Lee Der Industrial Co. Ltd. is closing three factories in China and laying off 5,000 workers, following the disclosure that the company was responsible for 1.5 million Fisher-Price plastic toys whose paint contained lead. The company's Hong Kong-based co-owner, Zhang Shuhong committed suicide Aug. 11, in the wake of the news.
But the closings do not put an end to the toy safety crisis for Fisher-Price or its parent company, El Segundo, Calif.-based Mattel Inc. The world's largest toy maker announced Aug. 14 a worldwide recall of 18.2 million toys with magnets that could come loose and be swallowed by children, as an expansion of a November 2006 recall. The company also issued a new global recall of 436,000 die-cast cars with components coated with lead paint.
``If more than one magnet is swallowed, the magnets can attract each other and cause intestinal perforation or blockage, which can be fatal,'' the U.S. Consumer Product Safety Commission said.
The 18.2 million magnetic play sets are all made of plastic, Mattel spokeswoman Michele Sturdivant said in an Aug. 15 telephone interview.
While the news was reported widely as yet another problem with Chinese-made products, the magnet-related recall is not a problem with the manufacturer's quality control.
Mattel Chairman and Chief Executive Officer Robert A. Eckert said in an Aug. 14 news conference call: ``This is really not a manufacturing issue. Primarily it is a design issue.''
Jim Walter, senior vice president of worldwide quality assurance, said Mattel met with ``each and every vendor in China'' the week of Aug. 6, making sure they understand their quality requirements, obligations and rules.
It is unclear whether Zhang Shuhong a Hong Kong resident in his 50s, had met with the Mattel team led by Eckert during the week before he killed himself.
Lee Der is headquartered in Hong Kong and has three toy factories in the city of Foshan.
Lee Der is one of Mattel's ``dozens of vendors'' in China, Eckert said. He also said half of Mattel's products from China are made by vendors and half by the company's own plants in Guangdong Province.
About 65 percent of the toys Mattel sells worldwide are made in China.
Lee Der stopped production in late May, when an excessive amount of lead was found in paint on its exports, according to Chinese newspapers. The factories have been paralyzed ever since, but Zhang still paid the 5,000 workers. Before he hanged himself in the warehouse of the firm's Shuaimeng factory in Foshan, he visited all three factories, chatted with workers and checked with payroll to make sure all employees received paychecks, Hong Kong newspaper Wenweipo reported.
Some of Zhang's employees and industry friends pointed out that Zhang was under financial pressure. Lee Der had difficulty gathering funds immediately for the more than $30 million required for the recall and penalties.
Lee Der is an exclusive exporter, with no domestic business. After the Chinese government revoked its export license, the business foundered.
The hazardous paint, which had been labeled lead-free, came from Dongxing New Energy, a company next door to the Shuaimeng factory.
It is not clear whether the lead paint involved in the die-cast car toys is also from Dongxing, as Mattel only stated the paint was from a nonauthorized third-party supplier.
In an Aug. 14 telephone interview, an unidentified Lee Der worker said the entire company is in mourning over the owner's death.
``All the media coverage gave [Zhang] too much pressure,'' he said.
Mattel did not identify the maker of the 18.2 million plastic toys with magnets. It said in the news conference call that the company is constantly reviewing optimal places to make products.