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CNBC Interview: Mattel CEO Describes 'Immediate Steps' in Toy Recall

CNBC
Thursday, 2 Aug 2007 | 6:12 PM ET

In a CNBC interview, Robert Eckert, chairman and chief executive of Mattel, said the company has taken "several immediate steps" to prevent any future incident like the recall of Chinese-made toys, yanked because of fears of lead-paint tainting.

Exclusive: Mattel Chmn. & CEO
Discussing the toy recall, with Robert Eckert, Mattel chmn. & CEO and CNBC's Maria Bartiromo

"We are now allowing plants to only use approved paint suppliers. We are in the product plants, testing the product before it is released. When a batch of toys, a production run, is made, we're testing the finished product before it is released from the factory," Eckert said.

The CEO added, "We have hundreds of people on the ground [now] in China, doing safety checks. We've been producing toys in China for many years. What's important here is not that something happened...but how we respond."

The recall, announced Wednesday, is expected to result in a charge of $30 million.

Of the 1 million products recalled from the U.S. market, Mattel said about 30% had reached store shelves.

The toys, manufactured for the company's Fisher-Price unit, were recalled because their paint may contain too much lead -- which is linked to health problems, including brain damage, in children.

"We've had no reports of any injury to consumers -- but it is important to us to get back that last one-third of toys that are in consumers' hands," Eckert said in the CNBC interview.

Eckert told CNBC of the tainted goods' source: "A third-party vendor plant used some paint that was from an unapproved supplier -- that paint contained lead," he said, noting that the supplier was in China.

(For recall information and product refund vouchers, go to: http://www.service.mattel.com.)

The products include such popular preschool characters as Dora the Explorer and Sesame Street's Elmo and Big Bird.

Independent toy industry consultant Christopher Byrne said the impact to Mattel financially as well as in the court of public opinion should be negligible.

"Mattel's systems are so strong that they were able to contain two-thirds of the product from ever getting into the marketplace," Byrne said. "That's good news and should make people very confident about Mattel."

But Mattel shares fell $2.03 to $21.55 before the bell. The shares have traded within a 52-week range of $29.71 and $17.54.

Mattel said in a filing with the U.S Securities and Exchange Commission that its second-quarter results would be adjusted to reflect the $30 million charge. The company's second-quarter revenue totaled $1.02 billion. Fisher-Price accounted for sales of $410.4 million.

Mattel said it was reviewing procedures with respect to all of its Chinese-made products, and said it was possible additional issues could surface in the future.

The recalled toys were manufactured between April 19 and July 6 and sold at stores across the U.S. between May and August 1, the company said.

Mattel is also expanding its testing programs to ensure that painted toys from third-party manufacturers are safe before being sent to customers.

The company is asking U.S. stores and consumers to return 967,000 plastic toys and is recalling another 533,000 from other countries, including Britain, Canada and Mexico.

The recall is Mattel's largest since a 1998 recall of about 10 million Power Wheels vehicles after reports that the ride-on cars and trucks could overheat and cause fires while being ridden.

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