Volkswagen has significantly reduced the value of its stake in Northvolt, a Swedish battery maker, as the company prepares to file for Chapter 11 bankruptcy. Over the last year, Volkswagen has written down most of its 21 percent ownership in Northvolt, according to sources familiar with the situation.
Despite these write-downs, which have occurred in stages over the past 11 months, there is no expected major effect on Volkswagen’s overall financial performance. However, this financial setback adds to the challenges faced by Volkswagen, which is also planning to close several factories in Germany and lay off thousands of workers due to a decline in electric vehicle demand and a decrease in its market share in China.
Volkswagen first invested €900 million in Northvolt in June 2019, acquiring a 20 percent stake and a board seat. A year later, the company added another €500 million to its investment. Brands owned by Volkswagen, such as Porsche, Audi, and Scania, have all become customers of Northvolt.
In the Chapter 11 filing, Volkswagen is listed as Northvolt’s second-largest creditor, holding a $355 million convertible note. As of the end of 2023, Volkswagen reported that the book value of its stake in Northvolt had dropped to €693 million.
The automaker has not commented on the write-downs or the current value of its stake in Northvolt. Other major investors have also faced losses as Northvolt, once seen as a leading battery manufacturer in Europe, struggles to stabilize. Reports indicate that funds managed by Goldman Sachs are looking to write off nearly $900 million by the end of the year due to Northvolt’s downfall.
The European Commission noted that the collapse of Northvolt could lead to significant losses for EU taxpayers, as the bloc had guaranteed $313 million in loans to the company.
Volkswagen was one of the key supporters of Northvolt, along with industrial partners like BMW and Scania, as well as financial investors including Goldman Sachs and BlackRock. By 2022, Northvolt had amassed $55 billion in customer orders and reached $15 billion in equity, debt capital, and government support.
However, Northvolt faced difficulties ramping up production at its plant in Skellefteå, Sweden, and pursued ambitious goals to not only produce battery cells but also manufacture chemicals and recycle materials. When Northvolt filed for Chapter 11 bankruptcy last week, it reportedly had just $30 million in cash—enough to fund operations for about a week—and was burdened with $5.8 billion in debt. The Chapter 11 filing allows it to access additional financing, including $145 million in cash and $100 million from Scania.
Insiders said that Volkswagen opted not to invest further in Northvolt as the battery maker sought more funding, citing its own financial struggles and doubts about Northvolt’s plan to recover. Co-founder Peter Carlsson mentioned that VW informed them it could not continue providing capital as he resigned from his position as Northvolt’s CEO.