Northvolt Files for Bankruptcy Protection with $5.8 Billion Debt Amid Financial Crisis

Northvolt Files for Chapter 11 Bankruptcy with $5.8 Billion Debt, Struggles to Stay Afloat

Northvolt AB, the Swedish electric vehicle battery maker, has filed for bankruptcy protection in the U.S. under Chapter 11 after a failed attempt to secure critical rescue funding. The company, once seen as a major contender in Europe’s push for an independent electric vehicle (EV) supply chain, now faces a mountain of debt totaling $5.84 billion. With just $30 million in cash on hand and only a week’s worth of liquidity, Northvolt’s financial outlook has become dire.

Chapter 11 Bankruptcy: A Last-Ditch Effort for Restructuring

In a statement released on Thursday, Northvolt revealed it would seek to restructure under the U.S. bankruptcy code, hoping to safeguard its future by negotiating with creditors and potential investors. The company’s decision to file for Chapter 11 protection follows months of negotiations with owners, customers, and creditors, which ultimately failed to generate the necessary funding to keep operations afloat.

The bankruptcy filing makes Northvolt one of the most indebted companies to file for protection in the U.S. this year, a distinction it shares with fellow Swedish company Intrum AB.

Continued Operations During Restructuring

Despite the financial turmoil, Northvolt’s flagship factory, Northvolt Ett, located in Sweden near the Arctic Circle, will continue operations. The company assures customers that it will meet deliveries and maintain payments to key vendors and employees. Northvolt will also have access to $145 million in cash collateral through the Chapter 11 process, with Volkswagen’s truck-making unit, Scania CV AB, offering an additional $100 million in financing to help the company weather the storm.

“Northvolt will continue to operate as it works through this restructuring process,” said Scott Millar, Senior Managing Director at Teneo, Northvolt’s financial advisor.

Struggling to Meet Growth Targets

Northvolt’s rapid growth, bolstered by billions of dollars in debt and equity financing, had promised to reshape the European battery industry. However, the company faced numerous setbacks, including a canceled $2 billion order from BMW due to quality issues and a failure to ramp up production at its Skelleftea plant. Market conditions worsened as competition from Asian manufacturers drove down prices, further straining Northvolt’s financials.

In a bid to cut costs and stave off complete collapse, Northvolt has already reduced its workforce by 25%, halted expansion plans, and put certain projects, including plants in Germany and Canada, on hold.

The Road Ahead: Will Strategic Investors Step In?

Now, Northvolt’s hopes rest on finding long-term strategic investors who can inject capital and stabilize the company’s future. The company’s current financial adviser, Teneo, is exploring potential partnerships, including with Asian investors, to secure Northvolt’s survival.

Sweden’s government has expressed its continued support for the country’s battery industry and the green transition but has refrained from providing direct financial aid to Northvolt. Meanwhile, Germany remains committed to backing Northvolt’s project in Heide, continuing its support for the company’s growth despite the current financial struggles.

A Challenging Chapter for Northvolt

Founded in 2016 and backed by private equity firms, Northvolt had raised approximately $10 billion in debt and equity to fund its ambitious goals of establishing a European battery supply chain to compete with Chinese and South Korean giants. However, as of now, the company finds itself battling both external competition and internal financial challenges.

Despite the difficulties, Northvolt’s founding shareholder, Vargas Holding AB, expressed confidence in the company’s ability to recover. “A Chapter 11 reorganization will provide stability to turn around this challenging situation,” they said in a statement.

The Future of Northvolt and the EV Battery Market

As Northvolt moves through the bankruptcy process, the EV battery industry remains closely watching its next steps. The company's reorganization could serve as a critical test case for the future of independent European battery makers, as the EU pushes to reduce its reliance on Asian battery manufacturers.

If Northvolt is able to emerge from bankruptcy and restructure its operations, it could still play a significant role in Europe’s green transition. However, it will need to secure solid investments and overcome a challenging market environment to continue competing in the rapidly evolving EV supply chain.