Started clock ticking on Chapter 11 filing by EV battery maker
Back then, few saw the significance of the move, which effectively started a countdown that would culminate in a Chapter 11 filing less than six months later. Northvolt scrambled to keep the financing flowing, but as Germany’s car industry fell deeper into its own crisis, it became clear orders would dry up.
The company responded to the lost revenue by retrenching expansion plans and slashing jobs. By the time the last attempt at an emergency plan failed, investors who had poured in US$10 billion discovered only US$30 million cash was left.
The company needs as much as US$1.2 billion to finance its new business plan, Carlsson said, telling reporters that “we’ll regret it in 20 years if we’re not driving transition” to clean technologies.
The Financial Times reported on Saturday that funds run by Goldman Sachs Asset Management are set to write down almost US$900 million at the end of the year. The investment was a minority one “through highly diversified funds,” Goldman said in an emailed statement, adding that its portfolios “have concentration limits to mitigate risks.”
One fund representative, who asked not to be named discussing private matters, said they were shocked at the speed with which Northvolt blew through its billions. As recently as July, the investor was confident of getting a return, but that changed in early August after getting a call from one of Northvolt’s owners, who warned that the battery maker could run out of cash by September.
The scale of the delays, and how bad things were with building budgets and construction projects remained hidden, the investor said, recounting how excel models and slide decks were used to conceal how empty the coffers had become.
The Swedish company now faces a task of restructuring, with a more focused operation set to emerge from the Chapter 11 process.
“A dilemma that these ambitious newcomers are facing is that from the get-go, they had to announce very large-scale plans in order to be attractive for financiers,” said Robert Heiler, senior manager at Porsche Consulting, part of the sportscar unit of Volkswagen, Northvolt’s top investor. “But it’s really difficult to scale up” various operations “all at the same time,” he said.
Just how badly Northvolt and its financiers misjudged the situation a year ago has now become evident. Last fall, the company invited investment banks to pitch for roles in an IPO that could have valued the battery maker at US$20 billion, the FT then reported.
A little over six months later, the IPO was pushed back from 2024, Bloomberg reported. Soon after that, VW’s truck unit, Scania, complained after Northvolt had trouble ramping up production volumes, and then BMW pulled its €2 billion (US$2.1 billion) contract to equip electric vehicles such as the i4 sedan and iX sports utility vehicle.
After repeated delays, the battery maker was unlikely to be able to produce the volumes BMW needed before 2026 — a year after predecessor models were set to be gradually phased out and almost three years after the original target date, a person familiar with the matter said, declining to be named discussing private information.
Around that time, a failure to close on an equity funding round meant that a US$5 billion green loan that was announced in January remained frozen, according to another person.
But the German auto giant was facing a crisis of its own. By late summer, with EV sales stagnant in Europe and its lucrative Chinese business flagging, VW called for unprecedented factory closures in Germany.
Against the backdrop of potentially tens of thousands of layoffs at VW, Northvolt funding was off the table, and in August, VW withdrew from the equity plan, the person said. A Volkswagen representative declined to comment.
The German automaker, which had valued its Northvolt holding at the equivalent of more than US$730 million as of the end of 2023, then balked at committing to more battery purchases, people familiar with the matter said this month.
Still, work on a bridge funding deal continued, with an agreement coming close to fruition as recently as October. The US$300 million in emergency aid would have involved lenders, creditors and customers, but talks fell short.
“In this latest funding round, VW basically told us that they are not able to continue to capitalize us,” Carlsson said on Friday.
Northvolt’s debts include a US$330 million convertible loan from Volkswagen that’s due in December 2025, according to the bankruptcy court filing.
In its bid to reassure financiers, Northvolt nixed a planned expansion of its main plant in Skelleftea in northern Sweden and, in October, replaced the factory’s manager. But Carlsson acknowledges that he acted too slowly.
“I should have probably pulled the brake earlier on some of the expansion paths,” he said.
Northvolt’s big-swing approach will be second-guessed for years to come. But it won’t disappear in the immediate future. In its filing, the company said finding a strategic or financial partner is an overarching goal as it seeks to restructure the balance sheet and continue operations.
Governments — from Stockholm to Berlin — have rebuffed suggestions they’d spend taxpayer funds on a rescue.
German Economy Minister Robert Habeck, who had in June suggested Northvolt should build a second factory in his home country, on Saturday told German press agency DPA that he’s “cautiously optimistic” about the company’s future.
The relationship with Volkswagen continues. Scania CV AB remains a key Northvolt customer and will provide US$100 million in debtor-in-possession financing at a hefty interest rate of 16 per cent. Northvolt will also have access to about US$145 million in cash collateral. Battery plants under construction in Germany and Canada were left out of the bankruptcy, though the company said these projects will be postponed.
Northvolt is also making preparations in case it fails to raise funds for the future. Documents filed with the U.S. court show that it plans to “assess potential opportunities for a sale of some or all assets and has engaged Hilco Global to assist with an orderly liquidation process if necessary.”
—With assistance from Sonja Wind, Kamil Kowalcze, William Wilkes, Sara Sjolin, Rafaela Lindeberg and Luca Casiraghi.