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Mattel May Face Action Related to Recalled Toy

Consumer Agency Is Reviewing Firm's Reporting Procedures

October 23, 1998|GREG JOHNSON | TIMES STAFF WRITER

The Consumer Product Safety Commission said Thursday that it is considering civil action against Mattel Inc., which is recalling 10 million Fisher-Price Power Wheels ride-on car and truck toys sold since 1984 because they pose a serious fire risk.

The commission said it is reviewing documents submitted by Fisher-Price to determine if the unit of El Segundo-based Mattel reported problems involving the toys in a timely manner.

There have been 700 reports of electrical component failures involving the toys. The commission said 150 fires occurred that injured nine children and caused $300,000 in damage to 22 houses and garages.

During a news conference Thursday in Washington, agency Chairwoman Ann Brown said that "the company knew of the incidents and the company did not report the incidents to us."

The commission said it received its first report about the problem in 1996, but the first fires date back to the early 1990s. The toys were introduced in 1984.

The recall of the toys, which retail for $70 to $300, is the largest ever involving toys sold through retailers, the commission said.

Mattel, the nation's largest toy maker, said its investigation only recently suggested that a recall was necessary, and it said regulators were kept abreast of the company's findings.

"Safety is always our priority, so this is something that Mattel has fully investigated over time," company spokesman Glenn Bozarth said. "We determined at this point in time that it was something that needed to be addressed. We're taking a leadership position on this."

Bozarth said Mattel investigators failed to find evidence of fires in half the 90 cases that its investigators reviewed. Mattel also found that in a majority of the cases reviewed by the company, consumers had disabled fuses designed to protect against electrical system failures, Bozarth said.

But product safety commission spokeswoman Nychelle Fleming said the agency has conducted its own review of complaints filed by both parents and fire officials.

"Extensive testing in our own laboratories did find faulty wiring--not consumer tampering--as the problem," Fleming said. "The connectors and fuses couldn't handle the power generated by the battery."

Agency officials are now "reviewing reporting procedures to determine if findings were reported within the time frame they should have been," Fleming said.

The popular toys, have been sold under 100 names, ranging from Barbie Beach Buggie and Jeep Sand Blaster to My First Roadster and Corvette.

The recall comes at a time when toys are getting safer, said Mar Vista-based California Public Interest Research Group, which praised the commission's action.

"We're glad that the CPSC, a very small agency with limited funding, is on the ball," said Janee Pelletier, CalPIRG's consumer programs associate. "Toy companies have an obligation to pull toys off of the shelves as soon as they realize that a toy is dangerous."

CalPIRG publishes an annual hazardous-toys list.

The recall marked the second time in recent years that a popular Mattel toy has come under scrutiny. The company voluntarily pulled its popular Cabbage Patch Snacktime Kids dolls from the market in early 1997 after receiving reports of dolls that were designed to eat play food but instead grabbed children's fingers and hair.

Mattel said it would take a $27-million, one-time charge to cover costs of fixing the toys at designated Fisher-Price service centers.

Word of the latest recall failed to dampen Wall Street's appetite for shares of Mattel, which closed up $1.13 at $32.88 on the New York Stock Exchange. Mattel on Thursday reported that earnings before the one-time charge were in line with analysts' expectations of 75 cents per share for the third quarter.

Before the charge, Mattel's quarterly profit rose by 1.4% to $226.9 million, or 75 cents per share, on revenue that rose by 7.6% to $1.67 billion. The company said it still expects to reach its yearly profit goal of between $1.80 and $1.85 per share.

Analysts said investors apparently see no long-term impact from the recall. "It's an unfortunate occurrence, but there are no signs that this type of incident is going to become part of their everyday business," said David Leibowitz, a retail and toy industry analyst with Burnham Securities in New York.

And while investors might fret about Mattel's lackluster profit growth during the quarter, "considering [that] the surprises that have afflicted the company and the industry of late have largely been negative, showing that there's been no further deterioration has got to be taken as a positive," Leibowitz said.

The company and the Consumer Product Safety Commission have established a toll-free number ([800] 977-7800) consumers may call to determine if their toy needs to be repaired or to locate a Fisher-Price repair center.

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