LEGO employees were recently notified that the greater part of the company’s production will be outsourced to electronics manufacturing services company Flextronics, over the coming three-year period.

      The decision to outsource means that production at the LEGO Group’s U.S.-based subsidiary in Enfield, Conn. will be phased out during the first quarter of 2007 and relocate to Flextronics’ production facilities in Mexico. Likewise, distribution in the United States will relocate. Altogether, the relocation will affect up to 300 employees.

      Production of the technically more demanding products (LEGO Technic and BIONICLE) will remain located at the LEGO facilities in Billund, whereas production of the LEGO System products will relocate to Flextronics’ facilities in Eastern Europe. This relocation means that over the coming three years, up to 900 jobs of its present 1,200 at the Billund production facilities will be affected. The relocation will take place in stages between 2007 and 2010.

      Lastly, Flextronics will take over operations at the LEGO Group’s factory in Kladno, the Czech Republic, beginning Aug. 1, 2006. The factory will continue to play a key role in the production of the LEGO System products.

            Upon implementation of the outsourcing, the LEGO Group’s headcount is expected to total approximately 3,000 employees as compared with a total workforce of 8,300 at the end of 2003, the last year before the LEGO Group started its restructuring process. Other than the planned outsourcing of the production, the divestment of the LEGOLAND Parks also contributes to bringing down the number of total staff as do also the outsourcing of the European distribution, the closing of the group’s production facilities in Switzerland and eventually also general cuts worldwide as a reflection of the reduced scope of the new business model...

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