Nokia agrees employees’ pay-off

Nokia, the world’s largest mobile phone company, is to pay €200m ($314m) to compensate employees in a factory closure that caused a political outcry in Germany.

The agreement between the Finnish company and employee representatives at the factory in Bochum, Germany, includes €185m in compensation for 2,300 staff, and €15m for a so-called transfer company designed to find the workers new jobs.

The €200m is much higher than the €70m proposed by Nokia, according to negotiators. Employees will receive on average €80,000, officials said.

The Finnish company’s plan to close the plant, announced in January, sparked trade union protests and threats to boycott Nokia phones. Peer Steinbrück, finance minister, accused the company of “caravan capitalism” for shifting many of the jobs to a lower-cost location in Romania.

Veli Sundbäck, Nokia’s executive vice-president, acknowledged on Tuesday that the plant’s closure was “painful for all affected employees”.

Gisela Achenbach, head of the employees’ works council, said the workers had “achieved our goal, which was to reach a satisfactory agreement for our members in line with the best German agreements [of this sort]”.

Nokia is still in negotiations with the regional government in North Rhine-Westphalia, where Bochum is located, over the state’s demands that Nokia return €60m in investment subsidies it received in the late 1990s for locating in the town.

Nokia said it was not obliged to pay as it had fulfilled the conditions attached to the subsidies. NRW disagrees, and has threatened legal action.

Mr Sundbäck said he expected an agreement with NRW in the near future. NRW declined to comment, beyond noting that the compensation agreement was an “important step in dealing with the social costs of the plant closure”.

Nokia said it would comment on the financial costs of the settlement on April 17 in connection with its first-quarter results.

The Nokia factory, due to close by June 30, is the last mobile phone assembly plant in Germany.

Nokia said in January that its German labour costs were almost 10 times those in Romania. German economists said the closure was not unexpected and was part of necessary economic restructuring and efforts in response to globalisation to focus on higher-technology industries.

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