Photograph: Northvolt/Reuters
Just three years ago, Sweden’s then prime minister, Stefan Löfven, visited Northvolt’s base near the Arctic Circle in Skellefteå – Europe’s first homegrown battery gigafactory – and declared the city “the future” in the fight against the climate crisis. Its work had huge significance for Sweden and the world, the Social Democrat said.
The arrival of the battery manufacturer was not only supposed to be a flagship project for Sweden’s “green industrial revolution” but hailed as Europe’s big hope against dependence on oil and imported batteries from China.
Since its foundation in 2016 to build “the world’s greenest battery”, Northvolt’s rapid rise has attracted billions of dollars of investment and orders from the world’s biggest car companies including Volkswagen, BMW and Volvo.
But as Europe’s electric car market struggles, much of this enthusiasm is starting to look like fantasy. In June, BMW cancelled a $2.2bn contract with Northvolt. And last week, amid a spiralling cashflow crisis, the battery manufacturer announced it was making 1,600 redundancies and suspending expansion of its Northvolt Ett factory in Skellefteå.
Rumours swirl of potential imminent bankruptcy and even Chinese sabotage – both dismissed by Northvolt as “speculation”. Meanwhile, police are investigating the death of a 25-year-old man at the factory amid suspicions that workplace violationsmay have led to his death.
The mood among employees, known as “Northvoltare” (Northvolters), is said to be one of deep concern as they await redundancy details, while workers hired from outside Sweden are faced with the prospect of having to leave the country.
Oliver Szabo, the chief security officer for the union IF Metall, said at the Northvolt Labs research and development campus in Västerås, central Sweden, where 400 jobs are to be cut: “Of course people are worried. We see that people don’t know if they will be affected or not.”
Although there had been problems, generally Northvolt had been a good workplace, Szabo said, but leadership could have been better. And the alleged workplace death in Skellefteå was “unacceptable”, he added.
The company has said it is in contact with prosecutors and police, and told Swedish broadcaster SVT it was refraining “from commenting on the ongoing preliminary investigation”.
The Swedish government has ruled out a bailout for Northvolt, but the company’s fate threatens to be a political problem for Sweden and the EU.
The energy and industry minister, Ebba Busch, has said the Swedish government was “working actively” to help Northvolt continue operations and following developments closely, but it would not be appropriate for the state to step in with taxpayer loans or as a partner.
However, the prime minister, Ulf Kristersson, has said the government was helping to find new backers and ownership models, which he said they had discussed with Germany, which has also ruled out a financial lifeline for the firm.
Mats Engström, a senior policy fellow at the European Council on Foreign Relations thinktank (ECFR), said the company’s management had “overpromised and underdelivered”, adding that its future was on a knife-edge.
“Now it is an open issue if Northvolt will survive,” he said. “Money is rapidly running out. If owners and lenders can agree on financing for the near future it might still be possible to save the core business.”
Engström warned that if Northvolt were to collapse, the repercussions would be far from a domestic headache. “It would certainly be a political problem for the Swedish and German governments as well as for the European Commission who all have supported the company’s plans,” he said.
He said any collapse would not be a failure for green industrial policy, but rather an indication of the difficulty of large-scale battery cell production, which – unlike iron and steelmining – Sweden did not have a history of experience in.
Nevertheless, critics suggest the crisis at Northvolt is a “harsh awakening” for Sweden’s green transition plans and the EU’s green deal.
“Northvolt has more than 60bn kronor (£4bn) in debt, is making huge losses, and can’t ramp up its production,” said Christian Sandström, an associate professor and a columnist for the business paper Affärsvärlden. “Any new funds will only go to creditors at this point. The only way to resolve this is via bankruptcy.”
The company, he believes, could file for bankruptcy “any day now”. It did not bode well for the multitude of green businesses that had opened in the north of Sweden in recent years, Sandström said. “Handing out cheap government money to capitalists who say they will save the world by setting up factories in the rural north where there’s a lack of skilled labour – maybe it wasn’t such a great idea after all.”
The Swedish government recently announced the launch of a “green acceleration office” and proposals to shorten the time it took for businesses to get a permit. “Sweden has enormous potential in the climate transition,” said Kristersson.
But some have accused the government of naivety. Jonas Algers, a PhD student at Lund University’s environmental and energy systems studies department, said: “Everyone likes the idea of a slick startup with a charismatic CEO and fancy PowerPoints revolutionising a sector.
“But at the end of the day, if you want to build a massive, largest-in-Europe plant it will require lots of workers who need to be coordinated, lots of construction that needs to be done in a safe manner, and skills and technology that need to be developed. None of this is a simple task.”
H2 Green Steel, in Boden, northern Sweden, had learned from Northvolt’s mistakes, Algers said, but there were issues in the Swedish labour market for large-scale projects like Northvolt.
Citing issues with cashflow, workplace accidents, and problems with subcontractors and machines, he said: “What policymakers need to understand is that the Swedish labour market model is in a bad state due to loopholes and excessive subcontracting which undermines Sweden’s ability to build large and advanced industrial projects.”
Matti Kataja, Northvolt’s communication and public affairs director for the Nordics, said: “We are focusing all energy and investments into our core business – large-scale manufacturing of battery cells. Success in the ramp-up of production at our factory Northvolt Ett in northern Sweden is critical for delivering to our customers and enabling sustainable business operations. Recent production records at Northvolt Ett show that we are on the right path.”
But, he added: “It’s no secret that we are involved in a financing round. In the past couple of weeks, we have seen significant progress. We hope we will be able to share more information as soon as possible.”
The company, he said, was “taking what we believe are the necessary measures to maintain our position as the leading homegrown cell manufacturer in Europe” and was “committed to its founding intention of establishing a European industrial base for battery production”.
