamed client in Europe.
Bankruptcy might lead to significant social consequences in northern Sweden, an area where Northvolt — employing roughly 5,000 individuals — had focused its activities.
“It certainly conveys a somber message and marks a deeply gloomy day for everyone of us who has put in tremendous effort daily, hoping the company would manage to navigate these challenging times,” stated Shaneika Jeffrey, a spokesperson for the labor union Unionen, in her commentary.
