Northvolt could apply for bankruptcy protection in the US
As the news agency Reuters claims to have learnt from two insiders, Northvolt is considering “the possibility of bankruptcy protection in the United States.” Plan A is still a funding deal with investors that would save the cash-strapped company from such a step – according to one of the Reuters informants, talks are continuing “despite the talks becoming more difficult in recent weeks.”
If negotiations fail, seeking bankruptcy protection under Chapter 11 in the US is an option.
Northvolt would not comment on the information but did not deny it either. “Since the beginning of the strategic review, we have constantly been discussing different options and that hasn’t changed throughout the process,” a spokesperson told Reuters. “We communicate results once we have found a conclusion, while we continue the dialogue with our stakeholders.”
The situation at Northvolt has become increasingly tense in recent months. It first became known that BMW had cancelled an order worth billions due to the delivery delays (caused by the production problems). The combination of cancelled orders and the capital-intensive problems related to ramping up production has put the company in a difficult financial situation.
As a result, the company initiated a strategic review, announced cost-cutting measures and reorganised the Management Board. In the meantime, however, doubts within the industry are growing: Traton brand Scania, which wanted to source all its battery cells for electric trucks from Northvolt, is reportedly looking for alternative suppliers.
According to a Swedish business newspaper Dagens Industrie, Scania also took part in talks with investors and lenders last week. These talks have reportedly stalled but will continue this week.
Chapter 11 proceedings are formally insolvency proceedings, which are regulated by Chapter 11 of the US Bankruptcy Code. However, it is more of a reorganisation procedure that protects ailing companies from being seized by creditors and is intended to enable them to restructure. However, it is important that the companies are not (yet) insolvent.
In the automotive industry, one recent example is General Motors. As a result of the car crisis in 2008, the US company had to reorganise under Chapter 11 in 2009. The bankruptcy protection proceedings helped the car manufacturer to reduce its debts by almost 70 billion dollars. However, brands such as Pontiac, Saturn and Saab were discontinued or sold in the process, 13 US plants were closed, and around 20,000 people lost their jobs.
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