View Full Version : LEGO to Lay Off 1,200 in Denmark, U.S.

06-20-2006, 04:28 PM
LEGO to Lay Off 1,200 in Denmark, U.S.

Lego Group said Tuesday it will end production at a U.S. facility and lay off 300 people there in early 2007, while some 900 of the toy maker's employees in Denmark will also be sacked over the next three years.

The production from Enfield, Conn.,, is to be moved to Mexico, the group said in a statement. Along with the 300 production layoffs, the distribution facility in Enfield will also be affected, Lego said, without providing details.

At Lego's headquarters in Denmark, up to 900 production employees will lose their jobs over the next three years as nearly a third of the domestic production will be moved to the Czech Republic, the company said.

Some Lego products, including the popular Lego Technic and Bionicle, will still be made at Lego's headquarters in Billund, 160 miles west of Copenhagen, which presently has a staff of 3,000 employees.

The production of the basic Lego bricks will be made by Flextronics, a Singapore-based electronics manufacturer, which operates factories in Mexico and in eastern Europe. Flextronics also is taking over Lego's factory in Kladno, in the Czech Republic, from Aug. 1.

"This is the last essential element in the restructuring of the group's supply line," Lego CEO Joergen Vig Knudstorp said in a statement. "We now see the contour of a new business model, where we go from traditional integrated model to a partnership model."

"This way we can achieve great financial advantages in a very difficult market," he added.

In 2005, the privately owned group posted a net profit of 505 million kroner ($86 million), compared with a net loss of 1.93 billion kroner in 2004.

Since its first reported loss in 1998 of 282 million kroner, the company whose colored plastic building blocks have been children's favorites for decades has been hit hard by increasing competition from electronic toy makers.

At the same time, Lego said that the bulk of the toys today are produced in low-cost countries, mainly in Asia.

In September, Lego said it was considering moving all or parts of its production to Eastern Europe or China, and said the restructuring plans could affect all of its production facilities.

A month later, Lego announced that it was closing a production facility in Switzerland and five European distribution centers, and moved those operations to the Czech Republic. That move affected 540 workers.

In 2005, the company sold off its four Legoland amusement parks in Billund, Denmark; in Windsor near London; in Carlsbad, California, and in Munich, Germany to the U.S.-based private equity group Blackstone Capital Partners.

Founded in 1932, Lego's name was invented by combining the first two letters of the Danish words "Leg godt" (play well) without knowing that that the word in Latin means "I assemble."

06-20-2006, 04:34 PM
BTW, I personally was livid when I read this, they're basically outsourcing the bulk of their manufacturing to Mexio and Asia which generally means poorer quality mold work. It's an incredibly foolish move IMO which could end up ruining them unless they're going to be hovering over QC so much which would probably cost just as much as keeping the work in-house in the first place. I truly hope this doesn't affect product quality, but I can't see how it won't, LEGO's quality has been so high because they made it themselves and could control production so carefully.

The Enfield facility is key to their operations here in the US so I hope the cutbacks impact there isn't as severe, the US is their largest market and damaging Enfield could put a big hurt on their already problematic mass retail situation here.

06-20-2006, 06:09 PM
I don't get why they have a need to outsource seeing as the Star Wars line has netted them over $1 billion since it's initial release 7 years ago or so.

It's ridiculous and, as you stated, I hope the production doesn't falter.:(

06-20-2006, 08:57 PM
I truly hope this doesn't affect product quality, but I can't see how it won't, LEGO's quality has been so high because they made it themselves and could control production so carefully.Yeah, sadly, it's probably going to mean that LEGO quality will falter. I can't see how it wouldn't. I just keep thinking about that walk through display at Legoland, where they show you how the bricks are made, and then tell you about the high standards at their factory. Well, could be worse. If they moved production to China, then we will be stuck with a cr** product. Mexico is not as bad... I don't know anything about the Czech Republic though.

This whole "achieve great financial advantages" thing will more than likely backfire on them. Much of their success is based on reputation, and this is really gonna hurt that. Even on a word of mouth level, it's gonna have an effect.

06-21-2006, 02:20 PM
Mexican mold making is really poor right now, like China a customer has to pay more to get the quality mold they originally hired out for, Mexico and China have been known on the market lately for being very bait-and-switch with their molds. The only for-sure good thing about starting a plant in Mexico is that lead times to the US will be decimated since they're in-continent.

06-21-2006, 07:41 PM
:( I've begun to notice the cheaper plastics used to make the products already. cutting corners isn't a good sign. Mega Bloks must be rubbing their hands with glee.

06-21-2006, 08:01 PM
Mexican mold making is really poor right nowI'd never say that it's the best option, and I only know what I know about Mexico vs. China from what I know about the garment industry, but Mexico... a) tries harder (right now anyway) in order to sway people from doing business with China, and... b) yeah, the fact that they're closer means that a company can more easily keep tabs on quality. (It's easier to fly down to Mexico a few times a month than it is to go to China. Most people I know would rather do business w/ Mexico anyway. They'd all rather do things domestically, but that's not always an option these days. In the end, you do what works to get the product made, to keep your company in business, and to keep your job, if your job is overseeing the first two things.)

Either way, it'd have been better if things had stayed the way they were. :(

I've begun to notice the cheaper plastics used to make the products already.Plastic's more expensive now, so I'm sure that means cutting corners to save/make money. Again... :(

06-22-2006, 03:37 PM
the fact that they're closer means that a company can more easily keep tabs on qualityNot for a European company such as LEGO.

06-22-2006, 05:56 PM
Not for a European company such as LEGO.This is true, but as I understand what I read above... the US production moves to Mexico, and the Denmark production moves to the lovely Czech Republic. There will probably still be someone here in the US dealing with Mexico for those people in Europe. If not, then Mexico isn't much farther than Enfield, Conn. for them to travel to. (Still, the point was, that no matter how you slice it, China is a big pain in the a** to deal with, and any alternative is better.)

06-22-2006, 06:22 PM
Yeah, but the team running the US facility won't be running the Mexico one, a totally different company will be.

06-26-2006, 09:12 PM
I have really mixed feelings about this. On one hand I feel that the quality in resent years has slipped. And on the other I want the company to stick around. I don't think bricks coming out today are as good as those made in 1986 or even 1996. So is this going to farther affect the quality? I can't say.

I will the the Czech Republic is known making some really good scale model kits and after market accessories. Now the model kits may not be as good as the same of the Japanese kits, but there still top notch. And most of the best after market accessories come out of the Czech Republic. So a bit more money and incentive Lego bricks out the Czech Republic might be a good thing.