Northvolt appoints restructuring manager and considers Chapter 11 procedure

Battery manufacturer Northvolt has appointed restructuring expert Paul O’Donnell as head of the Northvolt Ett factory. The company’s only active cell factory is lagging behind its production targets. Meanwhile, financing negotiations continue.

Northvolt Ett (based in Skelleftea in the north of Sweden) has officially been producing battery cells since the end of 2021 but had continuous problems scaling up production since then. On the one hand, many cells do not meet the quality standards, and on the other, the quantities are too low.

This autumn, a production target of 51,000 cells per week was circulated, but Northvolt Ett achieved this in one week between the end of September and the beginning of November. A spokesperson described this target as ‘outdated’ but did not give a new figure.

Restructuring

Northvolt has found a new factory manager in Paul O’Donnell. His predecessor, Mark Duchesne, resigned in October. Northvolt cites O’Donnell’s significant experience in financial restructuring from his time at Blackstone and his role as director of several companies. He has helped Thames Water engage with creditors, for example.

O’Donnell will also join the board of directors. “It makes sense to augment the board with an individual who has significant restructuring experience to guide the company through this period,” Northvolt spokesman Martin Hofelmann said in written comments to Bloomberg.

Customers are canceling

Low unit sales pressure turnover and the constant adjustments also cost money. In addition, major customer and shareholder BMW canceled a billion-dollar order in June.

The German car manufacturer would have needed the prismatic cells from Northvolt Ett for its current electric models. With the Neue Klasse, BMW is switching to large-volume round cells; thus, prismatic cells will no longer be needed at BMW.

The cancelled BMW order made Northvolt’s problems public. The combination of canceled orders and the capital-intensive issues of scaling up production has put the company in a difficult financial situation.

Doubts within the industry are growing: Traton brand Scania, which wanted to source all its battery cells for electric trucks from Northvolt, is reportedly looking also for alternative suppliers.

New start needed

As a result, the company initiated a strategic review, announced cost-cutting measures, and reorganized the Management Board. However, Northvolt needs fresh capital for this new start. There is talk of a financial injection of around $300 million.

Negotiations have been dragging on for weeks. They involve a consortium of banks and existing investors (the major US bank Goldman Sachs already has a significant stake in Northvolt, as has Volkswagen AG).

The Swedish newspaper Dagens Industri reported last week that the electric vehicle supplier was considering a US Chapter 11-style bankruptcy filing. This court process would protect the company from creditors while restating its balance sheet.

On the other hand, the Swedish government has repeatedly reiterated that it doesn’t want to invest in the company. In Quebec, the Canadian government is also debating whether to invest further in Northvolt.

The battery manufacturer is constructing a manufacturing plant there, which was supposed to open in 2026, but the opening date was recently pushed back to 2028.