The Final Case Analysis should focus on real life and real time application of topics covered in this
course; the uses you have seen and the uses you can envision.
Read and review the articles provided on the Mattel Toy Recall of 2007 (see below). The 2007 Mattel toy
recalls were in response to findings that several children’s toys were coated in lead-based paint.
Article 1-Mattel gets the lead
Joshua Lipton
8/14/2007 @ 11:30AM
Mattel Gets the Lead Out
Mattel now has to hope it still has time to repair its battered image with parents before Santa Claus
begins to stuff stockings.
The holiday shopping season is only a few months away but Mattel continues to make headlines for all
the wrong reasons. The company announced the recall of millions of toys on Tuesday because the
Chinese-made products contain small magnets that could be swallowed or contain impermissable levels
of lead.
The U.S. Consumer Product Safety Commission reported the recall at a news conference in Washington
D.C.
“The safety of children is our primary concern, and we are deeply apologetic to everyone affected,” said
Mattel Chief Executive Officer Robert A. Eckert. “Mattel has rigorous procedures, and we will continue to
be vigilant and unforgiving in enforcing quality and safety. We don’t want to have recalls, but we don’t
hesitate to take quick and effective action to correct issues as soon as we’ve identified them to ensure
the safety of our products and the safety of children.”
In morning trading on Tuesday, shares of Mattel quickly fell 3.4%, or 81 cents, to $22.76.
This latest bad news from the toymaker comes less than two weeks after Mattel recalled 1.5 million
other Chinese-made toys coated with paint believed to contain dangerous levels of lead.
That recall covered 83 types of toys distributed in 32 countries, including figures of such popular
characters as Big Bird, Elmo, Dora the Explorer and Diego. Mattel said it had stopped more than twothirds of the 967,000 U.S. toys from reaching store shelves, but over 300,000 had already been bought
by consumers from May through August. (See: “Chinese Toy Terror.”)
Despite the bad news, on July 16 Mattel reported that its second-quarter profits jumped 15.2% on strong
international sales.
Mattel said net income rose to $43.1 million, or 11 cents a share, from $37.4 million, or 10 cents a share,
in the comparable quarter a year ago. Sales also rose 6.5% to $1.02 billion. The results nearly matched the Street–analysts were expecting earnings of 11 cents a share and net sales of $1.03 billion. (See:
“Mattel Rises On Global Appeal.”)
–The Associated Press contributed to this article.
Article 2-Lead paint prompts Mattel to recall 967,000 toys
Lead Paint Prompts Mattel to Recall 967,000 Toys
By LOUISE STORY AUG. 2, 2007
Mattel, the maker of Barbie dolls and Hot Wheels cars, is recalling nearly one million toys in the United
States today because the products are covered in lead paint.
According to Mattel, all the toys were made by a contract manufacturer in China.
The recall, the second biggest this year involving toys, covers 83 products made from April 19 to July 6.
Many of them feature Sesame Street and Nickelodeon characters — including the Elmo Tub Sub, the
Dora the Explorer Backpack, and the Giggle Gabber, a toy shaped like Elmo or Cookie Monster that
toddlers shake to hear giggles and funny noises.
Mattel says it prevented more than two-thirds of the 967,000 affected toys from reaching consumers by
stopping the products in its distribution centers and contacting retailers, like Wal-Mart, Target and Toys
‘R’ Us, late last week. But more than 300,000 of the tainted toys have been bought by consumers in the
United States. According to the Consumer Product Safety Commission, the toys may have a date code
from 109-7LF to 187-7LF on the product or packaging.
A complete list can be found at nytimes.com, mattel.com or cpsc.gov.
Mattel is hardly the first manufacturer to encounter a breakdown in the Chinese production chain. In
recent months, factories in China have been sources of poisonous pet food sold in stores in the United
States, dangerous car tires, and lead paint on the popular Thomas & Friends wooden toys.
The Chinese government has said it is working to improve its product regulations, even as members of
Congress have called for legislation requiring more inspections of imports from China.
