US carmaker Ford has arrived at a settlement with its Chennai Car Factory Union on the final severance package after a period of deadlock.

After its announcement in September 2021 to close down its almost three-decade long car manufacturing operations in India, Ford has been been negotiating for a severance package with the union. Since the Chennai Ford Employees’ Union (CFEU) sought a revised compensation package, there was a stalemate as Ford management termed it “unreasonable” .

Now, both parties seem to have reached a consensus. “Ford is happy to arrive at a settlement with the union,” said the company.

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According to the agreed settlement, the company will revise the final severance settlement to an average equivalent of 140 days of gross wages per completed year of service from the ongoing offer of 130 days. An additional one-time lump sum of ₹1.5 lakh will also be included. The cumulative severance for each employee will range from a minimum amount of ₹34.5 lakh and a maximum cap of ₹86.5 lakh (translating to an average of ₹44.8 lakh per employee).

The revised settlement will translate to an average of about 5.1 years/ 62-month of salary for each employee (from a minimum of 3.9 years (47 months) to a maximum of 8.7 years (105 months)), it said.

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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 (instead of the company’s cap of ₹80 lakh).

The formal settlement agreement is planned to be executed before the end of this month. Ford will notify employees of the next steps and expects to complete the exit formalities by September 30.

Ford was running two car factories in India – Maraimalai Nagar near Chennai in Tamil Nadu and Sanand in Gujarat. After its decision to cease its car manufacturing operations in the country, it managed to sell its Gujarat unit to Tata Motors, the company’s neighbour in Sanand. But it couldn’t find a buyer for its Chennai factory. However, it continues to operate its IT services operations – Ford Business Solutions, which employs more than 11,000 people in the country.