Troubled Northvolt may struggle to find a buyer

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Peter Carlsson, the co-founder and former CEO of Northvolt, is said to have once joked about what would happen if Europe’s once great hope for the battery industry ran into trouble.

According to a former senior executive, he suggested that if everything went wrong, everyone in the Swedish company would end up speaking German. Carlsson admits to having made a comment along these lines, suggesting that it was an expression of Germany’s importance to Northvolt.

Volkswagen, the German automaker that is Northvolt’s largest shareholder with a 21 percent stake, has long been considered the most likely candidate to take over the Swedish battery maker since its initial investment in 2019. But Northvolt has now filed for Chapter 11. After the bankruptcy in the USA and Carlsson’s resignation, VW is hardly mentioned as a likely buyer. The company and virtually every other European automaker are in a crisis of their own due to weak demand and the uncertain outlook for electric vehicles, depriving Northvolt of a slew of possible saviors.

Another obvious group of potential investors – existing battery makers dominated by Asian players – are struggling with their own problems, particularly overcapacity in the industry. Another factory, albeit the only one in the rather unattractive European market, is hardly at the top of their Christmas list.

In addition, allegations are circulating among the Swedish group’s shareholders about who is to blame. One target of ire: The Swedish government, for not only not supporting Northvolt financially but also loudly saying in the middle of sensitive financial discussions that it would not do so. And then try to influence the rescue of the start-up.

That’s the unfortunate backdrop to Northvolt seeking up to $1.2 billion to exit Chapter 11 in the next three months. This raises questions about Europe’s willingness to take part in the fierce competition around the green transition.

The Swedish industrial startup hopes to complete what Carlsson called “its cleaning process” in the first quarter of next year. This is not least due to the precarious finances. The company filed for Chapter 11 with just $30 million in the bank, despite taking on $15 billion in debt, equity and government subsidies for its battery factory in northern Sweden and planned plants in Germany and Canada. Predictions in the file underscore the problems. According to the filing, revenues for the 13 weeks from mid-November to mid-February are estimated at $46 million, while outflows are expected to be $348 million.

Northvolt’s offer to potential investors is likely to be that they receive an expensive package of battery assets at a cheap price. Northvolt’s property and equipment was worth $5.2 billion at the end of 2023, including its current factory in Skellefteå in northern Sweden and properties in Germany and Canada.

The startup’s crown jewel, according to several former executives, is not the Skellefteå factory, but its research and development facility, known as Northvolt Labs, in Västerås, near Stockholm. This location is considered more attractive to foreign workers than a factory near the Arctic Circle and has facilities that no other battery manufacturer in Europe has.

Northvolt says it is talking to all potential partners about its future. A particular focus is on Asian battery manufacturers, including Chinese manufacturers such as CATL. Pan Jian, co-founder of CATL, told the Frankfurter Allgemeine Sonntagszeitung over the weekend that investing in Northvolt was “not a priority” but that there was a “possibility that we can help them on the production side.” This could include sending qualified battery engineers – something that is sorely lacking in Europe.

Despite providing almost no financial support to Northvolt, the Swedish government is causing further uproar by saying that it sees the battery maker’s “Western” shareholder base as a significant advantage and that it is important that Europe’s green transition does not become Chinese. This could easily collide with Northvolt’s attempts to get closer to Asia.

Northvolt’s task for now is to ensure that battery production can continue despite the turmoil and to finally try to increase production. Ironically for Carlsson’s joke, the company has turned to two new German employees – chief operating officer Matthias Arleth and Skellefteå factory manager Markus Dangelmaier – to steer it through Chapter 11. Northvolt’s path to financial salvation, industrial triumph and geopolitical success for Europe appears to be an increasingly difficult task.

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