The problems plaguing computers with batteries from Japanese electronics giant Sony (SNE) increased on Sept. 29, as Toshiba, IBM, Lenovo, and Fujitsu all issued recalls.
The latest recalls—now affecting six PC makers and more than 7 million lithium-ion batteries—only added to the embarrassment for Sony, a division of which produced cells for the batteries. Toshiba (TOSBY) recalled 830,000 batteries, while Lenovo recalled 526,000 batteries sold with ThinkPad notebooks, some of which dated back to when IBM (IBM) owned the ThinkPad line. Japan's Fujitsu also issued a recall for batteries inside its notebooks, but hasn't yet disclosed a specific number of machines affected.
The Lenovo recall follows an incident in which a ThinkPad T43 caught fire Sept. 16 at Los Angeles International Airport. That incident led Lenovo to voluntarily recall nine ThinkPad models sold between February, 2005, and September, 2006. Collectively, that amounts to between 5% and 10% of all notebooks Lenovo sold during that 19-month period, a company spokesman said.
EASING CUSTOMER WORRIES. No specific incidents have been reported involving Toshiba notebooks, but the company says it initiated the recall to ease customer concerns. A spokesman said Toshiba notebooks are unaffected by the issues that have affected Dell, Apple (AAPL), and Lenovo, but it opted to issue a voluntary recall to allay any lingering concerns among customers. A Hewlett-Packard (HPQ) spokesman, Mike Hockey, says the company uses a higher-grade Sony battery cell—not the complete battery pack—in its laptops and is not affected by the recall. Its battery system is designed to prevent overheating problems.
In a Sept. 29 statement, Gateway (GTW) said its batteries also do not appear to be affected by the battery recall. However, the Irvine (Calif.) computer maker did not rule out action in the future. "Based on our suppliers' input to date and our own research, we do not believe our systems are at risk for the same malfunctions that caused our competitors to issue battery recalls. We are investigating the latest developments and will continue to closely monitor the situation."
Separately, Dell (DELL), which in August recalled 4.1 million batteries, said it had increased that number by 100,000, pushing the suspect battery tally to 4.2 million. Fujitsu PC was also reported to be considering a recall of its own machines, but the company had made no statement on the matter as of Friday night and a U.S.-based spokesman did not immediately return a call for comment on the issue.
SAFETY CONCERNS. Overall, the U.S. Consumer Product Safety Commission, the main government agency that oversees such recalls, says it has received reports of 47 incidents involving smoke or fire from notebook PC batteries between 2001 and August, 2006.
Analyst Tim Bajarin, head of consultancy Creative Strategies, says one certain result of the latest string of recalls is that PC vendors will tighten the safety, testing, and inspection standards to which they hold their battery vendors. "You can bet the Dells and HPs and Lenovos of the world are doubling their efforts to manage battery safety," he said. "In the end this should make consumers more confident in their batteries over time."
Sony's financial matters and relationship with PC manufacturers will be more immediately affected. When news of the recalls at Dell and Apple first hit, Sony estimated that the recall would cost between $170 million and $250 million, which works out to a recall-related cost of $29 to $44 per battery. Increasing the number of affected batteries to 7 million could raise the upper end of that range above $300 million.
CUSTOMER COMPLACENCY. However, the actual cost to Sony may turn out to be much lower, because not all affected consumers will bother to take advantage of the recall, says analyst Roger Kay of Endpoint Technologies Associates.
"The recall acceptance rate is really, really low. People just don't do it. They say, 'It's too much of a pain, I don't want to deal with it, I don't have time.' So if these guys get a 20% to 25% response rate, that's a big deal," says Kay. "The real number is $100 million for everything because the reality is most people won't send them back." Plus given that the number of computers catching fire is about one per million, most will assume that they needn't bother at all.
The cost to Sony's reputation as a battery manufacturer, however, could be substantial. Sony's brand has suffered, particularly among PC vendors, after disclosures about how Sony manufactured its batteries, Kay says. "They had a process initially that didn't seem that high tech," he said. "They were talking about crimping the wire and dropping it into the cathode. That just sounds sloppy."
RECALLS' HUGE IMPACT. Kay imagines a future where consumers would shun laptops with Sony batteries and where computer makers would openly advertise that their products are "Sony-free." "I think it might be a good time for Sony to sell the business to somebody else," says Kay. "If I was HP, I would buy Sanyo batteries so I can say Sony-free because—even if you say they are making perfectly good batteries now—all of that gets lost in the noise. All the consumers know is Sony has a bad battery."
Recalls of notebook batteries are generally routine, but never have they been recalled in such large numbers and by so many vendors at the same time. Apple recalled 128,000 batteries manufactured by LG Chem, a division of South Korea's LG Electronics in May, 2005. Another Apple recall involving batteries also made by LG Chem affected 28,000 units.
Prior to this latest recall Dell had issued four battery recalls, between 2000 and 2005, the largest of which was a 2001 effort involving 284,000 units. Hewlett-Packard recalled 135,000 batteries in May, 2005, and 15,700 in April, 2006.
Hesseldahl is a reporter for BusinessWeek.com
With Catherine Holahan in New York
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