More Layoffs at Mattel After Lackluster Year : Toy Maker Hopes to Save $10 Million in New Round of Cuts, May Merge Plants
Mattel, the troubled maker of Barbie dolls and other toys, has embarked on a new round of layoffs to reduce costs following another money-losing year.
Two weeks ago, Mattel disclosed that it would lose money in 1987, as a result of disappointing sales and that more layoffs were a possibility. Last week, the company confirmed that layoffs are under way but refused to disclose details.
Spencer Boise, a Mattel vice president, said the company is reviewing each department individually and that the process would not be completed until the end of this month.
So far, Mattel has made cuts in its toy design and development department--the creative center of the company. These new cuts follow layoffs of 300 in mid-1987 and the closing of the firm’s last remaining U.S. plant in Paramount.
The new round of cuts indicate that Mattel’s difficulties may be more serious than they appeared in May, when the company pared its U.S. work force of 3,000 by 10% to save $20 million. The company lost an additional 150 jobs through attrition last spring as well.
Mattel expects to save at least $10 million as a result of the latest round of cuts, according to a source close to the situation. The company is also looking at its toy manufacturing plants abroad and may consolidate some operations to save more money, the source said.
Mattel has 16 plants in 14 foreign countries and employs about 17,000 worldwide. Mattel, based in Hawthorne, lost $1 million in 1986.
Mattel’s woes come at a time when the rest of the toy industry is also suffering after a lackluster Christmas season. Coleco, the maker of Cabbage Patch dolls, also has laid off workers in the wake of losses. Worlds of Wonder, the 3-year-old maker of the Teddy Ruxpin talking bear, recently fired half of its work force and sought protection from creditors under Chapter 11 of the federal bankruptcy code.
Asked about the likelihood of closing plants abroad, Mattel said in a statement: “We are always evaluating the cost-effectiveness of our manufacturing facilities. Plant openings and closures are based on what makes best economic sense for the company.”
However, toy industry analysts expect Mattel to consolidate its manufacturing plants and rely more heavily on subcontractors for toy production. Gregory H. Kieselmann, an analyst with Morgan, Olmstead, Kennedy & Gardner in Los Angeles, speculated that Mattel might sell some of its toy factories to subcontractors, but the company said it has no such plans.
Kieselmann said Mattel is shrinking the enormous administrative overhead that mushroomed a few years ago when the Masters of the Universe line of boys’ action figures were popular.
In 1986, sales of Masters of the Universe toys abruptly declined by an estimated $200 million, a drop that contributed to the company’s loss last year. In 1987, Mattel looked to its new Captain Power toys to replace lost sales. But the Captain Power toy, which has as its centerpiece a spaceship that shoots infrared beams, generated sales of about $60 million in 1987.
“That’s good for a new toy, but it’s not a blockbuster,” Kieselmann said.
Additionally this Christmas, Mattel was troubled by slightly lower sales of Barbie, Kieselmann said. The doll accounts for about $300 million, or about a third, of Mattel’s sales each year. “I think Mattel has realized that it is a much smaller toy company (without Masters of the Universe sales). It is really downsizing,” he added.
