This week, Mattel Inc., the maker of Barbie and other popular toys, announced a recall of about 800,000 toys because they contain excessive levels of lead paint. It's the third such recall for the company since August 1.
Please review the article and discuss the issue facing Mattel, its impacts, where the issue is in its lifecycle, and what the company's goals in managing this issue should be.
Mattel Recalls 800,000 Toys Worldwide
By ANNE D'INNOCENZIOThe Associated PressWednesday, September 5, 2007; 10:52 AM
NEW YORK -- The third major recall by Mattel Inc. of lead-tainted Chinese toys has left the world's largest toymaker fighting to maintain its reputation with the crucial holiday season fast approaching.
Mattel announced late Tuesday it was recalling 800,000 toys, including 675,000 accessories for one of the company's biggest sellers, the Barbie doll. Also part of the recall, the third in just over a month, were 90,000 units of Mattel's GeoTrax locomotive line and about 8,900 Big Big World 6-in-1 Bongo Band toys, both from the company's Fisher-Price brand. The Big Big World products were sold nationwide from July through August of this year, while the GeoTrax toys were sold from September 2006 through August of this year.
Mattel shares dropped more than 3 percent, or 68 cents, to $21.29 at the open of trading Wednesday.
Mattel's last recall, announced on Aug. 14, covered about 19 million toys worldwide. They included Chinese-made toys that either had excessive amounts of lead paint or had small magnets that could easily be swallowed by children.
On Aug. 1, Mattel's Fisher-Price division said it was recalling 1.5 million preschool toys featuring characters such as Dora the Explorer, Big Bird and Elmo because of lead paint. That action included 967,000 toys sold in the United States between May and August.
Robert Eckert, chairman and chief executive of El Segundo, Calif.-based Mattel, warned at a press conference last month that there may be more recalls as the company stepped up investigations into Chinese factories and intensified production checks.
In a statement issued late Tuesday, Eckert said: "As a result of our ongoing investigation, we discovered additional affected products. Consequently, several subcontractors are no longer manufacturing Mattel toys. We apologize again to everyone affected and promise that we will continue to focus on ensuring the safety and quality of our toys."
Mattel added that it has completed its testing program for the majority of its toys and spent more than 50,000 hours investigating vendors and testing toys over the past four-week period.
Mattel, which has cultivated an image of tightly controlled production in China, may have trouble convincing consumers that its products are safe this holiday season. The Consumer Product Safety Commission may investigate how quickly Mattel notified authorities of problems before the Aug. 14 recall.
With more than 80 percent of toys sold worldwide made in China, the problems go well beyond Mattel's image.
In June, toy maker RC2 Corp. voluntarily recalled 1.5 million wooden railroad toys and set parts from its Thomas & Friends Wooden Railway product line. The company said the surface paint on certain toys and parts made in China between January 2005 and April 2006 contained lead, affecting 23 retailers.
In July, Hasbro Inc. recalled Chinese-made Easy Bake ovens on reports of second- and third-degree burns to children. It was the second time the iconic toy has been recalled this year.
A Chinese quality official said Wednesday that the country is investigating the latest recall.
Wang Xin, an official with the General Administration of Quality Supervision, Inspection, and Quarantine, said the agency, which oversees all products made in China, is trying to get details on when the toys were made and the manufacturers involved.
Mattel vowed as recently as last month it would tighten its controls in China. About 65 percent of the company's toys are made in there, and about 50 percent of Mattel's production is in China at company-owned plants.
The recalled toys in the Barbie accessory line included a Barbie Dream Puppy House, which had lead paint on the dog; a Barbie Dream Kitty Condo playset, which had lead paint on the cat; and a Barbie table and chairs kitchen playset, which had lead paint on the dog and dinner plates.
Mattel said in a statement that the Barbie products affected by the recall were produced by Holder Plastic Company, a Mattel contract vendor, which subcontracted the painting of miniature toy pets and small furniture pieces to Dong Lian Fa and Yip Sing.
The two GeoTrax toys were made by Apex Manufacturing Company Ltd., one of Mattel's contract vendors, which outsourced paint work to a subcontractor, Boyi Plastic Products Factory. Apex supplied Boyi with certified paint; however, the toys were made with uncertified paint. Boyi is no longer in business, Mattel said.
