Eckert, Robert A.

(1955-)
Mattel, Inc.

Overview

Robert Eckert is the chairman and chief executive officer (CEO) of Mattel, Inc., the world's largest and most recognized toy maker. After a disastrous step into educational software in the late 1990s, Eckert was selected as the company's new CEO in 2000 and commissioned with the task of bringing profitability back to Mattel.

Personal Life

Robert A. Eckert grew up in Chicago. He attended the University of Arizona and received his bachelor's degree in business administration in 1976. From there, he returned home to enroll in Northwestern University, completing his MBA in marketing and finance in 1977. Eckert is married with four children. He serves on the advisory board of the J. L. Kellogg Graduate School of Management of Northwestern University and is also a member of the board of visitors at the Anderson School at the University of California, Los Angeles.

Career Details

After completing his graduate studies in 1977, Eckert joined Kraft Foods, headquartered outside Chicago in Northfield, Illinois. Initially he worked in the company's marketing department. In 1987 he was promoted to vice president of strategy and development for Kraft's Grocery Products Division. Two years later, in 1989, he became the company's vice president of marketing for the Refrigerated Foods Division. In 1990 he was appointed as the executive vice president of Kraft Foods and general manager of the Cheese Division. He was also responsible for the company's Oscar Mayer Foods and North American Foodservice Divisions. Eckert displayed his leadership and problem–solving skills in August 1991 when confronted with a difficult and embarrassing flub. Kraft ran a promotion that offered to give away a new van to one lucky winner. However, quite by mistake, some 20,000 grand–prize tickets were printed and distributed. Eckert avoided a potentially serious class–action lawsuit filed by disappointed ticket holders by sending out $10 million in coupons, cash, and prizes.

In October 1997, having served at Kraft for 20 years, Eckert was named the company's president and chief executive officer. Kraft Foods is a large and highly diversified company, boasting the largest sale organization of any U.S. food manufacturer. In 1999 Kraft controlled the production and sale of 27 brand names with high sales and four other brands with sales of over $1 billion. During his three years at the helm of Kraft Foods, Eckert earned high marks for his marketing skills; he successfully invented new appeal for old–time favorites that had begun to slip in sales, including Kraft Dinner and Oscar Meyer products. During his tenure, Kraft also introduced fat–free cold cuts and the immensely popular Lunchables. From 1996 to 1998, newly introduced products alone created more than $1 billion in sales.

Eckert was also known for his tenacity to drive his company forward to bigger, better ways. When asked by Prepared Foods in 1999 what it would take for Kraft Foods to become the food industry's undisputed leader, Eckert answered: "We'll know we're there when consumers see us as the company, above all others, that makes food a simpler, more enjoyable part of their lives and helps them connect their families the way they want so much to do. . . when our retail grocery and foodservice customers see us as their indispensable business partner. . . when investors see us as the food company that's best at delivering volume–driven earnings growth . . . and when our employees see us as the employer of choice. In many peoples' eyes, we're already there, but we're not letting up on our drive to be the best."

On May 17, 2000, Mattel, Inc., the world's largest toy maker, announced that Eckert had been selected as the company's new chairman of the board and CEO. Mattel's product lines include Barbie dolls, Fisher–Price toys, Hot Wheels and Matchbox cars, American Girl dolls and books, Harry Potter items, and licensed Disney (including Dinosaurs and 102 Dalmations) and Sesame Street products. As the worldwide leader in the design, manufacture, and marketing of toys, Mattel's revenues for 2000 topped $5.5 billion. However, despite its incredible name recognition and impressive revenues, Mattel had been through some difficult periods in the nearly five decades of its existence, and Eckert was entering the company at just such a time.

Mattel was founded by Elliot and Ruth Handler in 1955, and just 11 years later, sales totaled $5 million. Sales climbed steadily each year until 1959 when Mattel introduced the Barbie doll, which sent sales skyrocketing. By 1965 sales totaled more than $100 million. But during the 1970s the company overextended itself in less–than–profitable acquisitions, including Ringling Bros. and Barnum & Bailey Circus, and when the management team was found guilty of doctoring the financial records, the Handlers withdrew their involvement in the company under pressure from the courts and the Securities and Exchange Commission. Although under new leadership and a restructured board of directors the company once again became profitable, the tides turned again in the 1980s, and by 1984 Mattel was on the verge of bankruptcy, having lost substantial ground when the electronic game market dried up. In 1987 Mattel posted a loss of $113 million, and stock prices had fallen from a high of $40 per share in 1982 to $10 per share.