This is Mattel’s 17th recall in 10 years. Most recently, an infant swing made by its Fisher-Price division
was taken off the market because of a risk children could be trapped in its moving parts. And in its
largest consumer action involving toy safety, in 1998, the company recalled more than 10 million Power
Wheels cars. Speaking of the new recall, Nancy A. Nord, acting Consumer Product Safety Commission chairwoman,
said in a statement, “These recalled toys have accessible lead in the paint, and parents should not
hesitate in taking them away from children.” The statement said that the commission had stated an investigation and that “ensuring that Chinese
made toys are safe for U.S. consumers is one of my highest priorities and is the subject of vital talks
currently in place between C.P.S.C. and the Chinese government.”
Earlier this summer, RC2, the maker of Thomas trains, recalled 1.5 million trains and accessories because
a Chinese supplier had coated them in lead paint. At that time, consumer safety experts and toy industry
analysts said that Mattel was unlikely to face such a problem.
“There are companies that live up to their obligations to the government as well as to consumers, and
they are one of them,” Julie Vallese, a spokeswoman for the Consumer Product Safety Commission, said
of Mattel in mid-July.
But Mattel’s safety checks — which include independent audits of facilities and ownership of many of its
own factories in China — did not prevent the chain of events that led to today’s recall.
In early July, according to Mattel executives, one of the European retailers that sells Mattel toys
discovered the lead on some products. On July 6, Mattel stopped operations at the factory that produced
the toys and initiated an investigation.
On July 18, Mattel took a reporter for The New York Times on a tour of a factory in Guanyao, China, and
of Mattel’s toy safety lab in Shenzhen. At that time, Mattel executives say, it was unclear whether Mattel
was facing a widespread lead paint problem, or if the European case was an anomaly.
Last Thursday, the same day The Times ran an article about Mattel’s toy safety procedures, the
company’s executives say they received conclusive data that persuaded them to recall the 83 products.
Then, the company contacted retailers who stocked the toys.
“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 A. Eckert, the chief executive of Mattel, said in an interview. “They
understand our regulations, they understand our program, and something went wrong. That hurts.”
Mattel requires the factories it contracts with to use paint and other materials provided by certified
suppliers. Mattel executives said they did not know if the contract manufacturer substituted paint from a
noncertified supplier or if a certified supplier caused the problem.
Mr. Eckert said Mattel was considering various ways to overcome the problem, including reducing the
amount of toys it makes through contract factories. About 50 percent of Mattel’s revenue comes from
toys made in 11 factories it owns and operates. That is a high share for the toy industry. But the other half comes from toys that it outsources to up to 50 manufacturers in China. Those toys
tend to be short-term products that feature characters from movies and television shows rather than
Barbie dolls or other Mattel brands. In light of the recalls, Nickelodeon — which owns the characters Dora the Explorer and Diego — has
decided to introduce a third-party monitor to check up on all of the companies that make toys under its
brands, including Mattel.
Sesame Workshop, the nonprofit organization behind the “Sesame Street” program, is considering
adding third-party testing, Gary E. Knell, president and chief executive of Sesame Workshop, said in a
statement.
This summer, the Toy Industry Association has been working with the Consumer Product Safety
Commission on new regulations to require more stringent safety checks. Carter Keithley, president of the
association, said the federal government needed to help the industry block China from using lead paint.
“We don’t have lead paint in this country any more, and they shouldn’t either,” Mr. Keithley said of
China. “If there was no lead paint, then we wouldn’t have this problem.”
Thomas G. Rawski, an economics professor at the University of Pittsburgh, who has visited factories in
China regularly since 1975, though not toy factories, said companies there are trying to check product
quality, but more improvements are needed.
“The mechanisms for preventing this stuff don’t leap out of a tree,” Mr. Rawski said. “They have to be
built up carefully, and I think it’s very clear this process of building is going on in China right now. That
means there are lots of things happening that in an ideal world shouldn’t be happening, including things
that wouldn’t happen in Japan or the U.S.”
Article 3-Mattel recalls 19 million toys sent from China
Mattel Recalls 19 Million Toys Sent From China
By LOUISE STORY and DAVID BARBOZAAUG. 15, 2007
Mattel, the world’s largest toy company, yesterday announced the biggest recall in its history.
In a double-barreled announcement, the company said it was recalling 436,000 Chinese-made die-cast
toy cars depicting the character Sarge from the animated film “Cars” because they are covered with lead
paint.