The GeoTrax toys were manufactured between July 31, 2006, and September 4, 2006; however, the painted parts were stored and incorporated into toy production throughout the year. Mattel said it is recalling toys shipped between August 3, 2006, and July 31 of this year.
Fisher-Price's Big Big World toy was manufactured by Shun On Factory, one of Mattel's contract vendors, which outsourced the molding and painting of one plastic piece. A subcontractor, Jingying Tampo Printing Processing Factory, used uncertified paint on the recalled piece.
For information about Tuesday's recalls, consumers should call Mattel at 888-496-8330 or visit the company's Web site at http://www.service.mattel.com.
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9 comments:
This situation for Mattel is very serious. However, I do not believe it is fatal. It can be said that consumers have purchased Mattel products because they were confident of the quality of the products and that these products were also safe for their children. In fact some consumers would pay a premium price for the peace of mind of knowing that a product manufactured by Mattel addressed these concerns.
Mattel must restore consumer confidence with an aggressive PR campaign.
Mattel needs to offer deep discounts and rebates on all of their products.
Company executives must pay a very public visit to China, tour factories, meet with Chinese Government Officials, to assure consumers that they are on top of this situation. All of this must be well publicised, with aggressive media buys in print, radio and television and the internet. Make Mattel executives available for any and all interviews.
Arrange very public meetings with US Government officials to determine areas of cooperation between government and business.
Mattel needs to demonstrate they are on top of this issue, that they care and that they care more, they are doing more than other toy companies who manufacture toys in China.
Mattel needs to demonstrate that they are working with their partners, such as Walmart, to make certain that quality and safety issues in China are addressed.
Mattel needs to reassure consumers that this is a one time problem, Mattel is taking this very seriously, Mattel cares about the safety of children and with aggressive new qaulity controls, this will never happen again.
Mattell has been around since the early 1960's. Almost every person has owned and played with a toy manufactured by Mattel at least once in their lives. Because of this history, this relationship with consumers, there is a considerable amount of goodwill equity that will allow Mattel to weather this storm.
I agree with Earl that this is not going to be a long-term public relations problem for Mattel. The company must demonstrate urgency, but more importantly, genuine concern for the health of its customers. Wal-Mart seems to be doing a good job at that so far. Also, Disney announced today that it would be spot checking its products to make sure they are safe. Disney at least appears to be getting ahead of this story before it hits them (or has the potential to).
The American public does not only see these unsafe Chinese products as the fault of the American companies or Chinese manufactures. In a recent Associated Press-Ipsos poll, 65% of Americans do not believe the government is doing enough to ensure safety in products imported from China. The U.S. government has to do a better job of showing that it is responsive to such a widespread problem--at the same time, the government has to walk a tightrope not to offend the Chinese government.
While 84% blame the Chinese companies and 85% blame the American companies "some" or "a lot" for the problem, only 71% blame American customers that demand low prices. This speaks to the "Wal-Mart effect" where today Americans expect to pay such a low cost for products that they do not realize they are getting exactly what they pay for.
The issue facing Mattel is cyclical and therefore serious. They not only risk the loss economically of recalling products (as the decrease in their stock price indicated), they also lose part of their hard-earned reputation, which in turn cycles back to bad news for their bottom-line. All of this of course, as the story pointed out, comes at a bad time for Mattel – holiday toys (where they make all their money) are being shipped out to stores in the next couple of weeks. Time is not on their side and action in managing the issue has had to be taken fast.
The impact of all of this reverberates, since Mattel is the largest toy maker in the world (and other companies such as Hasbro have had similar recall problems with lead) to toy stores, other retailers, and most importantly to consumers (especially children), whose very safety is at risk.
So far, toymakers have proposed a three-part strategy, outlined in a recent TIME article: “a federal requirement to make safety testing mandatory; new, industry-wide standards for testing procedures; and certification for independent labs.” Federal regulators, including various governmental oversight bodies, are investigating. Tomorrow, September 12th, Senator Bill Nelson (D-FL) is holding a hearing about the issue and he has proposed legislation that would require toy companies to meet federal safety standards by seeking independent, third-party tests. As the article also points out however, all of the new rules won’t be in effect quick enough to have any impact on the toys that are currently making their way to store shelves for this Holiday season.
