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World’s Largest Toy-maker Issues Second Major Recall

August 14, 2007 at 6:25 PM EST
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TRANSCRIPT

JIM LEHRER: Next, that huge toy recall. Jeffrey Brown begins our look with some background.

JEFFREY BROWN: For the second time in a month, Mattel, the world’s largest toy company, will voluntarily recall millions of defective products. Nine million toys in the U.S. are affected. The company recalled nearly two million toys earlier in August.

This morning, Bob Eckert, the CEO of Mattel, took out ads in major newspapers to assure parents that his company was instituting a recall. The reason: “impermissible levels of lead paint” found in toys his firm sells. Risk also arose from the use of “small, high-powered magnets” in many of the devices. Some magnets were prone to break free of the toy, presenting a choking hazard.

All of the affected toys are produced in China, another instance in a string of food and product safety-related issues involving items made in China. Some of the toys to be recalled: 7.3 million play sets, which include Polly Pocket dolls and Batman action figures; 1.5 million die cast cars, including Sarge-brand cars made to resemble military Jeeps; and one million Doggie Day Care play sets.

Earlier this summer, the manufacturer of Thomas the Tank Engine recalled the popular train set after it was found to contain lead paint.

Reaction from safety commission

Nancy Nord
U.S. Consumer Product Safety Commission
The biggest risk and the primary reason that we did a recall of this scope was because we were concerned about small, powerful magnets becoming dislodged from the toy and falling out.

JEFFREY BROWN: And we turn first to Nancy Nord, acting chair of the Consumer Product Safety Commission. She announced the decision today.

First of all, no one was injured by these products so far, correct?

NANCY NORD, U.S. Consumer Product Safety Commission: That's right.

JEFFREY BROWN: Was there an imminent risk that you felt?

NANCY NORD: Let me tell you about the risk that we were concerned about. The biggest risk and the primary reason that we did a recall of this scope was because we were concerned about small, powerful magnets becoming dislodged from the toy and falling out.

When magnets fall out and a small child, who will put anything in their mouths, swallows a magnet, you don't want to see that, but what you especially don't want to see is when they swallow two. They can come together in the intestinal track and create blockages and perforations and very, very serious injuries. It's not a choking hazard we're concerned about. It's the two magnets coming together in the intestinal tract. And that is a hazard. However, nobody was injured.

JEFFREY BROWN: So how will the recall work? What do parents do who are concerned right now who might have these in their homes?

NANCY NORD: Parents who have these toys in their homes should take them away from their child and contact Mattel. Go to the Mattel Web site or go to the CPSC Web site, and they can get a replacement product from Mattel.

JEFFREY BROWN: The lead paint then is a separate issue? There are two issues here.

NANCY NORD: Yes, there were two hazards that we were concerned about in today's recall. I discussed the magnets. However, we also found lead paint in one of the toys that Mattel had. It's called a Sarge card toy. It's from the car movie, and it looks like a small military Jeep. And it did have excessive amounts of lead paint, so that is also being recalled.

JEFFREY BROWN: Now, who found the problem? Is it the company? Is it the government inspectors? How does this work?

NANCY NORD: In this case, Mattel found the problem. And Mattel came to the CPSC. We looked at the problem and said, yes, indeed, we believe a recall should occur. And a recall was done. I will also tell you that the scope of this recall is perhaps larger than might otherwise be warranted because we wanted to make sure that we got all the product off the market.

JEFFREY BROWN: Is it larger, also, because, as we said in our introduction, this fits into a pattern that we've been seeing lately, particularly in products from China?

NANCY NORD: Well, most products, most toys are manufactured in China. So it's not...

JEFFREY BROWN: About 80 percent or 85 percent, I read.

NANCY NORD: Indeed, so it's not unexpected to see, if you're going to have problems, that it would be from toys manufactured in China.

JEFFREY BROWN: What steps then are being taken to ensure that products, particularly toys, in China are safe?

NANCY NORD: Well, at the end of the day, the legal obligation rests with the toy-seller in the United States. They have an obligation to make sure that their products meet all U.S. safety standards. And toys are very, very heavily regulated. However, companies should make sure that they have good quality-control practices in place. Products should be tested by an independent third-party tester...

