Troubled Battery Maker Northvolt Faces Bankruptcy as Funding Runs Dry
The Swedish battery manufacturer Northvolt, once hailed as Europe’s answer to the dominance of Asian battery technology giants, is now battling for its survival. The company is reportedly exploring bankruptcy or Chapter 11 protection as it struggles to secure the short-term financing needed to continue operations.
Founded in 2016, Northvolt emerged as a beacon of hope for Europe’s electric vehicle industry, promising to challenge the market dominance of Asian battery manufacturers like CATL and Panasonic. Bolstered by substantial investments totaling more than $15 billion, the company attracted funding from major corporations including Volkswagen, Siemens, Goldman Sachs, and JPMorgan Chase, alongside subsidies from governments in Canada and Germany.
The company’s state-of-the-art manufacturing facility in Skellefteå, Sweden, was designed to anchor European EV battery production. However, Northvolt has struggled to scale production at the site, which currently operates at only a fraction of its intended capacity. Despite significant technological ambition, the project has been hampered by logistical bottlenecks, unreliable machinery sourced from Chinese manufacturers, and safety concerns raised by past and present employees.
In an interview with the Financial Times, a source close to Northvolt described its predicament as a result of “trying to do too much, too fast,” citing mismanagement and overambitious goals. Adding to its woes, Northvolt saw BMW pull out of a $2 billion contract earlier this year, further exacerbating the company’s financial instability.
Canadian Pension Funds
Northvolt’s potential bankruptcy has sparked alarm among Canadian stakeholders, particularly pension funds that invested heavily in the venture. Steve Saretsky, a prominent Canadian financial analyst, noted on social media that Northvolt received a $3.1 billion subsidy from Canada’s federal government, raising questions about the oversight of public funds. Canadian pension funds, including the Canada Pension Plan Investment Board, face potential losses as Northvolt investors reportedly begin to write down their stakes to zero.
The collapse of talks for a rescue package has heightened fears among these stakeholders. “It’s a very fluid situation,” a source involved in discussions told the Financial Times. “At a certain stage, you have to take a decision. Chapter 11 is possible, even bankruptcy is still an option.”
Northvolt’s troubles also carry broader implications for Europe’s green energy ambitions. With the EU aiming to reduce its reliance on Asian-made EV batteries, Northvolt was seen as a critical piece of the continent’s industrial strategy. Swedish policymakers have refused to offer a bailout, with the country’s center-right government consistently opposing state intervention for the struggling company.
Meanwhile, Northvolt has undertaken drastic cost-cutting measures, including laying off a quarter of its workforce and shelving new projects to focus on Skellefteå. Despite these efforts, skepticism among private shareholders has grown, with many questioning the feasibility of further investment in a loss-making enterprise.
One major investor, who spoke anonymously, described the situation as dire, saying they don’t see a pathway to profitability, and they’ve had to write down their investment to zero.
Worker Concerns
Concerns from workers have compounded the narrative of mismanagement at Northvolt. Employees have reported lax safety protocols and operational inefficiencies at the Skellefteå facility. A former worker highlighted that the company often rushed projects to meet ambitious timelines, sacrificing quality and safety.
Additionally, the reliance on complex Chinese manufacturing equipment has created reliability issues, further delaying production targets. Critics within the company have described a culture of overpromising, with leadership failing to acknowledge the steep learning curve required to match established industry leaders.
Amid growing speculation, Northvolt released a statement maintaining that its strategic review process remains ongoing.
“Since the beginning of the strategic review, we have constantly been discussing different options, and that hasn’t changed throughout the process. We will communicate results once we have found a conclusion, while we continue the dialogue with our stakeholders,” the company said.
While Northvolt has refrained from confirming specific plans, the company’s preference for a rescue package underscores its hope to avoid bankruptcy. However, time is running out, and with stakeholders growing increasingly wary, the company faces an uphill battle to stay afloat.
Information for this briefing was found via Financial Times and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
