Tom Murdough, who built two of the largest producers of toys still made in the United States - Little Tikes Co. and Step2 Co. - said he supports a move by Democrats in Congress to tax Chinese-made goods.
Murdough made the comments in a Sept. 14 speech at Plastics News' Survival Boot Camp, which was geared toward helping companies operating in the United States.
Murdough, who retired earlier this year from Step2, also blamed big-box retailers for driving prices ``down to ridiculous levels,'' pressuring Chinese toy suppliers to cut corners. One result has made headlines, as Mattel Inc. has been forced to recall millions of toys made in China for using lead paint and other safety problems.
``This whole issue is not just the Chinese - it's the mass merchants who have put so much pressure, from a price standpoint, on the Chinese themselves and on their customers they're selling to, to get the prices down, get the prices down, get the prices down,'' he said.
In a deal announced in the spring of 2006, Murdough sold Step2 to New York private equity firm Liberty Partners LP. He has retired as president and chief executive officer and handed the top post over to Scott Levin.
After his speech at the Survival Boot Camp in Rosemont, Murdough said he was speaking for himself and not on behalf of the toy company, where he remains a member of the board of directors and a paid consultant.
Murdough said about 80-85 percent of toys sold in the United States come from China.
Some members of Congress are pushing for duties on goods from countries that manipulate their currency. Murdough said China's greatly undervalued yuan gives Chinese-made toys an unfair advantage in the U.S. market.
``I think the impact of the Democrats in Congress is going to put a hell of a lot of pressure on China, which is long overdue,'' he said. ``I happen to be a conservative, and a Republican, but I think the Bush administration - and the Clinton administration before that - really let this thing get out of hand. And hopefully the Democrats will put a tax on this stuff coming in here, as one of the ways to force China to get their currency value up on the basis of the world market.''
The lead paint issue has given China a black eye. Earlier this month, U.S. and Chinese regulators took steps to ban the use of lead paint in toys from China, a practice that has been outlawed in the United States for nearly 30 years.
Murdough said Step2 toys are 90 percent U.S.-made. The Streetsboro, Ohio-based company, the largest rotational molder in North America, also plans to launch print ads and a public relations campaign touting its commitment to U.S. manufacturing.
Step2 does import some small parts from China, such as play cookware for its kitchen sets, and the electronic devices that make sounds in the toys. The company also will come out with a line of small preschool products that will have Chinese content.
Step2 recently announced it will expand its labeling to include the country of origin of even small accessories in its toys.
Murdough founded two of the largest producers of American-made toys, both in Ohio: Step2 in Streetsboro and Little Tikes in nearby Hudson. Together, the firms employ more than 1,000.
He has 43 years of experience in consumer products. Murdough started out selling Wilson-brand golf balls, then transferred to Wonder Products Co., which rotomolded large, spring-mounted rocking horses. He helped Wonder get into custom molding, with a big order for bed pans.
In 1967, he joined with entrepreneur Jack Hill at Rotadyne Inc., an Aurora, Ohio, rotomolder. Murdough bought out the company and founded Little Tikes.
Tikes' sales were stuck at around $10 million in 1977, but all of the business was geared around Christmas. To round out the selling season, Tikes introduced an outdoor product, the Turtle Sandbox, the following year, and sales took off in the spring and summer.
``From the covered Turtle Sandbox, we went on to do slides, climbers, pools, riding toys, anything that you could play with in the backyard,'' Murdough said.
Little Tikes created a whole new category of rotomolded toys. ``Go with your own gut'' to solve problems, Murdough urged Boot Camp attendees.
In 1984, with sales at $50 million, Murdough sold Little Tikes to Rubbermaid Inc. He stayed on, as sales continued to shoot up, but he left in 1989 after disagreements with Rubbermaid management about how the toy business was being run.
Murdough said he didn't see eye to eye with Rubbermaid head Stanley Gault.
``Our philosophical differences had largely to do with how we dealt with the mass market,'' Murdough said. ``Stan Gault, who was the chairman at the time, thought, `Hey, we'll sell our products to everybody, let them price it, and let it fall out as it will.' The ultimate effect of that was disastrous for Rubbermaid.''
Consumer products giant Newell Co. bought Rubbermaid in 1999.
Murdough founded Step2 in 1991, first making home and garden products, then later rotomolded toys to compete head to head with Little Tikes. Even then, Murdough was not shy about criticizing the power of big retailers, which have consolidated into about five major players.
In his speech, he called mass retail, high resin prices and China the ``terrible triumvirate.''
``The leverage [retail giants] have is enormous. Trying to get a price increase is like pulling teeth,'' he said.
Step2's solution has been to stress innovation and new products, which he said account for 15-20 percent of its business each year. The company also strives to reduce material use, develop more ``knock-down'' products in smaller packages, and move into new categories, he said.
The company creates a family atmosphere in which employees are treated fairly, he said. Everybody is focused on building Step2 as a long-term brand.
Murdough called growing Internet sales ``a godsend'' that allow Step2 to sell its products direct to consumers, through retailer Web sites or Step2's own site. The Internet has become the company's second-largest revenue producer, with higher profit levels than its retail business, he said.
Step2 also can come out with some new products that it only sells through its own Web site.
The bad publicity about China and Mattel could end up helping all U.S. manufacturers, Murdough said.
``There's going to be a recognition on the part of the American consumer that `made in China' is undermining our country, in many, many ways. Hopefully this mushrooms into something bigger,'' he said.