So what can Mattel do? What should their goals be? While the article points out that regulators have been asked to investigate the timing in which Mattel notified federal authorities, they have been fairly upfront since that point – advising families to seek medical attention if they believe they were impacted, pushing for clear, across-the-board standards for all companies, swiftly firing those contractors and sub-contractors who took responsibility for the lax production or outright errors, and publicly acknowledging what they are doing, what still needs to be done, and what consumers can expect from them this holiday season.
Their first and most important goal should be ensuring the safety of their toys for the millions of children who use them around the world. They should increase their oversight in China, and the oversight of imports from China that are used to make their toys. They should not only cooperate with federal regulators and other governmental entities, but as the industry leader, should be leading the fight for stricter and tougher standards across-the-board. Finally, they should continue to advise the public on the steps they are taking – guaranteeing the safety of their product – even if that means incorporating it into their holiday marketing plans.
I agree with Charliee that, "Their first and most important goal should be ensuring the safety of their toys for the millions of children who use them around the world. They should increase their oversight in China, and the oversight of imports from China that are used to make their toys."
I think that this situation ties in well with the Wal-mart effect chapters that we are reading. With American consumers having become accustomed to paying the lowest possible price for a product, without regard to its environmental or health risks/costs, it is apparent that this is parallel situation to what is now happening with Mattel and toy safety standards in China. More toy safety oversight is needed to prevent, the ever-present search for the lowest price tag, from resulting in more sick children.
From Bloomberg.com...
Wal-Mart Introduces First New Slogan in 19 Years
By Lauren Coleman-Lochner
Sept. 12 (Bloomberg) -- Wal-Mart Stores Inc., the world's largest retailer, introduced the first new companywide slogan in 19 years, promoting the benefits of low prices as it seeks to boost slowing sales.
The motto, ``Save Money. Live Better,'' appears in television advertisements starting today and then in print, on store receipts and shopping bags, spokeswoman Melissa O'Brien said in an interview. It replaces ``Always Low Prices.''
Wal-Mart wants to highlight its appeal as a low-price retailer after earlier attempts to woo shoppers with advertising taglines such as ``Look Beyond the Basics'' in 2006 failed to lure shoppers. Sales at stores open at least a year rose 2.1 percent last year, the least since the company began reporting the data in 1980.
``Now you're not only emphasizing low prices, you're also emphasizing a good value and improvements in your lifestyle,'' said Steven Baumgarten, an analyst at PNC Wealth Management in Philadelphia, with $77 billion in assets including Wal-Mart shares. ``At the end of the day, it's going to come down to what consumers see in the store when they go in there.''
The slogan was developed by all of Wal-Mart's agencies including Interpublic Group of Co.'s Martin Agency, the lead firm hired by Wal-Mart in January. It's based on research by consulting firm Global Insight Inc., which estimates Wal-Mart saved households $2,500 last year.
Road Trip
In one of the two commercials, a family pulls out of a Wal- Mart parking lot and embarks on a road trip to Florida. In the other, a father and son with Wal-Mart bags in the back seat of their pickup pull into a used-car lot so the son can inspect a red sports car.
Wal-Mart hired Martin to replace Interpublic's DraftFCB, the firm selected by former advertising chief Julie Roehm. Wal- Mart fired Roehm in December and dropped DraftFCB three days later.
Roehm sued the retailer for breach of contract and fraud, and Wal-Mart countersued, claiming Roehm had an affair with a subordinate and took gifts from Draft when it was seeking Wal- Mart's business. A federal judge in Michigan dismissed Roehm's suit last month, finding she should have filed the case in Arkansas.
Wal-Mart fell 23 cents to $42.71 at 4:33 p.m. in New York Stock Exchange composite trading. The stock has declined 7.5 percent this year.
To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net .
