Northvolt, the Swedish maker of battery cells for electric vehicles, said on Thursday it has filed for Chapter 11 bankruptcy protection in the US, dealing a blow to Europe’s hopes that its most developed battery player would reduce Western car makers’ reliance on Chinese rivals.

Northvolt said it has only enough cash to support operations for about a week and said it has secured $100 million in new financing for the bankruptcy process. It said operations will continue as normal during the bankruptcy.

“Northvolt’s liquidity picture has become dire,” the company said in its Chapter 11 petition, filed in US Bankruptcy Court in Houston. The company, which has operations in California, has about $30 million of cash, which can support its operations for only about a week. It has $5.8 billion in debts.

Northvolt, which employs around 6,600 staff across seven countries, said it expects to complete the restructuring by the first quarter of 2025.

Northvolt transformed in a matter of months from Europe’s best shot at a homegrown electric-vehicle battery champion to a company struggling to stay afloat by slimming down, hobbled by production problems, the loss of a major customer and a lack of funding.

Europe has been hoping that Northvolt would reduce Western car makers’ reliance on Chinese rivals such as battery maker CATL, and EV and battery maker BYD.

Northvolt said the $100 million in a new loan is part of $245 million in financing support for the bankruptcy. Swedish truck maker Scania, a shareholder and its biggest customer said on Thursday that it was loaning $100 million to Northvolt to support the manufacturing of electric vehicle battery cells in Skellefteå, northern Sweden.

“This decisive step will allow Northvolt to continue its mission to establish a homegrown, European industrial base for battery production,” Tom Johnstone, interim chairman of Northvolt’s board, said in a statement, noting the support Northvolt has received from existing lenders and customers.

As part of the restructuring, Northvolt will evaluate proposals for new money investment from strategic and financial investors, as well as existing lenders, shareholders and customers, he said.

Volkswagen, Northvolt’s top shareholder with a 21% stake, said it had taken note of the filing and was in close contact with the Swedish firm. It declined to comment on potential repercussions on its own business.

STIFF COMPETITION

Investment group Vargas, a co-founder of Northvolt and one of its largest shareholders, said the bankruptcy would allow the company to address financial challenges and maintain its competitive edge in producing high-performance battery cells.

Handelsbanken analyst Hampus Engellau said the bankruptcy filing would give the company some short-term breathing space. Even so, he said, “This tells us that they haven’t found investors and raised the capital needed to restructure their business.”

Northvolt had been discussing the possibility of filing for Chapter 11 bankruptcy protection in the United States as one of several options for survival, two sources familiar with the matter told Reuters last week.

Northvolt has led a wave of European startups investing tens of billions of dollars in battery production to serve the continent’s automakers as they switch from internal-combustion engines to EVs.

But EV demand is growing at a slower pace than some in the industry had projected, and competition remains stiff from China, which controls 85% of global battery-cell production, according to International Energy Agency data.

At a court hearing late Thursday, US Bankruptcy Judge Alfredo Perez approved some routine initial steps in Northvolt’s bankruptcy, including allowing the company to pay wages owed to employees and draw the first $51 million of the Scania loan.

On Monday, Reuters reported that Northvolt had missed some in-house targets and curtailed production at its battery-cell plant in Skellefteå, underscoring the challenge of ramping up output.

The company’s court filing on Thursday said it had capacity to produce 300,000 batteries a year.

In October, Northvolt struck a deal that gave access to a small amount of money while talks on a bigger financing package continued, Business Daily DI reported.

Those talks had become more difficult in recent weeks, one of the sources familiar with the Chapter 11 plan said.

In recent years several Swedish companies have opted for Chapter 11 bankruptcy protection filings, such as Scandinavian airline SAS and debt collector Intrum, a process that allows management to retain control over the company and run operations.

Swedish Deputy Prime Minister Ebba Busch said on social media platform X that the government continues to support the EV battery industry and hopes that the restructuring will help turn around Northvolt’s fortunes. Busch told Reuters on Tuesday that the Swedish government had no plans to take a stake in Northvolt.