Molly Maldonado

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Molly Maldonado Meredith Owen Veronica Sepe
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Background

• Started in 1945, Mattel has grown to become the
  worlds largest toy company.
• Mattel is responsible for many of todays most
  popular toy brands ex. Barbie, Tickle Me Elmo,
  and Hotwheels.
• 2006 sales exceeded 5 billion
• All of Mattels toy manufacturing is done through
  outsourcing, mainly in China, Mexico, Indonesia,
  and Thailand.

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Recent History

• 1997 - Trouble overseas
• 1997 - Mattel Introduces its Global
  Manufacturing Principles
• 1998 - Mattel purchases Pleasant Company
• 1999 - Merger with Learning Co.
• 2000 - Mattel Stock falls to 10 per share
• 2000 - Mattel Partners with Harry Potter
• 2000 - Robert Eckert steps in as CEO

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Recent History

• 2000 - Mattel adopts a new direction
• 2004 - Code of Conduct
• 2006 - International Business grows to contribute
  more than 40 of gross sales
• 2007 - Mattel releases its 2007 Global Citizens
  Report
• 2007 - Mattel named one of CRO Magazines
• 100 Best Corporate Citizens

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Code of Conduct Play!

• Play with Passion
• Play Together
• Play Fair
• Play to Grow

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2007 CrisisLead Paint Recalls
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Crisis Timeline

• Early July, one of the European retailers that
  sells Mattel toys found lead on some products
• August 2nd, recall of 967,000 US Fischer Price
  Toys announced (1.5 mil worldwide) from 83
  different products all together
• August 7th, Mattel identifies the factory at the
  center of the scandal, Lee Der Industrial
• August 13th, head of the factory commits suicide

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Crisis Timeline

• August 14th, second recall of 19 million toys
  worldwide, either with excessive amounts of lead
  or small magnetic pieces that were easily
  dislodged
• - 18.2 million toys, coming from 63 different
  toys, with magnetic parts that broke off,
  resulting in one death
• - 436,000 recalled because of lead paint,
  including Sarge character car from Cars movie,
  no deaths

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Crisis Timeline

• Sep 4th, recalls 850,000 toys because they
  contain dangerous levels of lead paint
• Sep 21st, Thomas Debroski, Mattel vice-president
  for world wide operations apologizes to Chinese
  govt for blaming Chinese suppliers for
  substandard products
• Oct 15th, Mattel announced a one percent drop in
  fiscal third-quarter profit, result of recalls
• Oct 25th Go Diego Go Animal Rescue Boat lead
  paint violation recall

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Key Players

• Robert Eckert
• Chairman and CEO of Mattel Inc.
• Thomas Debrowski
• Vice President of Worldwide Operations of Mattel
  Inc.
• Lisa Bongiovanni
• Vice President of Corporate Communication for
  Mattel Inc.
• Nancy Nord
• Head of the Consumer Product Safety Commission
• Li Changjiang
• Product Safety Chief for Chinese Government
• Zhang Shuhong
• former owner of Lee Der

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Key Publics

• Customers
• includes Walmart, Target, and Toys R Us as
  well as Parents
• Shareholders
• Employees
• Licensed Clients
• Disney, Sesame Street, Harry Potter, Nickelodeon
• US Government
• CSPC
• Chinese Government
• NGOs
• Toxicplayroom.org, Moms R rising
• Media

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• Like many of you, I am a parent. I, like you,
  care deeply about the safety of children. And I,
  like you, am deeply disturbed and disappointed by
  recent event. As to lead paint on our products,
  our systems were circumvented, and our standards
  were violated. We were let down, and so we let
  you down. On behalf of Mattel and its nearly
  30,000 employees, I apologize sincerelyWe are
  doing everything we can to keep this from
  happening again.
• -Robert Eckert

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Crisis Plan and Communication

