Europe’s largest electric vehicle battery project fails – Northvolt declares bankruptcy

Founded in Sweden in 2016, Northvolt planned to become the largest manufacturer of traction batteries in Europe, but it was never destined to get on its feet – it is going to restructure in the next quarter and has already declared bankruptcy, accumulating $5.8 billion in debts.

Image source: Northvolt

As Bloomberg notes, Northvolt CEO Peter Carlsson will leave his post, and the procedure for protection from creditor claims will allow the company to restructure in the first quarter. The manufacturer’s attempts to attract additional funds for its development were unsuccessful, which was the impetus for bankruptcy. Northvolt’s current cash reserves ($30 million) are sufficient to support its operations for one week.

The now former head of Northvolt, Karlsson, will retain his position on the company’s board of directors and the position of senior consultant, but emphasized that the company should be led by a “very competent team.” During the restructuring and search for a new leader, Northvolt will be led by the company’s chief financial officer, Pia Aaltonen-Forsell, and Mattias Arleth, president of battery cells, will act as chief operating officer. Under Karlsson’s leadership, the company managed to build its main plant in Sweden, as well as agree on the construction of plants in Germany, the USA and Canada. Having received about $10 billion in investor funds and subsidies for the implementation of its ambitious projects, Northvolt at a certain stage hoped to enter an IPO and value its capitalization at $20 billion. In the near future, Northvolt will focus on finding partners who can provide it with financial support, and also expects to complete construction enterprises in Germany and Canada.

By the fall of this year, Northvolt was faced with a rapidly developing liquidity crisis and was unable to increase production volumes in Sweden. Customers have simply reconsidered their need for traction batteries due to declining demand for electric vehicles. Northvolt’s struggling largest shareholder and customer, Scania’s truck division, Volkswagen, has refused to provide the battery manufacturer with additional funding, citing its own crisis situation.

During the upcoming restructuring, Northvolt expects to continue producing traction batteries, but the scale of the business will have to be reduced to a level that will allow it to remain sustainable. As a result of the proposed measures, the company expects to receive approximately $245 million, of which $145 million will be provided in the form of cash and the rest will be borrowed. The plant in northern Sweden will continue to operate as usual. Management still hopes to realize Northvolt’s original mission of building a Western battery industrial base. In September this year, the company announced plans to reduce its workforce worldwide by 20%, with cuts expected to reach 25% in Sweden. In total, Northvolt will need between $1 and $1.2 billion to restore normal operations, according to the former CEO. Until recently, Northvolt had 6,600 employees distributed across seven countries. If the restructuring plan cannot be implemented, the company will be liquidated.