Lego to cut jobs, add lines in Hungary

For employees of Danish toymaker Lego A/S in one European country, Hungary, news of the group's global job cuts plan is likely to have both a sour and a sweet taste.

Lego announced that it intends to cut its overall workforce by 8 percent and has indicated it expects to lay off about 70 workers at its Hungarian plant in Nyíregyháza as part of the cutback.

The global staff reduction will cut 1,400 jobs. Lego currently employs 18,200 people worldwide.

At the same time, Lego remains firmly committed to its operation in Hungary. The group is pressing ahead with a major ongoing expansion program in the country, launched last year. 

Investment of more than 100 million euros ($117.5 million)  is set to duplicate the size of the Nyíregyháza plant to 290,000 square meters, adding 768 new injection molding machines — double the installed number — and creating up to 1,600 jobs by 2020. The project will see the addition of molding, packing and warehousing space and processing areas, along with new administration buildings.

Last year, Lego began phase one of the expansion plan with the installation of some of the new molding lines at a leased site nearby, as well as putting in extra warehouse capacity and a new Lego Duplo processing plant.

Few details of the planned labor cutback have been revealed to date, but Lego's Hungary management estimated a likely impact of around 70 job losses locally this year. Currently, the national operation employs almost 2,000, mainly blue collar workers.

“As far as the Hungarian factory is concerned, we remain committed to producing Lego products here,” Csaba Tóth, human resources director at Hungary-based Lego Manufacturing Kft. told local media in September.

“Last year, we began the expansion of the factory in Nyíregyháza. We will continue this project, building the phases earlier approved and will also continue to determine the number of our employees in future in order to satisfy demand for Lego products.”

Lego stressed that its decision to invest in more capacity in Hungary was based on group expectations for long term growth in the group's global sales.

The toymaker, based in Billund, Denmark, announced a global labor cutback of around 1,400 jobs last month after reporting poor first-half 2017 results. It reported a 5 percent drop in its first half sales at 14.9 billion Danish krone ($2.38 billion) mainly due to low performance in established markets such as the United States and parts of Europe.

These results were mainly attributed to lower revenue from some established markets chiefly in the US and parts of Europe.

Lego will aim to slim down and simplify its organization after it had become increasingly complex to support global double-digit growth over the past five years. The complexity had in turn made it harder for the group to grow further, according to its chairman Jorgen Vig Knudstorp.