Outsourcing at Mattel: Elmo Sad… Elmo Covered in Led Paint
Outsourcing at Mattel: Elmo Sad… Elmo Covered in Led Paint
Mattel has a long standing relationship with Chinese manufactures. Nearly 65% of their
products are produced in China and where half of their revenue is gained. In 1980s Mattel took
ownership of factories in China because they worried about imitation being produced. During the
1990s the media exposed Mattel for having sweatshops conditions in Indonesia. I n August 2007,
they recalled 967,000 toys because of high levels of lead in the paint, which included 83 different
toys and costing them 30 million dollars. The third party vendor they used in China did their own
inspections for 15 years. Mattel was unaware of the lead products until a French retailer brought
it to its attention July 2007. Alternatively, they stopped production and notified Consumer
Product Safety Commission (CPSC). It had 17 recalls in the past 10 years. The owner of the
Chinese manufacture of tainted toys committed suicide in August of that year. Also in August
they had a second recall of 436,000 toys with dangerous levels of lead. In September 2007, there
was a third recall because another 775,000 toys were tainted with very high levels of lead paint
on Barbie’s accessories and eliminated several subcontractors in China.
The manufacturers in China added lead paint because it dries quicker, costless, small amounts
can cover large areas; it’s highly water resistant and produces vivid colors. Lead paint is widely
used industrial paint in China, so it is easily available. Robert Eckert CEO offered an apology to
congress on September 12, 2007for allowing lead painted toys into the country. Congress
suggested increasing fines for company’s who brought tainted merchandise into the United
States. Over a week later he also offered an apology to China to maintain in fear of losing the
countries as a manufacturing base. In September 2007, Disney and Toys” R” US claimed that
they would do their own inspections on Mattel’s toys to meet government standards. The first of
Outsourcing at Mattel: Elmo Sad… Elmo Covered in Led Paint
multiple legal problems was Michigan Pension Fund files a lawsuit in October 2007, saying the
Mattel knew about the threat weeks before they disclosed the problem and claimed a breach in
fiduciary duty. By December 2008 Mattel settled in 39 states and paid a total of $12 million.
Mattel also agreed to pay civil penalties in 2009 to the CPSC for their violations in the amount of
$2.3 million. It cost Mattel in all $50 million in settlements involving 22 lawsuits, including to
shareholders, consumers and stakeholders.
The stakeholders in the case were the shareholders, suppliers, customers, retailers, employees,
the government of China and the United States and let us not forget the children who ask their
parents to purchase these products based on the multimillion dollar mass advertisement of these
toys. The most important stake holders were the customers, who were children. Many children
