Northvolt's CEO and co-founder Peter Carlsson announces his resignation during a news conference in Stockholm, Sweden, on Nov. 22.Christine Olsson/The Associated Press
Northvolt AB’s founding chief executive stepped down on Friday as the struggling European maker of electric-vehicle batteries began a court-monitored restructuring process, with a $7-billion Canadian plant a key part of its hopes.
Stockholm-based Northvolt filed for Chapter 11 bankruptcy protection in Texas on Thursday, buying it time to restructure its finances in co-operation with numerous creditors, including four Canadian pension funds. It said it is seeking new investment or buyers.
The company said in its filing it faced a liquidity crisis with US$5.84-billion in debt, but just US$30-million in cash, equal to about one week of operating costs. It also said it was struggling to meet its production targets.
The downfall of Europe’s homegrown battery hope, backed by Volkswagen AG, Goldman Sachs and others, casts doubts on optimistic projections about Europe’s shift to electrified transport. Northvolt has cut a fifth of its work force, shut down a number of operations and hopes to sell others.
Europe’s car battery ambitions go up in smoke. China wins again as Northvolt files for bankruptcy
Peter Carlsson, a former Tesla executive who co-founded Northvolt in 2016, said in a statement that now is a good time to hand over the leadership, so the company can work toward ramping up production and meeting commitments to customers and suppliers. He will remain a senior adviser and member of the board. The company, meanwhile, has begun a search for a new CEO.
In its Chapter 11 filing, Northvolt said it plans to concentrate efforts on Northvolt Ett, its main operating gigafactory in Skelleftea, Sweden, and two projects currently under development: Northvolt Drei in Heide, Germany, and Northvolt Six, in St-Basile-le-Grand, Que., near Montreal.
The latter two are currently postponed, “though the well-funded and permitted projects remain important pieces of the Company’s future strategy,” it said,
The provincial and federal governments have promised the Quebec project US$5.8-billion in grants, debt and convertible instruments. The operation currently has US$240-million in cash, according to the filing. Northvolt said it is not part of the Chapter 11 process.
The company’s woes underscore the risks of trying to run what is essentially a startup as a major supplier of crucial equipment for such automakers as VW, BMW and Volvo Cars, said Greig Mordue, associate professor in the faculty of engineering at McMaster University.
It is not surprising that Northvolt suffered “hiccups” as it sought to ramp up output, he said. Investors, including pension funds, and governments that have provided subsidies failed to appreciate the complexity of what Northvolt was trying to achieve, and wagered its financing acumen would extend to manufacturing, he said.
“They underestimated two things: manufacturing is hard and patience for suppliers that don’t meet their quality, delivery and cost expectations is limited,” Prof. Mordue said.
The filing details how the battery industry in Europe suffered from a drop in EV sales growth and other pressures. Northvolt pointed to Volvo Cars’ decision to abandon a plan to sell EVs only, and VW’s drastic plans to cut US$11.1-billion in costs by closing three factories and eliminating tens of thousands of jobs.
Meanwhile, China bolstered its own position as a dominant supplier of batteries and their components, as the rest of the industry deals with oversupply, underused capacity and weak returns on investment.
Northvolt had amassed US$55-billion worth of orders, but said it lost US$1.2-billion in 2023, compared with US$285-million the year before. It said, however, that it did not expect the downturn to be long-term.
Canada Pension Plan Investment Board, Investment Management Corp. of Ontario, Ontario Municipal Employees Retirement System and Caisse de dépôt et placement du Québec participated in convertible debt financings for Northvolt, joining several major automakers and financial institutions. That program, known as Volta, grew to US$2.7-billion, the filing shows.
In terms of creditor seniority, those lenders rank behind a US$154-million shareholder bridge facility and US$330-million in convertible debt held by VW. The existing debt ranks behind US$100-million in debtor-in-possession financing Northvolt arranged with one of its customers for its restructuring process.
How the pension funds and other lenders fare in the restructuring will depend on what offers Northvolt may receive in the form of a sale of assets or a credit bid by secured creditors to to take ownership of the collateral, said lawyer Sharon Kour, a restructuring specialist with Toronto-based Reconstruct LLP.
Given the sizable funds at stake, it is unlikely that the pension plans are passively waiting for a resolution, she said. The process is slated to be completed in the first quarter of 2025.
“I doubt that the company filed without first talking to the pension plans. I think they probably knew about this and potentially are already involved in negotiating that restructuring plan,” Ms. Kour said.
Officials with the pension funds have declined to comment on the process.