Charles Woo, chief executive of Los Angeles toy maker Megatoys Inc., is certain his products don't contain lead paint, but he is ready for a consumer backlash nonetheless.
Since Mattel Inc. announced a string of recalls over concerns about the lead content of the paint used in some Chinese-made toys and possible dangers posed by small magnets in dolls and other products, local toy companies are feeling the heat.
With a "Made in China" label affixed to about 80 percent of toys sold in the United States, the companies are ramping up testing procedures and doing what they can to assure consumers their products are safe.
"We felt pretty good about our (safety) system but I think every responsible toy manufacturer has started looking at themselves and asking, 'Could it happen to us?'" said Woo, whose company makes an assortment of toys, ranging from small cars to dolls to water pistols.
"Eliminating lead from paint is not rocket science but the fact that we can repair the problem does not make the consumer feel any safer," he said.
The fallout from this controversy could hit L.A. particularly hard. The area is home not only to El Segundo-based Mattel and Megatoys, but also MGA Entertainment Inc., maker of the popular Bratz dolls, and Jakks Pacific Inc., which makes an assortment of licensed toy products, including World Wrestling Entertainment action figures.
Moreover, the downtown Toy District has about 300 smaller toy importers and wholesalers the vast majority of which are operated by Asian immigrants who hawk cheap wares on thin margins.
Estela Lopez, executive director of Los Angeles' Central City East Association, said a possible backlash against Chinese-made toys would be damaging to the Toy District as it gears up for what is normally the busiest time of the year.
"It couldn't come at a worse time. From September, October and on is when the Toy District downtown really begins to prepare for the upcoming holiday season," she said. "(The district) is certainly an economic engine for that industry in Southern California."
Indeed, it's unclear whether the small companies in the Toy District have the wherewithal to ensure that their products are lead free.
Mattel plans to spend millions on its stepped up safety program, with Chief Executive Robert Eckert announcing a three-pronged strategy to restore consumer confidence. The plan involves testing paint shipped to the plants, testing products after their manufacture and random inspections of the plants.
MGA, a highly profitable manufacturer in Van Nuys, issued a statement last week saying it does extensive testing to ensure that its products meet all government standards.
"The health and well-being of our customers is of the utmost importance to us," the company said. "Although MGA's products have tested safe for lead and other heavy metals, MGA has re-tested many of its products since the recalls were first announced two weeks ago to verify."
The companies are not the only ones focused on testing and inspection. Since the recalls were first announced, Sen. Charles Schumer, D-N.Y., called for the creation of an import czar who would have authority over the inspection of goods imported to the United States. Meanwhile, Sens. Barack Obama, D-Ill., and Christopher Dodd, D-Conn., have each expressed public concern over the safety of goods coming from China.
Also, the federal Consumer Product Safety Commission is meeting with government leaders and the toy industry to develop new testing procedures.
The Mattel recalls were hardly the first related to lead paint or magnets. In the past two years there have been 24 lead paint- or magnet-related toy recalls in the U.S. In May, Small World Toys, a subsidiary of Culver City-based Small World Kids Inc., recalled nearly 9,000 toy townhouses that contained potentially dangerous magnets. The company recently filed for bankruptcy reorganization for what it said were unrelated reasons.
At least now, the focus has been on new testing procedures with little discussion of moving manufacturing out of China. Not only does the Asian country have a huge infrastructure base that supports toy manufacturing, but it's unclear whether any other low-cost foreign country would be any safer.
But Paul Bingham, an economist who studies trade issues for Waltham, Mass.-based Global Insight Inc., said if consumers make a concerted effort to avoid Chinese-made products, it could force the toy industry's hand.
"There is a very real perception issue," he said. "The marketers in the U.S. will react to any changes in consumer tastes and if the U.S. consumers are spooked enough that they start to look for a country-of-origin label, then you may see some shifts."
Thus far, though, the toy industry has been weathering the storm fairly well. Since the first recall was announced, Mattel's stock has dropped just 4 percent to $22.55 for the week ended Aug. 15, while Malibu-based Jakks Pacific has fallen 8 percent to $22.09, although the overall market has fallen during that time.
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