Mattel's stellar reputation tainted
— -- Mattel mat, one of the most trusted names in toys, suddenly finds its consumer trust in a free fall.
On Tuesday, the toy giant recalled 18.2 million Chinese-made toys worldwide — 9.5 million in the USA — and more recalls may be on tap.
"There is no guarantee that we will not be here again and have more recalls," beleaguered CEO Bob Eckert told reporters in a conference call. "We are testing at a very high level here."
Most of the toys in the latest recall — from Barbie to Polly Pocket play sets — contain small magnets that children can swallow, and others contain lead paint.
It's beginning to sound a lot like … trouble. The recalls come within eyeshot of the crucial Christmas season and fewer than two weeks after Mattel's Fisher-Price unit recalled 1.5 million Chinese-made preschool toys for lead paint.
The back-to-back recalls represent a one-two punch for the largest U.S. toymaker, famous for its Barbie, American Girl and Hot Wheels brands. They threaten Mattel's holiday sales and its sterling reputation with parents, grandparents and, yes, kids.
"I'm going to be wary of what I purchase" from Mattel, says Tami Toon, a working mother from Chico, Calif., who has an 8-year-old and a 2-year-old. From now on, she says, no more toys made in China in her household.
It's that kind of reaction that Mattel executives fear most. About 65% of the company's toy products are made in China. Of those, half are made in Mattel-owned plants, the other half by Chinese vendors.
"In just a matter of weeks, Mattel's gone from a company with the best reputation in the business to one with a gaping wound," says Howard Rubenstein, a New York City publicist who specializes in representing major celebrities and companies in trouble.
"Mattel's in an extreme moment of corporate pain," says Rubenstein. "How do you tell a kid not to put a toy in his mouth?"
Mattel caught in bigger problem
The toymaker finds itself ensnarled in a burgeoning, global problem that's far bigger than Mattel — or even the toy industry. A rash of recalls is feeding a growing consumer fear of all products — particularly seafood, pet-food ingredients and now, toys — that carry the stamp "Made in China"
But it's the recent rat-a-tat toy recalls that appear to be leaving the deepest scars in parents' psyches.
"A parent's most basic role is to protect the child," says Robert Butterworth, a child psychologist. "Any parent who hears a toy may make the child sick is a very angry parent."
Kristina Rutkowski of Ann Arbor, Mich., says she is considering boycotting all Chinese-made toys.
For Christmas presents for her two boys, ages 4 and 1, she plans to purchase lots of Legos (made in Denmark, Mexico and the Czech Republic) and toy trains made in Missouri.
No injuries have been reported from any of the products involved in Tuesday's recalls, according to Nancy Nord, acting chairman of the Consumer Product Safety Commission. The broad scope of the recall, she says, was to "prevent any injuries from occurring."
A Polly Pocket recall in November, however, was prompted by reports of injuries from magnets used in various toys. One child has died, and 19 others have needed surgery since 2003 as a result of swallowing magnets used in toys, the government said.
Mattel has stopped selling the products recalled Tuesday, under an agreement negotiated with the safety commission. The company is offering replacement products to consumers.
Meanwhile, retailers have been instructed to remove the products from their shelves.
That's not a big issue at Wal-Mart, the nation's largest toy seller, because the majority of the toys recalled on Tuesday are "not currently being sold," says spokeswoman Melissa O'Brien.
The toys recalled Tuesday were sold from 2002 to 2006, she says, and Wal-Mart is set up to accept the toys for refunds.
The retailing giant also is checking to be sure that none of the recalled toys remain on its shelves. It also has a system that electronically blocks the checkouts in its stores from ringing up a recalled product.
Recall doesn't end brand risk
Despite the actions, the problem isn't going away soon.
"There's nothing riskier to a toy brand than questions about the safety of a product," says Allen Adamson, managing director at branding agency Landor Associates and author of BrandSimple. "That's ground zero for risk."
The recalls could cost Mattel $25 million in sales this year and $40 million next year, estimates Gerrick Johnson, analyst at BMO Capital Markets. Shares fell 57 cents, or 2.4%, to $23 on Tuesday.
The rest of the already-struggling toy industry may suffer, too. Even as toy sales already are in a slump, there's a real concern that consumers will cut back on buying toys even more. They may opt for books, video games, DVDs or other forms of entertainment, says Cliff Annicelli, editor of industry trade magazine Playthings.
Amid an outpouring of criticism from bloggers, industry analysts and parents of young children, Mattel responded forcefully on Tuesday. Its CEO led the charge with a letter to consumers in national newspaper ads, TV appearances and a press conference followed by one-on-one media interviews.
"What's important to parents is what we do about it," Eckert said in a phone interview with USA TODAY. "I'm a father of four. We're doing everything we can."
Eckert says that includes a three-step program that aims to prevent such an episode from recurring:
•Testing paint.
The company will now require use of paint only from certified suppliers. And it will require every batch of paint at every vendor to be tested.
•Testing toys.
Every production run of finished toys will be tested to ensure compliance before they go on sale.
•Inspecting vendors.
Mattel plans to tighten controls at vendor facilities and conduct unannounced, random inspections.
Will this be enough?
At Mattel, there may be lots of change in the coming months. Asked if he felt his tenure as CEO was safe, Eckert paused slightly, then responded, "Shareholders and the board of directors make that decision."
After reigning as kingpin of the world's toy business for decades, Mattel is suddenly receiving competitive potshots that sting. Some rival toymakers already are responding by boasting about their U.S. manufacturing roots.
K'nex, which makes construction toys for kids, will stick large labels on its packaging to let parents know that the majority of its toys parts are made in the USA, says Diane Adams, head of global sales and marketing.
At Tree City Diapers, a cloth diaper and toy store in Ann Arbor, Mich., owner Molly Ging says she's seeing more parents coming to the store inquiring about high-end European wooden toys — willing to spend $50 on a set of blocks rather than $20 for a set made in China.
While Mattel has taken action to protect its image, consultants and industry analysts say Mattel may need to consider bolder moves, including:
•Leave China.
It may be impossible for cost reasons, says public relations consultant Katie Paine, "But if I were Mattel, I'd be running away from China as far as I possibly could."
At least cease all imports from China, she advises, until every single toy has been inspected.
•Re-imagine China.
Mattel needs to re-examine from top to bottom the way it imports from China and how it manufactures there, says management consultant Barbara Brooks, president of The Strategy Group.
"They have the opportunity to become the poster child for how to manufacture in China," she says.
•Hire experts.
Rubenstein suggests that Mattel assemble leading scientists from Yale, Harvard, Columbia University and UCLA for an independent advisory panel that would analyze all the toys that Mattel imports from China.
•Be transparent.
Eckert, Mattel's CEO, should create a blog and use it to respond directly to consumer questions and complaints about the recalls, says Renee Fraser, an advertising psychologist and ad agency owner in Los Angeles.
At the same time, she says, Mattel should reach out to consumers for suggestions.
Consumers such as Melissa Niesen, perhaps.
The resident of Ames, Iowa, is the mother of a 3-year-old boy and 7-month-old girl. For her, the problem is likely to come to a head when she begins her Christmas shopping later this year.
"Every time you look at a toy, the doubt is there," says Niesen. "I wonder: Am I giving this kid a piece of poison?"
Contributing: Mindy Fetterman in McLean, Va., and Laura Petrecca in New York