Swedish company Northvolt subsidiary files for bankruptcy but stays firm on Quebec plant

The entrance to Northvolt, the new EV battery plant being built by the Swedish manufacturer in Saint-Basile-le-Grand, east of Montreal, Que.,Thursday, May 16, 2024. (Christinne Muschi / The Canadian Press)

Though Swedish battery manufacturer Northvolt confirmed one of its entities filed for bankruptcy with a Stockholm court due to its financial situation, it has no plans to back out of its Quebec project.

The filing concerns the subsidiary Ett Expansion AB.

Last September, the company announced the suspension of an expansion project in Skelleftea, Sweden, as part of a restructuring of Northvolt's Swedish operations.

The subsidiary is managing the construction project, but has no direct employees.

All expansion work has since been suspended, the company said in a statement.

Skelleftea police are also investigating after three Northvolt workers at the plant died under mysterious circumstances.

Northvolt said the bankruptcy petition did not affect any of the company's other legal entities.

"I want to be clear: the recent announcement regarding the Northvolt Ett Expansion AB subsidiary in Sweden has no impact on our project in Canada. This situation concerns a specific entity in Sweden," Northvolt said in a statement.

"The work surrounding our project in Quebec is progressing as planned ... We continue to work closely with our partners to ensure the success of our project in Montérégie as Northvolt proceeds with its strategic review."

However, the shape and timetable of the $7 billion project, in which Quebec and Ottawa have committed to investing $2.4 billion, could be revised as a result of Northvolt's new strategic direction.

In September, Northvolt announced the dismissal of 1,600 employees in Sweden, one-fifth of its workforce, illustrating the financial difficulties facing the company.

The company had also announced that it was pausing its cathode activities at its Skelleftea plant and abandoning its cathode manufacturing project in Borlange, also in Sweden.

The company said on Tuesday that it wanted to focus "its resources on accelerating large-scale cell production in the first fully-built phase of Northvolt Ett and on meeting its commitments to its automotive customers."

Mark Purdon, the Chair of decarbonization at Université du Québec à Montréal (UQAM) said it's reasonable for Quebecers to be worried about the future of the plant here.

"I think there's justifiable, you know, this could, this may not turn out. But my impression is North bolus hasn't said that they're cutting back on the Canadian what they Quebec project," he said.

Purdon pointed out that BMW AG, one of Northvolt's big clients, recently backed out of a $2.9-billion battery order over quality concerns. There have also been delivery delays.

Northvolt said the decision "was prompted by the desire of both BMW and Northvolt to concentrate our efforts on the development of next-generation cells." BMW represented five per cent of the company's order book.

"Ett is currently ramping up production and delivers tens of thousands of cells to our customers every week," a Northvolt spokesperson told CTV News.

He also said electric vehicle sales aren't as high as originally hoped — and Quebec already started rolling back some of its incentives for potential buyers. Meanwhile, companies are competing with the Chinese market that produces EV batteries at lower costs.

"It sounds like North volt is probably bitten off more than they can chew, and they are now in sort of a financial straits," said Purdon.

But, Purdon sees scaling back operations in Europe to focus on the North American market as a strategic move, especially with the American Inflation Reduction Act which gives Canada opportunities to supply electric cars and parts to the U.S.

Northvolt said it already has an established client in North America.

"I think the long term prospects seem reasonable, but Northvolt is going to have to compete with other companies ... like the Volkswagen plant in Ontario that's making batteries," he said.

With files from La Presse Canadienne