September 27th 2007

US toy giant Mattel's recent apology and the arrest by Chinese police of four people alleged to have supplied substandard paints have proved too late to help Chinese toymakers already financially damaged by US recalls of millions of their products.

Thomas A Debrowski, Mattel's executive vice president for worldwide operations, said in a meeting with Chinese product safety chief Li Changjiang, "The vast majority of those products recalled were the result of a design flaw in Mattel," and not because of flawed manufacturing in China.

Nevertheless, operations of one Chinese toymaker have come to a full stop after its US partner Mattel recalled about a million lead-tainted toys.

More than 2,500 employees with the Lida Plastic Toys company, a longtime contract manufacturer of Mattel based in southern China's Guangdong province, are still temporarily laid off without pay since the world's largest toy company announced the recall early last month. Export business was suspended and toys worth about 50 million yuan (US$6.6 million) have been overstocked, resulting in a halt of capital inflow, said Xie Yuguang, board chairman of Lida.

Construction of three factories and a new dorm for short-term employees was also forced to stop.

Seeing no way out, Lida's former boss Cheung Shu-hung, a Hong Kong businessman in his 50s, hanged himself on August 11 after paying salaries due to all employees and sending them home. Workers said Cheung was well respected by his employees, and it is a pity that the "good man" who had been in charge of Lida's management since 1993 could not realize his dream of business expansion.

It was estimated that the factory, which had been producing toys to Mattel for more than 10 years without any bad records, would suffer a 30 million yuan loss.

"We had been trusting our subcontractors and failed to conduct tests on paint materials," said Xie.

Initial investigation showed that Zhongxin factory, based in Dongguan city, Guangdong, had fabricated a safe-quality license for color powders - the key component for producing paint - that contained excessive lead. Chinese police have detained four suspects who are alleged to have supplied substandard paint to Lida.

"The four suspects can expect criminal sentences," Li Changjiang, director of the General Administration of Quality Supervision, Inspection and Quarantine, said in a meeting last Friday with Debrowski.

Li said more than 300 domestic toymakers have had their business licenses suspended or revoked in a national quality overhaul.

Debrowski apologized to Li and the Chinese people for the inconvenience Mattel had caused.

A press release from Mattel said a total of 17.4 million toys were recalled because of loose magnets and those recalled because of impermissible levels of lead numbered 2.2 million. Mattel's annual toy output stands at nearly 800 million.

"Mattel does not require Chinese manufacturers to be responsible for the magnet-related recalls due to design problems," it said, adding that the company improved the design in January to prevent the magnets from falling off.

It also admitted that Mattel's lead-related recalls were "overly inclusive", as the company was "committed to applying the highest standards of safety for its products".

Mattel said it understood how the recalls had damaged the reputations of Chinese manufacturers.

"We take responsibility for the toys we made," said Xie, while expressing regret that Mattel's latest apology could not help Lida get out of its predicament.

About 70% of toys in Guangdong are made for overseas clients according to their design and requirements, said Zhang Xiaolue, an official with the Guangdong Provincial Administration of Quality Supervision, Inspection and Quarantine.

Guo Zhuocai, vice chairman with the China Toy Association (CTA), said: "Both sides should shoulder the responsibility of supervising the whole process of production, including material quality."

Xie blamed foreign media for playing up the quality issue, something that placed Lida in a hopeless situation. "Mattel revealed the name of our company to the public under great pressure from the media, which made us the target of the event," said Xie.

The recall of substandard products is not unusual in the US market, as the US Consumer Product Safety Commission announced some 30 recalls in July, said Li Zhuoming, vice chairman of Guangdong Provincial Toy Association.

The media loudly publicized recalled Chinese goods, but paid less attention to some non-Chinese products that even caused injuries, Li claimed.

A senior official with the European retail giant Carrefour on Tuesday called on foreign media to stop exaggerating quality problems of Chinese products, while also saying that such reports would not affect Carrefour's products in China.

Jean-Luc Chereau, adviser to the chairman of the management board of the Carrefour Group and president of the Carrefour (China) Foundation for Food Safety, told a symposium held in southwestern China's Sichuan province that more than 95% of goods sold in Carrefour's Chinese outlets come from local suppliers, and 99% of them are up to safety and quality standards.

"When a case of substandard products occurred in China, media coverage on the case often led to an impression that all Chinese products had problems, which could not reflect the whole situation and should be contained," said Chereau.

He said he is happy to see the Chinese government's awareness of the significance of quality control and the efforts it has made. "China has already improved the quality of its products by a great deal," said Chereau.

China is the world's largest toy manufacturer, exporting 22 billion toys last year, about 60% of the world's total.

China has been paying great attention to safety and quality of toy products, according to officials with the CTA and the China Chamber of Commerce for Imports and Exports of Light Industrial Products and Arts-Crafts.

The two organizations have pledged to strengthen the quality inspection of Chinese goods and called on foreign toymakers and importers also to improve their self-supervision.

Source: Asia Pulse/Xinhua