Who Is Responsible For Lead In Toys?

by golbguru on September 13, 2007

leaded or unleaded?

We have been hearing about the recalls of “Made in China” toys, due to the presence of lead, for quite some time now. Each time this lead contamination issue is raised, fingers immediately start pointing towards the lack of quality controls on the Chinese end, and the blame falls squarely on the manufacturing facilities in China.

In light of this, I found the following statements by a contract manufacturer in China very interesting (source: BBC). According to the manufacturer, the root cause of substandard “Made in China” products lie in the cost cutting pressures imposed by western customers (companies who outsource manufacturing to Chinese contractors). Here are a few juicy excerpts from the article:

There are many contract manufacturers in China, just like my company, and they get all the blame for the low-quality of Chinese-made products. But that is not correct.

As an export director, I have personally experienced pressure to reduce costs by hook or by crook or lose big contracts that are vital for the survival of our company.

We, as contract manufacturers, get the material, apply the paint and prepare everything for mass production. But if the big brand comes back to us and asks us to cut costs, our only option is to compromise on materials.

We know that quality gets compromised. Our customers [the big brand companies] know it too.

We employ 5,000 people in our company. A contract ensures the survival of our business. If we don’t get a contract we lose our jobs and we can’t provide work for our workers.

Of course we’ll use cheaper paint if we have to.

Then when there’s a problem, the responsibility is passed down to the small guy. He speaks no English, he has no internet and no website - he has a workshop in a corner of a street, trying to make a living.

So now we know where it all begins. :)

Of course, after all the furore, laws will be passed and obvious dangers will be taken care of (where they are most easily visible) - but that’s not going to stop western companies from pressurizing for lowering the manufacturing costs. The lead contamination problem may stop soon (hopefully), but then, something else will take it’s place and the cycle will continue till the root causes are addressed.

Let’s see if a short “Why” analysis might point us in the right direction.

Why do Chinese manufacturing contractors use cheap lead-based paints?

  • Because, they want to keep the costs as low as possible and still maintain certain degree of profitability.

Why do they want to keep costs down to the minimum?

  • Because their western customers are threatening to rescind their contracts in the absence of heavy discounts.

Why are the western customers (our beloved corporations) putting so much pressure on the Chinese manufacturers for cost cutting?

  • Hmm.. it becomes interesting here. Think about it. :)

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{ 22 comments… read them below or add one }

1 Ms. M&P 09.13.07 at 7:18 am

A friend of mine just went to China on a sponsored trip that was supposed to focus on trade and business and U.S.-China relationships. They visited a bunch of places to look at conditions in various areas of China, but they were not allowed to go in a plant that was run by a MAJOR U.S. company. He said they all wondered what they were trying to hide. I think you’re right, that the corporations force cheaper labor and production practices so they can make more money.
As a side note, there was a U.S. Senate hearing on this yesterday. The blame for the contamination was placed squarely on the shoulders of the Consumer Product Safety Commission. They test lest than 1% of the toys that are sold on the shelves, yet are responsible for ensuring that 100% of the toys are safe.

2 David 09.13.07 at 7:55 am

It’s because we want to buy that crap at Walmart for $1.00. Once customers start realizing that things actually should cost money, the manufacturers won’t be forced into cost cutting measures and we can (hopefully) get safer products.

3 plonkee 09.13.07 at 8:05 am

This sort of thing is why safety regulation exists. I wouldn’t be surprised if the Chinese manufacturers were being victimised - after all, its easy to pick on them, they’re thousands of miles away.

4 The Financial Blogger 09.13.07 at 10:18 am

I have one question though: why the big brand company does not apply a quality check on the first batch? they could also ask how come the product become so cheap. Everybody knows that lead-based paint is bad for health, witch kind of company would really accept this kind of product knowing the bad reputation, law suits and other things that may inccur?

5 Money Blue Book 09.13.07 at 11:01 am

China’s economy is undergoing major expansion and their quality control and consumer protection laws have not caught up yet.

I think this extra world attention on their products is beneficial for them and the rest of the world that purchases their products. It will help to apply pressure for change.

But yes, like everyone else, I do enjoy my inexpensive Chinese made goods. I don’t think we Americans can really live without them.

-Raymond

6 The Decision Strategist 09.13.07 at 11:52 am

Great post! With everyone freaking out about products from China, it’s good to remember where the pressure comes from. I like the quick ‘why’ analysis at the end to. It’s like strategy: always ask who benefits.

7 AW 09.13.07 at 1:41 pm

Everyone is responsible - we demand low prices from Wal-Mart, Wal-Mart demands them from their suppliers, the suppliers demand them from the manufacturers, who all buy the lowest price materials.

I now get email alerts whenever there are new lead toy recalls from http://www.leadtoyrecalls.com.

8 David 09.13.07 at 1:48 pm

We can try to blame Walmart or whomever, but it boils down to one thing…”we” want the lowest price, so “we” are responsible for what happens.

