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% and has indicated it expects to lay off about 70 workers at its Hungarian plant in Nyíregyháza as part of the cutback.
At the same time, Lego remains firmly committed to its operation in Hungary. The group is pressing ahead with a major ongoing expansion programme in the country, launched last year.
Investment of more than €100m is set to duplicate the size of the Nyíregyháza plant to 290,000m2, adding 768 new injection moulding machines - double the installed number - and creating up to 1,600 jobs by 2020. The project will see the addition of moulding, packing and warehousing space and processing areas, along with new administration buildings.
Last year, Lego began phase one of the scheme with the installation of some of the new moulding 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 labour 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 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 labour cutback of around 1,400 jobs last month after reporting poor first-half 2017 results. These showed operating profit down by 6% to just over €590m on revenue down by 5% at €2 billion.
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 organisation 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 J?rgen Vig Knudstorp.
In 2016, its Hungarian business put in a strong performance with annual revenue up 11% from the previous year at a record €105m and an increased net profit, up 13%, to €2.5m, Hungarian news agency MTI has reported.
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