Northvolt, Europe’s most promising battery cell manufacturer, has filed for bankruptcy in Sweden, marking one of the country’s largest corporate failures and dealing a significant blow to the continent’s ambitions of challenging China’s dominance in the battery sector, according to Reuters.
The Swedish company, which had been seen as a key player in reducing Europe’s reliance on Chinese battery makers like CATL and BYD, announced the decision on Wednesday after exhausting all avenues to avoid insolvency.
The bankruptcy, officially declared by a Stockholm district court, puts 5,000 jobs at risk and highlights the challenges faced by Northvolt, which had received over $10 billion in equity, debt, and public financing since its inception in 2016.
Major stakeholders include Volkswagen, with a 21% stake, and Goldman Sachs, with 19%.
Northvolt’s financial challenges became apparent last November when it sought US Chapter 11 bankruptcy protection due to dwindling cash reserves and persistent production issues at its flagship plant in Skelleftea, northern Sweden. The company’s debt across its entities stood at just over $8 billion, according to US Chapter 11 documents.
Chairman Tom Johnstone described the bankruptcy as a difficult but necessary decision.
This was a decision we did not take lightly. Nevertheless, despite these exhaustive efforts, this decision represents the only realistic path forward for Northvolt and for its stakeholders.
While Northvolt’s Swedish operations are affected, its subsidiaries in North America, Germany, and Poland are not included in the bankruptcy filing. German Economy Minister Robert Habeck remains hopeful that an investor could rescue the company’s German plant.
The talks are ongoing. The possibility definitely exists.
Porsche, which had supply contracts with Northvolt, has begun searching for alternative battery suppliers. Porsche and Volkswagen CEO Oliver Blume emphasised the importance of maintaining battery development expertise in Europe.
Several stakeholders, including long-time partner Scania, have already written down the value of their stakes to zero. Scania has secured alternative battery cell supplies, while BMW cancelled a $2 billion order in June due to Northvolt’s failure to meet its contractual obligations.
A court-appointed trustee will oversee the bankruptcy process, which includes the sale of assets and settling outstanding obligations. Co-founder Peter Carlsson, who stepped down as CEO last November, revealed that the company needed up to $1.2 billion to restore its business but could not secure the necessary liquidity.
