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Northvolt AB filed for bankruptcy protection in the United States after failing to secure a lifeline for its battery cell business in a weakened electric vehicle market.

The Swedish company has filed for Chapter 11 in the Southern District of Texas, it said in a statement Thursday. The lawsuit gives the company legal protection from creditors, allowing operations to continue as it restructures its balance sheet.

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Northvolt said its main factory will operate as usual during the reorganization. “The company will continue to make deliveries to customers while meeting obligations to critical suppliers and paying salaries to employees,” the statement said.

Through the lawsuit, Northvolt will have access to about $145 million in cash collateral, the company said. One of its clients will also provide US$100 million in debtor-in-possession financing.

The move caps months of talks with owners, customers and creditors to find a way for Europe’s rare domestic EV battery maker to continue operations. The company has cut jobs and scrapped expansion plans as it tries to overcome a cash crunch that intensified in the fall after it lost a key contract and was unable to access $1.5 billion in loan guarantees.

In recent weeks, Northvolt has been embroiled in intense negotiations involving creditors, shareholders and customers over a proposed $300 million bailout designed to stop the company from seeking longer-term financing. When no deal materialized, the battery maker was left to seek protection from creditors.

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Northvolt opened its main factory in Skelleftea near the Arctic Circle in 2021, but has failed to meet volume growth targets amid intense competition from established battery makers in China and South Korea. In June, shareholder BMW AG canceled a $2 billion battery order due to quality issues.

As demand slowed in the broader electric vehicle market, Northvolt soon launched a review of its expansive growth plan. It decided to cut 20% of its global workforce, replaced the CEO of the flagship plant and bankrupted an expansion unit there.

Volvo Car AB initiated proceedings last month to take over the joint venture, while Volkswagen AG’s representative on Northvolt’s board resigned in November. Sweden’s government, meanwhile, has repeatedly ruled out making a bet to save its champion.

Chief Executive Peter Carlsson said this month that the company needs more than $900 million to permanently secure its finances and that the company is looking for partnerships, including in Asia.

Northvolt has received approximately $10 billion in debt and equity financing since inception, including support from the European Investment Bank, the Export Credit Corporation of Sweden and the Nordic Investment Bank.

Bloomberg.com

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