Danish toy maker Lego Group said Tuesday it will end its production in Enfield, Conn., and lay off 300 people there in early 2007, while some 900 employees in Denmark will also be sacked over the next three years.
The production in Enfield is to be moved to Mexico, the group said in a statement. Along with the 300 production layoffs, the distribution facility in Enfield will also be affected, Lego said, without providing details. (AP)
This is going to hurt. Lego is a big part of life in Enfield.
Source
"Lego to lay off 1,200 in Denmark, U.S.; move production." Associated Press 20 June, 2006.
6 comments:
I'm surprised they make so much in Denmark and Connecticut, which are both high-cost places. 900 Danish workers will be replaced with Czech workers working for a Singapore company that subcontracts Lego manufacturing. The Enfield jobs will go to Mexico.
I'd imagine it's not just wages, but also electricity, benefits, etc. that make Connecticut and Denmark uncompetitive.
BRubenstein said... "....thank NAFTA...."
Never one to let facts get in the way are you?
Connecticut had gained over
10,000 jobs due to NAFTA as of 1999 and seeing as CT's number one export location is now Mexico it's a safe bet the number's higher now.
I'm not sure what Rell or anyone else could have done to prevent these jobs from leaving. I don't know the case with Pfizer, but Lego isn't moving to another state, it's moving to another country. A country with much lower wage rates, laxer environmental rules, etc.
There's only so much a governor can do in this case. Just like Granholm is probably getting shaken down for the auto industry decline in Michigan. Sure, they all take credit when times are good...
First, if Connecticut's job creation rate is 1% less than the country as a whole, that means nothing without knowing how much Connecticut's population grew relative to the country at large. If Connecticut's job growth was 1% less than the nation, but Connecticut's population growth was also 1% less, then Connecticut is basically keeping on track.
What can a state government do to ensure good job growth? A bunch of things, but many of these are longer-term things. It can lower the tax rate, build a better infrastructure, lower regulation, etc.
Connecticut's infrastructure is not great, but a lot of that is NIMBY opposition. Highways are incredibly crowded, and the freight train infrastructure has never been good (I've heard rumours that this is because back in the 1800s, NY industrialists wouldn't allow freight trains to have bridges across the Hudson or some such thing; no idea if that's true or urban legend). But expanding highways is incredibly difficult politically: look at the fierce resistance to Super 7 from Norwalk to Danbury.
Connecticut's electricity rates are damned high: I think higher than just about any other state than Hawaii. And I've heard that our workmen's compensation plans are also quite expensive.
Real estate is expensive in many parts of the state as well. The high housing costs mean workers demand more money, which makes operating a business more expensive.
There isn't really a quick fix to a lot of these things. And some are in direct contention with each other: taxes and infrastructure, for instance. I also don't have all the answers, but for Malloy to blame Rell when a foreign company moves operations out of the US to another country seems a bit silly.
Yes, Stamford jobs have increased while Malloy has been mayor, but many of these have been achieved through various tax holidays, which I am totally against. I do not understand why UBS, for instance, should pay no property tax, while a deli has to. UBS is a better known name, but when the city government starts to decide which businesses it likes and which it doesn't, the whole situation becomes really muddled, and the corporation is the only one that wins in the end (it would have to put those people somewhere, but can now play the municipalities off one another). Essentially, the regular citizens of Stamford are subsidizing a large foreign bank.
This is a simple equation. The global economy is taking shape and these jobs are too costly to maintain here in the U.S. Too bad Government wasn't trimming the fat. Perhaps we'd have a fighting chance in the world economy. No matter who is in charge, money always flows to the lowest cost producer. Once you understand that, you see why tax and spend Liberal Policies are failing our State. I love the apples to oranges comparison average worker to CEO. The CEO isn't your average worker and commands a premium in this environment. Imagine paying Johnny Damon the same money as a minor league player?
I wouldn't pay Johnny Damon squat.
Also, I don't see how the 'tax and spend' vs. 'let the rich keep their money' vs. 'give big business a tax break so the low and medium income people have to pay off the national debt' policies have anything to do with 'money flowing to the lowest cost producer.'
The United States is no longer in a position (under ANY policy) to be a low cost producer anymore. The cost of living is just too high. As a result, money will continue to flow out of the country to poorer countries around the world. Eventually, as our standard of living goes down, the others will go up until all is equal ... then they will all go up together once we're on equal footing.
The problems with Lego ran deep.
1) The product was expensive and Mega Blox was alot cheaper in price. The product was not as high quality at the time as Lego was but with the reinvestment of profit into quality over time, it met Lego quality and was still cheaper for the consumer. Other companies have also jumped on the block bandwagon with heavy backing from huge toy companies.
2) You would pass out if you knew what the profit margin was on the kits that are sold.
3) Moving to mexico means more profit and the ability to use the lower costs of production in mexico to lower the kit prices more in sink with whats out on the open market today vs saying we are now selling you that 100 dollar kit for 50 dollars because all along it was only worth 50 dollars. And thats still with a huge profit margin. Hint: The box and the instructions cost more than what the bricks inside cost the company to make.
Save face and make more profit is the name of the game.
Post a Comment