Case Study: Mattel Toy Recall, 2007

I. Introduction : Mattel Toy Recall 2007 Case Study

About Mattel

In 1945, Ruth and Elliot Handler and Harold “Matt” Matson form a partnership called Mattel Creations in Southern California in a garage workshop that manufactured picture frames and dollhouse furniture. The world’s largest toy company, Mattel, Inc., also known as “the world’s premiere toy company – today and tomorrow,” designs, manufactures, markets, and distributes a variety of toy products all over the world. The company’s products include a number of core toy lines, including Barbie dolls (which eventually became the best-selling toy ever), clothing, and accessories; Hot Wheels vehicles; Harry Potter, Batman, Superman, and Looney Tunes products; the American Girls Collection of books, dolls, clothing, and accessories; Fisher-Price infant and preschool toys, and toys based on Disney and Sesame Street characters; and games such as Scrabble and UNO. Mattel’s toys are produced in company-owned manufacturing facilities in China, Indonesia, Malaysia, Mexico, Thailand, and independent contractors located in the United States, Europe, Mexico, the Far East, and Australia. The company’s three main retail customers include Wal-Mart Stores, Inc., Toys ‘R’ Us, Inc., and Target

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Corporation.

Throughout the years, Mattel continued to create and market popular toys such as Hot Wheels, merge with profitable manufacturers Fisher Price in 1993 and Tyco Toys, Inc. in 1997, partner with Disney, Sesame Street, and Nickelodeon, obtain licenses and rights to manufacture Cabbage Patch Dolls and Harry Potter merchandise, and acquire Pleasant Company (maker of American Girl brand) in 1997.
Since 1945, the Mattel Company works hard to ensure it is considered a trustworthy company for children and the community. Mattel established the Mattel Children’s Foundation to make “a meaningful difference in the lives of children in need globally.” In 1997, the corporation formed the Global Manufacturing Principles (GMP), establishing Mattel as the first company to create a framework to ensure responsible manufacturing, assembly, and distribution is conducted through consistent standards on a global level. In 1998, Mattel began a unique $25 million multi-year donation partnership to the UCLA children’s hospital, renamed the Mattel Children’s Hospital at UCLA to assist and serve children from around the world with nationally recognized health care.

With so much positive philanthropy projects, Mattel has not always been able to maintain an image of child-like and trustworthy purity. Mattel has experienced many criticisms for stealing ideas for toy-lines from children competing in toy invention competitions. In 1974, investigators revealed that company officials produced and issued false and misleading financial information to make it appear as if the company was continuing to successfully grow. And of course, Mattel has also had its share of recalls (the accurate number of recalls is debatable but it ranges from 17 to 28 recalls). But in August 1997, Mattel faced the biggest recall in the company’s history.

Brief Background

There are two separate reasons why Mattel recalled 19 million toys from August to September of 2007. The fact that both recalls occurred at the same time makes this the biggest recall in the company’s history.

The first toy recall was due to defective magnets. The design of the toy magnets included parts with high-energy magnets typically used for industrial purposes that easily come loose and posed a threat to young children and infants who could easily swallow the magnets which could then adhere together in the digestive tract and rupture the stomach tissue. The strength of the magnets combined with Mattel’s poor design of the toys made the products a critical hazard for young children. Mattel’s website (http://corporate.mattel.com) lists 71 models and makes of toys that were recalled because of faulty magnets.

The second toy recall was due to high levels of lead-based paint found on the surface of many toys. Mattel had previously given manufacturers in China a list of eight approved paint suppliers to use, but in order to reduce costs, subcontractors decided to employ unapproved suppliers. In some cases, the lead content was over 180 times the legal limit. Lead-based paint is dangerous for children because elevated levels create learning and behavioral problems, slow muscle and bone growth, hearing loss, anemia, brain damage, seizures, coma, and in some rare cases, death. Mattel recalled 91 models and makes of toys because of harmful levels of lead paint.

China

Since 1997, China has experienced many tribulations with the quality and standards of the products manufactured within the country. For instance, pet food, toothpaste, seafood, tires, and toys are just a few of the products recalled from homes in the United States because of serious, sometimes deadly, manufacturing inaccuracies.

