As the temperature cools, we’ll soon settle back indoors and cuddle on the couch with a good show on TV. Perhaps a good old mystery fiction. It so happens that I have an idea for a thrilling plot. A complete season in fact or perhaps more than one. This would be a cross between Midsomer Murders and Billions, with a slight resemblance to Millenium (minus Lizbeth Salander). Right now, the end is far from sight, even for the author, but the circumstances are there and not just in fiction. Let this Snap be the synopsis of the pilot episode.
Deaths in Skellefteå
First things first: there must be death, as sad and terrifying as it is. In fact, the pilot episode starts one fine morning at the beginning of June 2024 with the discovery of a third death. A 60-year old man was found on his balcony in Skellefteå, a Swedsh coastal town located some 700km north of Stockholm. What makes this case suspect is that the cause of death is not immediately identifiable and that this man, like two other recently deceased men worked at the giga-factory of battery giant Northvolt. For these two earlier cases, which took place in January and February, natural age-related causes could be excluded since they were just 19 and 33 years old respectively. The discovery of the third death triggers the in-depth investigation that the families of the two first victims had been waiting for all along.
A lost deal is a big deal
This is an unfortunate timing for the company’s founder and CEO Peter Carlsson. We imagine him pushing away the relentless questioning by the local police inspector, busy addressing more important problems. Indeed as the investigation takes place, one of Northvolt’s largest customers, German automaker BMW pulls back from a €2 billion deal concluded in 2020, a long-term contract for batteries meant to begin delivering this year.
Apparently, the contract is lost due to delays in the giga-factory’s production ramp up, but that is not the only reason. Trying to give the announcement a positive twist, BMW says that “Northvolt and the BMW Group have jointly decided to focus Northvolt’s activities on the goal of developing next-generation battery cells.” Indeed, on top of being delayed, it looks like Northvolt is not keeping up with Chinese and South Korean competitors and hasn’t transitioned from ‘prismatic cells’ to ‘cylindrical cells’ technology yet, a big deal for a high-end car manufacturer like BMW.
To top it off, the market for electric vehicles in general is showing signs of weakness in the first half of the year, as Goldman Sachs is keen to point out. While this trend may be temporary, it isn’t doing anything to reassure investors or the public. Northvolt is privately owned and counts Swedish workers among its prominent shareholders albeit indirectly via pension funds such as AMF or AP funds 1 to 4 and local private equity funds like one at Swedbank Robur. An IPO was in the cards last autumn but isn’t being mentioned so much anymore.
Politically, the woes of Northvolt are also a big deal. Skellefteå isn’t a very large municipality (with about 42,000 inhabitants between the ages of 20 and 65 according to figures from Statistics Sweden) and the company currently employs about 3,500 people at the factory. As of January, a large part of these employees were still waiting to find a permanent home, which bodes well for local developers and retail demand in general. Beyond the municipal government, the future of the company matters at the national level and even at the European or North American level. More about that later.
A strategic rethink
Around a sleek Scandinavian-style boardroom table, we imagine the heated discussions between members of management and its board. One person is missing: the chairman. Danish financier Jim Hagemann Snabe has taken a leave of absence. He is also chairing the board of Siemens and sits on the World Economic Forum’s board of trustees. He has suffered a leg injury, which resulted in a severe case of sepsis and impaired his ability to serve on the board since the beginning of the year. So far, Northvolt has kept this fact private.
Together, management forges a plan to scale down the company’s ambitious expansion plans, including new factories in other parts of Sweden, Germany and Canada. But CEO Carlsson decides to stay in stealth mode until the beginning of July, when he comes out with comments to the Swedish business daily Dagens industi. “We have been a little aggressive in our plans and that’s what we are now reviewing,” says Carlsson.
Suspicions emerge
“What else are they hiding?” Change of scene. We are now in the office of our show’s hero, the police inspector who will shed light on the whole truth. Daniel Craig would do well in the international version. He just read the announcement about the chairman’s absence and his decision not to return. Typically, a chairman’s resignation is bad news and, while some people are trying to frame this as a natural consequence of Snabe’s poor health conditions, he is well enough to stay on the board of Siemens.
