The sweeping restructuring, announced yesterday, comes after a year in which the Danish group's performance was hit by the huge growth in a new breed of computer games, such as those carried by Sony's Playstation. Industry experts say most children have ditched Lego's old fashioned bricks, which have remained virtually unchanged for half a century, for high- tech games.
The company tried to bridge the gap last year with the launch of Lego Mindstorms, an "intelligent" brick fitted with a microchip that can be built into a moving robot. Lego's efforts to get rid of its staid image also saw the Danish company tie up with Walt Disney to market Winnie the Pooh and with the film director George Lucas to sell toys modelled on the Star Wars characters.
However, analysts believe that Lego's marketing efforts are doomed unless the company reforms its internal workings. The company said yesterday that its inefficient corporate structure and difficult market conditions would push it into the red for the first time in its 67-year history.
The firm said the job cuts were needed to stop the slide in sales and profits. In a letter to the group's 10,000 employees, Kjeld Kirk Kristiansen, Lego's billionaire owner, said the company needed a "fitness programme" to improve its financial health. "Just like athletes, before we begin our all-important task we have to slim down and improve our overall health," he said.
The programme would see the disappearance of 1,000 jobs in 30 countries. In Britain, Lego has about 300 employees, mainly in the Legoland Park in Windsor, Berkshire, and in its sales operation in Wrexham, Clwyd. A spokesman said it was "too early" to say where the axe would fall but a counselling centre would be set up to help with the stress of redundancy. "It's part of the Lego culture of being close to our staff."
Mr Kristiansen, whose personal fortune is estimated at about $2.3bn (pounds 1.4bn), said the cuts would come mainly among administrative staff to "create a new, simpler and above all more efficient business system".
Industry experts believe that Lego's bloated workforce is one of the reasons for its problems and it will not be able to reverse its poor performance in the short term. They estimate Lego will post a loss of about 200m Danish Krona (pounds 19m) when it unveils its results for last year at the end of April.
Mr Kristiansen, the third generation of his family to run the firm, said Lego was not facing a crisis. "We will not deviate from our goal of being the world's strongest brand among families," he said.