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Denmark’s LEGO(R) to end Flextronics outsourcing deal
COPENHAGEN, July 1, 2008 (Reuters) - Europe’s largest toy maker LEGO said on
Tuesday it would end its existing outsourcing agreement with manufacturing
services giant Flextronics (FLEX.O: Quote, Profile, Research) next year to focus
instead on internal production.
“During the past year it has become increasingly obvious to the two parties that
it would be more optimal for the LEGO Group to manage its global manufacturing
set up,” LEGO said in a statement.
It was only two years ago that LEGO, the world’s fifth-largest toy company by
sales, announced the outsourcing of most of its production to Flextronics over
three years, shifting from Western European plants to low-cost countries and
cutting over 1,000 jobs.
The family-owned, unlisted company -- founded 76 years ago as a maker of wooden
toys -- said it and Flextronics had agreed Lego would take over production from
Juarez, in Mexico, and Nyiregyhaza, in Hungary.
“At the Nyiregyhaza facility, the LEGO Group is in negotiations with Flextronics
to take over the plant and people,” the company said.
Juarez production will move to a new LEGO site in Monterrey, Mexico, during
first quarter of 2009, it said.
“With this decision, the LEGO supply chain will be developed faster through
going for the best, leanest and highest quality solution at all times,” LEGO
global supply chain head Iqbal Padda said.
LEGO is facing intense global competition and the challenge of children
outgrowing traditional toys earlier in favour of electronic gadgets, though it
also receives significant royalties from Lego-branded computer games.
LEGO has its own production sites in Billund, Denmark, and Kladno, Czech
Republic, and cooperates with other manufacturing suppliers in Poland, Hungary
and China. After the change in the production set-up the LEGO Group will have a
total of about 6,500 employees.
http://uk.reuters.com/article/governmentFilingsNews/idUKL0137855520080701
Also on the LEGO.com press release link below.
http://www.lego.com/eng/info/default.asp?page=pressdetail&contentid=78308&countrycode=2057
-end of report-
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