By Ernest Scheyder
(Reuters) - Battery recycler Li-Cycle plans to lay off 17% of its staff - including three senior executives - as it pares its ambitious global growth plans in order to save cash and focus on building a crucial processing facility in New York.
The cuts, announced on Tuesday, are a tacit acknowledgement by the Toronto-based company that its rapid growth in recent years - with facilities announced across North America, Europe and Asia - was unsustainable given the high costs and technical challenges associated with building what is essentially a new global market for electric vehicle battery recycling.
In all, 60 employees will lose their jobs. The company was still informing affected staff about the cuts on Tuesday afternoon.
Li-Cycle, which plans to record an $8.3 million severance charge this quarter, will have roughly 200 employees after the cuts.
While Li-Cycle posted its highest quarterly revenue ever during 2023, the company has struggled with construction cost overruns at its Rochester, New York, battery processing facility. The U.S. Energy Department said last year that it would conditionally lend the company $375 million for that facility, but cost estimates have nearly doubled to $960 million.
That massive cost overrun - along with technical complexities of recycling technology the company planned to use - had hammered Li-Cycle's stock and forced it to seek a cash infusion from Glencore (OTC:GLNCY). The mining giant earlier this month announced a $75 million convertible loan that if exercised, would make it the largest shareholder of the New York-listed company.
The Rochester facility is central to the company's "hub-and-spoke" model, in which multiple collection and processing facilities shred batteries into so-called black mass, which then will be separated at the facility into lithium and other metals once it is operational.
Li-Cycle had talked about building similar hubs in Europe, but those plans are on hold until it can prove the model works in North America.
"We've got to get the Rochester hub operational," Ajay Kochhar, Li-Cycle's co-founder and CEO, told Reuters.
As part of the layoffs, Li-Cycle's co-founder and executive chairman, Tim Johnston, will relinquish his management role, although he will remain on the company's board. Johnston and Kochhar had essentially run the company together, although the reorganization will see Johnston stepping back.
The executive in charge of the company's international operations will leave, as will the company's finance chief.
Li-Cycle is one of a number of companies, including privately held Redwood (NYSE:RWT) Materials, eyeing growth in the recycling business.
Miners have also shown interest in the sector as consumers and regulators increasingly advocate for the circular economy in which materials and minerals are reused in a continuous manufacturing loop.