NFI Group settles XALT battery recall

Executive Summary

• NFI Group Inc. has entered into a Master Settlement Agreement (MSA) with XALT Energy LLC to resolve disputes regarding the recall of Generation 3 batteries and future support costs for other XALT batteries.
• The settlement provides approximately 75% to 80% recovery against NFI’s original $229-million warranty provision, comprising cash payments, asset transfers, and personnel hires.
• The agreement secures critical intellectual property, battery cell inventory, and a Michigan-based engineering team, positioning NFI to accelerate the introduction of a second battery supplier in 2027.

Key Details

• Recovery Value: The settlement provides approximately 75% to 80% recovery against NFI’s original $229-million provision recorded in Q3 2025.
• Cash Payments:
  • Majority of recovery to be received by December 31, 2025.
  • Immediate cash contribution increases NFI’s Q3 2025 pro forma total liquidity of $386-million by approximately 26%.
  • Additional cash payments held in escrow for 2026 costs associated with personnel and facility transfers.
• Asset Transfers:
  • Transfer of XALT’s inventory of new battery cells from a leading global cell manufacturer (originally purchased for a next-generation offering that is no longer proceeding).
  • Transfer of XALT’s battery management software and associated intellectual property.
• Personnel and Facilities:
  • Hiring of 21 Michigan-based software, engineering, and service team members from XALT.
  • Assignment of a lease for a Michigan-based office and engineering lab currently used by XALT.
  • Storage contract for the assumed battery cells.
• Operational Impact:
  • The settlement fully resolves all disputes with no admission of fault or liability.
  • Battery replacement will be performed at NFI’s North American service centers with no impact on new vehicle production.
  • Cash outflows for battery replacement are expected over 18–24 months starting Q2 2026.
  • Estimated 2026 cash expenses: $70-million to $90-million (35%–45% of total expenses).
  • Remaining expenses in 2027 will be partially financed by settlement proceeds.
• Accounting: NFI will finalize accounting treatment and record the full transaction in its Q4 financial results, including adjustments to normalized adjusted EBITDA and adjusted net earnings.

Notable Quotes

• "This collaborative settlement is positive for NFI and our customers... It delivers immediate cash payments to commence the battery recall, while also securing critical assets, systems, people and facilities to expand our zero-emission platform, improving customer support for electric buses in service and positioning us to accelerate the introduction of a second battery supplier in 2027." — Paul Soubry, President and CEO, NFI