In a letter written to the media, a group representing the workers said:

“We have contributed to the wealth of the group whilst being subjected to relocation and collective redundancies; now the anger and exasperation forces us to go on strike to defend our rights at work,” the group wrote in a letter published by various media outlets. “Conscious that the economic climate is unprecedented, we demand financial compensation and reclassification measures to help the families concerned to survive this difficult period which is looming.”

In Germany, meanwhile, there are reports that employees in Germany are being laid off under the watch of Ernst & Young.

If rival bids are going to emerge, they have to happen by July 21 as an auction is being held on July 24.

It will be interesting to see what investment firm Matlin Patterson does over the next two weeks after expressing an interest in buying Nortel outright.

The problem is these benefits are not insured, which means the money is coming from a Nortel Health and Welfare Trust as opposed to an insurance company.

There are more than 400 Nortel employees on long-term disability. If Nortel proceeds with its asset sale, these people would join the long list of unsecured creditors.

Here’s a letter from Nortel’s French employees:

Châteaufort, Yvelines (France) - 7th July 2009

The employees of Nortel France (NNSA), the worldwide R&D centre for Nortel GSM are going on a general strike. For 800 French families, including the subsidiary (NNF), a veritable harassment has been endured for several months.

Our situation is as follows:

The company went into administration 6 months ago,

The payment of our salaries is called into question each month,

We are told of 500 redundancies and yet no buyer has been announced and the accounts remain unclear after 6 months of administration.

The North American parent company, which has cash reserves at its disposal, refuses to support the French subsidiary which has always been profit-making: the accounts of Nortel France have been drained by up to 300 Million dollars by a mutual transfer mechanism which in fact only works in one direction! Faced with this situation, the Law court of Versailles is investigating, the authorities have frozen the research funding and the AGS (an Association for employee debt guarantee management) has called into question its contribution to the legal minimum redundancy payments.

The management who have driven the Nortel group to insolvency are still in control and grant themselves 45 Million dollars in bonuses to carry out the liquidation! We no longer have confidence in this management without any industrial vision and who have established greediness as a merit.

It’s one more financial scandal, after the corruption of accounts which led Nortel in front of the North American justice in 2002; it’s also an industrial fiasco for a high-tech group which had over 100 000 employees worldwide, 2 000 of which were based at the French site in Châteaufort.

We have contributed to the wealth of the group whilst being subjected to relocation and collective redundancies; now the anger and exasperation forces us to go on strike to defend our rights at work. Conscious that the economic climate is unprecedented, we demand financial compensation and reclassification measures to help the families concerned to survive this difficult period which is looming.

The workforce of Nortel France (NNSA)

Here’s a video showing Nortel’s facility in France and striking workers:

But just when the destruction of Nortel was nearly a fait accompli, MatlinPatterson could throw a wrench in the works by putting together a deal to acquire Nortel.

So what you’ve got are two diametrically opposite approaches: Nortel’s management and board wants to sell everything at the highest possible price, while Matlin Patterson apparently wants to keep Nortel intact.

From the outside looking in, Matlin Patterson looks like a white knight, especially compared to the dark knights now running Nortel. But keep in mind, Matlin Patterson’s bread and butter is acquiring distressed companies, and then maximizing value for its investors.

So don’t expect, Matlin Patterson to take over Nortel, and then play the nice guy. It’s in the business of making - a lot of money - and Nortel could have huge ROI potential.

Without any knowledge about Matlin Patterson’s plans for Nortel, you have to believe it sees a lot of value in Nortel. Rather than Nortel selling everything, Matlin Patterson may believe a better approach is keeping Nortel together, and then de-leveraging itself by selling non-core assets.

This seems like a better and more pragmatic approach than the senseless destruction of a once-great company that is suffering from bad strategic decisions and a lack of long-term vision.

More: If you take a look at Matlin Patterson’s Web site, there’s little information about the company and its investment approach. It was founded by investors David Matlin and Mark Patterson, former distressed debt specialists at Credit Suisse Group.

MatlinPatterson, a private equity firm that acquires distressed companies, issued a statement today that it doesn’t believe the Nokia deal “maximizes value for Nortel stakeholders, including its creditors, customers, employees and communities.”

Here’s the statement:

“Under the bankruptcy court-imposed timeline, MatlinPatterson is working to put forward a competing proposal that permits this critical part of Nortel to reorganize and emerge from bankruptcy as an independent, reinvigorated, stand-alone Canadian-based company.

MatlinPatterson’s objective is to present an alternative that not only exceeds the current bid in terms of value but also provides, on multiple fronts, a superior outcome for the company and all of its constituencies.

MatlinPatterson believes Nortel is a solid company with a valuable brand, talented employees and innovative technologies. It is interested in retaining, for current investors, the inherent value of the company rather than merely accepting a ‘fire sale’ of its core asset followed by the wholesale liquidation of the remaining businesses.

The firm has a proven track-record of leading successful reorganizations and is currently conducting due diligence and meeting with other potentially interested parties as part of our effort to prepare an alternative proposal.”

More: Reuters has a story on Matlin Patterson’s interest in Nortel.

With the spotlight on Nokia Siemens’ proposed $650-million bid for Nortel’s CDMA wireless business and LTE R&D unit, it’s interesting to note it was four years ago that Nokia and Nortel nearly entered into a wireless joint venture.

If the deal was had consummated, Nortel would have not only made a lot more money but it would have given Nortel the strategic focus and financial ammunition. Instead, the Nokia-Nortel JV was cast aside from then-CEO Bill Owens and the board.

In any event, here’s how the deal would have gone down:

JV 1: GSM/UMTS

•Nortel exits G/U RAN business
•Nokia provides all GSM/UMTS RAN technology / products

•Nokia assumes control of Nortel’s G / U development facilities in France
•Nortel provides Gateways/Voice Call Center platforms
•Nortel becomes CDMA product supplier to Nokia
•Nortel receives substantial compensation / ‘buy out’ from Nokia

JV 2: CMS/ HLR Development

•Develop ‘joint’ CMS and HLR platforms
•Nortel puts platforms/personnel into JV

Device Technology Partnership

•Nortel provides technology under license to Nokia for its Dual Mode Devices

The group also wants the federal government to “use its authority to set conditions under the Investment Canada Act for a significant proportion of the proceeds from the foreign purchases of Nortel businesses to fund Nortel’s Canadian legacy pension, health and long term disability plan deficits and severance. The latter request is due to concern about Nortel’s Canadian estate receiving only a small proportion of the proceeds from expected business sales.”

The speakers include:

Diane Urquhart, host & independent financial analyst
Don Sproule, chairperson of Nortel Retirees Protection Committee
Paul Hanrieder, representative of Nortel Alberta-based terminated employees
Paula Klein, representative of Nortel Ontario and Quebec -based terminated employees
Susan Kennedy, representative of Nortel long term disability employees

You can sign up for the Webinar at https://www2.gotomeeting.com/register/720532955

Since then, Dunn has been involved in litigation after being sued, along with several other Nortel executives by the Securities and Exchange Commission for allegedly engaging in accounting fraud from 2000 to 2004.

Dunn’s legal battles include a lawsuit against Chubb Corp., which he claims must pay 90% to 100% of its legal expenses as part of the coverage he received while Nortel officer.

Yesterday, a Court of Apple judge said Nortel’s insurance policy is “ambiguous”, and send he dispute back to a trial judge.

The dispute focuses on whether Chubb’s insurance policy covers legal costs related to lawsuit allegations involving Dunn’s conduct in 2003. Chubb has been paying half of Dunn’s legal costs.

Source: Bloomberg