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Mattel’s Response to the Crisis• As the holiday season is the most lucrative for toy companies, the third and

fourth quarters of each scal year usually bring in the most sales.6 !herefore,a fast and transparent corporate response "as imperative.

• Recall !imeline #une$%ovember &''(

Date Event

June 8 Mattel is first alerted to possible lead paint contamination.

June 9 The CPSC deadline for Mattel to report the problem.

June 10 CPSC deadline passes; Mattel fails to act.

July ! Mattel files full recall report "ith CPSC.

#u$ust Mattel %oluntarily recalls 1.& million 'isher(Price) toys that are supposedly coated in paint containin$

dan$erously hi$h le%els of lead.

#u$ust * Mattel identifies a Chinese factory as the source of the contamination scandal.

#u$ust 1+ Mattel %oluntarily recalls a further 1*.+ million products containin$ loose ma$nets easy for children to s"allo"

,Mattel Play Sets and -arbie) oll / Tanner.

September + Mattel %oluntarily recalls another 8&0000 toys due to lead paint contamination ,-arbie) #ccessory Sets 2t3s a

-i$ -i$ 4orld5 and 6eoTra75 n$ines.September 11 C :obert #. cert publishes an opinion statement in the Wall Street Journal .September 1 Mattel3s

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+. Ge then praised Mattel's new three-point check system "hich he claimed had been follo"ed by other toy

companies.

&. 'inally he reported that Mattel had had no further lead paint problems, claimin$ success for the ti$hter

inspection systems implemented after the #u$ust crisis.

• Mattel)s Response* +nternal Reorganiationo Mattel established a corporate responsibility division to report to -cert.

o -cert also announced a ne" Product Integrity Policy and Audit, /a

function that "ill combine an internal audit organiation and an independentaudit organiation to monitor Mattel and vendor facilities) compliance "ithMattel)s product integrity standards./

o  !he company also instituted a three-point safety check system*

1. Mattel "ill only use paint from certified suppliers. %ery sin$le batch of paint at e%ery

sin$le %endor "ill be tested. Paint that doesnIt pass "ill be discarded "ithout e7ception.

. Mattel "ill increase unannounced testin$ and inspections at e%ery sta$e of the

manufacturin$ process.

B. Mattel "ill test finished toys from e%er sin$le production run to ensure they meet accepted

lead le%els before bein$ shipped to stores

o Mattel plans to apply American standards of lead to0icity levels to -uropean

1nion countries, even if local -1 standards are not as high.

• 2hortcomings in Mattel’s Response

MattelIs successful responses do not completely deflect its errors.

'irstly the toymaer has on se%eral occasions failed to comply "ith CPSC reportin$

reFuirements. Thou$h Mattel "as alerted to the 'isher(Price) paint contamination on June 8 it did not

file a full report "ith the CPSC until July ! more than a month and a half later .

Secondly critics accuse the toymaer of e7pendin$ a disproportionate amount of effort on

 preser%in$ its reputation. 'or e7ample subseFuent reports re%ealed that Mattel misled publics to belie%e

its Chinese suppliers and manufacturers "ere responsible for both the lead paint and the ma$nets "hen

in fact the ma$net ha=ard "as an internal Mattel desi$n fla". This blame(shiftin$ bacfired as China

retaliated and on September 1 Mattel3s e7ecuti%e %ice president for "orld("ide operations admitted to

China3s product safety chief that the ma$net recall should not ha%e been associated "ith China; he also

apolo$i=ed to Chinese consumers.*! Critics claim such panderin$ to corporate interests e7poses e7cessi%e

in%estment in public relations and the bottom line.

A third area "here Mattel could improve is compensation. /Mattel is o3eringequivalent value coupons good for other Mattel products in e0change for recalledproducts. 4iven the inconvenience caused to consumers and the need to motivatethem to return the a3ected products, this o3er may not be su5cient,/(( says #ohnuelch, a senior associate dean at the 7arvard 8usiness 2chool.

• Competitors 9 increased transparency in their process

•

+nvestors 9 1nsurprisingly, the recalls shoo investor condence, as evidencedby the company’s gradually decreasing stoc price during the recall period. +naddition, a large pension fund led a shareholder)s suit against Mattel in:ctober &''(, alleging that the company)s board of directors and e0ecutivespurposely delayed announcements in order to sell as many faulty products aspossible and to articially increase stoc shares.

• ;atchdog $ After the recalls, several groups including the -cology Center and theCenter for 7ealth, -nvironment and #ustice tested percent contained lead, "hile only &' percent contained no lead.

 !racey -asthope, director of the -cology Center)s -nvironmental 7ealth ?ro@ect, saidthat lead levels in

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a3ected by the recalls said they "ould also avoid toys manufactured in Chinaduring the holiday season.

• 4overnment $ elevated the importance of product safety, stricter regulations for

toymaers.