Lego Co. is preparing to close plants in Switzerland and switch production to low-cost Eastern Europe as it continues to restructure to regain share in a changing global toy market.
In a bid to increase efficiency and cut costs still more, Lego of Billund, Denmark, is ready to shut down its plastic brick injection molding plant in Willisau, and its central in-house mold-making operation in Steinhausen, both in Switzerland, next year.
With Lego's decision to transfer all its Swiss manufacturing to Eastern Europe in the first half of next year, 239 jobs will go at Willisau. Last year, the group shut another injection molding unit in Baar, Switzerland.
Willisau production is to be transferred to a Lego plant in Kladno, Czech Republic, and to low-cost, third-party processors. Some new jobs will be created at Kladno, but Lego did not say how many.
``Obviously, high costs in Switzerland have been a key factor in deciding to transfer production to Eastern Europe,'' said Lars Altemark, senior vice president of Lego's global supply chain. To gain the maximum benefit from cost reductions, whole units need to be moved elsewhere, he added.
The Steinhausen tooling unit, which employs 68, will close at the end of January unless a buyer is found.
``As production times from idea to finished product necessarily shorten, the need for new molds fluctuates considerably, which means that the tooling works is no longer able to use its capacity to the full,'' the firm said.
In addition, that unit no longer can compete with prices in China and Eastern Europe, added Lego, which intends to outsource more molds in the future.
Meantime, Lego announced half-year 2005 results showing slightly higher sales, reflecting the recapture of some market share. Consumer sales of its products rose in Asia, Europe and the United States. The firm expects a pretax profit this year of about 200 million euros ($240 million).
Lego also announced that from early 2006, it plans to concentrate distribution of its products in Europe from one site in the Czech Republic, which will be run by external logistics company DHL Solutions. The outsourcing will result in the gradual closure of five centers, in Billund, Denmark; Hohenwestedt and Flensburg, Germany; and Lyon and Dunkirk, France, by March 2007. Lego owns only the Billund and Hohenwestedt units. A total of 301 jobs, 213 of them from Lego, will disappear.
In June, Lego closed a packing plant in Icheon, South Korea, cutting 63 jobs.