Northvolt, once heralded as Europe's key challenger to Asian dominance in electric vehicle (EV) battery production, has filed for Chapter 11 bankruptcy protection in the United States after failed negotiations with investors for a last-minute rescue package. The Swedish battery manufacturer, crucial to Europe’s automotive sector, made the decision to reorganize its operations as part of a larger effort to secure long-term sustainability. This filing comes after months of financial turmoil and mounting production challenges.

The company, founded with the ambitious goal of countering the dominance of Asian players like China’s CATL, Japan’s Panasonic, and South Korea’s LG and Samsung, had raised over $15 billion from prominent investors such as Volkswagen, Goldman Sachs, and BlackRock. Despite this, Northvolt struggled to ramp up production at its Skellefteå factory in northern Sweden, which had a planned capacity of 16 gigawatt hours of batteries annually—enough to power around 270,000 EVs. However, the plant produced less than 1% of its targeted output last year, with internal sources citing issues such as mismanagement, overspending, poor safety standards, and excessive reliance on Chinese machinery.

In its Chapter 11 filing, Northvolt disclosed that it was left with only $30 million in cash, enough to maintain operations for just one more week. The company also reported a staggering debt of $5.8 billion. While the filing is seen as a crucial step in preserving the company, Northvolt did announce that it would have access to $145 million in cash and an additional $100 million in new financing from Swedish truckmaker Scania, one of its key customers. The company’s German and Canadian operations, which include planned factories in both countries, are unaffected by the Chapter 11 filing, as they are financed separately, including substantial government subsidies totaling nearly $4 billion.

As part of its restructuring efforts, Northvolt is in the process of seeking new investors who can provide the capital necessary to restore the company’s financial health and ensure its long-term viability. It is hoped that the restructuring process, expected to conclude in the first quarter of the next year, will allow Northvolt to secure the funding it needs to regain stability and growth. The company has already scaled back its original plan to raise $7 billion, and its attempts to negotiate a $300 million rescue package with investors collapsed earlier this month.

Unfortunately, the company’s struggles have not been limited to financial woes. Last year, Northvolt’s factory was the site of a tragic explosion that led to the death of an employee, prompting Swedish authorities to investigate the incident for potential gross manslaughter charges. Additionally, BMW, one of Northvolt’s shareholders, canceled a $2 billion contract due to the company’s inability to meet its production targets.

Despite the challenges, Northvolt remains hopeful that the Chapter 11 process will provide the company with the breathing room it needs to recover. The firm’s leaders, including interim chair Tom Johnstone, maintain that the reorganization will allow them to continue their mission of building a strong, European-based battery production industry that can compete with established players in Asia. Northvolt has expressed optimism about finding new investors and restructuring its operations to ensure it can thrive in the rapidly growing EV battery market.

FT.COM