Toy exporters to Mexico may have a tough 1995, but firms that manufacture there could benefit from lower costs induced by the peso devaluation. ``[The devaluation] cuts two ways,'' said David Miller, president of Toy Manufacturers of America in New York. ``It obviously will be a damper for importers of toys into Mexico, but those which export [from Mexico] will be more competitive.''
Miller said firms that import raw materials and pay for them in pesos also will be hurt.
``The retail market is very bad overall,'' said Leslie Mapes, spokeswoman for the Hudson, Ohio-based Little Tikes division of Rubbermaid Inc.
``[Before devaluation] about 80 percent of Mexico's toys were bought outside the country,'' Mapes said in a telephone interview. ``Now they are primarily sourced locally.''
Little Tikes does not manufacture in Mexico. It supplies rotationally molded and injection molded toys from its plants in California and Ohio.
The total Mexican toy market is down significantly, Mapes said. She and other industry representatives interviewed could provide no estimate of the size of the industry.
Glenn Bozarth, a Mattel Inc. spokesman, said the peso devaluation late last year ``came at the worst possible time for us.''
Mattel took a $20 million charge in the fourth quarter of 1994 because of currency transaction losses for Mexico, he said. Mattel's receivables and inventory for Mexico were denominated in U.S. dollars. The firm is trying to reduce its risk on currency transactions this year, and Bozarth said he does not expect any further one-time charges against earnings.
Bozarth said Mattel has more than half of Mexico's toy market and supplies it by imports ratherthan production from its three export-oriented plants south of the border. Its two plants in Tijuana and one in Monterrey import raw materials but benefit from lower labor costs after the devaluation, he said.
In Monterrey, Mattel is nearly doubling the size of its Montoi SA de CV facility in an expansion scheduled to be completed this month. It is moving production to Monterrey from Fisher-Price Inc. plants it is closing, Bozarth said. Mattel acquired Fisher-Price in December 1993.
The Monterrey plant employs 1,000 and molds and assembles about 150,000 toys per week. Bozarth declined to discuss Mattel's investment in the Monterrey expansion or how much molding capacity the company is adding.
Toy markets usually are resilient to economic conditions, ``but here we have a severe disruption of the economy,'' said Paul Valentine, Standard & Poor Inc. analyst.
``Optimistic forecasts came to an abrupt halt after the devaluation of the peso,'' Valentine said.
Bozarth said Mexico was Mattel's fastest-growing market before the peso crash.
``It was one of our five top countries in sales, but not after the devaluation,'' he said.
Mexican custom processor Polienvases SA de CV also has seen toy-related business drop. Its president, Ismael Gomez, believes a gradual recovery could take until 1996 because of the weakness of the peso.
``The dollar is very expensive and it will be expensive for a while,'' Gomez said in an April 20 interview at his plant in Monterrey.
His firm's domestic business isdown about 30 percent this year.
He said Mexico opened its toy market to foreign manufacturers about five years ago and they quickly grabbed a large share of the business. Polienvases-with 15 presses, two blow molding machines and thermoforming capacity-began looking for custom work to keep busy.
Pl sticos Latapi molded flexible vinyl toys for the domestic market on its only injection press in Saltillo until mid-December, when customers stopped buying. Owner Carlos Latapi said April 21 that the firm recently received its first two toy orders since then.
Lego Systems Inc. is taking a long-term approach in the recent start-up of a Mexican sales subsidiary, Lego Mexico SA de CV in Mexico City. Spokesman David Lafrennie said the Enfield, Conn., firm is banking on the country's sales potential.
Lego's Enfield plant will supply Mexico, taking over that role from parent Lego Group's European plants. Local distributor Corex SA de CV of Mexico City will help with warehousing for a year. Lego Systems President Peter Eio said his company wants to establish a closer relationship with Mexico's market, but Lafrennie said Lego has no plans to manufacture there.