Dell Announces “Laptop Fire” Battery Recall, Sony Could Take Financial Hit

August 14, 2006 by Jeff Shepard

Dell Inc., in cooperation with the U. S. Consumer Product Safety Commission and other regulatory agencies worldwide, announced the voluntary recall of approximately 4.1 million Dell-branded lithium-ion batteries with cells manufactured by Sony. According to industry sources close to the situation, if Sony has to pay for all 4.1 million batteries it may cost the firm $225m. Although it's the worst case scenario for Sony, it adds up to 14% of its operating profits for the past year.

Under rare conditions, it is possible for the batteries in the Dell laptops to overheat, which could cause a risk of fire. Dell reported that there have been no injuries related to the laptop fires, of which the company has received six official reports. Nonetheless, there have been reports of loss and damages to furniture and other nearby objects. The recall is the largest in the twenty-two year history of the company.

The problem for Dell began when one of the company's notebook computers appeared to spontaneously combust at a conference in Osaka, Japan, in late June. As fate would have it, the incident occurred in front of a man with a camera phone. Dell was able to capture and investigate the charred remains of the laptop, but the damage was done. As Dell engineers worked to discover the cause of the flames, the world's technology Web sites were already exchanging photos of the incident &ndash businessmen flinch as a laptop burns with a white flame, then stare disbelievingly at the charred tablecloth left by the blaze. This seemingly isolated incident was then followed by a Singapore man who came forward with pictures of his "flaming" PC. Soon Dell had a PR mess on its hands, and requested government assistance in investigating the reports of flaming laptops that followed, and eventually led to the recall.

The recalled batteries were sold with the following Dell notebook computers: Dell Latitude™ D410, D500, D505, D510, D520, D600, D610, D620, D800, D810; Inspiron™ 6000, 8500, 8600, 9100, 9200, 9300, 500m, 510m, 600m, 6400, E1505, 700m, 710m, 9400, E1705; and Dell Precision™ M20, M60, M70 and M90 mobile workstations; and XPS™ , XPS Gen2, XPS M170 and XPS M1710. The batteries were also sold separately, including in response to service calls. "Dell" and one of the following are printed on the batteries: "Made in Japan" or "Made in China" or "Battery Cell Made in Japan Assembled in China."

Dell states that customers should contact the company to determine if their notebook computer battery is part of this recall, and that customers may continue to use the notebook computers safely by turning the system off, ejecting the battery, and using the ac adapter and power cord to power the system until the replacement battery is received. Dell also stated that the company does not expect this recall to have a material adverse effect on its results of operations, financial position or cash flows. The company also stated that it has no intentions of severing its relationship with Sony as the manufacturer of the battery cells.