The business relationship between Mattel and China seemed to be a strong partnership. Mattel manufactured 65 percent of its toys in China, and before the recall, was a company others used as a model for successful global manufacturing. Mattel was criticized for placing too much faith in the partnership with China as well as careless inspections on the quality of the manufacturing sites abroad. Timeline
In November of 2006, Mattel recalled Polly Pocket sets sold with magnets that posed a threat to children. In July 2007, a European retailer discovered high levels of lead content on various Mattel toys. Once notified, Mattel began an investigation and closed operations at the factories producing the toys. During the investigation, Mattel discovered millions of products available since 2003 that did not pass safety standards.

On August 1, 2007, Fisher-Price recalled 1.5 million toys due to high levels of lead-based paint – 60% of which were all manufactured in China. After further investigation, Mattel recalled 18 million more products on August 14, 2007 because of the possible hazards of children swallowing faulty magnets. And on September 4, 2007, Mattel recalled another 848,000 toys due to high levels of lead-based paint.

The U.S. Senate Committee began scrutinizing American safety standards for children’s toys and clothing and stated the possibility of creating new legislation to keep hazardous toys and clothing from children.

Despite the fact that a larger number of toys were recalled because of faulty magnets and not lead-based paint, the framed communication made China appear culpable for the recalls in order to reduce reputational damage and the Chinese media stated that Mattel should be accountable for the mistakes rather than blame China. Mattel eventually listened and on September 21, the company issued an apology to China taking full blame for the recall crisis. Mattel also posted news releases and video interviews on the company website to keep the public informed.

June 8, 2007

Mattel receives information on possible lead paint contamination

June 9, 2007

CPSC deadline to report the problem

June 10, 2007

Mattel fails to report problem to CPSC

July 26, 2007

Mattel files full report to CPSC

August 14, 2007

Mattel voluntarily recalls 17.4 million products

September 4, 2007

Mattel voluntarily recalls 850,000 toys with lead paint

October 25, 2007

Mattel voluntarily recalls Go Diego Go! Rescue boats coated in hazardous lead paint

November 6, 2007

Mattel voluntarily recalls 155,000 choking hazard toys manufactured in Mexico

OBJECTIVES

Mattel’s management has expressed the overall company vision as “The World’s Premier Toy Brands–Today and Tomorrow.” Management set five key company strategies:

1. improve execution of the existing toy business

2. globalize the brands

3. extend the brands

4. catch new trends

5. develop people

The company also adapts its definition of truthfulness by:

· Collecting and disseminating all information about the recall to the public accurately, quickly, and efficiently.

· Reassuring the public, especially parents and retailers, that the company is devoted to producing safe toys and improving honest communication.

· Taking responsibility for the recall, solving the crisis, and maintaining a working relationship with China.

CRISIS PLAN

Mattel is known for their 100-page crisis plan and a well-planned crisis response infrastructure tested from 28 recalls since 2000. Mattel speaks with one voice, communicates consistently through a crisis, acts quickly, and responds with public apology and any other expectations. All steps of the plan are code of a successful crisis plan and response. When Mattel realized the company was facing a serious crisis, their first act was to contact the federal agency overseeing toy issues and product safety. When federal officials publicized the first Mattel recall, Mattel’s crisis management team instantly arranged for open communication channels with reporters from the top media outlets. The team sent e-mail alerts with the recall press release, invited reporters to a teleconference with company executives, and arranged for the media to interview key personnel employed with Mattel.

The day of the recall, Robert Eckert, CEO of Mattel, met with reporters for television and phone interviews. Mattel established a help line, answered over 300 media requests in the United States, and placed full page ads in the New York Times and Wall Street Journal by the end of the week.

Mattel also started an online movement to notify consumers about the recall with updates posted on a regular basis, chat rooms, message boards, and social media. Mattel has consistently been open with the media and consumers testifying new company policies with very high standards and quality and safety testing procedures, although carefully stating “no system can be perfect.” Mattel also made it clear that they are doing all that they can to assess the situation on the manufacturing level.

Apology to China

Mattel prematurely placed disproportionate blame on Chinese manufacturers encouraging China bashing in the media across the world damaging China’s reputation.