Chronology: Robert A. Eckert

1955: Born.

1977: Joined Kraft Foods as a marketing executive.

1987: Promoted to vice president of strategy and development for Kraft's Grocery Products Division.

1989: Became vice president of marketing for the Refrigerated Foods Division.

1990: Appointed executive vice president of Kraft Foods and general manager of the Cheese Division.

1997: Selected as the president and chief executive officer of Kraft Foods.

1998: Mattel stock traded at an all–time high of $46.75 a share.

2000: Became chairman and chief executive officer of Mattel, Inc.; earned $12.5 million in compensation in first seven months on the job.

2001: Announced closure of last U.S.–based Mattel factory.

2001: Mattel posted a profit for first three quarters of 2001.

Mattel's fortunes were turned around by promoting John W. Amerman to CEO. Amerman cut costs, reduced corporate staff by 150, and refinanced high–cost debt. He then refocused the company on the old standards, like Barbie and Hot Wheels. He also brokered a deal with Disney to provide toys based on Disney films. In 1991 Mattel estimated that 95 percent of all U.S. girls ages 3 to 11 owned at least one Barbie doll. In 1992 sales of Barbie products alone totaled $1 billion, over half of the company's total sales. Mattel continued to post larger profits and higher sales figures throughout much of the 1990s, and stock prices returned to the $40 range. However, the company stumbled badly after Amerman retired. Replaced as CEO by Jill Barad, known for her skills in marketing Barbie merchandise, the new chief promised more than she could fulfill in regard to earnings. She spent $3.5 billion to acquire the Learning Co., maker of educational software, but the purchase was ill advised, and Mattel lost $300 million, ultimately posting a loss for four consecutive quarters and recording the first annual loss in a decade. The cost in stock market value was measured at nearly $7 billion due to the drastic decline in stock prices. Under pressure, Barad resigned in February 2000.

When Eckert came on board as chairman and CEO in May, investors expected him to clean up the Learning Co. mess and restore Mattel to its former glory. On the day of Eckert's first shareholders' meeting in June 2000, Mattel stock was trading at $14.69 a share, down from a high of $46.75 reached in March 1998. According to Michael White of the Associated Press, the shareholders were looking for answers. "Eckert was grilled for about an hour [about] what he planned to do to restore the world's largest toy company to profitability." Eckert promised to strengthen core brands, bring in top management talent, and cut costs. Although he agreed with Barad's decision to move into high–tech toys, Eckert believed the Learning Co. was not the correct choice for such an endeavor. According to White's report, Eckert noted, "It was the execution that was flawed. It is clear consumers have become more adept at new technology. We need to capitalize on the opportunities that creates."

After less than a year as CEO, Eckert was earning cautious praise from analysts. In March 2001, Katherine Hobson of U.S. News & World Report, wrote, "[A]t Mattel. . . it may be too soon to promise a happy ending, but the new boss is enjoying a strong opening act. . . . [Eckert] is taking a back–to–basics approach to turn the company around: He's getting a handle on out–of–control costs, building business around perennially popular brands like Barbie, and keeping a lookout for that next must–have toy. So far, the reviews are good: in a gloomy market, Mattel stock just hit a 52–week high."

Eckert first addressed the issue of the Learning Co. In the end, Mattel basically dumped the company, getting no cash up front but agreeing to settle for a portion of future profits. Another area on which Eckert focused was increasing sales overseas. Global sales had declined for the three previous years, and Eckert was determined to do a better job moving into the vast untapped market of children outside the United States. According to Eckert, it is a matter of great importance, considering that Mattel's take from global sales makes up 30 percent of its revenue—translating into $1 billion from Western Europe alone. Eckert also devised a restructuring plan that implemented cost–cutting measures, including dissolving some unprofitable licensing agreements. Refocusing on Mattel's main product lines, Eckert pushed popular brands like Barbie, Hot Wheels, and Fisher–Price toys to the top of the priority list. Those three product lines alone produced $4.7 billion in sales in 2000.