Last Updated: September 12, 2007 17:25 EDT
Mattel is a very well known company. They will be feeling the effects of the recent recalls for a while, but the company will stay afloat. Brand loyalty lends a hand to an already strong brand image. I agree with Earl in that consumer confidence can be restored ith active and aggresive PR, but more importantly with what Charliee has said about ensuring safe and quality products for the children who have and will in the future have these toys.
The effects of this problem are going to be felt throughout the Mattel company, but their stature in the consumer world will assist them in reversing the negative effects.
The damage from this case to Mattel is going to be minimal, but there are long term problems that must be dealt with.
Companies that use Chinese manufactures are playing with fire. The product they are able to purchase from these companies is cheaper per unit, but there is a long term cost that will have to be factored in. Chinese companies are able to sell their product at the lowest possible cost not only because of low wages, but for two additional reasons: no effective Government oversight, and a business culture that does not favor "Corporate Social Responsibility."
These companies operate in regions of the country that have flimsy oversight and where corruption is rampant. These companies themselves are also full of corruption and oversight by a multinational company on the other side of world is extremely difficult.
It is becoming apparent from the multitude of product scares from Dog food to toys that companies will be at risk. This risk, though, is only going to grow for companies. They have been warned about what goes on in these Chinese companies, yet they continue to do business as usual there. It is only a matter of time before a Child dies from one of these products. The lead cases are a premonition for these companies to change how they do business in China over the long term. There is little evidence at the moment that the toy industry has learned its lessons here. It needs to come down harshly on these companies, and it has to show the Chinese government that it will enforce what their government does not. The toy industry, especially Mattel have an opportunity to build and strengthen their brand reputation. It is not clear now, though, that they will use it to their advantage.
http://business.guardian.co.uk/story/0,,2174444,00.html
An update to the Mattel case.
An interesting development in our discussion on this issue.
China seizes on Mattel apology to emphasize safety Mon Sep 24, 5:47 AM ET
China highlighted Mattel's apology over its recall of huge numbers of toys on Monday to press Beijing's claim that its exports are generally safe and foreign politicians and media have unfairly hyped quality scares.
Before those recalls, a spate of complaints involving unsafe Chinese products ranging from other toys and seafood to toothpaste that entered EU and U.S. markets prompted calls on both sides of the Atlantic for stricter scrutiny of made-in-China goods.
Thomas Debrowski, executive vice president of worldwide operations for toymaker Mattel Inc, apologized on Friday following recalls of about 21 million Chinese-made toys over five weeks. The recalls stoked U.S. complaints that lax Chinese quality controls threatened foreign consumers.
"Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people and all of our customers who received the toys," Debrowski told China's quality watchdog chief, Li Changjiang, in Beijing.
The vast majority of recalled toys suffered from a design defect that was Mattel's own fault, Debrowski said.
Mattel subsequently issued a statement saying his words had been "mischaracterized" -- though it did not specify how -- and his apology was directed at buyers of its toys.
But China's state-run media have seized on his remarks to make their government's case that the country has been the victim of unfair accusations echoed throughout the international media.
"The apology, though delayed, should help dispel the suspicion American customers harbor against Chinese-made products," the China Daily said in an editorial.
"Its (Mattel's) reputation will be impaired when the whole truth about the recalls is finally made public."
Last week Mattel CEO Robert Eckert had to defend his company's toy safety record as Democratic lawmakers accused him of stonewalling a U.S. congressional probe into production practices in China.
The People's Daily -- the official voice of China's ruling Communist Party -- said the apology showed the wave of Western media reports questioning the country's export safety was unfair.
"If China's toy exports depended solely on a cheap price and did not ensure quality, we would never have won such a massive worldwide market," the paper said, citing a toy-making association official in Guangdong, the southern province where Mattel produces many of its toys.
The paper said that China-based suppliers and workers had suffered unfairly because of the Mattel recalls.
The International Herald Leader, a newspaper issued by the official Xinhua news agency, called for U.S. news media to follow Mattel's example and apologize for what it called flagrant bias.
"The U.S. media have also made an irreplaceable contribution to making made-in-China wear these dark accusations for so long," the paper said.
But Xinhua has also reported that police detained four Chinese nationals accused of having supplied one of Mattel's contract manufacturers, the Lida Toy Company, with the substandard paint behind the first recall in August.
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