Sony to share cost of Dell battery recall

Sony to share cost of Dell battery recall
By David Turner in Tokyo and Richard Waters in San Francisco
Copyright The Financial Times Limited 2006
Published: August 15 2006 12:21 | Last updated: August 15 2006 12:21


Sony on Tuesday said it would pay some of the costs involved in Dell’s recall of millions of notebook computer batteries made by the Japanese company.

“Dell will pay some of the costs, Sony will pay some of the costs,” a spokesman of the Japanese consumer electronics group told the Financial Times on Tuesday. The recall is believed to be the biggest so far involving the power unit.

Sony’s decision to share costs is important to Dell, at a time when the US computer maker is fighting broad perceptions of poor customer service amid slowing sales growth. It will likely take some of the responsibility off Dell’s shoulders in the eyes of consumers.

Dell is to recall 4.1m batteries, 2.7m of them sold in the US.

The voluntary recall, the biggest in Dell’s history, follows the revelation that the lithium ion batteries, made by Sony, are liable to overheat and in rare cases produce smoke or catch fire. A small number of cases involving fire have been reported so far. Personal belongings have been damaged, although there have been no injuries.

The withdrawal comes at a time of heightened concerns about the potential dangers of laptop computers powered by unstable battery packs.

A number of cases of fires caused by laptops spontaneously bursting into flames have circulated on the internet, drawing concerns from aircraft regulators.

The Sony spokesman said: “Under certain conditions there is an elevated risk that batteries may overheat or catch fire. The potential for this to occur is very rare.”

Experts say the problem is caused by a manufacturing error by Sony, where metallic impurities were introduced into some of the batteries. The metallic parts may then intrude through the insulation that is supposed to keep apart the anode and cathode elements in the battery cells, leading to a spark that can cause a fire.

The batteries covered by the recall were produced by Sony over the past two years. The same batteries are also used by other computer makers, although the Sony spokesman said the problem was restricted to those used by Dell.

The problem also comes at a sensitive time for Sony, which is struggling to increase profits through radical restructuring. Last month the company revealed a rise in first quarter profits for the first time in four years.

Analysts say that despite the reputational damage, financial costs are likely to be small for both companies, since the low number of cases is unlikely to provoke many consumers to take up the recall option.

Sony’s shares on Tuesday ended 0.4 per cent lower to Y5,210 in Tokyo.