1. How would you evaluate Mattel's actions during August 2007? What are reasons Mattel argues for lead paint and loose magnets? Do their arguments have accurate evidence to support? . How would you evaluate Mattel's public relations such as the New York Times and Wall Street Journal? Why do they use public relations? 2. Should Mattel have apologized to customers and the public and what were the risks involved? (B) On 1 August 2007, Mattel Inc. ("Mattel") recalled 1.5 million of its toys, manufactured by the Lee Der Industrial Company ("Lee Der?) in China because they contained toxic lead paint. Lee Der's owner committed suicide and his company was in the process of closing down. Meanwhile, Mattel intensified its efforts to test products manufactured in China and on 14 August announced a double recall: one related to lead paint and the other related to loose magnets. The paint problem was discovered in "Sarge" toy cars, manufactured by Early Light Industrial Co. Ltd ("Early Light"), which had been a vendor to Mattel for 20 years. Early Light had subcontracted the painting to Hon Li Da Plastic Cement Products Co. Ltd in Shenzhen. Hon Li had used paint from an unauthorized paint supplier. The recall involved 436,000 toys, of which 253,000 were in the US. Thomas Debrowski, Mattel's executive vice-president for worldwide operations, said: I think it's the fault of the vendor who didn't follow the procedures we've been living with for a long time. In the last three or five years you 've seen raw material prices double or triple and I think there's a lot of pressure on guys that are working at the margin to try to save money. Jim Walter, senior vice-president of worldwide quality assurance at Mattel, said, We have immediately implemented a strengthened three-point check system: First, we 're requiring that only paint from certified suppliers be used and requiring every single batch of paint at every single vendor to be tested. If it doesn't pass, it doesn't get used. Second, we are tightening controls throughout the production process at vendor facilities and increasing unannounced random inspections. Third, we're testing every production run of finished toys to ensure compliance before they reach our customers. We've met with vendors to ensure they understand our tightened procedures and our absolute requirement of strict adherence to them. Additionally, Mattel announced the voluntary recall of magnetic toys manufactured between January 2002 and 31 January 2007, including certain dolls and play sets that could release small magnets. This recall expanded upon an earlier voluntary Mattel recall of eight toys in November 2006. This time 18.2 million magnetic toys were recalled globally (9.5 million in the US), most of which had already been sold to the public. In an effort to persuade customers and investors that the situation was under control, Mattel released full-page advertisements in leading US newspapers such as the New York Times and Wall Street Journal. Mattel posted an announcement on its website plus a special video of Robert Eckert, chairman and CEO, saying: The safety of children is our primary concern, and we are deeply apologetic to everyone affected. 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. After a conference call to newspaper and TV reporters he was also quoted as saying, "There is no guarantee that we will not have more recalls. We are testing at a very high level. We've got teams working around the clock. We've literally spent tens of thousands of man-hours testing toys." There was an immediate wave of media reports about Chinese imports, most of which used words like "scare" and "crisis" that raised public concern. There were demands that more should be done, and American politicians joined in. For example, Senator Dick Durbin said, "Another week, another recall of Chinese-made toys. We can't wait any longer for China to crack down on its lax safety standards. This needs to stop now before more children and families are put at risk." Nancy Nord, Acting Chairperson of the US Consumer Product Safety Commission said, "There is no excuse for lead to be found in toys entering this country. It's totally unacceptable and it needs to stop." The American popular press and online blogs started featuring articles referring to anxious parents and describing how Mattel's recalls would damage customer confidence which would affect its Christmas sales. There were also comments saying that America should manufacture more of its products at home. The financial press noted that Mattel's new stricter testing procedures would increase its costs of doing business. It was even suggested that Mattel could face lawsuits based on claims that it did not do enough to ensure it had well-designed products and has been negligent in supervising its suppliers' operations in China. Mattel's business partners were also worried. One of the companies from which Mattel obtained its licensed toy characters was the Walt Disney Company, and it said it would start its own testing of toys featuring Disney characters. Moreover, one of Mattel s main retail customers, the Toys R Us chain, said it would do random sample inspections of toys on its shelves. Meanwhile, Mattel charged its accounts with a $29 million loss due to product recalls. Its share price fell from its May high of $29.71 to $23, a drop of 23%. In a further development, Mattel's CEO Robert Eckert was invited to appear before a US Congress committee to explain what was going on. Before he could get there, Mattel announced yet another product recall on 4 September. Once again the issue was lead paint, this time found in Barbie doll accessories and two types of Fisher-Price branded toys. This recall covered 844,000 toys, manufactured by three different Chinese companies, not previously identified as being problematic. It was suggested that they had run out of paint from their approved suppliers and, in a rush to meet delivery dates for the Christmas season, had subcontracted painting to unauthorized sources. 