(Bloomberg) -- Northvolt AB sought bankruptcy protection for one of its units in a bid to limit the financial fallout from the troubled battery maker’s now-halted expansion in northern Sweden.
Northvolt Ett Expansion AB was managing construction of the project at its flagship plant in Skelleftea, according to a statement on Tuesday. The company said last month it was suspending the build-out as it confronts a deepening liquidity crisis.
“We have been working for several weeks to find another solution,” a Northvolt spokesman said in an email. “Unfortunately, this has not been successful, and therefore we have filed for bankruptcy for the subsidiary.”
Sealing off the unit from the rest of the group could buy time for Northvolt to work on a broader fundraising effort as the maker of electric-vehicle batteries attempts to steady its shaky finances. Yet the move illustrates the urgency of Northvolt’s strains, while it also risks vexing suppliers who won’t be able to collect on money owed.
The company said it continues to work on a strategic review aimed at strengthening its its core business.
“We are in the middle of a financing process, and we plan to return with more information later on,” the company said.
The filing in Sweden marks a deepening of the crisis at Northvolt, which has received about $10 billion in debt and equity funding since being founded in 2017.
The plan to expand at Northvolt Ett was suspended last month as part of a package of wider measures to stabilize the company’s finances. The battery maker drew major backing from governments, customers and investors as it sought to stand up an independent European supply chain for electric vehicles.
Now Northvolt faces a cash crunch, after a production ramp-up faltered at its main plant near the Arctic Circle. Bloomberg reported last week that the company has also pulled back on an aggressive expansion across Europe and North America, as it sought to build the manufacturing scale needed to compete with lower-cost Chinese producers.
Slowing EV demand in key markets this year has also dimmed the outlook for Northvolt.
While the unit that filed for bankruptcy had no direct employees, it carried liabilities including 606 million Swedish kronor ($58.2 million) of debt to suppliers, 325 million kronor to companies within the group and 554 million kronor in accruals and deferred income, according to its latest annual report at the end of 2023. Assets at the time stood at 10 billion kronor, according to court documents seen by Bloomberg News.
The unit’s bankruptcy filing doesn’t relate to any of the other legal entities in the wider group, Northvolt said. In a letter to suppliers seen by Bloomberg News, the company indicated that some of those affected also do business with other parts of Northvolt.
The company’s “strong intention” was to maintain those working relationships, and urged its vendors to “please continue to keep in contact with us in the normal way on those supplies.”
The subsidiary filing for bankruptcy had debt registered with the Enforcement Agency in Sweden totaling 460,000 kronor, an amount that was due on Monday, according to a report by Swedish news magazine Affarsvarlden.
The company said a bankruptcy trustee will now manage all contact with the affected unit. The wider group “continues to be in dialog with stakeholders for continued cooperation within Northvolt Group’s ongoing operations,” it said.
--With assistance from Christopher Jungstedt.
(Updates with company comment from third paragraph)
©2024 Bloomberg L.P.