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Published: Thursday, 12/7/2000

Firm toys with making Etch A Sketch in China

BY JON CHAVEZ
BLADE BUSINESS WRITER

BRYAN - Production of the world famous Etch A Sketch, a toy made in northwest Ohio since its U.S. introduction in 1960, could move to China soon.

It is part of several maneuvers planned by Ohio Art Co., which is expected to finish financially in the red this year. The firm, with $48 million in annual sales last year, just released its third-quarter earnings, which showed a 27 per cent drop in profit and a 20 per cent drop in sales from the same period a year ago.

Officials for the Williams County company said yesterday they are seriously considering moving the Etch A Sketch assembly line to Asia as a way to reduce costs.

``Ohio Art and Bryan is the home of the Etch a Sketch. It's a good toy. We hate to see it leave,'' said Virgil Fry, a committeeman for Local 5-0701 of the Paper, Allied-Industrial, Chemical, and Energy Workers, the union that represents 160 hourly workers at the company.

Jerry Kneipp, the company's chief financial officer, said a decision on whether to move all the toy production won't be final until January. Several factors must be weighed, such as the costs of relocating the work and how much savings would be involved because the Bryan plant will still have a metal printing operation, he said.

About 75 per cent of the company's toys, including its Betty Spaghetty doll, are made at several toy plants in China. The remaining 25 per cent, plus Etch A Sketch and Ohio Art drum sets, are made in Bryan.

``A move to China is primarily a savings in labor and production costs,” Mr. Kneipp said.

Mr. Fry said the union believes Ohio Art has decided to move the production to China. The company is under tremendous pressure to cut costs from its primary lenders, Fifth Third Bancorp and CIT Financial Group, he said.

The fall quarter, normally its busiest of the year because of pre-Christmas orders by stores, had a profit of $612,000, or 71 cents a share, on sales of $14.6 million. For the nine months ending Oct. 31, the company has a net loss of nearly $1.1 million on sales of $36.1 million. Its stock ended trading yesterday at $5.19 a share on the American Stock Exchange.

The company enacted cost-cutting measures last month, such as trimming 10 office jobs in September and a third-shift of 13 workers in its metal lithography operation. The firm has begun random quality checks on production instead of 100 per cent checks and is examining ways to trim shipping costs, Mr. Kneipp said.

Ohio Art hoped its third-quarter earnings would be improved significantly after posting losses in the first two quarter of 2000. It blamed the decrease in sales on the Betty Spaghetty doll, which sold well internationally, but had soft sales in North America.

“Our earnings were disappointing for the quarter. We were profitable, but we would have liked to have seen it more profitable,'' Mr. Kneipp said. ``Betty Spaghetty was just off. We think it should have been much stronger.

The only consolation is that all toy companies are hurting this Christmas, because there has been no dominant or hot toy to emerge and drive parents into toy stores, Mr. Kneipp said. Ohio Art hopes that a new toy - Water Golf - will help kick off spring sales. It will give the toy a more formal introduction at the annual toy fair show in New York in February.

Most of the firm's Christmas orders are filled, so the company isn't likely to see any boost in sales or profits at the end of the fourth quarter, he added.

Still, David Leibowitz, managing director at Burnham Securities in New York, said it is possible Ohio Art could have a decent fourth quarter.

``The key is going to be the how much merchandise they can get out the door from this point on,'' he said.

Besides toys, Ohio Art's plant is used for its headquarters and the more lucrative lithography that prints artwork on metal used for canisters and other decorative metal containers. That operation would remain in Bryan, as would a warehouse operation to store toys.



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