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Sony Apologizes for Battery Recall

By YURI KAGEYAMA
The Associated Press
Tuesday, October 24, 2006; 11:01 AM

TOKYO -- Sony executives apologized Tuesday for inconvenience caused by a massive global recall in laptop batteries, but said the problems were now fixed and that none of the company's top leaders would resign over the incident.

The embarrassing spate of battery recalls that is threatening to tarnish the once impeccable Sony brand power is coming at a time when Sony has been struggling to turn around its core electronics business.

It could hurt the Japanese electronics and entertainment company's sales during the critical year-end shopping season. For some, Sony's woes have shaken this nation's confidence in its long prized manufacturing prowess.

Sony slashed its profit forecasts last week, citing the battery recall as well as price cuts in Japan for the next-generation PlayStation 3 video game console. Sony expects an 80 billion yen ($673 million) profit for the fiscal year through March 2007, down 38 percent from its projection in July.

John Yang, equity analyst with Standard & Poor's in Tokyo, said the recall problem is unlikely to devastate Sony's battery operations because only a handful of major companies compete in that business.

"It's definitely making a dent in Sony's image," he said. "But if Sony does well with games and LCD TVs, Sony still has a chance to come back as one of the major players."

Sony Corp. said improvements in production, design and inspection have been made to prevent a recurrence of any laptop overheating problems. Company officials said the problems were caused by microscopic metal particles that mistakenly got inside the battery, causing short-circuiting.

Sony said last week that about 9.6 million lithium-ion batteries, manufactured between August 2003 through February this year, are being recalled worldwide after reports of some computers using the Sony battery packs overheating and bursting into flames.

Top management, including Chief Executive Howard Stringer and President Ryoji Chubachi, would stay on at the company and make the successful completion of the recall a priority, Sony officials said.

"We would like to take this opportunity to apologize for the worries," Sony Corporate Executive Officer Yutaka Nakagawa said, bowing slightly with two other executives at a news conference at a Tokyo hotel.

There would be no move to drop or curtail the company's laptop battery production, the company said.

The executives were seated while they bowed and did not bow deeply standing as most Japanese executives generally do in public apologies for troubles at their companies, underlining how Sony has been reluctant to admit fault in the troubles with its laptop batteries.

Sony has maintained that the short-circuiting happens only very rarely and only in certain ways that the battery is connected in a system with laptop models, or if the laptop is used improperly and gets bumped around.

Sony officials said Tuesday that only one overheating problem was confirmed among 3.5 million batteries, although they declined to comment on problems reported by other laptop makers.

They said the batteries are safe and the replacement program is for putting consumer worries at rest.

"This is not a safety issue," said Naofumi Hara, a Sony spokesman. "This is about addressing people's concerns which have become a social problem, and we made the managerial decision that the recall was necessary."

But laptop makers, including Dell Inc., have blamed Sony batteries, and Japanese rival Toshiba Corp. has said it may sue Sony for compensation for damage to its brand image.

Toshiba raised the number of recalled Sony batteries Tuesday to 870,000, instead of the 830,000 announced last month.

"We want to put this behind us," Nakagawa said. "I take this problem seriously and I want to finish the replacement program as quickly as possible for the sake of our users and corporate customers."

Overnight a voluntary recall of 340,000 laptop batteries made by Sony Corp. was announced in the United States. The Consumer Product Safety Commission, the government's consumer-watchdog agency, issued the formal recall notice for U.S. consumers.

The batteries, some of them in the Vaio brand laptop computers manufactured by Sony, could catch fire, the CPSC said.

Sony is replacing the batteries free of charge in the recall that is affecting almost every major laptop manufacturer in the world, including Dell Inc., Apple Computer Inc., Lenovo Group, Toshiba Corp. and Fujitsu Ltd.

The replacement program, which Sony started last month after major computer makers announced recalls of Sony-made batteries, will cover about 3.5 million units excluding batteries previously recalled by Dell, Apple and Lenovo, Sony said in a statement.

About 9.6 million batteries will be recalled worldwide, including the estimated numbers for those three companies, the statement said, leaving unchanged a projection Sony made last Thursday.

Sony also left unchanged its estimate that the lithium-ion battery recalls will boost its costs by 51 billion yen ($427 million) in the July-September period. Sony's statement such costs may grow.

Sony shares, which have dipped by about 40 percent over the last five years, gained 1.3 percent to close at 4,830 yen ($40) in Tokyo.

© 2006 The Associated Press