At the same time, the toy maker said it was recalling 18.2 million other toys because their small,
powerful magnets could harm children if swallowed. The magnetized toys were also made in China, but
they followed a Mattel design specification. About half of the toys in each recall were distributed in the United States.
Amid a wave of increasing safety concerns about products made in China, the recall threatened to set
the toy industry on its heels — just as companies are beginning to ship toys to stores for the holiday
shopping season, when half of all toy purchases are made. Separately, laboratory tests have found that some Chinese-made vinyl baby bibs sold at Toys “R” Us
stores appear to be contaminated with lead.
Industry analysts said Mattel’s woes are part of a much larger problem.
“If I went down the shelves of Wal-Mart and tested everything, I’m going to find serious problems,” said
Sean McGowan, managing director and the toy analyst at Wedbush Morgan Securities. “The idea that
Mattel — with its high standards — has a bigger problem than everybody else is laughable. If we don’t
see an increase of recalls in this industry, then it’s a case of denial.”
Even Mattel executives said repeatedly yesterday that the company may have more recalls.
“No system is perfect,” Robert A. Eckert, Mattel’s chairman and chief executive, said in a conference call.
“There’s no guarantee that we will not be here again.”
Shares in Mattel dropped 57 cents, to $23, during regular trading, but rose the same amount after hours.
The mounting wave of safety concerns is forcing Mattel and other toy companies to reconsider long-held
assumptions about the safety of their products. Mattel executives said yesterday that in the long run
they are trying to shift more of their toy production into factories they own and operate — and away
from Chinese contractors and sub-contractors.
“We do realize the need for increased vigilance, increased surveillance,” said Jim Walter, senior vice
president of worldwide quality assurance at Mattel, in an interview.
Still, the latest recall led to intensified calls from consumer advocates and politicians for stricter safety
standards, as well as tougher penalties for companies.
“This summer alone has seen well over 13 million toy recalls, popular toys removed from our homes and
our stores because they have been found to be extremely dangerous, in some cases lethal, to our
children,” said Senator Amy Klobuchar, Democrat of Minnesota, a member of the Senate commerce
committee.
Senator Klobuchar said it was “increasingly clear” that the Consumer Product Safety Commission needed
more financing and greater authority. The commerce committee held a hearing last month on the safety
of goods made in China. The lead-paint recall was Mattel’s second in less than a month of lead-tainted toys made in China.
Together, the recalls have thrust the maker of Barbie dolls and Hot Wheels cars into the heart of rising
concern over products made in low-cost factories in China.
Last month’s recall of toys with lead paint included some based on characters from “Sesame Street” and
“Dora the Explorer.” The magnetic toys involved in the new recall included 63 products that, though produced in China, were
recalled because of a design flaw on Mattel’s part, not a problem with its Chinese contractors.
The magnetic toys had been produced since 2002 and sold before January 2007. They include 44
different Polly Pocket toys, 11 Doggie Day Care toys, 4 Batman toys, a One Piece toy, and 2 Barbie toys.
Many toy makers have recalled magnetic toys since early 2006 as the consumer safety commission,
concerned that children could ingest the magnets, focused on magnets on toys as a rising safety hazard.
Mattel said it was working with the safety commission and other regulatory agencies worldwide, as well
as with retailers to remove the affected products from stores.
Before the recall was announced, Mattel began an advertising campaign yesterday aimed at reassuring
consumers of its commitment to product safety.
Mattel said the lead-tainted products, made from May to July, were discovered in routine safety checks.
But Mattel has also been running an investigation of all its toy manufacturing since early July. The latest
recall involves toys from a different Chinese contractor from the one that produced toys recalled earlier
this month, Mattel said.
The recall is the latest in a series of such actions this year involving Chinese-made goods, including
contaminated pet food ingredients, children’s jewelry, defective tires and tainted toothpaste. In July, one
of Mattel’s European retail partners noticed lead paint on some of its toys, and Mattel began an
extensive investigation of the toys in its distribution chain and of the contract manufacturers that make
half of its toys. Mattel has not stepped up checks on the nearly 3,000 companies that license its brands
to put on products other than toys, Mr. Walter said.
