Is China hurting Disney's (DIS) reputation?

Posted Sep 10th 2007 12:42PM by Peter Cohan
Filed under: China, Walt Disney (DIS), Mattel, Inc (MAT)

The New York Times [registration required] reports that The Walt Disney Compnay (NYSE: DIS) is changing its policy towards the Chinese toy manufacturers that license its brands. Thanks to numerous recalls of Mattel Inc. (NYSE: MAT) toys made in China, Disney will no longer cash its licensing checks from toy makers while looking the other way on quality matters.

Now, worried about the potential damage to its brands, Disney will inspect the toys made in the likeness of its characters. Disney's tests will focus on 2,000 toymakers and 65,000 products each year. Disney's Product Integrity Office, which oversees safety programs throughout the company, including in its theme parks, is deciding how often the tests will occur.

Toys and other children's products like jewelry will be tested off the shelves of all retailers that sell Disney toys, including Wal-Mart Stores Inc. (NYSE: WMT) and KB Toys as well as stores in other parts of the world. The tests will start within next two weeks.

Will Disney's testing be enough to change Chinese toy manufacturing practices? I hope so.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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