Troubled battery maker Northvolt reportedly considers Chapter 11 bankruptcy protection in the United States as possible option
Swedish electric vehicle (EV) battery maker Northvolt continues to explore its corporate options, amid ongoing financial issues at the firm.
Reuters, citing two people with knowledge of the matter as its source, reported that Northvolt has been discussing the possibility of bankruptcy protection in the United States as one of several options for the cash-strapped company to survive.
Last month a subsidiary company managing Northvolt’s Ett expansion project filed for bankruptcy, after the factory expansion it was developing was cancelled.
Chapter 11?
Now this week, Reuters noted that local business daily Dagens Industri had cited unnamed sources, late on Thursday, and reported that Northvolt was leaning towards Chapter 11 proceedings under the US Bankruptcy Code as a way to sort out its finances.
Last month Northvolt was reportedly in talks with investors and lenders over securing short-term funding worth about 200 million euros ($218m, £167m).
That came soon after the company replaced the chief executive of its Northvolt Ett (“One”) factory.
That funding however was not considered enough to secure the company’s future.
And then earlier this week Dagens Industri reported (again citing sources), that talks between the cash-strapped firm and creditors, shareholders and at least one customer on a short-term financing deal had stalled.
European batteries
Northvolt had been set up as part of an EU effort to reduce the region’s dependence on Asian producers for batteries for electric vehicles (EVs) and power storage.
The EU in 2019 had approved a 3.2bn euro subsidy from seven member states, led by Germany and France, into the battery industry plan.
But in total the lithium-ion battery manufacturer has received approximately 10 billion euros ($10.57 billion) in funding since its startup in 2016.
Just before Christmas 2021, Northvolt had reached a deal with Portuguese oil firm Galp to build what was intended to be Europe’s largest integrated lithium conversion plant in Portugal.
Also in December 2021, Northvolt confirmed that its gigafactory in Skellefteå, a former gold mining town about 200 km south of the Arctic Circle, had assembled the first battery cell.
Challenging period
But Northvolt is currently facing a number of challenges and difficulties, as the Northvolt Et gigafactory (built to serve the European car industry’s transition to electric vehicles), reportedly struggles with ‘persistent production problems’.
Those production problems, coupled with sluggish demand for electric vehicles and competition from China, have reportedly impacted Northvolt’s financials.
In September after a strategic review and as part of a cost cutting exercise, the firm announced plans to cut 25 percent of its workforce.
It confirmed that 1,600 Northvolt employees were being let go, split across Skellefteå (1,000 positions), Västerås (400 positions) and Stockholm (200 positions).