SHENZHEN, China: Inside Mattels sprawling test lab here, scores of technicians are doing their worst: setting Chicken Dance Elmo dolls on fire, wrecking Hot Wheels cars and yanking at the limbs of Dora the Explorer. The lab workers are paid to break toys, pick apart their innards, and analyze the raw materials that go into them.
The goal is to protect young children from the serious harm that poor construction or dangerous components can bring. But it is also to protect Mattel, the worlds biggest toy maker, from what is increasingly viewed as the risk of doing business in China.
The recent wave of recalls and warnings from China has ignited worldwide concern about the safety of Chinese products, potentially mucking up a global system built, in large part, on outsourced manufacturing. As a result, companies are trying urgently to figure out how to do business here, without risking their reputation, consumer trust, or customers lives.
Mattel may have some of the answers. In the 1990s, critics charged the company with running sweatshops in Asia. Now, independent analysts, and even watchdog groups, say Mattel may be the best role model for how to operate prudently in China.
“Mattel realized very early that they were always going to be in the crosshairs of sensitivities about child labor and product safety, and they knew they had to really play it straight,” said M. Eric Johnson, a management professor at the Tuck School of Business at Dartmouth, who has visited numerous factories in China, including some of Mattels. “Mattel was in China before China was cool, and they learned to do business there in a good way. They understood the importance of protecting their brand, and they invested.”
Mattel, and many of the outside analysts, say the key is command and control. Unlike many other companies, Mattel, which makes about 65 percent of its toys here, actually owns the plants that produce its most popular wares. About 50 percent of Mattels toy revenue comes from core products made in these company-run plants, a high proportion in the industry Д and a more costly method than using the lowest-bidding local manufacturer.
Its workers check toys for safety on site and in facilities like the one here in Shenzhen. An independent auditor inspects factories and posts reports on the Internet.
The company demands that the outside manufacturers it does use comply with its safety guidelines. And when supplies or raw materials arrive at one of its five Chinese factories, they are analyzed and tested.
“We are not perfect; we have holes,” said Jim Walter, a senior vice president at Mattel. “But were doing more than anyone else.”
Mattels presence in Asia predates the global outsourcing wave by decades. “The foot-stamp on the original Barbie says Made in Japan, ” said Jules Andres, a spokeswoman for Mattel. “That was 1959.”
Initially, overseas production was handled largely by outside vendors. But in the 1980s executives became concerned that outsourcing toy-making put trademarks at risk: the market could be flooded with imitation Barbies. Executives also thought they could handle manufacturing more efficiently themselves by building large factories.
Mattel aggressively expanded the number of plants it owned in Asia. Noncore products, like trinkets made under movie-licensing deals, could be outsourced. But Barbie dolls and Hot Wheels, among others, would be kept in tightly controlled factories.
For all its efforts to assume direct control, Mattel was surprised when, at the height of the holiday shopping season in 1996, NBCs “Dateline” program sneaked cameras into Mattels Indonesian factory and alleged that the company had hired underage workers and overworked them. U.S. News and World Report ran a cover story the same month with the headline “Sweatshop Christmas.”
A Mattel spokeswoman said that many of the charges against its factories were unfounded, and that the toy maker was already committed to decent workplace conditions.
Still, in 1997, Mattel took a significant step to improve its image and working conditions. The company hired S. Prakash Sethi, a professor at Baruch College, part of the City University of New York, who had an international reputation as a critic of worker mistreatment.
Sethi would make unannounced visits to Mattels factories and vendors plants. He insisted that he would only monitor Mattel if the toy maker let him post his reports publicly and uncensored.
Mattel agreed.
Ten years later, Sethi says Mattel, unlike most companies operating abroad, still gives him 100 percent independence in his reports, which are often critical. “Mattel is the gold standard,” he said.
Today, industry analysts tend to mention Mattels commitment to worker conditions in the same breath as its commitment to product safety.
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