With all the dangers -- both real and imagined -- from Chinese-made toys, can parents still "Buy American" and ensure their children's safety?
It's difficult, because 80% of all the toys sold in the U.S. are manufactured in China. But it's not impossible. There are plenty of good, solid substitutes for foreign-made playthings. You're just going to have to look.
Perhaps you wanted a Thomas the Tank Engine toy train made by RC2 (NASDAQ:RCRC) but got scared off by the lead paint found on it. Or you got more scared when the toy they sent out as an apology needed to be apologized for as well because it, too, had high levels of lead paint. Or maybe you wanted a Polly Pocket by Mattel (NYSE:MAT) but became nervous about the reports of loose magnets.
You might be heartened to learn that the Whittle Shortline Railroad Company in Missouri produces a Little Engine That Could wooden train which, as the site notes, is painted with "100% Kid-Safe Lead-Free Paint." You can still buy a U.S.-made Louisville Slugger from Hillerich & Bradsby (though its gloves are made in the Philippines), a Slinky from POOF-Slinky, and Cottage Dollhouses from the Imagination Box Co. with paints that are American made.
There are playing cards from the U.S. Playing Card Co., Step 2 toys, Wiffle balls, and K'Nex (but some parts like motors are Chinese made). Parents still have plenty of options, and they may explore them this Christmas.
On the RC2 discussion board of Motley Fool Hidden Gems, where the company was recommended, there's some strong sentiment expressed from parents who would willingly pay a premium for "safe" American-made toys. Those feelings may result in a backlash the likes of which no jawboning can hide -- this Christmas might not be fine and dandy in terms of sales.
A subscriber who contributes to the discussion boards as pwc123 says, "As a parent of a 1-year-old boy who shoves everything in his mouth, the opportunity to pay a premium to guarantee my son's toys would be lead-free would be appealing."
Mattel-brand toys accounted for 60% of the company's sales in 2006, and the Fisher-Price line accounts for the other 40%. These are the toys at the heart of the company's recalls. RC2 recorded a charge of $0.19 per share last quarter as a result of the recalls. Its new recall, while smaller, will lead to additional charges and perhaps an extended impairment to its reputation with both consumers and HIT Entertainment, the company from which it licenses its Thomas line.
Moreover, China has instituted a series of inspections in hopes of regaining the American consumer's trust. Those inspections, though, are creating havoc for the Chinese toy companies that have toys sitting in warehouses, waiting for the government's seal of approval. That's creating logjams in delivery that will push retailers' receipt of the toys well past this holiday season.
Even so, we shouldn't delude ourselves into thinking that by "buying American" we protect our kids from harm. We may erect a barrier to lead paint, but toys -- foreign made or American made -- can still pose risks. Lead paint will fade from the headlines, and tomorrow it can and will be something else.
Hasbro (NYSE:HAS) had to recall its popular Easy-Bake Oven not because of lead paint, but because fingers got caught in the oven door and the bulbs caused burns. Admittedly it's a Chinese-made product, but that's more of a design flaw, like Mattel's magnet problem. Bookseller Bookspan recalled books because a squeeze toy represented a choking hazard, while several years ago U.S.-made toy boxes sold at J.C. Penney (NYSE:JCP) were recalled. Every year Target (NYSE:TGT), Costco (NASDAQ:COST), and Wal-Mart (NYSE:WMT), the biggest toy sellers, remove toys from their shelves because of recalls.
Even if traditional retailers get their supplies in time, concerns over foreign-made toys coupled with a Buy-American mentality may cause some top- and bottom-line pain for the retailers and toy makers. Classy, locally made toys may just win out this holiday, although such movements tend to fade when the crisis passes, danger is no longer omnipresent, and we once again wish to save money.
