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Embattled Mattel Searches for Profits and Superheroes

May 24, 1987|DENISE GELLENE | Times Staff Writer

At the headquarters of Mattel, the troubled toy maker, a curious question is going around: Could mild-mannered John W. Amerman be the firm's new He-Man?

He-Man--as most any 8-year-old will tell you--is the centerpiece of Mattel's Masters of the Universe army of action toys and simply "the most powerful man in the universe." And for most of the mid-1980s, He-Man and the rest of his pals helped guard Mattel's position on top of the toy world.

But those days are over, and Mattel finds itself in need of a new He-Man. Not just another line of toys to match the success of Masters of the Universe, but also a chief executive who can cut costs, expand its booming overseas business and, perhaps most importantly, inspire Mattel's toy designers.

Amerman, who built Mattel's international business into a powerhouse, was named chairman and chief executive in February. It was his success overseas that apparently led Mattel's directors to place him in charge of the beleaguered company, which has recently experienced flat sales, lackluster profits and layoffs--as well as impatient investors.

Can Count on Help

But Amerman is far from discouraged. "I think we've got great people and innovative products," he says. "I see nothing but opportunity."

Amerman knows he can count on help from Barbie, the doll created by Mattel 28 years ago. The ageless teen-ager, who has her own swimming pool, car, rock band and steady boyfriend, Ken, now brings in a whopping one-third of Mattel's yearly $1 billion sales.

"Never underestimate the power of Barbie," says Ron Qualles, head toy buyer for Merchants West, which operates 27 Karl's Toy and Hobby stores in California. Barbie had her best year last year, despite competition from Jem, Hasbro's new punk-rock doll. Some retailers predict that this year will be even better, as little girls like the new "jewel secrets" version, which comes with glittery jewelry and dresses that can be folded into purses.

And then there's Captain Power, one of Mattel's newest toys and one of the few that toy experts consider promising. The controversial "interactive toy" comes with a spaceship that can shoot infrared beams at cartoon characters to be featured in a Captain Power television series starting this fall. Children's advocacy groups have criticized this new kind of toy, but some retailers say the criticism may help sales.

Sales Generally Flat

Amerman's challenge comes when U.S. toy sales are generally flat and the industry is becoming more competitive. Once the nation's biggest toy company, Mattel in 1985 fell to No. 2, behind Hasbro. Mattel lost $1 million last year.

Mattel is taking a beating in the important U.S. market. Mattel's operating profits in the United States and Canada skidded to $6.2 million from $96.7 million in 1985. This came as sales of two key toys--Masters of the Universe and Rainbow Brite dolls--plummeted by a staggering $250 million last year, as children apparently lost interest in the once-popular items.

Mattel's weak sales upset the investment group that controls more than one-third of Mattel's shares. The group isn't happy with the way things are going and is willing to sell out at the right price. "Mattel hasn't performed as well as we would have liked," says John M. Vogelstein, vice chairman of E. M. Warburg, Pincus & Co. and a Mattel director.

Working with management consultants, Amerman hopes to reduce overhead by $20 million, or 8%, this year, partly by laying off as many as 200 management employees--or about 10% of the firm's U.S. work force. He is looking to relocate operations overseas, where they can be performed more cheaply. Amerman is also looking for ways to sharpen Mattel's reflexes, so that the company can move fast when children's tastes change.

"When we're through, Mattel will be a very different company," he says.

Amerman came to Mattel after 15 years as a cosmetics and chewing gum company executive at Warner-Lambert, the New Jersey drug company. Before that, he was a college recruiter for Colgate-Palmolive. "It was a great experience. I learned how to deal with people," he says.

Former colleagues say he is a relaxed and confident executive who listens to employees. "He was very friendly and open to suggestions," says John F. Walsh, who worked for Amerman at Warner-Lambert's American Chicle unit. "He was also very responsive," recalls Walsh, now president of American Chicle. "You knew you could always go to John for a quick answer."

Amerman was named chairman and chief executive Feb. 19 when Mattel abruptly shuffled its top management. At that time, Amerman was part of a triumvirate running the company after the retirement of chairman Arthur S. Spear. The other two were Mattel President Thomas J. Kalinske and Ray Ferris, executive vice president and chief financial officer.

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