World's largest toy maker goes bankrupt By Chen Xingjie | 2008-10-17 | ONLINE EDITION
A TOWN government in Guangdong Province paid 24 million yuan (US$3.51 million) in emergency living allowances to about 6,500 workers after the world's largest toy maker announced two factories of its factories in the town were bankrupt.
Workers lined up to receive the allowance yesterday at the factories in Zhangmutou Town in Dongguan City, a toy making center, Nanfang Daily reported today.
Hong Kong-listed Smart Union Group (Holdings) Limited, the world's biggest toy maker and trader on an OEM basis, announced the bankruptcy of the two factories on Wednesday. The announcement cost 6,500 workers their jobs, the report said.
As some workers haven't been paid for up to two months, the government said it will work out plans to help them with their wages and future jobs in three days, the report said.
"I have to find another job," a worker surnamed Guo, a native of Sichuan Province, told the newspaper.
Senior officials of Smart Union were unavailable for comment yesterday.
Smart Union is the OEM supplier for three of the world's five leading toy brands including Mattel and Hasbro. Mattel is famous for its line of Barbie dolls, Hot Wheels and Matchbox cars while Hasbro is well-known for its Transformers toys.
The companies relied heavily on exports to the United States with 70 percent of all toys being sold to that market, the report said.
Analysts said the bankruptcies were the result of the ongoing US credit crisis and that it was the first bankruptcy case on the Chinese mainland due to the global financial turmoil.
China is the world's largest toy producer and exporter, sending about 17 billion toys to overseas markets last year, according to Chinese customs data. Dongguan accounts for 40 percent of China's toy industry, which constitutes 70 percent of the world's total, the report said.
In the first eight months of this year, China's toy exports reached US$5.1 billion, up 1 percent year on year. The growth rate was 22 percentage points lower than the same period last year, the Nanfang Daily report said. In Dongguan, toy exports slipped of 1.5 percent to US$550 million, the first drop in recent years.
Rising labor costs, increasing raw material prices, the appreciation of the yuan, tightened tax refund policies and surging examination fees for exports were cited as reasons for the bankruptcies.
Smart Union announced a loss of HK$201 million (US$25.91 million) in the first half of the year.
Its shares closed at its lowest price of HK$0.08 on Tuesday before its announcement the factories were bankrupt. The price was a drop of 95 percent from its peak of HK$2.38 per share on July 20, 2007.
Smart Union was founded in 1996. At one time it employed 10,000 workers at its four factories in Dongguan and Qingyuan City, the report said.
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