Eckert has moved slowly but deliberately to stabilize the company, and he has offered conservative but positive outlooks to shareholders, preferring to overachieve rather than overreach. William Nygren, a portfolio manager for a major shareholder, told the Los Angeles Times, "One of the best things Eckert has done is to refuse to set unattainable goals. You don't need to re–create this company every couple of years. We love those franchises—Barbie and Hot Wheels—they don't need to be transformed; they need to be nurtured." Eckert is the first to agree that the company's future lies in its past by learning from previous successes and failures. "What we need to do today is outperform the toy industry, not change the company," Eckert told the Los Angeles Times. "Every time we try to do something else, we haven't done it well. You know, we owned the circus once; that didn't work for us. We've ventured off into electronic games before. That didn't do well. We owned the software company; that didn't do well. I've got it three times, I've seen it and we're not going to give it a fourth time."

Social and Economic Impact

As part of cost–cutting measures, Mattel announced in April 2001 that it would close its last U.S. manufacturing site in Murray, Kentucky. The plant, which was opened in 1973 by Fisher–Price and was acquired in 1993 when Mattel purchased Fisher–Price, employed 980 workers, who manufactured approximately 10 percent of Mattel's preschool products. The plant and jobs were slated for relocation to Mexico. Like other toy manufacturers, Mattel depends on overseas production. Mattel has 15 factories in other countries, including Mexico, Indonesia, China, Malaysia, and Thailand.

Just a week after the news of the last U.S. Mattel factory relocation outside the country to save money, Mattel released information regarding Eckert's salary. According to the Associated Press, for the first seven months of his employment Eckert was paid more than $12.5 million in salary, bonuses, and stock grants. In addition, the company provided Eckert with a loan of $5.5 million that would be forgiven, along with interest, if Eckert remained with the company through May 18, 2004. The reports of the large amount of pay mixed badly in the media in light of Mattel laying off nearly 1,000 U.S. workers. Eckert benefited from the initial arrangement that provided that the majority of his compensation was tied to stock performance, basically tying Eckert's salary to how well he could turn the company around. As stock prices rose, so did Eckert's annual intake.

Improvement has been slow but steady. For the second quarter of 2001, Mattel reported a loss of $4.9 million. However, over the first two quarters of 2000, the loss of $38.9 million on net sales of $1.59 billion showed a considerable improvement compared to the same time period from the previous year in which the loss totaled $165 million on net sales of $1.51 billion. By the end of the third quarter of 2001, the news was even better. The company posted a net profit of $199.8 million, compared to a net loss of $336.9 million during the same quarter of the previous year. The total for the first three quarters of 2001 showed a net income of $161 million, compared with a net loss of $502 million during the same period in 2000. On October 18, 2001, stock prices were $18.29 a share—nowhere near the all–time low of under $10, but also not yet close to the all–time high of mid–$40. But investors and analysts continue to remain confident in Eckert's ability to lead the company back to substantial profitability. A sluggish economy may prove his greatest obstacle.

Sources of Information

Contact at: Mattel, Inc.
333 Continental Blvd.
El Segundo, CA 90245–5012
Business Phone: (310)252–2000
URL: http://www.mattel.com

Bibliography

Dwyer, Steve. "No Disputing Kraft's Goal." Prepared Foods, May 1999. Available at http://www.preparedfoods.com.

Goldman, Abigail. "Mattel Will Shut Down Last U.S. Manufacturing Site." Los Angeles Times, 4 April 2001.

Goldman, Abigail. "Toy Repair Man: Mattel's New Chief, Robert Eckert, is Putting the Firm Back in Working Order by Returning to the Basics." Los Angeles Times, 15 April 2001.

Gornstein, Leslie. "Mattel Reports $4.9 Million Q2 Loss." Associated Press, 19 July 2001.

Hobson, Katherine. "Meet Corporate Turnaround Barbie." U.S. News & World Report, 5 March 2001.

"Mattel Chief Earned More Than $12.5 Million." Associated Press, 10 April 2001.

"Mattel, Inc." Hoover's Online, Inc., 2001. Available at http://www.hoovers.com.

Michaels, Adrian. "Mattel Names New Chief." Financial Times, 17 May 2000. Available at http://www.ft.com.

Montgomery, Bruce P. "Mattel, Inc." In Laura Whitely ed. International Dictionary of Company Histories. Vol. 25. Detroit: St. James Press, 1999.

Pruzan, Jeff. "Kraft's Big Cheese Tapped to Mend Mattel." Financial Times, 17 May 2000. Available at http://www.ft.com.

"Rebounding Mattel Inc. Reports Third Quarter Porfit." Associated Press, 18 October 2001.

"Robert A. Eckert." Mattel, Inc., 24 January 2002. Available at http://mattel.com/about_us/au_vision.asp#bio.

White, Michael. "New Mattel Boss Confronted by Angry Stockholders." AP Newswire.