"I'm sorry you sent us lead-tainted and defective toys that we had to recall -- three times!"
You can file the above paraphrased quote in the "man bites dog" news file, but reports today that Mattel (NYSE: MAT) issued a bizarre apology to its Chinese toy manufacturers are, well, bizarre.
As we all know, Mattel announced three huge recalls this summer when it was discovered that toys sourced from China failed lead paint tests or had parts that posed dangers to children. First, it was found that its Fisher-Price brand imported toys had dangerously high levels of lead. The second recall featured a die-cast version of the Sarge vehicle from Disney's (NYSE: DIS) Cars film, as well as Polly Pocket toys, all of which had lead or loose magnets that could choke kids if swallowed. Its iconic Barbie dolls were the focus of the third recall.
The recalls, we were told, were necessary because the Chinese manufacturer of the toys, Lee Der Industrial, had violated not only U.S. safety standards but Mattel's own guidelines.
These recalls came on the heels of other high-profile toy recalls from RC2 (Nasdaq: RCRC) and Oriental Trading Co., which found lead in some of the Chinese-made trinkets it sells. Considering that, it was not so surprising to believe that Mattel also found lead levels 180 times higher than allowed by law.
Mattel CEO Bob Eckert has made several emotional pleas in the media since these events, saying that as a father, he too is concerned about the danger his company's toys are posing. He stressed that his company would be doing all it could to remedy the situation.
Now, it seems that part of Mattel's solution is helping China save face by accepting full responsibility for the problem. A little more than a week ago, I asked if we could believe Mattel. Today, the answer is "apparently not."
In its apology to the head of China's General Administration of Quality Supervision, Inspection and Quarantine, Mattel said that it may have been "overly inclusive" in its recalls because toys may not have had the excessive amounts of lead it claimed they did. In addition, the company claimed Mattel's own design flaws were to blame for toy defects, not Chinese manufacturing processes. Gee, that's not what Eckert has been telling us, nor did Mattel elaborate in identifying which toys were not tainted.
Mattel can't have it both ways. Maybe the Chinese are mad at being made to look like the scapegoat in a summer of toy recalls -- even Hasbro's (NYSE: HAS) Easy-Bake Oven recall originated from China. But if, as has been alleged, they're producing toys that don't meet U.S. standards and coming up with shipping manifests that conceal the true nature of their products, then they have to own up to it. Mattel can't tell the American consumer it's those bad Chinese toy makers that caused these problems, then turn around and try to make nice with those same manufacturers.
It seems to me that Mattel is extremely worried about this coming Christmas season. For whatever reason, this about-face about who's at fault positions the company as extremely vulnerable and desperate. While CEO Eckert said the company's deeds would speak louder than its words, what Mattel is saying right now sounds highly suspect -- and less than believable.
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