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Nokia winds up production at Chennai factory after agreement with workers

After Nokia's Chennai factory churned out its final orders for Microsoft, employees have accepted a severance package.

As Nokia suspends production at its Chennai facility in India, the company says it has reached an agreement with workers over a severance package.

The company appears to be one step closer to extricating itself from a sticky tax situation in India that prevented it from transferring its Chennai handset-manufacturing facility to Microsoft as part of the sale of its devices business earlier this year .

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The Finnish company last month announced it would wind down production at the Sriperumbudur  site after Microsoft terminated manufacturing services from November 1.

Since then, Nokia has been negotiating the details of a severance package that it first offered to the 6,600 employees of the site in Chennai in April. While the majority accepted the package, around 1,000 workers remained and stood to be affected by Saturday's suspension, which has seen Nokia negotiating with unions and India's Labour Commissioner.

According to a Nokia spokesman, the company has now reached an agreement with affected workers.

"We can confirm that constructive discussions with Union representatives and the Labour Commissioner have resulted in agreement on a financial package for Chennai factory personnel," the spokesman said in a statement.

According to the Economic Times, the package offered is between 750,000 rupees ($12,215) and 950,000 rupees ($15,470) depending on an employee's experience, and includes monthly salaries for November and December.

The publication notes Nokia's significance as an employer in the region. After opening in 2006, it directly employed 8,000 people while another 25,000 indirectly benefitted from the plant.

Nokia's Chennai plant was once among its largest facilities in the world but ahead of the sale to Microsoft it ran afoul of authorities in  two separate tax claims , both of which were refuted by Nokia.

While Nokia was gradually shifting its focus away from basic mobile phones that were produced at the facility, Microsoft put a swift end to the bulk of its feature phone business this July, when the company announced it was putting an end to the production of Asha and S40 phones. It also announced plans to reduce its headcount by 18,000 worldwide, including 12,500 employees gained through the Nokia acquisition.

As for fate of the facility itself, Nokia last month said it was unable to transfer the facility to a successor due to the continuing asset freeze imposed by the tax department.

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