By Sarah Coffey
New York - Mattel Inc., the largest U.S. toy company, recalled millions more Chinese-made toys on Tuesday due to hazards from small, powerful magnets and lead paint, sending its shares down as much as 6 percent.
The company's second recall this month came as it launched a national advertising campaign to assure consumers it is on top of product safety.
The new recall involves 18.2 million magnetic toys globally, including 9.5 million in the United States. All have magnets or magnetic parts that can be dislodged.
The U.S. Consumer Product Safety Commission said it had received hundreds of reports of magnets coming loose. It said it had previously received reports of three children swallowing more than one magnet and suffering intestinal perforations that required surgery. When more than one magnet is swallowed, the magnets can attract each other and cause intestinal perforation or blockage, which can be fatal.
In the United States, the recall includes 7.3 million Polly Pocket dolls and accessories with magnets, 1 million Doggie Day Care magnetic toys, 683,000 Barbie and Tanner magnetic toys, and 345,000 Batman and One Piece play sets.
About 253,000 Pixar Sarge die-cast toy cars with lead paint were also recalled. Lead has been linked to health problems in children, including brain damage.
Earlier this month Mattel's Fisher-Price unit recalled about 1.5 million preschool toys made by China-based contract manufacturer Lida Toy Co. because the paint on the toys might contain excessive amounts of lead. The global recall included products based on popular preschool characters from "Sesame Street" and "Dora the Explorer."
"The safety of children is our primary concern, and we are deeply apologetic to everyone affected," Mattel Chief Executive Robert Eckert said in a statement on Tuesday. "Mattel has rigorous procedures, and we will continue to be vigilant and unforgiving in enforcing quality and safety."
The earlier recall was Mattel's largest since 1998, when it recalled 10 million Power Wheels vehicles made by Fisher-Price, and the company said it expected to take a $30 million charge from that action.
Nancy Nord, acting chairwoman of the CPSC, said the new recall was made especially large to prevent injuries from the toys.
"There is absolutely no excuse for lead to be found in toys entering this country," she said. "It is totally unacceptable and it needs to stop. This agency is going to take whatever action it needs to take to address that problem aggressively."
There has been concern worldwide about the safety of goods imported from China. The United States stepped up its inspection of Chinese goods after a chemical additive in pet food caused the death of some animals.
In June, RC2 Corp recalled wooden Thomas & Friends toy trains made in China and sold in the United States because some of them contained lead paint.
With more than 80 percent of toys on U.S. store shelves manufactured in China - according to the Toy Industry Association - toy sellers are worried consumers will stay away from Chinese-made products.
Analysts are also concerned that Mattel's brand name has taken a hit.
"The real issue longer-term is how this affects the Fisher-Price brand equity," said Oppenheimer analyst Linda Bolton Weiser. "Even though everything's made in China, it's still specific products and brands that have been recalled."
Wedbush Morgan Securities analyst Sean McGowan said Mattel is known to take safety more seriously than its peers. The issue is "more corruption in some of these factories than a problem at Mattel," he said, adding that if other companies were as vigilant as Mattel, more problems would be uncovered.
Mattel has said it is expanding its testing programs to ensure that painted toys from third-party manufacturers are safe before they are sent to stores.
The independent watchdog group Consumer Reports is calling for third-party testing for toys similar to what independent tester Underwriters Laboratories does for small electronics.
"Certainly, consumers have lost confidence," said Don Mays, director for Consumer Reports' product safety and planning. "People have said they cannot trust products from China and they will not buy products from China."
Mattel took out a full-page ad in Tuesday's Wall Street Journal, New York Times and USA Today, featuring three children playing together and a letter from Eckert addressed to "Fellow Parents."
"Nothing is more important than the safety of our children," Eckert wrote.
"Our long record of safety at Mattel is why we're one of the most trusted names with parents. And I am confident that the actions we are taking now will maintain that trust."
News of the second recall comes as an owner of the Chinese toy factory at the center of the first recall was reported to have committed suicide.
Mattel shares were down 3.27 percent at $22.80 in late-morning trade on the New York Stock Exchange after falling as low as $22.10 earlier in the session.
(See http://blogs.reuters.com/category/themes/shop-talk/ for "Shop Talk" -- Reuters' retail and consumer blog)
(Additional reporting by Jessica Wohl and Regan Doherty in Chicago)