By Rebel News | Created at 2024-11-22 16:21:34 | Updated at 2024-11-29 02:32:53
6 days ago
A Swedish battery maker — with ties to Canadian taxpayers and pensioners — filed for Chapter 11 bankruptcy Thursday, forcing its $7.2 billion Québec plant to shut down construction indefinitely.
“Despite near-term challenges, this action to strengthen our capital structure will allow us to capture the continued market demand for vehicle electrification,” reads a statement from the subsidized automaker, Northvolt. “We are likewise pleased by the strong support we have received from our existing lenders and our customers.”
Meanwhile, a Conservative motion to study some $50 billion in electric vehicle (EV) subsidies was voted down on September 26, amid concerns the plant would not proceed.
WATCH: Is there a future for Ford's Oakville assembly plant? Sources say things look bleak…
Disturbingly, the Canadian and Ontario governments continue to invest tens of billions of taxpayer dollars into EV plants to produce cars that few can afford!https://t.co/48qRCPwEDI
Despite the court filing, the company claims to be “well-funded,” and says “permitted projects remain important pieces of the company’s future.”
Northvolt further explained that filing for bankruptcy was voluntary, allowing them to restructure debts without jeopardizing the Northvolt Six plant in St-Basile-le-Grand, Quebec.
Québec's Minister of Economy, Christine Fréchette, did not panic Thursday during a speaking engagement, claiming the step back would not affect construction. She told reporters "It is the parent company in Sweden that is being placed under protection," and does not concern the Quebec project.
A Conservative motion to study some $50 billion in electric vehicle (EV) subsidies was voted down Thursday. Three proposed factories in Canada have either halted construction or are reviewing future operations.
READ MORE: https://t.co/5wBcHB1LMA pic.twitter.com/Jd6BRggdQg
The company could not ascertain a timeline for when operations would resume, reported the Globe and Mail. Northvolt hopes to finalize its corporate restructuring early next year.
At such time, it would review investment proposals from financial backers, including existing lenders.
Four Canadian pension plans are among its lenders, including the Canada Pension Plan Investment Board, Investment Management Corp. of Ontario, Ontario Municipal Employees Retirement System and Caisse de dépôt et placement du Québec.
Last year, the funds collectively financed Northvolt in excess of $3 billion in convertible debt securities. The state of those investments remains unclear as of writing.
— Rebel News Canada (@RebelNews_CA) July 3, 2024According to documents filed on Thursday, Northvolt’s “liquidity picture has become dire,” with US$5.84 billion in debt, and a mere US$30 million in cash.
Fréchette claimed Northvolt secured enough funds to sustain operations for the next 18 months, with the company already investing over $100 million.
Québec taxpayers could be on the hook for $170 million should the company’s financial position fall into dire straits, however, the Chapter 11 filings indicate the company can still access $145 million in cash collateral.
Under similar bankruptcy protections, lenders either have their debt reduced, converted to equity or have other terms adjusted to emerge on stronger financial footing.
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“Northvolt will continue to operate as usual during the reorganization, much like other international companies that have used the Chapter 11 process to restructure their financial obligations,” the company said in its statement.
Northvolt managers assured their consumers that all shipments would be delivered to clients, and the suppliers and staff would receive their fees owed.
PM Trudeau announces Canada will put a 100% tariff on Chinese electric vehicles and a 25% tariff on Chinese steel and aluminum.
"Actors like China have chosen to give themselves an unfair advantage in the global marketplace," he says.https://t.co/PHR7jF0lJM pic.twitter.com/cG8UHlSJom
Northvolt confirmed 1,600 job cuts in the Scandinavian country, with managers blaming “headwinds in the automotive market,” as well as fierce competition from Asia.
A federal mandate insists on rendering fossil-fuel vehicles obsolete by 2035, though EV demand faces a “significant slowdown.” Statistics Canada says purchases plateaued in the third quarter of 2023.
Rick Perkins, a Conservative MP and current vice-chair on the Standing Committee on Industry and Technology, previously said the EV industry only thrives wherever a “massive government subsidy” is in place.
The Department of Environment and Parliamentary Budget Officer (PBO) put current subsidies at $151.5 billion, including $52.5 billion for auto and battery manufacturers.
Alex Dhaliwal
Calgary Based Journalist
Alex Dhaliwal is a Political Science graduate from the University of Calgary. He has actively written on relevant Canadian issues with several prominent interviews under his belt.