• Mattel has had 28 product recalls in the last
  seven years
• Lisa Marie Bongiovanni, VP of corporate
  communications at Mattel called the recall one of
  the largest communications challenges shes
  experiences at her seven years at Mattel
• the first priority of their crisis
  communication was to communicate with as many
  parents as possible and as quickly as possible

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Crisis Plan and Press Conference

• 100 page crisis plan, which it turned to five
  days before the recall
• Immediately after the recall was announced a 16
  person public relations staff for Mattel was
  prepared to handle the news media
• morning after the recalls were announced, the
  press conference was immediately made available
  on Mattels website
• crisis communications team communicated via
• e-mail with reporters who needed clarifications

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Crisis Communication and Action

• On the second day of the recall Mattel announced
  a three-point-plan
• 1. increase the amount of control the company has
  over production
• 2. increase control over the unauthorized use of
  subcontractors
• 3. testing of products by Mattel themselves,
  including every batch of paint
• As of August 28th, Mattel had fired four
  subcontractors and still evaluating more

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Corporate Responsibility Division

• Formalized after crisis
• 500 employees worldwide
• Headed by Geoff Massingberd
• Announced the formation of Product Integrity
  Policy and Audit

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Rebuilding Reputation

• Mattel began running television ads featuring
  Eckerts vow to do better
• Emphasized how less dependent Mattel is on
  outsourcing compared to other toy manufacturers
• Bought ad space in major newspapers across the
  country and published a personal letter to
  parents from Eckert

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Crisis Communication and the Web

• Webcasts, crisis response websites and search
  marketing
• Dark site, one that is used to establish a line
  of communication with externals during a crisis
• contained a webcast that featured chief executive
  Robert Eckert apologizing for the recall
• another webcast outlined the testing procedures
  the company was currently doing on their products
• step-by-step online process for consumers to use
  to learn more about the recalls and receive
  compensation for recalled products

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CSPC

• CSPC mandates that companies must report any
  incident that could expose a hazard within
  twenty-four hours
• the company has been penalized twice for not
  passing reports of safety defects in accordance
  to this statute
• Mattel denied any wrongdoing in both cases
• Mattel feels they should be able to evaluate
  hazards internally first

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China

• Mattel executive Thomas A. Debrowski publicly
  apologized to Chinas top product safety official
• Mattel said the apology was simply repeating what
  the company had already said in Europe and the
  United States
• Chinese press interpreted Debrowskis apology as
  a personal apology for flaws committed by Mattel

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U.S. Congress

• Septmeber 20th, the House Energy and Commerce
  Consumer Production subcommittee held a two-day
  hearing on tainted toys
• accused Mattel of negligence for failing to
  detect a recent flood of lead paint
• In his testimony, Eckert defended Mattel by
  insisting that the company had been testing toys
  to ensure safety

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International Issues

• needed to communicate internationally because of
  the scope of their market
• spoke to BBC and other global news outlets and
  had staffers taking international media and
  consumer inquires around the clock

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Legal Issues

• October 7th the Michigan pension fund filed a
  shareholder lawsuit
• accused Mattel of misleading investors by
  delaying reporting of defects in its toy
• also accused three current members and one former
  member of Mattels board of directors of engaging
  in illegal insider trading
• Guangdongs fair trade bureau is considering
  helping affected manufacturers sue Mattel

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Financial Repercussions

• Financial analysts expect Mattel to make a full
  comeback.
• Wedbush Morgan Securities analyst Sean McGowan
  said he expected the recall-related disruptions
  to be limited to 2007, with the company showing
  strong sales and earnings growth next year
• From 10 per share in 2001 to 20 per share today
• 4th Quarter reports remain to be seen, but
  barring future crises, many expect Mattels
  financial crisis to blow over within a year.

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Financial Repercussions

• Mattel estimates that recalls resulted in a
  charge of about 40 million during the quarter
  and disrupted its supply chain
• Costs to Mattels reputation and loss of
  consumers and stockholders.
• Crisis fallout remains to be seen - legal issues
  could possibly affect the profit and reputation
  of Mattel in future fiscal years.