1. How would you evaluate Mattel's actions during August 2007? What are reasons Mattel argues for lead paint and loose magnets? Do their arguments have accurate evidence to support? . How would you evaluate Mattel's public relations such as the New York Times and Wall Street Journal? Why do they use public relations? 2. Should Mattel have apologized to customers and the public and what were the risks involved? (B) On 1 August 2007, Mattel Inc. ("Mattel") recalled 1.5 million of its toys, manufactured by the Lee Der Industrial Company ("Lee Der?) in China because they contained toxic lead paint. Lee Der's owner committed suicide and his company was in the process of closing down. Meanwhile, Mattel intensified its efforts to test products manufactured in China and on 14 August announced a double recall: one related to lead paint and the other related to loose magnets. The paint problem was discovered in "Sarge" toy cars, manufactured by Early Light Industrial Co. Ltd ("Early Light"), which had been a vendor to Mattel for 20 years. Early Light had subcontracted the painting to Hon Li Da Plastic Cement Products Co. Ltd in Shenzhen. Hon Li had used paint from an unauthorized paint supplier. The recall involved 436,000 toys, of which 253,000 were in the US. Thomas Debrowski, Mattel's executive vice-president for worldwide operations, said: I think it's the fault of the vendor who didn't follow the procedures we've been living with for a long time. In the last three or five years you 've seen raw material prices double or triple and I think there's a lot of pressure on guys that are working at the margin to try to save money. Jim Walter, senior vice-president of worldwide quality assurance at Mattel, said, We have immediately implemented a strengthened three-point check system: First, we 're requiring that only paint from certified suppliers be used and requiring every single batch of paint at every single vendor to be tested. If it doesn't pass, it doesn't get used. Second, we are tightening controls throughout the production process at vendor facilities and increasing unannounced random inspections. Third, we're testing every production run of finished toys to ensure compliance before they reach our customers. We've met with vendors to ensure they understand our tightened procedures and our absolute requirement of strict adherence to them. Additionally, Mattel announced the voluntary recall of magnetic toys manufactured between January 2002 and 31 January 2007, including certain dolls and play sets that could release small magnets. This recall expanded upon an earlier voluntary Mattel recall of eight toys in November 2006. This time 18.2 million magnetic toys were recalled globally (9.5 million in the US), most of which had already been sold to the public. In an effort to persuade customers and investors that the situation was under control, Mattel released full-page advertisements in leading US newspapers such as the New York Times and Wall Street Journal. Mattel posted an announcement on its website plus a special video of Robert Eckert, chairman and CEO, saying: The safety of children is our primary concern, and we are deeply apologetic to everyone affected. 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. After a conference call to newspaper and TV reporters he was also quoted as saying, "There is no guarantee that we will not have more recalls. We are testing at a very high level. We've got teams working around the clock. We've literally spent tens of thousands of man-hours testing toys." There was an immediate wave of media reports about Chinese imports, most of which used words like "scare" and "crisis" that raised public concern. There were demands that more should be done, and American politicians joined in. For example, Senator Dick Durbin said, "Another week, another recall of Chinese-made toys. We can't wait any longer for China to crack down on its lax safety standards. This needs to stop now before more children and families are put at risk." Nancy Nord, Acting Chairperson of the US Consumer Product Safety Commission said, "There is no excuse for lead to be found in toys entering this country. It's totally unacceptable and it needs to stop." The American popular press and online blogs started featuring articles referring to anxious parents and describing how Mattel's recalls would damage customer confidence which would affect its Christmas sales. There were also comments saying that America should manufacture more of its products at home. The financial press noted that Mattel's new stricter testing procedures would increase its costs of doing business. It was even suggested that Mattel could face lawsuits based on claims that it did not do enough to ensure it had well-designed products and has been negligent in supervising its suppliers' operations in China. Mattel's business partners were also worried. One of the companies from which Mattel obtained its licensed toy characters was the Walt Disney Company, and it said it would start its own testing of toys featuring Disney characters. Moreover, one of Mattel s main retail customers, the Toys R Us chain, said it would do random sample inspections of toys on its shelves. Meanwhile, Mattel charged its accounts with a $29 million loss due to product recalls. Its share price fell from its May high of $29.71 to $23, a drop of 23%. In a further development, Mattel's CEO Robert Eckert was invited to appear before a US Congress committee to explain what was going on. Before he could get there, Mattel announced yet another product recall on 4 September. Once again the issue was lead paint, this time found in Barbie doll accessories and two types of Fisher-Price branded toys. This recall covered 844,000 toys, manufactured by three different Chinese companies, not previously identified as being problematic. It was suggested that they had run out of paint from their approved suppliers and, in a rush to meet delivery dates for the Christmas season, had subcontracted painting to unauthorized sources