Northvolt cuts 1,600 jobs | Quebec promises put to the test

Despite the financial storm at Northvolt, the company and the Legault government persist and sign: the Quebec project for a battery cell plant in Montérégie remains on the cards. Will it keep the promises announced with great fanfare barely a year ago? Doubt is setting in among experts.

“At this point, it’s obvious that the project as presented for Quebec will not see the light of day in this form,” says Raphaël Duguay, professor of accounting at Yale University. “Will it see the light of day? We don’t know.”

Estimated at $7 billion, this mega-factory planned for the South Shore of Montreal is counting on the production of cathodes (the positive pole of a lithium-ion battery), the manufacture of battery cells as well as recycling. More than 3,000 people are expected to work there. The Press has already revealed that the commissioning, scheduled for 2027, would be delayed.

The pressure is such that Northvolt announced new details of its restructuring on Monday, “one of the most difficult moments in [son] It is laying off 1,600 people – almost a quarter of its global workforce – in Sweden and slowing the expansion of its mega-factory in Skellefteå, in the north of the country.

In this context, does the initial plan still hold up in Quebec? The Legault government and the company are simply repeating that activities on the $7 billion construction site are continuing on the immense land that straddles Saint-Basile-le-Grand and McMasterville.

“Northvolt assures us that the project in Quebec is not affected by its announcements,” reiterates the office of the Minister of Economy, Innovation and Energy, Christine Fréchette, in a statement, describing the battery sector projects as a “controlled risk.”

Investissement Québec, the investment arm of the Quebec government, agrees. Its president and CEO, Bicha Ngo, who is also responsible for the battery sector, believes that delays are inevitable.

“The discussions we have with them [Northvolt] “To date, their interest and the reasons why they are in Quebec are still there,” said Mr.^me Ngo, Monday, at an event organized by the Canadian Club of Montreal. “So, the fundamentals don’t change. Will there be issues in terms of timelines? Maybe.”

In Montérégie, preparatory work continues. However, no buildings have been built. The construction site is still in its infancy. It remains to be seen what will be built.

Pivotal moment

The next few weeks will be decisive for the young company, which must prove to investors that its model is viable, according to Sylvain Audette, professor at HEC Montréal and associate member of the Research Chair in Energy Sector Management.

To do this, it must cut costs and produce more battery cells at its Skellefteå plant, which is currently loss-making. “The company must regain strength and focus on its core business,” says Audette.

The expert believes that the Swedish manufacturer is, more than ever, in a race against time: “If it takes Northvolt two years to prove that its business model works, Chinese companies will take even more market share and Northvolt risks missing the acceleration curve.”

Although it is considered the most funded start-up in Europe with a collection of US$15 billion, Northvolt no longer has the financial strength to support its current business model. Even if it had US$2.1 billion in its coffers at the end of 2023, the company was consuming, on average, US$220 million in cash per month.

Its financial cushion has melted like snow in the sun. The Swedish media Days Industry recently suggested that the Swedish manufacturer needed some US$730 million to get through the next few weeks.

It is in this context that the creditors decided to retain, last week, the services of a New York investment bank, PJT Partners, to study various recovery scenarios. According to Raphaël Duguay of Yale University, this means that Northvolt’s managers are no longer alone in charge.

“A lot of decision-making power is shifting from the hands of the company’s management to the creditors,” he says. “Increasingly, we’re in a situation where the creditors have a say because the company has liquidity problems.”

According to Mr. Duguay, this situation could have an impact on future choices in Quebec as well as elsewhere in the world.

“Burn more money”

Manufacturing startups like Northvolt are juggling their own realities, says Richard Chénier, general director of Québec Tech. They are known for “burning more money” than startups in the IT sector.

Their development is “staircase-like,” he explains: “Every time they want to increase their production, they have to invest in facilities.” The result: large sums are needed to increase their production capacity.

A major challenge in terms of planning, he says. “They have to be able to measure their production capacities to supply the market, therefore to properly evaluate all the logistical aspects of the operations according to the potential of the demand.”

With the collaboration of Martin Vallières, The Press