- AIG, Ex-CEO Greenberg Reach Pact to Settle Disputes
- Bank of America CEO Search May Extend Into 2010
- Steepest Black Friday Discounts, Revealed
- 'Cancer of Fraud' Permeates Health Care System: Critics
- US Mint to Suspend American Eagle Gold 1-Ounce Coins
- Judge Erases Couple's $525,000 Mortgage Payment
- For Many in US, It Will Be a Scaled-Down Holiday Season
- Where Do Pardoned Turkeys Go?
- Jobless Claims Below 500,000, Durable Orders Slip
- 4 Thanksgiving Week Buys For Your Portfolio: Market Pros
- There's a 'Great Chance' For a Double-Dip Recession: Strategist
- Revenge of the Gangsta Nerds
- Will TCU See The "Flutie Effect?"
- Retail Earnings and Sales to Improve in Q4: Analyst
- Consumers Catching the Holiday Spirit
- It's Beginning To Look A Lot More Riskless
- Crescenzi: Claims Level Suggests End to Job Losses
- Hedge Funds Take Early Lead in Warren Buffett's 'Big Bet'
MOST SHARED
- The Executive Job Search
- S&P Stocks Trading at New 52-Week Highs
- Where Do Pardoned Turkeys Go?
- Judge Erases Couple's $525,000 Mortgage Payment
- Activision Prepares to Double Dip on ‘Modern Warfare 2’
- Salvation Army's Kettles Now Credit Card-Ready
- US Plans to Reduce Emissions By 17% Within Next Ten Years
- US Mint to Suspend American Eagle Gold 1-Ounce Coins
- Trader Talk
- New-Home Sales Jump 6.2% To Highest Level in Over Year
Text Size 
Danish toy company Lego expects to post a 50% profit growth in 2009, CEO Jorgen Vig Knudstorp told CNBC, and he expects the growth momentum to continue in the near term.
 |
Michael Sohn / AP A little girl looks at a giant spider made of Lego bricks during the pre-opening of the Legoland Discovery Center at the Sony Center in Berlin, Germany, Tuesday, March 27, 2007. (AP Photo/Michael Sohn) |
"I think we can continue this low double-digit growth for the foreseeable future," he said, which is a commendable feat considering the company was deep in the red when Knudstorp came on board five years ago.
Then, Lego was losing nearly $350 million a year. Knudstorp has since embarked on a massive restructuring, closing down plants and whittling down packaging. Lego still makes 7000 different pieces, but only half of what it used to.
While many multi-national firms are outsourcing production to more cost-effective countries like China, Lego prefers to 'in-source' its operations.
"The real economic profits are much less (when you outcome) because you lose sales, you have too much inventory, you've got too much working capital," Knudstorp said, adding that the protection of intellectual property rights is also a major concern for us.
"So we found that for a number of reasons (it's) economically unattractive to manufacture in China to serve our major markets. China to us today is 40 times smaller than the U.S. market. I think it's going to be another 15 to 20 years before China is a major market in the context of Lego."
Knudstorp said he may be manufacturing in Asia in 10 years. For now, Lego says it plans to increase capacity in Mexico - its hub for U.S. sales.
Lego is also warming up to Hollywood. Knudstorp said the Star Wars series has been a blockbuster in the U.S., but licensing costs and keeping up with trends could be a gamble.
- For nearly three decades, these on-call experts have been dishing advice on how to – and not to – cook turkey.
- Eric Schmidt pledges to create a virtual copy of the Iraq National Museum at Google’s expense.
- Bill Griffeth is taking a leave of absence from CNBC and Power Lunch for a year. Here's a message from Bill.
- More shoppers than ever plan to comparison-shop this season. Who will benefit?
- It may be the most unusual guide to business you'll read.
- How can you get out of debt and back on the road to recovery? Follow these ten steps.
Data is a real-time snapshot *Data is delayed at least 15 minutes