Northvolt files for Chapter 11 in the US

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The company points out that filing for Chapter 11 does not mean filing for bankruptcy in the sense of liquidation. Chapter 11 is often referred to as “reorganisation bankruptcy,” meaning the company holds on to its assets and continues operations while working on a plan to repay creditors. In other words, it will continue honouring customer contracts, fulfilling vendor obligations, and paying employees wages.

“These Chapter 11 filings will help Northvolt to implement the decisions made as part of its strategic review to rescope the business and prioritise commitments to customers,” the company says in its press release. Northvolt expects the restructuring process “to be completed in the first quarter of 2025.”

With a slight delay, the Swedisch manufacturer also announced that founder Peter Carlsson is stepping down as CEO but will remain active as a member of the Board of Directors and Senior Advisor. “Today marks a significant new phase for Northvolt as well as for me personally,” he says. “The Chapter 11 filing allows a period during which the company can be reorganized […] That makes it a good time for me to hand over to the next generation of leaders.”

Tom Johnstone, Interim Chairman of the Board of Directors, recognised the vision and commitment of the outgoing CEO, who will not be replaced immediately. The search for a new CEO has begun, he says. Until then, the company’s management will consist solely of Chief Financial Officer Pia Aaltonen-Forsell and Cells President Matthias Arleth, who will now take on the role of Chief Operations Officer. The duo will be supported by Chief Restructuring Officer Scott Millar.

This trio will now primarily steer the company through the Chapter 11 proceedings.

As the company points out, it will use the restructuring process to raise new capital. It expects to raise around 245 million dollars. The company specifies. That includes “approximately $145 million in cash collateral. In addition, one of Northvolt’s existing customers has committed to provide $100 million in new financing to support Northvolt’s business operations in the form of debtor-in-possession (DIP) financing, which is a specialized type of financing for businesses that are restructuring through a Chapter 11 process.”

Northvolt is actually a Swedish company but says that its international presence allows it to file for the proceedings in the US. It also points out that similar proceedings are not available elsewhere. “The US Chapter 11 procedure enables companies to maintain operations during restructuring”, Northvolt explains. “At the same time, this procedure gives them access to special forms of financing, such as debtor-in-possession (DIP) financing, which are not available in the same form in other countries.”

Chapter 11 does not come as a surprise

Northvolt has been dealing with financial (and production) issues for some time now, and the situation has become increasingly tense in recent months. First, 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.

As a result, Northvolt said earlier this week that filing for bankruptcy protection in the US would be one option it is considering – and has now opted to do so.

Northvolt is not the first company to have chosen this route. General Motors is just one recent example from the automotive industry. 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 car manufacturers reduce their 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.

What happens outside the US

As pointed out above, Northvolt is actually based in Sweden, where it currently operates its only battery cell factory. However, it also has factories under construction in Germany and Canada – both of which will not be affected by the bankruptcy protection proceedings, as they belong to Northvolt AB subsidiaries Northvolt Germany and Northvolt North America and are financed separately.

The battery plant in Skellefteå, Sweden, and Northvolt Labs in Västerås, Sweden, operated by the parent company and thus affected by the proceeding, will remain operational. The company just appointed a restructuring expert as head of the latter. The Swedes emphasise that the long-term goal of establishing battery production in Europe will not change.

“Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification, “says Tom Johnstone, interim Chairman of the Board. “Throughout this process, we will focus on meeting our commitments to our stakeholders, including our employees, customers, suppliers and the governments of the countries in which we operate. As a reorganized entity, we aim to establish a resilient base of operations and a competitive platform for innovation and long-term growth that will advance our work to build a more sustainable society.”

northvolt.com, northvolt.com (Carlsson)