Hard-pressed toy maker Lego A/S plans to outsource ``the greater part'' of its remaining production in Europe and the United States to Flextronics International Ltd. during the next three years.
The decision by Billund, Denmark-based Lego, producer of the world-famous colorful plastic building bricks, means its U.S. plant in Enfield, Conn., will close early next year, with a loss of as many as 300 jobs. Manufacturing will switch to a Flextronics facility in Mexico, Lego announced June 20.
In Denmark, Lego will cut as many as 900 of 1,200 jobs at its headquarters plant in Billund by 2010 as the labor-intensive production of Lego products relocates to Flextronics facilities in Eastern Europe.
Billund will retain production of its more technically demanding Lego Technic and Bionicle products.
Flextronics, a Singapore electronics manufacturer, also is due to take over Lego's low-cost plant in Kladno, Czech Republic, in August.
Lego recently shifted injection molding work to Kladno from its higher-cost plant in Willisau, Switzerland.
The outsourcing decision follows ``an in-depth analysis of the company's total supply chain,'' the company said. In the future, any products involving labor-intensive decorating and assembly or packing processes will be outsourced.
Since 2003, Lego has seen its higher-cost manufacturing operations slashed with a series of major cutbacks, closures and layoffs.
In 2004, the privately owned company lost nearly 1.7 billion Danish kroner ($288 million).
``This is the last major step in our process of restructuring the group's supply chain, which has been implemented since 2004 with the purpose of cutting total production costs by DK1 billion ($170 million),'' said Lego President and Chief Executive Officer Jurgen Vig Knudstorp.
Lego is aiming to improve profitability while strengthening its competitiveness, he added.
In the past year, Lego has outsourced production of its Duplo products to Flextronics' plant in Hungary, and Lego has ``come to know Flextronics as a very professional partner,'' Knudstorp said.
Lego said it has found outsourcing to be profitable, mainly because of the high labor cost of packing operations.
Flextronics welcomed the new Lego business. ``We are excited to expand our partnership with the Lego Group, as this allows Flextronics further market diversification and enhanced plastic molding capabilities in low-cost regions,'' said Matt Ryan, Lego executive vice president of worldwide operations, in a news release.
Lego employs about 3,000, down from 8,300 at the end of 2003, thanks to plant closings in Switzerland and South Korea, outsourcing of its European distribution operations, divestment of the Legoland theme parks and general cutbacks worldwide.