It looks like the big changes that toy company Lego A/S has made in the last few years are working out -- big time. The company announced Feb. 21 that its 2006 net profit rose to 1.43 billion Danish kroner ($251.7 million), up from 505 million kroner in 2005. Lego, which is based in Billund, Denmark, lost money in 2004, and toy industry analysts wondered about the company's ability to attract the attention of today's video game generation. The company decided to outsource most of its injection molding work to Flextronics International Ltd., which shifted manufacturing to lower-cost plants. Lego slashed employment at operations in Billund; Willisau, Switzerland, and Enfield, Conn. "The year 2006 was a particularly satisfactory year. It shows that Lego products are full of life, and that our strategy of concentrating on our core business is correct," Lego Managing Director Jørgen Vig Knudstorp told reporters. He added in the news release: "Despite the announcement in 2006 of the outsourcing of most of the production, the employees delivered a great and impressive effort, even though the pressure on the employees has without doubt been very heavy." The turnaround at Lego is notable, and the prescription for success -- outsourcing captive molding work to custom molders -- is one that other OEMs might emulate.
Lego's big turnaround
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