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Mattel's troubles spur downgrade

September 08, 2007|Abigail Goldman | Times Staff Writer

Mattel Inc. saw its stock fall 3% on Friday and took a hit from the Standard & Poor's credit rating service, which downgraded the toy maker to "stable" from "positive."

"The rating action is based on our concern that Mattel's third product recall in less than a month may slow the company's pace of improving operating performance," S&P credit analyst Hal Diamond said.

The ratings revision came as Mattel -- which has recalled more than 21 million toys since Aug. 1 -- prepared for another week of scrutiny.

Chief Executive Robert Eckert will testify before a Senate subcommittee Wednesday, along with Toys R Us Inc. CEO Gerald Storch, representatives of Consumers Union, the Toy Industry Assn. and two officials from the Consumer Product Safety Commission.

Sen. Richard J. Durbin (D-Ill.), chairman of the Appropriations Committee panel on financial services, said he called the hearing to focus on the product safety commission's "ability to protect American consumers."

In the House, the Energy and Commerce Committee's panel on commerce, trade and consumer protection has scheduled hearings for Sept. 19 and 20 on lead-tainted children's products imported from China. The subcommittee requested information from 19 companies, including Mattel, about recent recalls. A company spokeswoman said she didn't know whether Eckert would testify.

Shares of Mattel, based in El Segundo, have fallen 7% since it announced the first of three major recalls. The stock closed Friday at $21.30, down 62 cents.

Eckert released a statement Friday saying he supported the Consumer Product Safety Commission and recognized that "more resources are needed for the organization to carry out its important duties."

That agency has said it was investigating how and when Mattel responded to news of problems with its products, which is part of the agency's standard procedure after a recall. A spokeswoman declined to say if the agency was taking a further look into whether Mattel reported the problems within the 24 hours mandated by law.

A Mattel spokeswoman said the company also backed the toy trade group's bid to restore confidence in the safety of playthings by calling for federal rules that would make testing and inspection mandatory.

Mattel's most recent troubles began in early August, when it warned of possible lead paint on 1.5 million Fisher-Price infant and preschool toys. Two weeks later, the company recalled more than 400,000 die-cast toy cars for the same reason and nearly 19 million other toys because of potential problems with high-powered magnets.

This week, Mattel recalled 11 types of toys that it found had unsafe levels of lead paint, three from the Fisher-Price infant and preschool division and eight from the Barbie doll line. In June, toy maker RC2 Corp. recalled 1.5 million Thomas & Friends wooden train toys, also imported from China, because of possible lead paint.

Most analysts had predicted a strong year for Mattel, which in 2006 did well at holiday time with popular toys, including the giggling TMX Elmo and a vehicle line based on the movie "Cars."

The company reported profit of $592 million, up 42%, on sales of $5.7 billion in 2006.

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abigail.goldman@latimes.com

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