In debt and weighed down by premature investments, the Swedish manufacturer of batteries for electric cars, Northvolt, files for bankruptcy

Nackstrand/AFP

Once considered the European champion in lithium-ion battery manufacturing, Swedish Northvolt has filed for bankruptcy. The company, founded by two former Tesla employees, has filed for protection under the American bankruptcy law, “Chapter 11”. Its CEO, Peter Carlsson, has resigned, it was announced on Friday, November 22, 2024.   

The Swede co-founded Northvolt in 2016 with Paolo Cerutti, both men come from Tesla. From 2020 to 2024, the company has raised a number of funds, the highest being $5 billion in January of this year. After the first Northvolt Ett plant, which started up in December 2021 in Skellefteå, Sweden, five more sites were quickly built or under construction in Poland, Germany and Canada. 

Premature investments, $5.84 billion in debt 

The “European champion” of electric battery manufacturing, the continent’s hope to compete with the Chinese (CATL, BYD), the Americans and the Koreans (LG), which also received subsidies from the Scholz government, even intended to control the entire value chain of battery production, from the extraction of raw materials to recycling. Northvolt has made massive investments as well as numerous partnerships, but its strategy seemed premature. 

The Swedish company quickly became disillusioned with significant financial difficulties, caused among other things by significant production delays, weighed down by a less dynamic electric vehicle market than expected and, above all, fierce Asian competition. Northvolt thus found itself with a colossal debt, limited liquidity, and the obligation to restructure its activities. 

The first restructuring will take place in September 2024. This included freezing expansion projects as was the case with its plant in Skelleftea, abandoning certain activities such as cathode production, and cutting 1,600 jobs out of 6,500, particularly in Sweden. Partners such as BMW, which is a shareholder in Northvolt, had also cancelled a €2 billion contract last summer.  

On Friday, the Swedish manufacturer of batteries for electric vehicles announced that it had filed for Chapter 11 protection under the US bankruptcy law. This means that a company in financial difficulty requests a bankruptcy procedure in the United States that allows it to temporarily suspend the payment of its debts while continuing its operations. According to the Swedish press, Northvolt's debt has reached $5.84 billion. However, the manufacturer only has $30 million in available cash.

Its CEO, Peter Carlsson, has resigned from his position. “The Chapter 11 filing allows the company to reorganize, to grow its business while respecting its commitments to its customers and suppliers and, ultimately, to position itself for the long term,” he recalled. “It is therefore the right time for me to hand over the reins to the next generation of management.” A new restructuring is being launched and the Swedish manufacturer hopes to complete it by the end of the first quarter of 2025. 

Towards new shareholders 

With Volkswagen (21%), Goldman Sachs (19%) and Vargas Holding among its shareholders, Northvolt was unable to convince them to recapitalize. This “desperate situation” did not allow it to operate for more than a week, explains the manufacturer, which managed to obtain another financing of 100 million dollars from one of its major customers, the truck manufacturer Scania, owned by Volkswagen. Northvolt also obtained 145 million dollars of loan secured on its assets. 

“The current funding will see us through to early next year, and we need to recapitalize, but I'm confident we'll be able to do that,” Carlsson added. “It's very possible that those who are financing this restructuring process today will also be part of this recapitalization process,” he said.  

However, Canada no longer plans to invest in the Swedish manufacturer, which was building a plant in the province of Quebec. This project was also a cornerstone of Prime Minister Justin Trudeau's industrial and climate policies. “We don't think Quebec and the federal government intend to give the company more money,” the source told Reuters. 

Northvolt stressed that its Canadian and German operations were not part of the bankruptcy proceedings. 

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