Nov 21 (Reuters) -

Sweden's Northvolt seeks US Chapter 11 bankruptcy protection

in the U.S. Chapter 11 bankruptcy protection, the cash-strapped

company said on Thursday.

Northvolt went in a matter of months from being Europe's

best shot at a home-grown electric-vehicle battery champion to

racing to stay afloat by slimming down, hobbled by production

problems, the loss of a major customer and a lack of funding.

Northvolt has been discussing the possibility of filing for

Chapter 11 bankruptcy protection in the United States as one of

several options for survival, two sources familiar with the

matter told Reuters on Nov. 15.

Local media had reported Chapter 11 was seen as a way for

the company, which was set up in 2016, to sort out its finances.

The filing by its most developed battery player is the

biggest blow yet to Europe's hopes of building its own EV

battery sector, reducing Western carmakers' reliance on Chinese

rivals such as CATL and BYD.

With Volkswagen among its owners, Northvolt has

led a wave of European startups investing tens of billions of

dollars in battery production to serve the continent's

automakers as they switch from internal combustion engines to

electric vehicles.

But growth in EV demand is moving at a slower pace than some

in the industry had projected, and competition remains stiff

from China, which controls 85% of global battery cell

production, International Energy Agency data shows.

On Monday, Reuters reported that the embattled green tech

player has missed some in-house targets and has curtailed

production at its battery cells plant in northern Sweden,

underscoring the challenge of ramping up output.

In October, Northvolt struck a deal that gave access to a

small amount of money while talks on a bigger financing package

continued, business daily DI reported.

Those talks had become more difficult in recent weeks, one

of the sources familiar with the Chapter 11 plan said.

In recent years several Swedish companies have opted for

doing Chapter 11 such as Scandinavian airline SAS and debt

collector Intrum, a process that allows management to retain

control over the company and run its operations.

In October, a source with knowledge of Northvolt's plans

said the company was looking to raise some $300 million, which

would carry it into 2025 if successful.

But this amount was far less than the 15 billion Swedish

crowns that Swedish media had reported Northvolt was aiming for

a few months ago, or even the scaled-back ambition of 7.5

billion crowns reported in September.

Deputy Prime Minister Ebba Busch told Reuters on Tuesday the

Swedish government did not plan to take a stake in Northvolt.

(Reporting by Terje Solsvik in Oslo, Dietrich Knauth in New

York)