Northvolt CEO quits on tumble into administration

Peter Carlsson, co-founder CEO of Swedish battery challenger Northvolt, has resigned after the ailing firm sought bankruptcy protection in the US. But potentially out-of-pocket investors and creditors may be concerned that Carlsson is staying on as both senior advisor and board member, while Northvolt is explicitly positioning its flight to Chapter 11 as a strategic move.

“Today marks a significant new phase for Northvolt as well as for me personally. The Chapter 11 filing allows a period during which the company can be reorganised, ramp up operations while honouring customer and supplier commitments, and ultimately position itself for the long-term,” Carlsson says. “That makes it a good time for me to hand over to the next generation of leaders."

As recently as July, Northvolt was still making expensive new hires, including a new CFO to allow the incumbent to take on a newly created Chief Transformation Officer role and a President, Cells. Then, in early September, the mood music changed significantly.

Troubled waters

A strategic review concluded that the firm needed to focus on the ramp-up of large-scale cell manufacturing. That saw a cathode active material (Cam) production facility expansion in Sweden being placed into care and maintenance, another proposed Swedish Cam production plant being cancelled, a search for partners for its Polish battery systems production facility and the rolling-up of a US lithium technology acquisition into its Swedish Northvolt Labs arm.

It also warned of delays in the timeframes of new projects in Sweden, Germany and Canada. And it acknowledged that job cuts would be part of the strategic pivot.

But the bad news kept coming, with the subsidiary tasked with building the mothballed Cam expansion collapsing in early October. Now Northvolt itself and certain other subsidiaries have sought Chapter 11, while stressing that this US process is “distinct from a bankruptcy or administration proceeding in Sweden or many other countries”.

“By enabling the company to restructure its debt, appropriately scale the business to current customer needs and secure a sustainable foundation for continued operation, these Chapter 11 filings will help Northvolt to implement the decisions made as part of its strategic review to rescope the business and prioritise commitments to customers," the firm says.

“Northvolt will continue to operate as usual during the reorganisation, similar to other international companies that have used the Chapter 11 process to reorganise their financial obligations. The company will continue to make deliveries to customers, while fulfilling obligations to critical vendors and payment of wages to employees.”

New footing

The process will allow the firm to access new sources of funding, including c.$145mn in cash collateral. In addition, one of Northvolt’s existing customers has committed to provide $100mn in new financing to support Northvolt’s business operations in the form of debtor-in-possession (DIP) financing, which the firm says is a “specialised type of financing for businesses that are restructuring through a Chapter 11 process”.

Its Swedish gigafactory at in Skelleftea and Northvolt Labs in Vasteras will continue to operate, while its subsidiaries developing new facilities in Germany and Canada are financed separately and will remain outside the Chapter 11 process.

“This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production, says Tom Johnstone, Northvolt’s interim chairman. “Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification.

“We are likewise pleased by the strong support we have received from our existing lenders and our customers,” he continues. The EV inFocus view is that it crucially important that Europe and North America — and indeed any major automaking areas that want to strategically reduce dependencies on China within the EV battery supply chain — develop China-free battery making to reduce Beijing’s leverage as EV adoption grows.

Thus Northvolt surviving and ultimately prospering would be good news. But its hubristic over-expansion and carelessness with borrowed money, and its nakedly transactional view of its entry into bankruptcy protection do not leave a particularly sweet taste.

Ironically, the two July hires —CFO Pia Aaltonen-Forsell and cell chief Matthias Arleth — that now seem like the last hurrah of Northvolt’s largesse phase will be tasked with leading the firm while the search for a new CEO starts.