JEFFREY BROWN: Excuse me. Is that testing in China?

NANCY NORD: Absolutely.

JEFFREY BROWN: And then what about when it comes to the U.S.?

NANCY NORD: If it comes to the United States and it violates a U.S. safety standard, we will recall it, and we will penalize the company.

JEFFREY BROWN: But is there an inspection once it comes to the U.S.? Where in the process does this all take place?

NANCY NORD: This takes place in China and then, of course, at the U.S. border. If something is coming into the United States that does not meet our safety standards, we would like to catch it at the border. If it for some reason gets into the stream of commerce, then we will recall it.

JEFFREY BROWN: With the various recalls that have been in recent weeks and months and problems that we're seeing, should American consumers feel concerned today because of a growing problem or relieved in some sense because in this case, at least, it was found?

NANCY NORD: Well, I think American consumers have to recognize that, although nine million products is a big number, it's just a tiny, tiny fraction of the number of toys that are coming into the United States.

Toys are heavily regulated, and the U.S. marketplace is a very safe one. However, consumers should look at what's in their toy boxes. They should go to the CPSC Web site, CPSC.gov, and look at the list of recalled items there to make sure they don't have any recalled items in their toy chest. They can also go to CPSC.gov and sign up to get e-mail notices of recalls so that they have information if this is something they're concerned about.

JEFFREY BROWN: All right, Nancy Nord of the Consumer Product Safety Commission, thank you very much.

NANCY NORD: Thank you.

Oversight of the supply chain

Don Mays
Consumers Union
They only have about 15 people that are actually working at our ports. So with that level of staffing, how can you possibly prevent unsafe products from crossing our borders?

JEFFREY BROWN: Now, we turn to two people who look closely at questions of safety and manufacturing. Don Mays is senior director for product safety with Consumers Union. Eric Johnson is a professor of management at Dartmouth's Tuck School of Business. He's visited toy factories in China, including one of Mattel's.

We invited Mattel to join us, but they did not respond to our request.

Don Mays, let me start with you. Is this a manufacturing problem, an inspection problem? How do you define it?

DON MAYS, Consumers Union: Well, actually, we believe that the responsibility for product safety has to be placed along every link of the supply chain. That means not only the manufacturer, but the importer, the distributor, as well as the retailer. Also, the government watchdog agencies responsible for protecting our marketplace have to be staffed, have to be funded to protect consumers and prevent unsafe products from crossing our borders.

JEFFREY BROWN: Think they are funded at the appropriate levels?

DON MAYS: No, not at all. In fact, you know, if we look at just the Consumer Product Safety Commission, the agency responsible for toy safety in this country, they are a woefully underfunded agency with a budget of -- an annual budget of only about $63.5 million.

They have a full-time staff of a little over 400 people. They only have about 15 people that are actually working at our ports. So with that level of staffing, how can you possibly prevent unsafe products from crossing our borders? Clearly, we need to have better staffing, better funding to have this government agency make sure that products are safe.

JEFFREY BROWN: Eric Johnson, the situation in China, from what I've read, Mattel has a pretty good reputation for product safety there and around the world. But how much control does the company have over the various suppliers in China that supply the parts that go into its products?

ERIC JOHNSON, Tuck School of Business, Dartmouth: Yes, it's ironic that we're talking about Mattel, because I always view them as really one of the better companies. They have been in China a long time, long before China was cool, in terms of low-cost sourcing, and they have a lot of good practices in place to protect against these kinds of failures.

But the reality is, there are a lot of suppliers and a lot of different vendors and a lot of toys flowing into the U.S. You know, those die-cast toys you were talking about alone, we're talking about hundreds of millions of units flowing. And tracking all of those and keeping the quality there is a real challenge.

Challenges of tracking back

Eric Johnson
Tuck School of Business, Dartmouth
Where did the bad products get introduced? Was it at the manufacturer? Was it at a supplier? Was it a supplier to the supplier. And tracking back into those Chinese companies is a real challenge.

JEFFREY BROWN: But you mean all of the suppliers who supply to Mattel, Mattel has no way of keeping charge and control over all of that?

