Lego To End Production At Connecticut Facility Next Year

Three-hundred jobs will be lost as production gets moved to Mexico.Distribution will also be impacted.

COPENHAGEN, Denmark (AP) - Danish toy maker 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 employees in Denmark will also be sacked over the next three years.

The production from Enfield, Connecticut, 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, 255 kilometers (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 (?68 million; US$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.''

More in Operations