This morning many of us read about Mattel apologizing to the Chinese, claiming that the recalls were primarily the company’s fault and not that of quality or process defects from outsourced operations. I’ll give Eric over at Grim Reader credit for being the first blogger I know of to comment on it, but the following is my take.
The apology is surprising.
As recently as this week, Mattel Chief Executive Robert Eckert told Congress that the company’s "standards were ignored, and our rules were broken" at Chinese plants. Mattel’s Mr. Eckert has at times focused heavily on the lead paint issue in his public statements. In an opinion piece he wrote for The Wall Street Journal earlier this month, he referred to "three voluntary recalls of products, due to impermissible levels of lead in paint" and said "lead paint is topmost on parents’ minds."
But Mattel has been outsourcing to China for longer than most companies; in fact they overtly claim to be one of the first to take advantage of that supposed great opportunity. They’ve become so embedded that their business is now influenced by significant non-operational issues.
It was an extraordinary attempt to placate Mattel’s most important supplier. Chinese officials have ratcheted up criticism recently of Mattel and U.S. regulators, believing they are putting too much blame on China in the recent recalls of toys and other Chinese-made products. Mattel’s apology is a reminder that U.S. companies dependent on business in China offend Beijing’s government at their peril.
Hey… now here’s an interest tidbit: in the print edition of today’s Wall Street Journal, the sentence above reads "… offend Beijing’s communist rulers at their peril." Hmmm… perhaps the WSJ is also trying to placate a major world power by changing the online version?
The reality is that most of the recalls were not due to the lead paint issues that have received so much press.
By the numbers, however, the vast majority of the recalled toys didn’t have a lead problem. The biggest recall, affecting 18 million toys, involved tiny magnets that can fall off toys and be deadly if swallowed. The recall of those toys, Mattel is now stressing, had nothing to do with a failure of Chinese manufacturing but rather stemmed from Mattel’s own flawed designs for everything from Barbie accessories to Batman action figures.
The data is correct, but whether the magnet issue is due to a design flaw is a question. However Mattel has decided to fall on the sword, which could have serious consequences.
While soothing China’s pride, the apology could make Mattel a target in lawsuits. "I can’t think of any other instance where" a major toy company "has actually come out with such a public announcement of a defect," said Andrew Krulwich, a former general counsel for the U.S. Consumer Product Safety Commission who now practices at Wiley Rein LLP. Mattel’s embrace of responsibility for the magnet issue could raise thorny legal issues.
And there you have it. Absorbing a slew of lawsuits driven by product defects that affect our most precious resource, kids, is less onerous than upsetting the "rulers" of the country where most of the products are manufactured.
What is the true total cost of offshore outsourcing again?