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Cablegate: Mattel - Mending Fences and Fixing Problems

VZCZCXRO5414
RR RUEHCN RUEHGH RUEHVC
DE RUEHGZ #1213/01 3180458
ZNR UUUUU ZZH
R 140458Z NOV 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC 6653
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEAUSA/DEPT OF HHS WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASH DC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC

UNCLAS SECTION 01 OF 02 GUANGZHOU 001213

SIPDIS

SENSITIVE
SIPDIS

STATE PASS CONSUMER PRODUCTS SAFETY COMMISSION RICH O'BRIEN/INTL
PROGRAMS
STATE PASS USTR CHINA OFFICE
STATE PASS HOMELAND SECURITY COUNCIL
STATE PASS IMPORT SAFETY WORKING GROUP


E.O. 12958: N/A
TAGS: ETRD EIND TBIO ECON PGOV CH
SUBJECT: MATTEL - MENDING FENCES AND FIXING PROBLEMS

REF: GUANGZHOU 887

(U) This document is sensitive but unclassified. Please protect
accordingly. Not for release outside U.S. government channels. Not
for internet publication.

1. (SBU) Summary: Mattel's relations with Beijing are on the mend
and there are no indications that provincial government authorities
are planning to sue the company for alleged damage to the "Made in
China" brand, according to Mattel executives based in South China.
More frequent product testing and enhanced supply chain control -
the lessons of the recall - have prevented further problems with
lead paint in Mattel toys since August. The executives also
commented that China had strengthened its inspection system for the
toy industry, with new Chinese regulations requiring toy
manufacturers to get third party certification confirming that new
toy lines meet safety requirements. End summary.

Mending Fences with Chinese Officials
-------------------------------------

2. (SBU) Mattel's relationship with Chinese national-level officials
is improving, according to Theodore Pang, Senior Counsel and
Director of Asia Pacific Legal Affairs. Pang told Congenoffs
November 9 that after a recent informal lunch with a high-level
MOFCOM official, senior Mattel executives felt that Beijing no
longer doubted the company's commitment to improving China's safety
record. Pang stressed that Mattel and China had a long history of
working together and the national government is again relying on the
company to play a leading role in restoring the international image
of brand China.

3. (SBU) Pang also said he was not aware of any lawsuits against
Mattel for damaging the "Made in China" brand. Media reports in
early November cited rumors of provincial Guangdong officials
considering a suit against Mattel for alleged harm to the country's
reputation. Subsequent news stories quoted officials clarifying
that the government would not be filing any lawsuits of this type.
Pang emphasized that his company had cooperated with government
authorities at every level to correct Mattel's quality problems.
This has included working with Guangdong provincial officials to
organize product quality training for other players in south China's
toy industry.

4. (SBU) During the discussion with Congenoffs, John Trang, Vice
President and General Manager for Mattel's south China operations,
noted rising costs in the Pearl Delta River region and said Mattel
was looking at other possible locations for expansion of
manufacturing operations. However, he emphasized that Mattel had no
interest in relocating its manufacturing facilities out of China.

Fixing Problems in Supply Control
---------------------------------

5. (SBU) Expanded testing has been one of the key elements in
Mattel's effort to strengthen product safety controls in its south
China manufacturing operations. The executives explained that
Mattel had begun testing every new batch of toys for lead and other
heavy metals, regardless of how long a particular line of toys has
been in production. Prior to Mattel's August recalls, it relied
primarily on random sampling for well-established toy lines after
they passed a battery of initial quality and safety tests. The
Foshan factory that Congenoffs visited, which makes die-cast Hot
Wheels cars and plastic Fisher Price toys, employs approximately 150
quality control workers out of a total staff of about 4,000 during
peak season. Mattel's product testing lab nearby occupies 2,000
square meters with 60 technical staff. The lab performed 15,000
tests in 2006 and is working towards accreditation as a private lab
capable of certifying toy quality for any toy manufacturer in China.


6. (SBU) In addition, Mattel has tightened controls over companies
authorized to supply paint for its products. Mattel requires all
factories and sub-contractors to order paint from one of seven
certified Chinese suppliers. Each new batch of wet paint is tested
upon delivery to the factory before being released for production.
Random testing also continues for dry paint during each production
run. All paint used in Mattel's products is coded by batch and

GUANGZHOU 00001213 002 OF 002


catalogued to allow traceability if test results reveal problems
later in the production process. The Mattel executives told us that
no new cases of lead paint had been discovered since the new
procedures were implemented in August.

China Tightening Controls Too
-----------------------------

7. (SBU) Chinese inspectors have also tightened their product
safety controls, according to the Mattel executives. Simon Tan, the
Manufacturing Director at the Foshan plant, said that China
Inspection and Quarantine (CIQ) inspections had become more
frequent. Previously, the Foshan plant had been inspected only on a
yearly basis. However, since the recent recalls, the plant had
already been subjected to additional inspections. He also noted
that new Chinese regulations required toy manufacturers to get third
party certification confirming that any new toy line meets safety
requirements.

GOLDBERG

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