How a Tiny Toy Makes Big Bucks

With that kind of money on the table, Mattel now rolls up big, providing product and, most important, its stable of Hot Wheels designers to autograph their creations, which typically don't leave the packages (the better to hold their value). More than 100 grown men lined up in a courtyard at the Hilton to meet the designers they idolize. "A part of me feels like a geek telling people I'm going to a Hot Wheels convention," says Carlyle McCullough, 43, communications director for a Texas church. "But it's not like we're going behind a closed door and going 'vroom, vroom.' Well, not very often anyway."

It hasn't always been a smooth ride. The Hot Wheels story has many twists. It began in 1967, when custom hot rods ruled the road in Mattel's southern California neighborhood. Mattel cofounder Elliot Handler wanted to capitalize on the craze and give boys a toy on par with Barbie. Back then, boys played with toy train sets. Toy cars were crude contraptions, with wheels fused to their die-cast bodies. Handler asked a designer to rig a car from British competitor Matchbox (now owned by Mattel) with wheels that actually spun. An hour later, the designer had a prototype. The boss gave it a flick and it zipped across his desk. "Now those are some hot wheels," Handler reportedly said. And a franchise was born.

When the first flamed-out, chromed-up cars appeared in 1968, with names like Hot Heap and Heavy Chevy, they took off like dragsters. Mattel figured it had a hot product it could ride for a year or two. But the toymaker discovered that as long as it rolled out new models—revved-up reproductions of Detroit muscle along with flights of fancy like the skull-faced Bone Shaker—boys kept coming back for more. "The cars change every year, so you have perpetual contemporaneity," Cross says. "That's what makes Hot Wheels go."

What made them stall was any design change that slowed the cars down. In 1973, to cut costs, Hot Wheels cheapened the cars' piano-wire suspension, which made sales go cold. Designers fixed that and Hot Wheels took off again. In 1977, to save a penny per car, Mattel stopped painting a thin red line around the tire sidewalls. (Keeping the price under a buck a car has always been critical.) Today, collectors pay hundreds for those original "Red Line" Hot Wheels.

These days, Hot Wheels does as much business for Mattel as Barbie, toy analysts say. And there are now 35 designers, kicking out 300 new models a year. Lately, they've been toiling in a "treehouse" on the company's backlot in El Segundo, Calif., while Mattel builds them a new hangar-size studio nearby. You can climb to the second-floor studio on a rope ladder hanging from a faux tree, or you can simply take the stairs. Once aloft, you find a tree fort outfitted like a gearhead's garage, with a gleaming chrome toolbox, a checkerboard-flag floor and corrugated metal bulletin boards where designers hang their latest works with magnetic lug nuts. "This is our brainstorm area," Wood says. Detroit's real-car designers are trying to escape to this toy land. "I got a call today from guy in Detroit asking if we had any positions open," says designer Alec Tam, 37, a second-generation Hot Wheels designer whose father penned the original Beach Bomb. "The little cars are very similar to the real-car business from a design standpoint."

Just like their big-car cousins in Detroit, Hot Wheels designers went to art school and now create cars on computer. They zap their digitized designs to virtual model makers in Asia, who send back encoded files that are then used to produce 3-D renderings. The entire process takes just days, and a car created in January can be hanging on a peg at the toy store by summer. The process in Detroit can take four years. Another contrast: since you don't need a car loan for a 99-cent car, sales for an individual model can top one million units. "I've designed the bestselling production car in GM history; it's crazy," says GM designer Amaury Diaz-Serrano, referring to his Chevroletor retro racer, which became a Hot Wheels model last year in a design contest Mattel conducted with real-world carmakers.

Hot Wheels takes no pleasure in Detroit's pain. "We need Detroit to exist for us to be successful," says Walker. After all, Hot Wheels bestsellers remain replicas of classic Detroit iron. For decades, Motown has shared its top-secret blueprints of upcoming models with Mattel so that the Hot Wheels and real-wheels versions could debut simultaneously. That's happening again in November at the L.A. Auto Show, when Ford unveils a new design for its Mustang. As soon as the wraps come off the candy-red pony car, the journalists covering the introduction will be handed the 1/64th-scale Hot Wheels replica with a matching paint job. "It helps sell the real thing," explains Ford licensing executive John Nens. Barbie might get old. But boys and their toys never grow up.

With Patrick Crowley

© 2008