EU battery hopes in tatters as Northvolt CEO resigns and company files for bankruptcy

In a huge blow to Europe’s plan to set up its own battery industry to power electric cars, Peter Carlsson resigned as CEO of battery-maker Northvolt on Friday morning, shortly after the company filed for Chapter 11 bankruptcy protection in the U.S.

“The Chapter 11 filing allows a period during which the company can be reorganized, ramp up operations while honoring customer and supplier commitments, and ultimately position itself for the long-term,” Carlsson, a former Tesla executive who cofounded Northvolt in 2016, said in a statement.

He will stay on as a senior adviser and remain on the board.

The filing, and departure of its cofounder, marks a swift reversal of fortunes for the company that was set to be Europe’s battery champion and chief competitor to the Chinese and other Asian companies that dominate the sector.

“Northvolt’s liquidity picture has become dire,” the company said in its Chapter 11 petition.

Northvolt’s Swedish subsidiary, Northvolt Ett Expansion, filed an application for bankruptcy in October.

Sweden’s government has consistently said it will not step in to save the company. German officials considered getting involved, but the government is cash-strapped and dealing with turmoil in its domestic automotive industry — the same woes that started Northvolt’s downfall.

Chinese automaker insiders, meanwhile, are scratching their heads at European leaders’ willingness to let Northvolt die, said Cornel Ban, an associate professor at the Copenhagen Business School, who studies electric vehicle investments in China.

“[Northvolt] is our silver bullet in the competition,” he said.

The company managed to create an EV battery without lithium or other critical raw materials that China controls. However, it ran into large problems with overspending, management and production. It was also hit with an unexpected slowdown in EV demand.

“Why didn’t we solve the financing sooner? It was an incredibly complicated game to get bridging financing between different stakeholders. We finally had to give up on that attempt,” Carlsson told reporters.

He blamed the company’s difficulties on starting new production facilities with innovative technology. “When you start with new products, build a new factory, and hire new employees, you’re taking on a significant challenge,” he said.

While the Chapter 11 filing will allow it to restructure, Northvolt’s meteoric rise is over as it struggles to bring in new financing.

Tom Johnstone, the interim chair of Northvolt’s board, said: “This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production.” 

In a remark to reporters, Carlsson said the company needs to raise between $1 billion and $1.2 billion to get the company back on track. By filing for bankruptcy protection in the U.S., it now has access to $145 million in cash collateral and $100 million in new financing from one of its existing customers, the company said.

“First and foremost, this was necessary to capitalize and drive the company forward,” Carlsson said. “Essentially, Northvolt is crucial for both our customers and for Europe’s green transition. The recapitalization allows us to emerge from this process with a simpler capital structure.”

Northvolt’s downward spiral began over the summer when BMW canceled a contract worth €2 billion. The next blows came fast, with Volvo saying it would take over its joint venture with Northvolt as soon as it finds an investment partner.

In September, Northvolt announced it was laying off 1,600 people, or a quarter of its workforce in Sweden, and suspending its gigafactory expansion project.

But the biggest setback came from Volkswagen, which is Northvolt’s top investor and holds 21 percent of the company. The German automaker is facing a financial crisis of its own with slowing sales in China and negotiations with union workers over layoffs and potential plant closures.

Despite the Chapter 11 filing, the company’s flagship gigafactory in Skellefteå, Sweden, and Northvolt Labs in Västerås, Sweden, will remain operational. Northvolt Germany and Northvolt North America will also continue operating, with the company saying that a C$7 billion factory being planned for Quebec is still on track.

“There are many questions about the speed of the green transition and Europe’s role. It’s essential to keep pushing forward,” Carlsson said. “We’ll regret it in 20 years if we don’t accelerate the transition and create a strong European market with strong European champions.”