Nokia to suspend Chennai unit operations from Nov; decision to impact 800 employees

Finland-headquartered Nokia, which could not transfer its Chennai mobile handset production facility in its deal with Microsoft due to a legal wrangle with the Indian government, has decided to halt the production activities from November 1.

After several attempts to save the Chennai plant ? the only unit in India and the largest outside its home-turf ? Nokia has decided to suspend handset production operations, post termination of its services agreement with Microsoft.

The closure decision would impact 800 employees at the Chennai plant besides the component supplier companies which account for a workforce of over 5,000. Around 10 supplier companies had Nokia as their only customer and had set up their plants along with Nokia way back in 2005-2006 as part of the SEZ project.

Nokia?s Chennai production facility was kept out of its $7.2-billion devices and services deal with Microsoft as the Delhi High Court had frozen assets due to a tax litigation in India. Nokia, which is going through a Rs 21,000-crore tax dispute with the Centre, had also been slapped with a Rs 2,500-crore VAT claim by the commercial tax department of Tamil Nadu.

Nokia had introduced VRS for the Chennai plant employees and out of close to 7,600 employees, around 5,000 had opted for the severance package. Nokia had also rolled out ?Bridge? programme for the employees in order to get them trained in other skills and to place them in other companies.

A Nokia spokesperson said: ?Due to the liens on the Nokia handset manufacturing facility in Chennai, the site was left out of the devices and services deal with Microsoft, which closed on April 25, 2014. As a consequence, Nokia entered into a transitional services agreement with Microsoft to address their immediate production needs and keep the factory operational.?

Nokia further said that Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from November 1. ?In absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility from November 1. Unfortunately, the continuing asset freeze imposed by the tax department prevents Nokia from exploring potential opportunities for the transfer of the factory to a successor to support the long-term viability of the established, fully functional electronics manufacturing ecosystem,? it said. Nokia will be informing all stakeholders, including the labour commissioner of the suspension.

?As a responsible employer, Nokia is currently evaluating options to minimise the impact on existing employees at the manufacturing facility. It will share further information once details have been finalised, ? Nokia said.

When contacted, R Soundararajan, a CITU leader, told FE: ?It is completely illegal and unacceptable. Nokia India had earlier informed that the remaining workers as well as the state government that it will run the Chennai factory without any problem till March 2015. But going against their own promise they have now unilaterally announced their decision to suspend the operations. It is prelude to their decision to completely do away with Chennai plant.?

Soundararajan said Nokia had to first get approval from the state government before announcing the decision. He added that the union will call a meeting to chalk out next course of action. The union also plans to file a dispute before the state?s labour department.