Mattel: Steering Through a Difficult Recall
Mattel has been forced to conduct two recalls in recent weeks, concerning potentially dangerous toys manufactured in China.
While there were obvious faults in Mattel’s quality control processes, the Company has taken aggressive steps to address the problems and restore customer confidence.
On the new Harvard Business Online Blog, John Quelch looks at how Mattel has navigated these difficult waters. According to Quelch, Mattel deserves credit for its prompt actions:
CEO Bob Eckert took personal charge of the situation with no efforts to duck behind suppliers or subcontractors.- The Company has aggressively gotten word out to consumers
- The product recall website Mattel has created makes it easy for consumers to assess whether they have an affected item and has clear instructions for returning such items
Quelch points out that Mattel’s actions should allow it to recover, provided there are no further incidents.
As long as the two recalls represent the whole of the problem and not the tip of the iceberg, Mattel’s brand reputation should survive. The CEO knows that Mattel’s brand trust–built up over 62 years–is at stake, just ahead of the holiday selling season.
Meanwhile, Bank of America remains optimistic on the long-term prospects for Mattel but cautious in the near-term.
We expect MAT shares to experience pressure near term and at this point we assume this is an event that only impacts 2Q07. However, we note 80% of the industry’s toys are manufactured in China. As a result, we believe that today’s announcement is likely to weigh on MAT shares and we are maintaining our cautious view on the stock.
Moody’s adds that there will be no immediate change to Mattel’s credit rating or outlook following the recalls, but plans to monitor the situation for any financial impact that may arise from product liability lawsuits or increased costs for quality control.
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