Northvolt Reacts To Changes In Demand For Batteries – Make A New Plan, Stan!

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2024 has not been kind to Northvolt, the Swedish battery-maker co-founded by Peter Carlsson, who previously worked on battery technology at Tesla. The problems have led BMW to rethink its $2 billion order for Northvolt batteries after the company was unable to meet its production targets. A few weeks ago, Northvolt announced the initial steps that are part of a strategic review. These measures reflect a challenging macroeconomic environment and a subsequent reassessment of Northvolt’s near-term priorities, leading to a rescope of operations and appropriate resizing of our workforce, the announcement said.

The objective of the strategic review is to focus resources on becoming a leader in sustainable large-scale cell manufacturing. That will involve ramping up the first phase of the Northvolt Ett gigafactory in Sweden, while continuing to leverage the company’s R&D facility, Northvolt Labs, in Västerås, Sweden. That is considered a key requirement for Northvolt to maintain its position as a leading cell manufacturer in the Western world.

Peter Carlsson said, “With the strategic review now underway, we are having to take some tough actions for the purpose of securing the foundations of Northvolt’s operations to improve our financial stability and strengthen our operational performance. While conditions at this time are challenging, there remains no question that the global transition towards electrification — and the long-term outlook for cell manufacturers, including Northvolt — is strong.”

Tom Johnstone, head of the Northvolt Board of Directors, commented: “Our success is in part dependent on the overall market ramp-up of electric vehicles and support from stakeholders around us. Equally, we must build on lessons learnt through our journey to date.”

Now that review process is complete and the company has announced its plan for moving forward. It is harsh news for many employees. It includes a revised scope of operations in Sweden to ensure that resources are focused on accelerating production in large-scale cell manufacturing at Northvolt Ett. These measures are expected to result in the redundancy of approximately 1,600 Northvolt employees, split across Skellefteå (1,000 positions), Västerås (400 positions), and Stockholm (200 positions). All redundancies are subject to ongoing union negotiations. Redundancy is how companies say “You’re fired!” but in a less mean way.

In adjusting its near-term ambitions and focusing on the ramp-up of the first 16 GWh phase of Northvolt Ett, Northvolt is positioning itself to prioritize commitments to its current automotive customers. This priority is further being supported by a recently introduced acceleration program geared to further increase levels of production. The program is already demonstrating results and contributed to Northvolt Ett cell production increasing three-fold since the beginning of this year.

Northvolt Charts A New Course

CEO Peter Carlsson said, “While overall momentum for electrification remains strong, we need to make sure that we take the right actions at the right time in response to headwinds in the automotive market, and wider industrial climate. We now need to focus all energy and investments into our core business. Success in the ramp-up of production at Northvolt Ett 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 the decisions we’re taking today, however tough, are required for Northvolt’s future.”

In Skellefteå, Sweden, the development of Northvolt Ett expansion project will be suspended. The construction project was intended to provide an additional 30 GWh of annual cell manufacturing capacity. The decision follows the announcement earlier this month to place the Northvolt Ett cathode active material facility into care and maintenance. In Västerås, Sweden, programs and expansion will be slowed at Northvolt Labs. The fundamental platforms hosted at Northvolt Labs will be maintained, enabling Northvolt Labs to retain its position as Europe’s leading campus for battery innovation and product development.

As it reduces the scope of its operations and programs in Sweden, Northvolt will also reduce the size of its corporate support functions, which today are largely located in Stockholm. The rescoping of operations is critical to ensure a sustainable operation and cost base. In order to achieve this a workforce reduction of approximately 20% at a global level, and 25% in Sweden is required. The company is currently engaged with its union representatives surrounding all relevant processes and the path forward.

Acknowledging the impacts that the resizing of Northvolt’s workforce will have, especially at Northvolt Ett and for the city of Skellefteå in northern Sweden, Northvolt has engaged its partners and stakeholders to support in efforts to mitigate impacts to the greatest extent possible. Northvolt’s internal resources have been mobilized to support impacted employees in several areas, including the search for new employment and assistance in matters relating to relocation. Further to this, Northvolt is establishing a task force together with external partners to provide additional support to employees on work visas, and their families.

Daniela Maniaci, Chief People Officer, commented: “Today marks one of the most challenging times in our company’s journey, as we face the difficult reality of reducing our workforce. Our priority is to offer as much support as possible during this time to all our employees, especially those impacted by redundancy. In supporting employees who will leave the company, we are committed to handling the process with compassion and care, and ensuring everyone receives guidance needed for their next steps.”

While narrowing its immediate focus, Northvolt is more than ever committed to its founding intention of establishing a homegrown, European industrial base for battery production. The decisions outlined today are designed to support this by establishing a stronger focus on scaling up battery cell production and, thereby, a foundation for future growth. Peter Carlsson added, “The decisions announced today are both challenging and painful. I and all my colleagues at Northvolt will do everything we can to support the colleagues who will eventually leave the company. The decisions are, however, necessary to adjust for current realities and enable the long-term success of Northvolt. We are determined to overcome the challenges we face, and to emerge stronger and leaner as we continue forward in our work to contribute to a more sustainable society.”

The Takeaway

The European Union is desperate to develop a homegrown battery industry to counter the likes of China’s CATL and BYD, but the going is rough. China has been throwing money and resources at the battery sector for the past 15 years, so companies like Northvolt are about a decade behind. In addition, they do not have the overwhelming level of government support those Chinese companies enjoy. This latest news from Northvolt makes clear how difficult the task is and what challenges lie ahead.