ERIC JOHNSON: Well, they certainly do. And, in fact, Mattel is a little different than many other toymakers in that they actually produce toys in their own factories in China, and then they use outsourced suppliers who also produce toys. And in both cases, they are inspecting. And, in fact, you heard the CEO today talking about their inspection practices.

But the problem is difficult, and it's difficult because you're thinking about not just those firms that make the toys, but the suppliers to those firms and the suppliers to the suppliers. And that is really the story that I think we're going to see all year, as they start talking about some of these different problems, whether they be pet food or toothpaste. We start asking ourselves the question: Where did the bad products get introduced? Was it at the manufacturer? Was it at a supplier? Was it a supplier to the supplier. And tracking back into those Chinese companies is a real challenge.

JEFFREY BROWN: Mr. Mays, what do you see in this chain that's being described, suppliers, suppliers to suppliers, and so on? Where in the process is the inspection supposed to happen? Who is supposed to have control?

DON MAYS: Well, actually, Mattel has to have control over the situation. If you look at the recall that they issued two weeks ago and look into the details of that recall, you'll discover that Mattel actually entrusted the testing of those toys to the very factory that was producing them. That was an outsourced factor, a contract factory. To a certain extent, that's like the fox guarding the henhouse.

What needs to be established is third-party, independent testing and inspection prior to shipment. And if, during that testing and inspection process, it's discovered that products don't meet our regulations or safety standards or pose any other sort of safety hazard, it should stop the shipment. Now, I've worked in China's Chinese factories, and I've seen this process work. It's very effective, and it prevents the exportation of unsafe goods into this country.

Assuring American consumers

Eric Johnson
Tuck School of Business, Dartmouth
It's going to be solved by building that supplier base to Western standards so that those suppliers themselves not only are testing themselves, but they're testing their suppliers, just as we would do in the U.S.

JEFFREY BROWN: Mr. Johnson, you've studied companies, U.S. companies over there. Would a regime like that work?

ERIC JOHNSON: Well, I think, you know, certainly Mattel has the responsibility to be putting testing procedures in place, and I think they really do. But I would argue that, in the end, they also have the responsibility to teach those Chinese companies good Western quality management practices.

And this problem is really not going to be solved by lots and lots of testing along the supply chain. It's going to be solved by building that supplier base to Western standards so that those suppliers themselves not only are testing themselves, but they're testing their suppliers, just as we would do in the U.S.

So simply putting in lots and lots of tests and audits along the way is really never going to solve the problem in the end. The end solution needs to be higher levels of quality maturity in those plants.

JEFFREY BROWN: But in the meantime, staying with you, can companies guarantee to American consumers the safety of the products if that supply chain is as long as you make it?

ERIC JOHNSON: They have to. They have no choice. And Mattel, of course, is taking this quite seriously, as are other toymakers. Well, I mean, one of the reasons I study the toy industry is that they are on the leading edge of many of these challenges, and they're not alone. I think we'll be hearing the story in other industries throughout the year.

JEFFREY BROWN: Mr. Mays, what advice do you give to consumers in the meantime?

DON MAYS: Well, we tell consumers that they need to arm themselves with information about the safety of products. And one of the ways they can do that is to go to www.Recalls.gov, where the federal watchdog agency issues regular recall and safety alerts.

And if you follow that and sign up for some of the e-mail list that they send out, it enables consumers to look into their own toy chest and look into their own homes to see if they have any products that are subject to recall. We also ask people to go to ConsumerReports.org and look at our safety blog. We're updating the information about the safety of consumer products, particularly imports, on almost a daily basis.

JEFFREY BROWN: And let me ask you briefly, finally, the same question that I asked Nancy Nord. The fact that this is caught, is there some sense of relief today for Americans that the regime is there to catch things like this and have a recall? Or is it a day for concern?

DON MAYS: Well, I think it's an issue of concern, because actually the recall is a reactionary method of dealing with a product safety problem. We have to worry about stopping products from being shipped out of China and into America, as opposed to worrying about how to get them out of the hands of children once unsafe products are already here.

JEFFREY BROWN: All right, Don Mays and Eric Johnson, thank you both very much.

DON MAYS: Thank you.

ERIC JOHNSON: Thank you.