Atmosphere at Mattel Is Not Fun and Games
The tally is in on the housecleaning at Mattel. The maker of Barbie dolls has reduced its domestic work force by nearly 15% as part of a corporate overhaul designed to save $6 million this year.
The Hawthorne toy company says it laid off 150 employees and eliminated another 150 jobs through attrition. Among those leaving are 10 vice presidents, including top executives in marketing and production.
The intensive overhaul was initiated by John W. Amerman, who became Mattel’s chairman and chief executive six months ago. By pruning company management, Amerman hopes to make Mattel more responsive to a hotly competitive marketplace.
Besides getting rid of jobs, Mattel is reducing such perquisites as magazine subscriptions and first-class travel to save costs. The company is also moving its annual fall toy fair from a Tucson resort to its Manhattan showroom to save money. As a result of such efforts, Mattel expects to save $20 million next year.
Additionally, the toy company expects to save $4 million this year and $15 million next year by refinancing a $117.6-million debt at lower rates. It also hopes to trim $2.9 million annually by converting into common shares the 9.2 million shares of preferred stock held by E. M. Warburg, Pincus & Co. and other investors who helped restructure the company in 1984.
These savings come at a time when toy manufacturers are experiencing higher production costs because plastic has become more expensive. Amerman, in a recent letter to toy retailers, said that Mattel would absorb higher manufacturing costs. But other toy companies are starting to raise prices: Hasbro has hiked them on some of its toys by as much as 6%, according to retailers.
Some retailers say Mattel won’t get many additional orders despite its decision to hold the line on prices. “The reason why they can’t raise prices is because they don’t have a hot toy,” says Bart Raymond, a buyer for Federal Wholesale, one of the largest toy distributors in the West.
Amerman expects Mattel to do well this year. Though earnings declined in the second quarter to $1.7 million from $2.3 million a year ago, Amerman says he is encouraged by a 5.4% revenue gain in what has been a soft year for toys sales.