On September 20, 2007, Mattel issued an apology to China in a meeting with Li Changjiang, the Chinese product safety chief. In the apology, Debrowski states “Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys.” China accepted the apology saying “Mattel should value our cooperation. I really hope that Mattel can learn lessons and gain experience from these incidents, [and they should] improve their control measures” and anticipates that China will restore consumer confidence in products “made in China.”

Result of Crisis

Mattel appeared to handle the crisis by appearing to be up-front and open about the massive toy recall. Mattel’s homepage contains a dedicated bold red link to toy recalls containing information about recalls affecting all countries, what toys are being recalled, where to bring recalled toys, and defining Mattel’s three-point safety check system:

1. Mattel will make sure that manufactures only use paint from certified suppliers and they will test every single batch of paint from all vendors. If the paint isn’t up to Mattel’s standards, it won’t be used.

2. Mattel is increasing control on every level of the production process and conducting random inspections at all vender facilities.

3. Mattel pledges to test all finished toys vigorously before they reach the consumer. The toys must meet a series of strict safety standards before they are put on the market.

Mattel assures customers that all venders are aware of these new procedures and Mattel’s strict enforcement of them.

ANALYSIS

Applying SCCT

* Good

o Public apology from CEO

o Coupons offered

o Stressed stringent inspection processes and company improvement

* Bad

o Placed initial blame on China, later making an apology to China

o Stated media and government escalated the crisis

Media Coverage

Most of the media information that covered the Mattel toy recall discussed the lead-based paint recall and did not include the magnetic toy design flaw crisis which led to the China bashing products replying “Made In China should be viewed as a warning label.” Many media outlets reported the importance of China creating strict safety standards before putting more lives in danger.
Media coverage of Mattel was very different since the focus was on Mattel’s timely apology and quick release of recall information. The fact that key Mattel executives spoke with the media provided a favorable reputation for the company.

What China Has Done

China continues to build manufacturing trust with the United States while improving problems within the country.

US Regulatory Structure after the crisis

The United States Consumer Product Safety Commission is “charged with protecting the public from unreasonable risks of serious injury or death from thousands of types of consumer products under the agency’s jurisdiction. “

In order to ensure the safety of children’s toys, the U.S. Consumer Product Safety Commission (CPSC) stopped the use of lead paint in toy manufacturing. CPSC Chairman stated that the Work Plans “show significant forward progress in the agency’s efforts to bring Chinese-made consumer products into line with the U.S. safety rules. This is an important signal from the Chinese government that it is serious about working with CPSC to keep dangerous products out of American homes. We will be looking for meaningful cooperation on the ground – that means not just with the Chinese government, but also with industry at both ends of the supply chain.” The CPSC also plans to increase consumer product inspections manufactured for the United States and will review the plans’ effectiveness after one year to discuss and implement improvements.

The Consumer Product Safety Improvement Act includes strict guidelines of Children’s product safety for:

* Sec. 101. Children’s products containing lead; lead paint rule.

* Sec. 102. Mandatory third party testing for certain children’s products.

* Sec. 103. Tracking labels for children’s products.

* Sec. 104. Standards and consumer registration of durable nursery products.

* Sec. 105. Labeling requirement for advertising toys and games.

* Sec. 106. Mandatory toy safety standards.

* Sec. 107. Study of preventable injuries and deaths in minority children related to consumer products.

* Sec. 108. Prohibition on sale of certain products containing specified phthalates.

Personal interest as a mother

During the Mattel toy recall crisis, I was in my third trimester with my first child. Imagine what went through my mind as a soon-to-be-new-mother already filled with angst. And so, a new Fleenor rule was born – all products made in China were not welcomed and banned from our home. Easy enough I thought. Our son would have toys, clothing, food, and furniture made in the USA only – easy enough I thought. So we discussed our decision with family and friends that all items with the “Made in China” label would be returned. Shopping became a difficult task because about 80 percent of toys, clothing, and furniture sold in America are made in China.

I soon realized that I needed to shop online for specialty “Made in the USA” stores, find local artisans to build furniture and toys, and plan on entertaining my child myself with books, funny faces, and outdoor adventures.

While I am still cautious of “Made in China” products, I am much more relaxed as I take responsibility in becoming an informed consumer through product recall email alerts from cpsc.gov, maintaining open communication with my children’s pediatrician, and still acting as the main entertainment source for my two children.

