A man stands in front of the Northvolt Ett factory in Skelleftea, Sweden, on Nov. 27, 2024.MARIE MANNES/Reuters
Northvolt AB, the European electric-vehicle battery maker, has filed for bankruptcy in Sweden in a move that raises serious doubts about the viability of a megafactory planned for Quebec.
The Stockholm-based battery-cell maker said in a statement that it exhausted all available options and was unable to secure the necessary financial conditions to continue in its current form. A court-appointed trustee will now oversee the sale of the business and its assets and settlement of outstanding obligations.
“This was a decision we did not take lightly,” and it was the only realistic path forward, Northvolt chairman Tom Johnstone told a news conference, saying every avenue had been pursued to avoid bankruptcy for the company, which puts 5,000 jobs at risk.
Europe’s auto sector had hoped Northvolt would reduce Western car makers’ reliance on Chinese rivals such as battery maker CATL and EV and battery maker BYD. The bankruptcy is one of the biggest in Swedish corporate history and the most high-profile since car maker Saab Automobile more than a decade ago.
It also has potentially serious implications for Canada. The company was building a giant battery-cell factory in the greater Montreal region with financial backing from the Quebec and federal governments – a key facility in Premier François Legault’s industrial strategy to make the province a global hub for electric-vehicle battery production and development.
That $7-billion project, billed as the largest private-sector investment in Quebec history when it was announced two years ago, is now in doubt.
European EV battery material startups make recycling breakthroughs
Observers have pointed to several reasons for Northvolt’s collapse, both internal and external. They include poor leadership, a flawed battery design, and a failure to scale-up production effectively.
While Northvolt Germany and Northvolt North America are not part of the Swedish bankruptcy filing, they are wholly-owned subsidiaries of Northvolt AB and the decisions affecting them will be made by the trustee in consultation with the group’s lenders, the parent company said.
Quebec Economy Minister Christine Fréchette said the province would like to see the trustee search for a buyer that would take up Northvolt’s entire North American activities in order to relaunch the project. Construction on the site, located in the towns of Saint-Basile-le-Grand and McMasterville, has now been halted.
“We’re obviously disappointed by the situation,” Ms. Fréchette said in an e-mailed statement. “We’re weighing our options and we’ll exercise our rights in the event of a liquidation of assets in Quebec.”
Northvolt’s North American unit is solvent. It also has potential customers lined up and will benefit from a block of hydroelectricity earmarked for the project by the Quebec government.
Quebec has lost $270-million in the venture so far in financial backing awarded to the parent company. It also lent the battery maker another $240-million to help it buy land for the factory, a loan secured by the property as collateral in addition to other Northvolt North America assets.
The federal government committed financing for the Quebec project but hasn’t yet disbursed any funds. In all, Quebec and Ottawa together pledged $2.7-billion to Northvolt to allow it to build the first phase of the factory.
Major pension funds in Canada have also been left exposed.
Canada Pension Plan Investment Board, Ontario Municipal Employees’ Retirement System, Investment Management Corp. of Ontario and Caisse de dépôt et placement du Québec participated in US$2.3-billion in convertible debt financings for Northvolt, joining major automakers and financial institutions to support the company when its future looked bright. At least three of the four organizations have taken writedowns on their investments.
Northvolt has received more than US$10-billion in equity, debt and public financing since its 2016 inception. Its biggest owners include Volkswagen, with a 21-per-cent stake, and Goldman Sachs, with 19 per cent.
The Swedish company was once seen as the future of EV battery making in Europe. But it ran out of money last year after a wave of problems that started when BMW AG cancelled a US$2-billion order in June after Northvolt failed to deliver on a long-term contract.
Things then spiralled further into crisis and the company scrambled to keep going by cutting jobs, pulling back on its expansion plans and seeking more financing. It sought creditor protection in the United States last November.
German Economy Minister Robert Habeck said Wednesday that he hoped Northvolt might still be rescued by an investor who could secure the future of its planned German plant. “The possibility definitely exists,” he said.
With a report from Reuters.