VZCZCXRO3073
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0887/01 2190722
ZNR UUUUU ZZH
R 070722Z AUG 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6349
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 000887 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: WTRO ECON PGOV CH
SUBJECT: MATTEL IN CHINA: THE GOLD STANDARD IN TOY MANUFACTURE 
ENCOUNTERS A PROTOCOL BREAKDOWN 
 
(U) THIS DOCUMENT IS SENSITIVE BUT UNCLASSIFIED.  IT SHOULD NOT BE 
DISSEMINATED OUTSIDE U.S. GOVERNMENT CHANNELS OR IN ANY PUBLIC FORUM 
WITHOUT THE WRITTEN CONCURRENCE OF THE ORIGINATOR.  IT SHOULD NOT BE 
POSTED ON THE INTERNET. 
 
¶1.  (SBU) Summary: Mattel officials at the company's Dongguan 
factory - about an hour south of Guangzhou - told Ambassador Alan 
Holmer, the Special Envoy to China for the Strategic Economic 
Dialogue, that a new vendor used fake testing certificates to 
surreptitiously introduce lead paint into the production line of 
Fisher Price toys had had been recalled from a different Mattel 
plant.  The Chinese government, in the view of these managers, is 
simply not strong enough to prevent people from cutting corners to 
save money; the government needs independent institutes rather than 
local labs to perform the tests.  The government is often tempted to 
collude with dishonest merchants, sometimes for money, or just as 
often to make sure that firms can continue to operate to save jobs. 
 Senior leadership understands that "Made in China" as a brand has 
been harmed, but local leaders remain less willing to sacrifice the 
short term gain realized by dishonest practices.  End summary. 
 
Quality Assurance and Safety Protocols Failed 
--------------------------------------------- 
 
¶2.  (SBU) What happens when you play by the rules, have a rigorous 
quality assurance system, and constantly evaluate your test 
protocols to ensure product integrity?  Well, according to Mattel 
Asia Pacific Sourcing Senior Vice President David F. Lewis, you end 
up like Mattel, i.e., forced to recall nearly a million Fisher Price 
toys.  In his August 3rd meeting at Mattel's factory plant in 
Dongguan with Special Envoy to China for the Strategic Economic 
Dialogue Alan Holmer, Lewis was candid about the circumstances 
surrounding the product safety snafu.  In response to Ambassador 
Holmer's questions about the recent incident, Lewis answered that 
the usual Mattel contractor for the toys made in the Guangyao plant 
(north of Guangzhou) had changed paint vendors.  The new vendor gave 
the contractor a fake certificate documenting that the paint had 
been tested - and passed - by an approved laboratory.  For this 
particular contractor, the bait-and-switch was a real eye opener; it 
had had a one hundred percent Quality Assurance (QA) up to this 
point.  Although the actual date that the paint was used on the toys 
was April 19, the problem was only discovered six weeks later when a 
French retail customer requested a test of a toy at a Hong Kong 
laboratory.  Lewis said that as soon as Mattel learned of the 
problem, it stopped shipment of the Fisher Price toys, notified the 
Consumer Product Safety Commission, and spent the week before the 
announcement quietly informing its retailers of the affected toys' 
Stock Keep Unit number.  (An SKU number is an identifier that allows 
merchants to systematically track products and services offered to 
customers.)  The stoppage of shipment meant that only 600 
twenty-foot containers out of the normal 900/week were shipped at 
the time. 
 
¶3.  (SBU) At this point, Mattel's investigation is ongoing, Lewis 
said.  It is not clear whether the contractor will be penalized. 
However, the vendor that supplied the fake certificate has shut down 
his business, cleared out his factory and disappeared.  This is not 
an uncommon phenomenon and whether the vendor will be found and held 
accountable is problematic.  Lewis seemed somewhat bemused when the 
Shenzhen Customs officials breathed a sigh of relief that the 
dishonest vendor was not in their territory; in other words, it was 
now someone else's problem.  What Mattel needs to do now, Lewis 
said, is review its QA system and ensure that this does not happen 
again.  Ironically, the recall occurred just one week after a very 
favorable July 26 article in the New York Times hailing Mattel as 
the "gold standard" for the toy industry in China. 
 
Chinese Government Unable to Exercise Testing Control 
--------------------------------------------- -------- 
 
¶4.  (SBU) The crux of the issue, Lewis went on, is that the Chinese 
government simply is not strong enough to prevent people from 
cutting corners to save money.  What the government needs is 
independent testing institutes rather than local labs which might be 
tempted to collude with dishonest merchants.  Indeed, all too often, 
officials look the other way for money or to ensure that firms stay 
in business and local jobs remain.   While senior leadership 
understands that "Made in China" as a brand has been harmed, it's 
the local leaders that remain recalcitrant about enforcing 
standards. The short term gain realized by dishonest practices is 
just too enticing. 
 
¶5.  (SBU) For a company with $5.6 billion sales worldwide - and with 
70 percent of those sales based on products made in China - Mattel 
recognizes that it has to be proactive in cleaning house.  As a 
result it is looking to make common cause with the International 
Council of Toy Industries to develop standards to be used 
industry-wide. 
 
 
GUANGZHOU 00000887  002 OF 002 
 
 
¶6.  (U) This cable has been cleared by Ambassador Holmer's party.