Through The Fly's Eyes: Mattel, Inc

from Laurie Pasternack of Theflyonthewall.com

Mattel to China: Whoops!

One of the bigger issues to come up this year involved several concerned products ranging from toothpaste to toys from China that were deemed unsafe and prompted calls for tighter scrutiny. As it turns out, not all things recalled were actually unsafe.

Toy maker Mattel (MAT) issued a big "I'm sorry" to China over its recalls of millions of toys this summer. The apology, by the way, was in contrast to previous comments from Mattel CEO Robert Eckert, who last week placed the faulty toys blame on "outside contractors." According to the company, which has now taken "full responsibility" for the 21 million Chinese-made toy recalls this summer, the Chinese exports were "generally safe." Thomas Debrowski, executive vice president of worldwide operations for the toy maker, added in his apology that the toys suffered from a design defect that was Mattel's -- not China's -- fault and that foreign politicians and media had "unfairly hyped" quality-control scares.

Mattel, which had been known for making toys in Asia for several years, surely felt pressure to apologize to the Chinese government. For one thing, Joe Lampel, a professor of strategy with the Cass Business School in London, said Mattel’s about-face was driven in part by a strong desire to make things right with Beijing. Not only was the company's reputation was affected by the recalls, the company eventually realized that much of the company's profits were generated by Chinese factories. Lampel said, "They have to salvage some of their business relationship with China. They need the goodwill of the government." And what better way to get back into the Chinese government's good graces than to issue a humiliating public apology. Indeed, it is easier to apologize than to make an enemy of the country at the center of the toy-making world. China exported nearly $8B in toys last year; to get further on its bad side would not be ideal for Mattel.

What does China have to say of the apology? The damage has certainly harmed the “Made in China” label, several Chinese factories have been shut, and a Lee Der Industrial Co, one of Mattel’s suppliers, killed himself in August. However, according to the China Daily , the “delayed” apology should help repair the country's reputation and "help dispel the suspicion American customers harbor against Chinese-made products." In addition, the editorial said Mattel's reputation should also be repaired "when the whole truth about the recalls is finally made public."

While unclear for now whether Mattel will look elsewhere to place blame, perhaps the company will have learned a lesson from the incidents and will take more quality control into its own hands. And while China may forgive the company, Andrew Krulwich, a former general counsel for the U.S. Consumer Product Safety Commission, believes the apology could make Mattel a lawsuit target.