Toymaker's suicide sharpens focus on China quality woes

BEIJING — The suicide of a Chinese executive implicated in a massive recall of Mattel toys has intensified the spotlight on China's quality-control problems and the strong role "guanxi," or connections, play in business dealings here.

Cheung Shu-hung, a co-owner of the Lee Der Industrial in southern China, came under severe pressure in August after El Segundo, Calif.-based Mattel voluntarily recalled nearly 1 million plastic preschool toys made by Lee Der and containing paint with excessive levels of lead.

State media reported Monday that Cheung greeted workers over the weekend, chatted with them, then went to the warehouse and hanged himself.

According to the Southern Metropolitan Daily newspaper, Cheung, reportedly in his 50s and unmarried, was sold the defective paint by his best friend.

Officials at the Lee Der factory in Foshan in southern China and its headquarters in Hong Kong could not be reached for comment.

The toys manufactured by Lee Der between April 19 and July 6 and sold in the U.S. under Mattel's Fisher-Price brand included such well-recognized favorites as Big Bird, Elmo and the Dora and Diego characters.

Mattel is set to announce the recall of another toy involving a different Chinese supplier as early as today, according to three people close to the matter who spoke on condition of anonymity because of the sensitivity of the situation.

Details of the latest recall were not immediately available, but one of the three people said the toy is being recalled because its paint may contain excessive amounts of lead.

Mattel's quality problems are the latest in a parade of scandals involving Chinese-made toys, tires, seafood, pet food, medicine, toothpaste, vitamins and food additives, among others. Mattel, the world's largest toy maker, said last week the recall will reduce its second-quarter pretax operating income by $30 million, or 47 percent.

China's General Administration for Quality Supervision, Inspection and Quarantine, one of the nation's safety agencies that often fight over turf, placed a temporary export ban on Lee Der's products late last week.

The Consumer Products Safety Commission said it is investigating the Mattel recall — standard procedure following a company's report about a potential problem. The agency will examine whether Mattel reported its concerns as soon as it should have. Companies are required to alert the CPSC within 24 hours of learning of a possible hazard.

Mattel said it was alerted to the problem in early July, after a European retailer's product tests detected lead. The company said it halted production on July 6 or 7 at Lee Der and began conducting its own tests. Mattel said it alerted the CPSC on July 26.

On Friday, the toy maker was served with a class-action suit for violating consumer-protection laws.

Last week, Mattel identified Lee Der as the sole source of its lead-paint problem. Adding to the pressure on Cheung, Mattel invited competitors to sever their relationship with the Chinese supplier.

Reports of his death spread quickly through China's toy industry.

"I'm surprised to hear about his suicide," said Xu Quanning, secretary of the Shanghai Toy Association. "Then again, $30 million is a huge financial hit. He must have known about the lead paint. It's almost impossible the company chief wouldn't know."

It's important that Mattel not be let off the hot seat too easily, however, some said.

"It's cheaper for American companies to produce overseas in low-cost countries," said Zheng Yusheng, Shanghai-based associate dean of the Cheung Kong Graduate School of Business and a specialist in supply-chain management. "But brand companies like Mattel get high profits. With the profit also comes the responsibility to check the quality. If toys have lead in them, it's easily found."

Information from The Associated Press is included in this report.