Northvolt gets another blow with VW and Goldman Sachs abandoning ship

Northvolt’s number one and two shareholders, the Volkswagen Group and Goldman Sachs bank will write down their stake in the battery maker. This is another blow for the cash-strapped company.

Northvolt filed for Chapter 11 bankruptcy protection in the US last week. The Swedish factory has a new CEO, and Peter Carlsson has stepped down. The goal was to restructure without having to declare insolvency.

And when it rains, it often pours. Now, the company’s shareholders are writing off their shares. Although this does not change Northvolt’s account balance, investors indirectly express their assessment that the battery manufacturer is rapidly losing value.

Shareholders disembark

Volkswagen, Northvolt’s biggest shareholder with a 21% stake in the battery maker, has significantly written down its share. According to Reuters, two people familiar with the matter have confirmed this.

It shouldn’t surprise Northvolt, as Volkswagen has been performing writedowns throughout the current financial year. However, it is unclear how much of the shares will be written off or what their current value is.

Regarding shareholder number two, Goldman Sachs, that answer is pretty straightforward. According to the Financial Times newspaper, the US bank has “at least $896 million in exposure to Northvolt,” and “they will write that down to zero at the end of the year.”

Just a few weeks ago, Goldman Sachs was still actively involved in finding a lifeline for Northvolt. There was even talk of the US bank teaming up with other investors to rescue the cash-strapped battery manufacturer. It was said to be critical to any further investments.

Those two most prominent shareholders might not be the only ones who will cut back on their investments in Northvolt. Swedish pension fund AMF, a top ten shareholder, also said it regularly reviewed and adjusted its stake but did not go into details.

“As is obvious to everyone, the value of Northvolt is considerably lower than it was compared to a year ago,” an AMF spokesman told Reuters. Over the years, it has invested the equivalent of 1.95 billion Swedish crowns (€169 million) in the Swedish company.

Fighting to survive

As mentioned, Northvolt filed for Chapter 11 bankruptcy protection in the US at the end of last week. Chapter 11 is often called ‘reorganization bankruptcy’, meaning the company holds on to its assets and continues operations while working on a plan to repay creditors.

In other words, it will continue honoring customer contracts, fulfilling vendor obligations, and paying employees wages. The battery maker also emphasized that this will only affect the company’s only operating battery factory in Skellefteå, Sweden, and Northvolt Labs in Västerås, Sweden. The company appointed Paul O’Donnell as a restructuring expert for the battery factory.

Northvolt has been dealing with financial (and production) issues for some time now, and the situation has become increasingly tense in recent months. BMW canceled an order worth billions due to delivery delays (caused by production problems), and Traton brand Scania, which wanted to source all its battery cells for electric trucks from Northvolt, is reportedly looking for alternative suppliers.

The combination of canceled orders and the capital-intensive problems related to ramping up production has put the company in a difficult financial situation.

Are future factories unaffected?

The factories under construction in Heide, Germany, and the province of Quebec, Canada, are supposedly unaffected, as they are operated and financed by Northvolt AB subsidiaries Northvolt Germany and Northvolt North America.

And the Swedes continue to emphasize that the long-term goal of establishing battery production in Europe will not change. How long they can continue down that path remains to be seen.

Meanwhile, Benoit Lemaignan, co-founder and CEO of French battery cell manufacturer Verkor, reacts in an interview with the German newspaper Wirtschaftswoche to the backdrop of the problems at Northvolt. “We are currently experiencing the first major challenges for the European battery industry,” he admits. But he is certain: “There will be factories, and there will be customers; we are seeing that more and more.”