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                                                                    EXHIBIT 10.2

                               SEVERANCE AGREEMENT

                                     between

                            TECUMSEH PRODUCTS COMPANY
                               100 EAST PATTERSON
                               TECUMSEH, MICHIGAN

                    (hereinafter referred to as the Company)

                                       and

                               JAMES S. NICHOLSON
                              4827 BILLMYER HIGHWAY
                             BRITTON, MICHIGAN 49229

                    (hereinafter referred to as the Employee)

                                    Section 1
                         Duration of Severance Agreement

This Severance Agreement ("Agreement") shall become effective on that date that
is later the date of its execution by (i) the Company and (ii) the Employee. The
duration of this Severance Agreement is for an indefinite period and is subject
to termination in accordance with the terms and conditions hereof.

                                    Section 2
                                Severance Benefit

If Employee is severed or terminated by the Company while this Agreement is in
effect, other than under the circumstances set forth in Section 3 below, then
the Employee is entitled to twelve months (the "Continuation Period")
continuation of his then current salary and benefits (the "Severance Benefits"),
subject to fulfilment of any conditions to receipt of Severance Benefits set
forth in this Section 2. Once the Continuation Period ends, the Employee will be
eligible for certain benefits available pursuant to and in accordance with the
Consolidated Omnibus Budget Reconciliation Act, commonly known as COBRA.

If the Severance Benefits are found to be duplicative of any other benefits
payable by the Company to or for the benefit of Employee as a result of Employee
suffering a severance or termination

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event for which Severance Benefits would be available to Employee under this
Agreement, none of such duplicative amounts or benefits owed to Employee
hereunder shall be paid or become payable to or for Employee.

Notwithstanding anything herein to the contrary, under no circumstances will any
Severance Benefits become payable to Employee or the Continuation Period begin
until such Employee has executed and delivered an agreement which releases the
Company, its affiliates, directors, officers, employees, agents, and
representatives from any claims by the Employee, his heirs, representatives, and
successors and assigns, and includes a covenant not to sue.

                                    Section 3
                              Agreement Termination

This Agreement terminates and shall be of no further force or effect, and the
Employee forfeits any Severance Benefit amounts then due or that may become
payable under the Agreement, if Employee resigns or announces Employee's
intention to resign. In addition, the Employee shall not be entitled to any
Severance Benefits under this Agreement upon the occurrence of any of the
following events or circumstances and this Agreement shall automatically
terminate and be of no further force or effect:

     1.   The Company sells all or substantially all of its compressor
          operations (via a stock or asset sale(s)) and the Employee is offered
          employment by the acquiring company or companies;

     2.   Employee receives or is entitled to receive compensation or benefits
          pursuant to another agreement which is triggered upon a
          change-in-control of the Company, and such change-in-control has
          occurred;

     3.   Employee is terminated by the Company due to Employee's willful
          misconduct, gross negligence, or continued failure to perform the
          Employee's duties after a written demand for substantial performance
          is delivered to the Employee specifically identifying the nature of
          such unacceptable performance and such condition goes uncorrected for
          thirty (30) days;

     4.   Employee is convicted of a felony; or

     5.   Employee dies or becomes disabled pursuant to the terms and conditions
          of the Company's disability policy.

The Company reserves the right to, at any time, without increasing or decreasing
Employee's base salary, change or alter the Employee's title, position, work
location within Northern USA, and responsibilities in keeping

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with his knowledge and skills. No such alterations or changes shall be
considered a constructive termination of employment by the Company or Employee.

                                    Section 4
                                 General Duties

While this Agreement is in effect, Employee shall work exclusively for the
Company. In addition, while this Agreement is in effect and during the
Continuation Period, if any, Employee shall neither engage in a business nor do
business in the same geographic or product areas of the Company for his own or
another's account that competes with the Company.

While this Agreement is in effect and during the Continuation Period, if any,
Employee shall not become employed by, otherwise provide services to, or acquire
an investment or ownership interest greater than 1% in a business that competes
with the Company or that maintains a business relationship, to a substantial
extent, with the Company.

Employee covenants and agrees that Employee shall preserve and protect the
secrecy and confidentiality of all non-public Company information (in any form
or media), while employed by the Company and thereafter. Employee shall keep in
safe custody all business documents and correspondence as well as any duplicates
and photocopies made thereof and shall return such items to the Company, without
having to be requested to do so, upon termination of his employment with the
Company. The Employee further acknowledges and agrees that he has no right to
retain any such documents or correspondence.

                                    Section 5
                                Other Provisions

The validity, interpretation, construction, and performance of this Agreement
shall be governed by the laws of the State of Michigan without reference to
principles of conflict of laws.

The Company shall withhold from any amounts payable under this Agreement all
Federal, state, local, or other taxes required pursuant to any law, regulation
or ruling. The Company will not be responsible for Employee's personal income or
other taxes resulting from Employee's receipt of Severance Benefits that may be
provided under this Agreement.

This Agreement and the right to receive Severance Benefits hereunder, shall not
be assignable or transferable, whether by pledge, creation of a security
interest, or otherwise. In the event of any attempted assignment or transfer by
the Employee contrary to this section, such assignment or

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transfer shall be void and of no force or effect against the Company, and the
Company shall have no liability or obligation to pay or provide any amount or
benefit so assigned or transferred.

Any term or provision hereof that is invalid, illegal, or unenforceable shall
not affect the validity or enforceability or the remaining terms and provision
hereof or the validity or enforceability of the offending term in any other
situation or in any other jurisdiction, and another appropriate provision shall
apply in the place of such provision, insofar as legally permissible, that comes
closest in economic terms to what the parties wanted or would have wanted had
they been aware of the invalidity of the provision. .

Amendments to this Agreement shall be invalid unless made in writing and signed
by both the Company and Employee.

Any notice required to be given by a party to the other hereunder shall be in
writing and delivered in person or sent by certified or registered mail, return
receipt requested, or by nationally recognized overnight delivery service. Such
notices shall be deemed to be effective when delivered (if in person) or sent
(if mailed or tendered for delivery) at the address of the parties set forth
above or at such other address as that party shall hereafter designate in
writing.

This Agreement shall constitute the entire understanding of the parties relating
to the subject matter and any and all prior understandings, agreements or
representations, written or oral, shall be merged into and barred by the
execution hereof.

This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered, on the date(s) set forth next to each party's signature.

                                        Tecumseh Products Company


March 29, 2007                          By /s/ James J. Bonsall
                                           -------------------------------------
                                           James J. Bonsall
                                        Its: President and COO


                                        Employee


March 29, 2007                          By /s/ James S. Nicholson
                                           -------------------------------------
                                           James S. Nicholson