Bad for Europe's battery industry: Northvolt applies for creditor protection
The ailing Swedish battery company Northvolt has filed for bankruptcy protection in the USA. The planned construction of the factory in Heide is to continue.
(Image: Volvo)
The Swedish battery manufacturer Northvolt has filed for bankruptcy protection in the USA under Chapter 11 of the United States Bankruptcy Code. A rescue package has apparently previously failed.
As the Swedish company announced on Thursday, it has filed for reorganization under Chapter 11 in the United States Bankruptcy Court for the Southern District of Texas (Case No. 24-90577). Chapter 11 proceedings offer companies, including those that only have a branch office in the USA, judicial protection from creditors. As a rule, companies file for insolvency under Chapter 11 in order to achieve a court-supervised restructuring of the company's finances. Insolvency proceedings at Northvolt's headquarters in Sweden, on the other hand, would have required the appointment of an insolvency administrator.
Access to new funds
The voluntary restructuring gives Northvolt access to new sources of funding, including around 145 million US dollars in cash collateral and 100 million US dollars in debtor-in-possession (DIP) financing. This special type of financing is available to companies in the USA during insolvency proceedings. It enables companies in financial difficulties to take out loans in order to maintain ongoing operations. The claims from this financing have priority over all other existing debts.
Business operations will continue as usual during the Chapter 11 reorganization proceedings, Northvolt explained. "The company will continue to serve its customers while meeting its obligations to key suppliers and paying wages to employees," the press release said.
Construction of the factory in Heide continues
Northvolt's flagship battery gigafactory in Skellefteå, Sweden, as well as the plant in Västerås, Sweden, will remain in operation, according to the company. Northvolt plans to ramp up production "to meet its commitments to its customers". The subsidiaries Northvolt Germany and Northvolt North America "will be financed separately and will continue to operate as usual outside of the Chapter 11 proceedings as key components of Northvolt's strategic positioning," it said.
The construction of the Northvolt factory near Heide in the Dithmarschen district, which started in March, will therefore continue despite the economic problems. According to Northvolt Germany CEO Christofer Haux, the location is a "top priority", reports NDR. Northvolt wants to build battery cells for up to one million electric cars per year in Schleswig-Holstein in the future. The factory is expected to create 3,000 jobs. According to Northvolt, the construction of the factory near Heide is on schedule. However, according to NDR, production there will start later than planned – in the second half of 2027. Originally, the first assembly of battery cells was scheduled for the end of 2026. The state of Schleswig-Holstein and the federal government provided funding of around 700 million euros. However, this money has not yet been paid out. The company promises that Northvolt Germany will not draw down any funds as long as the restructuring continues.
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Restructuring to secure Northvolt's long-term goal
The application for creditor protection "will enable Northvolt to continue its mission to create a domestic, European industrial base for battery production," said interim Chairman of the Board of Directors, Tom Johnstone. "Despite short-term challenges, this move to strengthen our capital structure will enable us to meet the ongoing market demand for vehicle electrification."
The move comes after months of discussions with creditors, shareholders and customers in an attempt to find a way to continue operations. Northvolt has cut jobs and canceled expansion plans to overcome cash shortages. At the beginning of July, Northvolt CEO Peter Carlsson said in an interview with the Swedish business newspaper "Dagens industri" that the company had been a little too aggressive in its expansion plans in competition with established Chinese and South Korean battery cell manufacturers. Previously, the German car manufacturer BMW had withdrawn a two billion euro order for battery cells. In addition, demand in the general market for electric vehicles has slowed down. Negotiations with lenders over a 300 million US dollar rescue package did not lead to an agreement and ultimately prompted Northvolt to seek protection from creditors. The restructuring process is expected to be completed in the first quarter of 2025, the company announced.
(akn)
