Ouch with Chinese Characteristics -- Mattel recalls one million toys/IHT

International Herald Tribune

Mattel recalls one million toys

By David Barboza
Thursday, August 2, 2007

SHANGHAI: Mattel, the maker of Barbie dolls and Hot Wheel cars, is
widely considered the most conscientious toy maker operating in China.
It has sophisticated testing labs and independent audits of its
facilities here, and the company requires contract manufacturers to
follow stringent quality and safety guidelines.

But despite those checks, Mattel said Wednesday that it was recalling
nearly one million toys in the United States, many featuring Sesame
Street and Nickelodeon characters, because the products may be coated
with toxic-levels of lead paint. All the toys, the company said, were
made by a contract manufacturer in China.

The recall, of items like Dora the Explorer Backpack and the Giggle
Gabber, was the latest in a series of troubling incidents this year
involving "Made in China" goods that were tainted or defective and yet
somehow managed to evade quality or safety checks.

"This is a vendor plant with whom we've worked for 15 years; this isn't
somebody that just started making toys for us," Robert Eckert, the chief
executive of Mattel, said in an interview Wednesday. "They understand
our regulations; they understand our program, and something went wrong.
That hurts."

Mattel said Thursday that it expected the cost of the recall to be about
$30 million, Reuters reported.

Officials at Mattel, based in El Segundo, California, say they are now
investigating what went wrong with the contract manufacturer. But
analysts say this latest recall illustrates just how difficult it is,
even for companies with strict controls, to patrol Chinese contract
manufacturers and suppliers, some of whom are eager to cut corners to
save money.

Earlier this year, RC2, a U.S.-based company, was forced to recall 1.5
million of its popular Thomas & Friends toy railway sets because those
products were coated with lead paint. The company was also using a
Chinese contract manufacturer.

Analysts say Chinese factories sometimes substitute cheaper supplies for
required ingredients and find ways around regulations to improve their
often tiny profit margins.

"Now what's happened is a lot of guys here have gotten very sharp on how
to look compliant without being compliant," said Dane Chamorro, Greater
China general manager at Control Risks, a risk consultancy. "Too few
companies do surprise inspections, and many times the inspectors that go
in are not that familiar with the factories."

The Mattel recall comes a week after the European commissioner for
consumer protection, Meglena Kuneva, visited China and pressed
regulators and local toy makers to improve the quality and safety of the
products shipped to the European Union.

"That's exactly what we need," Kuneva told a local toy factory operator
as she looked on as a worker conducted tests on a stuffed toy animal.
"They need to establish a culture of checking."

But Kuneva also complained that she was dissatisfied with the Chinese
government's quarterly reports on recalls, some of which acknowledged
that regulators could not find the problem toy makers.

U.S. legislators are also weighing in, calling for increased funding and
new regulations to guard against unsafe products entering the country.

"Sadly, this is the most recent in a series of disturbing recalls of
children's toys," Senator Dick Durbin, an Illinois Democrat, said in a
statement. "While the toys may be different, they have one thing in
common - they were manufactured in China."

Worried that the recalls could put a dent in exports of some goods and
even lead to sanctions, Chinese regulators say they have stepped up
their safety checks this year, improved standards and created a system
that holds toy makers and other exporters more accountable for shipping
poor quality or dangerous goods.

But government and company inspections are imperfect for a variety of
reasons, analysts say, ranging from ineffective sampling and testing to
poor enforcement and rampant bribery that allows products or supplies to
pass through inspections or make it overseas.

"There are gaps in the system," said Ian Anderson, the Asia-Pacific
director at SGS, which conducts consumer testing services for major toy
makers. "But you can put the best systems in the world in place, and you
can always find some enterprising person who can get around it."

Anderson, who has been working with Mattel's China operations for years,
says he, too, was surprised at the lapse. But few companies were so
aggressive in patrolling safety and quality, he said. Mattel was the
only big toy maker that still owns factories in China and recently
started operating a new post-production testing system in China to
better ensure quality.

As for its recall, which involves over 83 products, Mattel said that in
early July, European retailers had reported a problem with lead on some
toys, shortly before Mattel executives offered a New York Times reporter
a tour of a company-owned factory and testing lab in southern China.

Mattel officials also say they had helped the contract manufacturer
blamed for the recall to set up its own testing lab, which should have
guarded against such a problem.

A complete list of the recalled products in the United States, sold
under the Fisher-Price brand, can be found at the Web site of the U.S.
Consumer Product Safety Commission, CPSC.gov.

Mattel officials said they had carefully tested all new products and
even tested incoming supplies at company factories to guard against
faulty supplies like lead paint.

Analysts say Mattel is widely admired in the toy industry because it has
hired an independent auditor who is allowed to post his findings on the
Internet and because the company has systematic checks on its contract
manufacturers and its suppliers. Also, it strictly follows labor laws in
China, where violations are rampant.

But Mattel has also largely moved with the toy industry in adopting
contract manufacturers in China.

While the company owns five factories here that produce its core
products, like Barbie dolls and Hot Wheels cars, a large percentage of
its China-made products are produced by 30 to 50 contract manufacturers.

Mattel, the world's biggest toy maker, also says that it has over 1,000
licensees, who can produce goods based on its brands, and that those
companies operate about 3,000 factories in China.

Some experts say that patrolling that many operations is incredibly
difficult. According to some estimates, China has over 10,000 toy
factories, many of them small operations.

Louise Story contributed reporting from New York.

International Herald Tribune Copyright (c) 2007 The International Herald
Tribune | www.iht.com