With the latest recall of millions of unsafe toys by the world’s biggest toy company, Mattel, a stark truth has come home to roost for the $60-billion global toy industry: you cannot have dirt-cheap production thousands of kilometres away from home in China without incurring huge risk.
It is a truth that could cost the industry dearly, not just in immediate costs — possibly as much as $100-million for Mattel — but in the extra steps it must now take to protect its products in future and in the hammering to its reputation. The upside is that the recall, combined with the suicide of one factory owner whose export licence was revoked, will hopefully alert Western consumers to the conditions endured by the millions of young migrant girls who actually make 80% of the world’s toys. Their treatment, often abysmal, is part and parcel of the same system that has resulted in the unsafe toys.
The recall of 18,6-million toys worldwide, 436Â 000 of them for containing impermissible levels of toxic lead paint, is damaging in itself. But it was the company’s second in as many weeks — the first involved nearly one million playthings from its Fisher-Price range. These were only the latest in a series of scares: RC2 Corp recalled 1,5-million Chinese-made Thomas and Friends wooden railway toys because of possible lead paint dangers. Hasbro, the world’s second-largest toy company, had to call back one million Easy Bake Ovens that caused burns; in one case a child had part of a finger amputated.
The United States Consumer Product Safety Commission issued a recall for 3,8-million “Magnetix” sets consisting of tiny magnets. Swallowed, the magnets bonded in the stomach: children were seriously injured and one 20-month-old boy died when they locked on his small intestine, causing a blockage. In the European Union, toys are the most defective Chinese import. In both the US and Europe insiders predict further toy recalls.
A few smaller toy companies have quickly relabelled their products proclaiming the (rare) fact that they are made in the US or Europe. Isaac Larian, the man behind the multibillion-dollar Bratz dolls, has even talked of starting up some production in the US.
This is all marginal. The world toy industry basically is large US companies, mostly public with a constant eye on Wall Street, which design and market the toys, and the 8Â 000 Chinese factories that manufacture for them.
To visit the Pearl River Delta, north of Hong Kong, is to enter the toymaking centre of the world. Choking smog stings eyes and throats. Behind guarded gates, factory compounds stretch mile after dusty, depressing mile. On identical concrete boxes, only the washing hanging at chicken wire-covered windows shows these are dormitories.
The workers, mostly young women, shuffle from building to building. They could be on their way to school — if they did not appear so exhausted from working most of their waking hours. They have travelled in by bus from rural areas up to three days’ journey away. Shifts can last 15 hours a day or more, seven days a week — unlawful, but not uncommon in the peak toymaking season. Inside the fetid dormitories, often packed illegally with as many as 22 to a room, they collapse into curtained-off bunks. At lunch breaks, thousands of them in uniform, pour on to the streets.
Moving production to China has advantages for toy companies far beyond cheap and plentiful labour. It saves investment in plant and equipment; they can increase manufacturing capacity fast without having plants lying idle at quiet periods and push a key part of a high-risk business over to the suppliers. There is another somewhat perverse attraction: the communist regime ensures order and stability, while China’s tight control on the exchange value of its currency and organised labour force subsidises manufacturing costs. Occasionally, the industry threatens to move production to even cheaper countries, but it is a hollow threat — China has a unique ability to give the industry what it needs. The country has the right infrastructure — customs officers at Shenzhen handle 300 containers of imported raw materials for toys and another 40 containers of ready-made toys for export every day. Plastic moulds, parts and components are supplied by the textile, electrical and metal industries.
Factories may make products for competing brands. Because they churn out the product, their share of the total toy cake is infinitesimal. Of the $9,99 retail price of a Chinese-made Barbie doll, according to an investigation in 2000, only 35c went to the producers in China.
The toy industry is as hard as they come. With total sales barely growing and competition from new “toys” such as iPods and cellphones, the industry competes with increasingly aggressive marketing and vicious cost slashing.
Relentless economising breeds poor conditions and corner cutting. Many executives seem oblivious to the glaring incompatibility of what they demand from their suppliers — the lowest prices and production in large volume at very short notice and, at the same time, working conditions and practices that will not offend the West. It is these pressures that make the Chinese workers and suppliers’ lives stressful and even intolerable, as the suicide of factory owner Zhang Shuhong shows.
The squeeze has been getting tighter. One estimate is that in a recent three-year period, prices demanded by international toy companies ordering from China dropped by 30%. Factory managers complain of demands for faster turnarounds without extra pay, with the threat that if they don’t comply, there are always other factories.
The industry does send in teams to monitor conditions, but in a country that is nominally communist but in reality a heartland of unrestrained capitalism, such checks too often don’t work. Just as auditing of factories has developed, so too has anti-auditing — factories have become more proficient at hiding the truth.
Then there is sub-contracting. A factory may take an order, then lay some off to another plant. That factory may sub-contract further. In the latest Mattel case, the main supplier for Sarge cars sub-contracted to a company that used an unauthorised supplier it blames for the toxic paint. Often companies end up having no idea who actually made their product.
Many toy companies worry about sweatshop conditions only during periods of bad publicity. They persuade themselves that consumers quickly forget and carry on buying. Safety, they are finding, is a different proposition: no parent can live with the prospect (however remote) of his or her small child dying in agony from a swallowed magnet, suffering brain damage because of lead paint, losing a finger due to a faulty oven.
What can be done? There’s the apology/we-will-do-better approach. Mattel this week took out full-page ads in US newspapers. Chief executive Robert Eckert went on to the internet to apologise to parents, making a point of his own four children and insisting that “absolutely nothing is more important than the safety and wellbeing of our children”. (At the same time, the company was vigorously assuring Wall Street that new quality controls would not adversely affect holiday sales and, by inference, the share price.)
Whether there is a tipping point at which bad publicity resulting from safety fears makes it worth the companies’ while to ensure minimum standards, keeping closer tabs on their suppliers and easing the relentless pressure on costs, is moot. Evidence from other industries, from food to clothes, is rarely encouraging.
What is clear is that making an example of individuals, as happened in this case, absolves the system of which the toy industry is a part, shifting all blame to the factory and punishing the people who should not be punished — the workers. In China, it’s better to have a rotten job than no job at all. But Western consumers must begin to face reality. We cannot demand ultra-cheap toys and still enjoy clear consciences and guaranteed safety. To think we can is as naive as believing in Father Christmas. — Â