US carmaker, Ford has presented its final severance package to the Chennai car factory Union after a period of stalemate.  

There was a deadlock in firming up the settlement package as the Chennai Ford Employees Union (CFEU) sought a revised compensation package. But Ford management dismissed it as an “unreasonable demand” and sought a meeting to finalise the wage package. 

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Failed negotiation

“Unfortunately, the Company’s attempts to negotiate a fair severance package have not yielded results because of the Union’s unreasonable demands (of an average of 215 equivalent days of wages per completed year of service). The Union failed to recognize that no company, which has decided to stop production on account of significant accumulated losses and no sustainable path forward, can meet such demands,” the company said. 

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Since the announcement of its decision to wind up almost-3-decade long car manufacturing operations in India last September, Ford has been negotiating for a severance package with the Union. It claimed to have conducted 68 meetings, including meetings with labour authorities/ senior government officials. 

“In absence of any suitable alternative i.e. buyer for the Chennai manufacturing plant, Ford has decided to roll out the final severance settlement offer to employees, which on average is equivalent to 130 days of gross wages per completed year of service.”  

The final severance settlement offer communicated by the Company exceeds what the applicable statutes call for and is higher than the industry benchmarks,” it said. 

Final severance settlement offered

With a cumulative average severance of ₹41 lakh per employee, the final severance settlement offer translates to an average of about 4.6 years/56-month salary for each employee, thus assuring employees with adequate financial cushion and adequate time to decide their next action. 

The Union sought 185 days of average equivalent wages per completed year of service calculated on the basis of 26 days per month, the inclusion of an apprenticeship period in the service year and fixation of a minimum package at ₹50 lakh instead of 30 lakh and no cap on the maximum package. 

Ford said it strongly encourages employees to accept and sign-up for the final severance settlement offer, valid from September 5, 2022, to September 23, 2022, for their own and their family’s future. Further, employees who take the final severance settlement offer will be paid wages until 30th Sep 2022. 

Post the deadline, if the Company were to retrench employees and pay the statutory compensation, the employees will only be entitled to severance pay of 15 days per completed year of service. The Company continues to provide the employees with outplacement support as previously communicated.