Nokia employees seek legal options against Chennai plant closure

Employees union at Nokia's India production facility at Sriperumbudur near Chennai is looking at "legal options" after the company on Tuesday announced its decision to suspend operations at the unit.

The factory, which was not included in Microsoft's acquisition deal due to ongoing tax issues with the Indian government, is the last of Nokia's production facility in operation.

Nokia on Tuesday confirmed it would end production at its last remaining smart phone plant on 1 November.

According to Nokia India Employees Union, there are about 900 employees still working at the factory.

Following the Nokia's $7.2 billion sale of its mobile phone business to Microsoft, Nokia introduced a voluntary retirement scheme for employees and 5,700 of them opted for it, from about a total of 6,600.

Earlier this year, mobile devices maker HTC said that it would "look into" the possibility of buying the plant from Nokia. HTC, however, has not indicated that it's any close to making an acquisition.

Nokia yesterday announced plans to suspend handset manufacturing at the Chennai plant from November, due to the termination of services agreement with Microsoft.

Responding to the company's decision, Nokia India Thozhilalargal Sangam (Nokia India Employees Union), Honorary President and sitting MLA, A Soundararajan said: "This is illegal. They have indirectly told us to leave the organisation. We are asking them to take care of our future. Some of the employees are working here for several years.''

The Chennai plant will officially halt operations next month after Microsoft informed Nokia that it will no longer use the facility for its smart phone production, Nokia said on Wednesday.

"Microsoft has informed Nokia that it will be terminating the manufacturing services defined in the agreement with effect from 1 November 2014," Nokia told CNET in an e-mailed statement. "In absence of further orders from Microsoft, Nokia will suspend handset production at the Sriperumbudur facility from 1 November."

The Chennai plant was under a cloud due to an ongoing tax disputes with the Indian government when Microsoft acquired Nokia's devices and services division in April and hence was unable to include the facility in the sale to Microsoft. Instead, the companies signed an agreement that would enabled Microsoft to temporarily use the facility for smart phone production.

Earlier this year, tax officials raided the plant and hit Nokia with tax dues amounting to Rs3,000 crore  ($500 million). Nokia is fighting the levy in court, saying that it has done nothing wrong.
Microsoft steered clear of the issue when it acquired Nokia's devices and services operation. The original agreement had assumed that the Chennai plant would be included in the deal.

Since Nokia owns the plant, it could sell the site to other companies that would use it to produce devices. However, because of the ongoing tax issues, the government has put a freeze on the company's assets, preventing Nokia from seeking other customers.