Ford India makes final severance offer to Chennai plant employees

American carmaker Ford Motor Company, which announced its plan to stop manufacturing operations in India on September 9 last year, has rolled out its ‘final’ severance settlement offer to employees. As is known, Ford India has wound up all manufacturing operations in the country with the last car – an EcoSport – being produced at its Maraimalainagar plant in Chennai on July 21, 2022.

The company has revealed in a press statement today that following its ongoing severance discussions with the Union and manufacturing employees in Chennai, the final severance settlement offer was communicated to employees on September 5.

“Since the announcement of business restructuring last September, Ford has continuously made efforts to negotiate a fair and reasonable severance package with the Union, spanning 68 meetings, including meetings with labour authorities / senior government officials,” Ford India said in a statement.

“The company has always cared for its employees and has taken steps to help them to the extent possible. 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 also failed to recognise that no company which has decided to stop production on account of significant accumulated losses and no sustainable path forward can meet such demands,” it added.

Ford’s latest and arguably the last settlement package to its manufacturing employees is a step up from its earlier offer that considered an average of 115 days of equivalent wages, which was then revised to 121-day wages in July after furious employees staged protests. The offer also comes after the company’s failure to find a suitable buyer for its state-of-the-art manufacturing facility in the automotive hub of Tamil Nadu, unlike the successful sale of its Gujarat plant to homegrown carmaker Tata Motors last month.

“In absence of any suitable alternative (buyer) for the Chennai manufacturing plant, the company 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,” Ford India communicated to its staffers earlier today.

56 months of financial cushion
Considering the 130-day average gross wages for every completed year of service, the company’s severance package ranges from Rs 33 lakh to a maximum (capped) of Rs 85 lakh, thereby, averaging Rs 41 lakh per employee. Ford says this translates to an average of 56 months or 4.6 years of severance pay for outgoing employees, thus, “assuring them with adequate financial cushion and adequate time to decide their next action”, the company said. The severance package is calculated from a minimum of 43 months (3.5 years) to a maximum of 100 months (8 years).

Ford India said in its statement that the company strongly encourages employees to accept and sign-up for its final severance settlement offer, valid from September 5 to September 23, “for their own and their family’s future. Further, employees who take the final severance settlement offer will be paid wages until September 30, 2022,” its statement read.

Ford India has also said that after the September 23 deadline, if the company were to retrench employees and pay the statutory compensation, the employees will only be entitled to a severance pay of 15 days for each completed year of service, as per the statuary norms. “The company continues to provide the employees with outplacement support as previously communicated,” it said.

Out of its two plants in the country, Ford India is understood to have employed over 2,500 people – more than six times the Gujarat-plant workforce – at its 200,000-unit annual capacity plant in Chennai’s Maraimalai Nagar. After announcing its restructuring, the carmaker had earlier envisaged to utilise this facility as an EV export hub for its global markets, but in May this year announced its complete exit from the world’s fourth-largest passenger vehicle market.