9 golbguru 09.13.07 at 6:01 pm

David, it’s not just about Walmart - it’s about a lot of retail stores in the country. In fact, Wal-mart’s name has been not been directly related to any of these recalls. There are other “importers” between Wal-mart and the Chinese contractors - and but these importers are also between almost every other retail store that sells toys. So, it’s hard to pin the blame on Wal-mart [although, I cannot deny a connection]

Below is a list of some of the importers [in all probability, these are the "western customers" that the Chinese contractor was talking about] that were involved in the latest lead recalls:

1. Fisher-Price Inc., of East Aurora, N.Y.
2. Mattel Inc., of El Segundo, Calif.
3. Schylling Associates Inc., of Rowley, Mass.
4. Hampton Direct, of Williston, Vt.
5. The Orvis Company, of Manchester, Vt.

So, it’s not Wal-mart that’s directly exerting the pressure.

But you are right when you say that it does boil down to our consumerism - the lowest price mentality.

10 David 09.13.07 at 6:39 pm

No, of course it’s not just Walmart…its every store selling Chinese-made goods, and the public wanting the lowest price on things that should, in reality, be more expensive. I should have clarified.

11 FIRE Finance 09.13.07 at 11:43 pm

Two pronged pressure from shareholders and consumers are the culprits for such a vicious cycle of doom - for ourselves, for the planet in general. We are, for most part, short sighted and care only about our own lifetime. This ought to change. We should try to develop expansive consciousness and a caring attitude. Sure it needs few sacrifices on our part, but they would be worth it.
Cheers,
FIRE Finance

12 Canadian 09.14.07 at 6:32 am

I read a book that mentioned the pressure Wal-Mart and similar companies put on manufacturers to reduce their costs more and more: Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses, by Stacy Mitchell. I highly recommend it.

13 sfordinarygirl 09.14.07 at 10:50 am

I went to a conference recently that talked about safety issues not just on toys but with clothing. The problem is we are consumers are cheap. We have to admit that. Why else is walmart and target expanding rapidly into super walmart and super targets? corporations don’t care about quality … it comes down to cost, cost and cost and penny pinching for the last dollar.

I was talking to someone at the conference who said if we could manufacutre based on demand and produce a limited supply then we’d avoid less cheap products flooding the market.

Most large corporations do safety checks - I believe Nike and Levi’s do quality assurance checks on every single one of their products. It’s on their website - corporate social responsibility part I think.

how many of us are willing to pay $100 for one toy if it means fewer harsh chemicals and lead-based paint? most single families can’t afford $100 for a toy … how long will it take for that one person whose barely scraping by to afford that and recoup costs?

if most of america wasn’t so cheap we might have better standards.

14 David 09.14.07 at 11:03 am

Pressure may be a factor, but I don’t buy it as an excuse. Sure, we like cheap products. That’s not bad old consumerism; it’s common sense. Why should I pay the higher price for a product I can get at a lower one? That’s pressure? Okay, then that’s pressure. But who forced the Chinese companies to use dangerous materials in the manufacturing process? That is ultimately the company’s choice. They can choose to stick to a safe standard, or they can stoop to poisoning pet food for a quick buck. Seems to me that if they had basic ethics, the choice would be clear. But then again, we’re talking about China - still officially a totalitarian communist regime which prevents its own people from exercising many basic rights.

15 David 09.14.07 at 11:17 am

David - “But who forced the Chinese companies to use dangerous materials in the manufacturing process? That is ultimately the company’s choice.”

We forced them, plain and simple. In order to get the orders and sell to the Walmarts and Targets, these manufacturers have to continually cut cost. Most effective way to do that? Cut corners in the quality.

When we all decide to pay a fair price for goods, a lot of these problems will go away. The problem is that we want everything for nearly free…and that’s where the problems are created.

16 Cheryl 09.14.07 at 4:30 pm

I have to disagree with some of this… While I do whole-heartedly agree that China is the new Scapegoat (and a bit unfairly so), I don’t think its us as consumers that are the problem.

You say that it is us consumers being “cheap” that makes the retailers demand cheaper prices from the importers, who demand cheaper prices from the exporters, who demand cheaper prices from the manufacturers.

BUT

Would the same retailers, importers, exporters and suppliers NOT demand cheaper prices if the consumer paid more for the item?

I mean, imagine a barbie doll or something. Mattel pays $1.50 per barbie. You pay $20 for a toy now… Tomorrow it costs $40. Do you really think Mattel would all of a sudden pay $3 for Barbie, just because the CONSUMER is paying double?

No.

Mattel is going to pay what Mattel wants to pay, and stuff the rest into its pockets.

The only thing that will happen if the cost of goods goes up is that inflation will follow, and retailers & importers will see record profits.

Consumers on the other hand, will still be stuck with crappy merchandise - except now, it will be over priced.

Think about it.

17 Tim Harris 09.15.07 at 3:06 pm

What you are talking about is capitalism, plain and simple. Nobody ever said capitalism was “good.” Now I guess we are all seeing what Marx was warning us about all this time. Capitalism DOES and WILL replace the worker with the corporation.

18 Customers Revenge 09.17.07 at 9:03 am

Are you guys serious? The Chinese manufacturer just has to say:

“We can cut costs, but we would have to use poisonous materials.” Then they are without fault if Mattel says “Yes, we would like you to produce toys with lead paint for us.”

The Chinese don’t want to lose business so they’re wiling to put out hazardous toys. Yeah, I guess that’s our fault for asking if the prices can be reduced.

19 C.G. 09.18.07 at 6:30 am

I think you hit the nail on the head with this one.
No one wants to talk about where the cost cutting pressure comes from. Good job Guru!

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