What we learned

Mattel dealt with the toy recall crisis precisely the way Coombs recommends companies to deal with image damaging crises. Mattel’s experience with recalls definitely ensured precise and smooth execution of their well documented crisis management plan. The company and CEO were visible, available, and publicly apologetic. And more importantly, Mattel told the truth and took immediate action to fix the problem allowing the company to focus on a positive solution and restoring the company’s dependable reputation.

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It is often difficult to know exactly where and how consumer products are manufactured and how products are inspected in today’s ever-changing global economy. The toy recall crisis also allowed us to realize that we are also facing an economic crisis with global manufacturing. While the United States is doing the best to ensure our safety through strict product regulations, we need to realize the difficult challenges we face when heavily relying on outside countries to manufacture such large quantities.

“It would be far to easy to attribute this summer’s recalls to China’s poorly regulated export manufacturers. Regulatory deficiencies, shoddy business practices, and the forces of globalization all play a substantial role in this catastrophe. There is enough blame to go around,” Representative John Dingell (D-Mich.) said during the Sept. 19, 2007 hearings.

Similar recalls

The RC2 Corporation of Oakbrook, Ill. recalled approximately 1.5 million Thomas and Friends train sets on June 13, 2007 because of high levels of lead-based paint used by Chinese contractors. The R2C Corporation’s recall was not as grand in scale as Mattel’s, but the company quickly posted an apology to consumers on the company website, terminated business contracts with manufacturers not complying with RC2 paint specifications, and employed a six-point safety check system.

On February 6, 2007, Hasbro recalled 985,000 Easy-bake Ovens because young children could easily insert their hands in the over and get their hands caught and burned.

Summary

“I think Mattel handled the problem very well overall. It’s a problem that isn’t unusual for them to have. Product defects and difficulty with suppliers are pretty typical in their line of work and they took responsibility. They were willing to talk about it and understood the ramifications,” stated Paul A. Argenti, Professor of Corporate Communications at the Tuck School of Business at Dartmouth. What should Mattel do now? Plan for tomorrow and be more conscientious using domestic and international manufacturers. Again, Mattel took responsibility for the entire recall, which not many companies are willing to be held accountable for – Toyota is the best example today. Owning up takes courage and actions in good times and bad should express the company’s character. Mattel should continue to identify possible problems, enforce strict manufacturing regulations to produce safe toys, reassure consumers that child safety and product safety is the bottom line, and collaborate with international suppliers and government agencies to ensure public well-being. Mattel has to be prepared for other problems and continue risk management audits. “There are always going to be problems. But if Mattel can lead the change for toy manufacturers to create a more responsible industry, they could become the hero.”

Bibliography

AudraAng, “China Calls for More Testing of Exports,” June 6, 2007

Brian Hartman, “Thomas & Friends Wooden Railway Toys Recalled, “http://abcnews.go.com, June 13, 2007

Brief Review of China Toy Industry in 2006. (2006). Retrieved February 2010, from China Toy Association: http://www.toy-cta.org/mail/en/7/

Bureau of Standards, Metrology and Inspection (BSMI). (2007). Retrieved February 2010, from Bureau of Standards, Metrology and Inspection (BSMI): http://www.bsmi.gov.tw/wSite/mp?mp=2

Consumer Product Safety Improvement Act. (2010). Retrieved from CPSC: http://www.cpsc.gov/

CPSC Chairman Inez M. Tenenbaum Keynote Address via Video Recording, APEC Toy Safety Initiative Open Dialogue on Toy Safety. (2010, January 12). Retrieved February 2010, from CPSC: http://www.cpsc.gov/PR/tenenbaum01122010.html

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Eric Lipton, David Barboza, “As More Toys Are Recalled, Trail Ends in China,” The New York Times, June 19, 2007

Laws and Regulations. (2007). Retrieved February 2010, from General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China: http://english.aqsiq.gov.cn/

Mattel Consumer Relations Answer Center. (2010, February). Retrieved from Mattel: http://service.mattel.com/us/recall.asp

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“Toys Made in China Set Recall Record, Alarming Parents and Regulators,” http://www.mercurynews.com, June 19, 2007

U.S. Consumer Product Safety Commission. (2006). Handbook for Manufacturing Safer Consumer Products. Bethesda: U.S. Consumer Product Safety Commission.