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Toy
Recall Impacts How U.S. Companies Do Business in China |
Posted:
08.22.07
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Following a massive recall by the world's largest toymaker Mattel,
toymakers and other manufacturers are reexamining whether the
benefits of inexpensively creating products in China outweigh
the risks.
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Mattel voluntarily recalled more than 18 million Chinese-made
toys earlier this month after the company discovered "impermissible
levels of lead paint" and the use of loose magnets that children
could swallow. This follows an earlier recall for  other
toys with lead paint by the company.
As a result Mattel has said it will increase testing of toys
and the materials, especially paint, used to make them.
"We're reaching out to people today and, particularly parents.
We've changed our own testing procedures, so we'll be extra vigilant
in this area," Robert Eckert, the chairman and chief executive
of Mattel, said in a conference call, the New York Times reported.
But it remains to be seen if the lead paint problem -- and Mattel's
response -- will impact the company's bottom line.
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China responds |
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Chinese government officials responsible for product safety have
said that the current criticisms are exaggerated and unfair. They
say that in general their toys are safe and that other producers
are jealous of their hold on the manufacturing market.
 "More
than 99 percent of our goods meet standards," Li Changjiang,
China's quality watchdog chief, said on state television, Reuters
reported. "Demonizing Chinese products, or talking of the
Chinese product threat, I think is simply a new kind of trade
protectionism."
Despite the public statements, many in China linked to the scandal
have lost their jobs and one of the factories that used the tainted
paint, the Lee Der toy company, has closed. The company's head
committed suicide, the BBC reported.
"We're staying until the boss' funeral -- he paid us everything
we were due -- then we'll go and find new work," one worker
told the BBC.
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Manufacturing
in China |
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Over 80 percent of all toys
are manufactured in China. The main reason is the Asian country's
cheap labor costs allow toy companies to meet retailer and consumer
demand for cheap products.
When adjusted for inflation, many of today's toys may be less
expensive than toys sold decades ago, even as the price of materials
like plastic have increased, according to independent toy industry
consultant Chris Byrne.
"We can't have ever-decreasing prices without something
eventually being squeezed," Byrne told MSNBC.
Part of the challenge for toymakers will be to ensure that the
companies they contract with in China are using reputable  subcontractors.
"The transparency at the back-end of these operations is
hazy," Eric Johnson, professor of operations management at
Dartmouth's Tuck School of Business who has studied Chinese manufacturing,
told MSNBC. "Each layer becomes harder and harder to manage
and control."
Some experts believe tighter safety standards will help.
"Standards are a piece of the solution," John Frisbie,
president of the U.S.-China Business Council, a group of American
companies that do business with China, told the San Francisco
Chronicle. "Enforcement is another piece. And we need criminal
penalties in China."
According to U.S. law, toy manufacturers are responsible for
determining the safety of their toys. Toys imported into the country
are expected to meet U.S. safety standards.
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Unexpected
winners |
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But not all toymakers are
on the defensive over the scandal. Some small toy manufacturers
in the United States and Europe have seen a windfall since the scandal.
One is Maple Landmark Woodcraft in Middlebury, Vt., which makes
wooden toys. Since the recall announcement traffic to the toy
maker's Web site has increased dramatically, according to the
company.
 "We
think we're going to be really relevant again," company co-owner
Mike Rainville told the Rutland Herald.
Although "the toy business has left our shores long ago,"
according to Rainville, he is hopeful that consumers will demand
that toys are made in the United States again.
But one barrier to capturing the lucrative toy market is that
these small manufacturers have to charge more for their products
and it's unclear if consumers are willing to pay the higher prices.
But not all companies strive to be the biggest.
"We are not interested in the mass market," Christian
Vollmer, who is responsible for selling German toys made by Haba
in the United States, told the Boston Herald. "That is not
our clientele."
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--
Compiled by Annie Schleicher for NewsHour Extra
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