Yesterday’s lead paint recall was caused by a subcontractor, Hong Li Da, hired by Mattel’s contractor in
China, Early Light Industrial. Mattel executives said Early Light, which has worked with Mattel for 20
years, was not at fault in the paint substitution. A number of Mattel’s 30 to 50 contractors in China
subcontract parts of their production to other companies, Mr. Walter said.
At least two other major toy manufacturers have begun investigations of their toys from China this
summer in reaction to the recalls, said Carter Keithley, the president of the Toy Industry Association. Mr.
Keithley declined to name those companies.
Hasbro has increased the level of its safety checks this summer in light of the recalls, said Wayne
Charness, a senior vice president. Hasbro does not own any factories in China and instead entirely uses
contractors for its production there.
There are already many lawsuits against companies involved in the pet food recall as well as the Thomas
& Friends toy train recall.
Manufacturing experts say that companies have cut costs so much in China that more toy testing is not
affordable for many manufacturers. “If Mattel, with all of its emphasis on quality and testing, found such a widespread problem, what do you
think is happening in the rest of the toy industry, in the apparel industry and even in the low-end
electronics industry?” said S. Prakash Sethi, a professor at Baruch College, part of the City University of
New York, who has acted as an independent monitor of working conditions in Mattel’s factories for the
last 10 years. “Everyone is going to be found with lots of dirty laundry.”
But, he said, “there is something to be said about the pressure that American and European and
multinational companies put on Chinese companies to supply cheap products. The operating margins are
razor thin, so you really should not be surprised that there is pressure to cut corners.”
The Consumer Product Safety Commission is negotiating with the toy industry to conduct broader
testing of toys that are being imported, said Nancy A. Nord, the commission’s acting chairwoman. Ms.
Nord also urged consumers not to overreact to the news.
“In today’s environment, it is easy to take recalls out of proportion,” she said. “By no means is it the
largest recall this agency has done, and it represents only a tiny fraction of the hundreds of millions of
toys that are sold in the United States every year.”
About 65 percent of Mattel’s toys are made in China, some in five factories the company owns and
operates there. Mr. Walter visited China and Hong Kong last week to meet with all of Mattel’s contract
manufacturers to reiterate Mattel’s quality rules.
“The message was very clear,” he said. “If you cannot do these things, please let us know. No problem,
but you won’t be doing business with us.”
Mattel announced a $30 million charge soon after that recall, and executives yesterday said that amount
would cover the cost of this week’s recall.
Lee Der Industrial, a contract manufacturer based in southern China, was responsible for producing the
toys that contained excessive levels of lead paint in the first recall. Mattel stopped accepting goods from
the contractor, and last week the Chinese government revoked Lee Der’s export license. The owner of
Lee Der, Zhang Shuhong, committed suicide by hanging himself in a factory warehouse last Saturday,
Chinese officials have confirmed.
Mr. Eckert said in an interview that Mattel had been able to recover the costs of its recall of the products
made by Lee Der Industrial. “My understanding is that Lee Der is out of business,” he added.
Eric Lipton contributed reporting. eight- to ten-pages (not including the tit and ref page), that addresses the following:
-Explain if Mattel acted in a socially responsible and ethical manner with regard to the safety of its toys.
-Describe what Mattel should or could have done differently. -Describe who or what was responsible for the fact that children were exposed to potentially dangerous
toys.
-Explain the best way to ensure the safety of children’s toys and consider how the following groups
would respond: government regulators (in the United States and China); consumer advocates, the toy
industry, children’s product retailers, and standard-setting organizations. Explain the differences in their
point of view.
-Describe what you think is the best way for society to protect children from harmful toys and discuss
the appropriate roles for various stakeholders in this process.
-intro paragraph with a clearly stated thesis or topic.
– address the topic of the paper with critical thought. That is, state your response to the content, either
positive or negative, and then defend your position. If multiple options/alternatives/positions are
present and are being rejected, you must also defend the reasons for rejecting an option.
– conclude with a restatement of the thesis or topic and a closing paragraph that summarizes the main
point or points of your paper.
– use at least four sources in addition to the textbook.
– ref pag
Lisa J & Scott C (2016) Corporate and Social Responsibility: Road Map for a Sustainable Future;
Bridgepoint Education, Inc