There is also increasing evidence that, despite Carlsson’s recent denying of serious safety issues at the production plant, employees and sub-contractors are coming forward with evidence of the contrary. Dangerous waste is allegedly being handled without adequate protection, and further accidents are reported with different causes. On top of this, the company’s annual report still isn’t registered at the Swedish companies’ house Bolagsverket despite the typical deadline having passed and the glossy version of the report being out without a full auditor’s opinion.
The list of suspects
“Things are not the way they want us to believe they are,” we imagine our valiant inspector muttering. He rolls up his sleeves and makes space on his white board. It is time to draw the list of those who would want to harm Northvolt on the left and those who would have had an interest to protect the company, at any cost, on the right.
One would be forgiven for thinking of the Chinese and the South Koreans as those most threatened by Northvolt’s future success, but they are well ahead, for the time being. We can also set aside, for now, the Russians and the Israelis. They are busy with more pressing issues. What about the Americans? Their domestic battery production isn’t growing fast enough and they potentially stand to benefit from an alternative to Chinese batteries. They will go in the right column. The Germans also belong there. Chancelor Olaf Scholz was seen, as late as the end of March, formally opening the construction at the third Northvolt factory in Heide, in Schelswig-Holstein. The EU’s even approved almost €1 billion in German state aid for that project. The slowdown in Northvolt’s expansion plans is a significant blow for the region.
In Sweden, politicians are divided. On the one hand, Northvolt is seen as a national jewel, or as having the potential to become one. The figurehead of the green transition. On the other hand, politicians opposing the country’s green optimism such as the Sweden Democrats are criticising “Northvolt’s insatiable appetite for more [governmental] support”. Is the taxpayer supposed to pay the bill for the transition? Is Northvolt’s claim to producing green batteries legitimate when it is consuming so much hydropower that it may force Sweden to import brown electricity from Germany to fulfil its other needs?
The cliffhanger
The pilot episode could contain a lot more details about the unfolding of Northvolt’s saga. In late July, Northvolt’s CFO Alexander Hartman is replaced by an external hire, Pia Aaltonen-Forsell. He will stay on with a new title: Chief Transformation Officer. Another new hire, Matthias Arleths is named President Cells. He will be leading the factory to a safer and more efficient future.
Meanwhile, two more deaths are reported. Whether they are related to the others is an open question. In the business world, pressure mounts. BMW’s competitor VW, also one of the company’s large shareholders is allegedly setting up a task force to evaluate the problems.
What will happen for the investors? They are, of course, nervous. If not, they should be. As late as February this year, the company raised $5 billion in green debt to fund its expansion. This takes the total financing to more than $13 billion, including equity. If things were to turn south for the company, there are reasons to hope that it would be rescued by the many stakeholders that stand to benefit from Northvolt’s expansion, but the shareholders may well be wiped out. Remember Renewcell? That project was rescued by Swedish private equity investor Altor at the beginning of the summer, but it didn’t help the original shareholders.
There are other shows that can serve as inspiration or cautionary tale, not the least ‘WeCrashed’, the biopic on co-working space provider WeWork, which shows how hubris and toxic positivity can end in disaster. The fact that Northvolt’s expansion plans are being scaled back should be seen as a positive in comparison.
My personal wish for the end of this story is that no nefarious motives lay behind the tragic deaths of Northvolt’s workers and that, whatever the fate of the company, it doesn’t tarnish other green investments by association. If it fails, it is not because the business is (or is trying to be) green. Any business can fail. We must use these early signs of distress to remind ourselves that green is not a stamp of business quality, just the way ‘ESG’ wasn’t one for Silicon Valley Bank, even if, on average, a positive correlation with sound management has been observed. Most importantly, leaders must be held accountable and workers safety must never be the subject of compromise.
