 "Nokia offers financial assistance to Chennai factory employees")
Nokia today announced the complete transfer of its Devices & Services business to Microsoft. While today is the red-letter day for the two multinational giants, back at Sriperembudur, near Chennai, where Nokia's facility is located, it is a “Black Friday”. The company said that it is not transferring the Chennai facility and offered a financial assistance to its employees the chance to explore opportunities outside Nokia.
The facility, which caught in the IT dispute, was kept away from the $7.2 billion deal and left around 21,000 workers jobs “uncertain”. The plant here will now work under contract system for Microsoft, and that too, wont be for long.
Nokia said that the company and Microsoft made some adjustments in the transaction, included Nokia's manufacturing facilities in Chennai in India and Masan in the Republic of Korea not transferring to Microsoft.
More From This Section
gThese adjustments have no impact on the material deal terms of the transaction and Nokia will be materially compensated for any retained liabilities”.
Consequently, the facility remains part of Nokia following the closing of the transaction. Nokia and Microsoft have entered into a service agreement whereby Nokia would produce mobile devices for Microsoft.
gAmid the uncertainty for our employees in Chennai and because of the planned closure of our facility in Masan, Nokia plans to offer a program of support, including financial assistance which would give our employees the chance to explore opportunities outside Nokia starting from a sound financial base. The company plans to bring to Chennai and Masan elements of its Bridge program, which we have made available for employees affected by company changes in other sites,” said Nokia.
The Chennai facility was freezed by the Income tax department, that has slashed a Rs 21,000 crore tax notice on Nokia. The Department refused to allow transfer of the plant till the dues claimed by the department are not remitted by the company. The matter is now at the Apex Court.
Nokia is also facing a similar dispute with Tamil Nadu Government's sales tax department, which issued a Rs 2,400 crore tax notice. The matter was argued at the Madras High Court last week and the Court has reserved its order for April 29.
On this background, question remains unanswered, since Mobile handsets is a high-technology business and as Nokia has decided to exit the sector, the factory will be left with no technology support. So what will happen after 12 months is still a mystery.
Globally, Nokia has eight factories, two in China, one each in Brazil, Hungary, India, Mexico, Vietnam and South Korea. Of these factories, while there is no news about which all facilities will be transferred to Microsoft, sources said Microsoft decided to keep the South Korean facility out of the deal and some of the other “operational businesses” in other countries will come under service agreement.
Chennai facility has around 8,000 direct and another 20,000-25,000 employees. Over 5,000 of the total direct employees are women.
Microsoft said that it will not acquire the factory in Masan, South Korea, and the factory in Chennai, India, will stay with Nokia due to the tax liens on Nokia’s assets in India that prevent transfer.
As a result, Microsoft will welcome approximately 25,000 transferring employees from around the world. Originally the company was planning to take 32,000 employees on board through this acquisition.