Mattel (NYSE: MAT) actually apologized to the Chinese government for making it appear that poor quality control by the country's manufacturers caused defects in its toys. The Associated Press reported that Thomas A. Debrowski, Mattel's EVP of global operations, said this at a meeting in China yesterday: "Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys."
The press and investors have not heard this kind of talk from the toy company before, and it was assumed that the factories that make toys for Mattel were at fault for using lead paint in several products.
Mattel's CEO was dragged before Congress earlier this week and beaten like a red-headed mule. Congress wants to know why the company did not catch problems earlier and had to recall over one million units.
The AP says that a large part of Mattel's profits result from outsourcing manufacturing to Chinese factories. With low labor costs in the country that is probably true. Moving production to another country could take a great deal of time and would pressure Mattel gross margins.
It would not be beyond the realm of possibility to think that the Chinese pressured Mattel into its statement. The US company may have given in rather than be forced out of relationships with its current suppliers.
If Mattel's new statement is accurate, and the company is at fault for all of the problems that caused the recalls, it is hard to imagine how all of the senior executives at the company still have their jobs.
Something about the incident does not make sense.
Douglas A. McIntyre is a partner at 247wallst.com.
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Reader Comments (Page 1 of 1)
9-21-2007 @ 10:13AM
Bruce said...
Mattel is a grim reminder that they and our US economy have become so dependent on the cheap products and labor from China, that we are forced to bow down to them even when they are wrong. We are creating a Communist monster, with US dollars, that will soon rule over us all. Wake up America!
9-21-2007 @ 10:45AM
Jeff said...
you should consider cultural implications of such statements.
9-21-2007 @ 11:32AM
Makendoo3 said...
"The Voice of One Crying in the Wilderness" - Return to American-based manufacturing that pays real wages to people who live and spend money in this economy. How long do we think the free ride is going to last? We cannot continue to export jobs (manufacturing and service jobs) and still maintain our economy. All we are doing is building up foreign economies that will eventually bury us. There is an educated and trained work force in this country who need good paying jobs, not "rice bowl" or "tortilla" wages. Instead of building whole villages in India for service industry jobs Corporate America could have re-built whole cities in the South, especially with tax incentives granted after the natural disasters of recent years. This is all about corporate greed and corporate desire to operate outside of US safety regulations. Mattell and China are symptoms of a much more deadly disease.
9-21-2007 @ 2:24PM
Jeff said...
rice bowl and tortilla wages? what about hamburger wages? you are racist.
9-21-2007 @ 2:59PM
dewarcnc said...
Why apologize to the chinese? Corporations need to apologize to the American people for exporting our jobs and then turning around and selling us tainted junk. It is time to require labeling on every product that we purchase with origin of ingredients or materials, and information on manufacturing. I do my best to avoid all Chinese products, but it has become impossible to do. WAKE UP PEOPLE! If we refuse to purchase the junk they want to pawn off on us, they would get the message. I, for one, am getting sick and tired of having only cheap garbage that breaks before it is removed from the box, being the only offering. I am also fed up with having big box stores as the only brick and mortor businesses left. If we demand quality and don't spend a dime unless we get it, the market will have to respond to us. In the short run it will cost more, but long term the benefit would far exceed the initial added cost.
9-23-2007 @ 2:38PM
W.Z. said...
I don't understand why Mattel should be sympathesized for making the apology to China since it is a fact that their "design in America" should hold most of the recalls recently made. American media failed again to tell the truth until Mattel was forced to tell that by Chinese. American media is losing its spirit. This is once again after the start of the Iraq war. It is only a dream that toy making jobs will come back to the US if Chinese made toys are banned. The production lines will only be transferred to another poor country for cheap labors. American blame China for lead tainted toys for a better reason, but don't forget that Mattel developed the system in China to push down the cost below the margine for the greatest profit by exploiting Chinese labors, which American investors including millions of common people acompliced to achieve.
9-23-2007 @ 4:21PM
Andy said...
If Mattel being a responsible company, it should test their products before selling them. The testing should include paints and safety. Instead, they released the product without good quality control. To that part, they should apologize for their negligence to consumers and producers. If they have done their job right the first time, the paint and other issue would be caught at the manufacture stage. These cases reveal how vulnerable our consumers are. Corporations are focused on their profits, not their consumers (or the low-wage workers in China). Sad.
Commented by Andy Zhang, www.andyzhang.info