Sony’s Li-ion Battery Woes Continue to “Flame Up”

September 27, 2006 by Jeff Shepard

The issue of Sony Corp.'s financial health has come into further question this week as the result of additional negative developments related to the "flaming battery" controversy surrounding the company's Lithium-ion (Li-ion) batteries. After a laptop caught fire at the Los Angeles Airport, Lenovo and IBM, in cooperation with the U.S. Consumer Product Safety Commission, announced that they were recalling 526,000 Sony-manufactured Li-ion batteries. With this recall coming within a month of the highly-publicized Dell and Apple recalls of Sony batteries, the company quickly responded with an announcement that it was instigating its own battery replacement program. Sony had previously only offered to financially support manufacturer-initiated recalls of its batteries.

Japanese electronics giants Toshiba and Fujitsu have responded to these developments with their own announcements of similar recalls, with Toshiba revealing that the action affects 830,000 batteries in its laptops, and Fujitsu refraining from giving a total number but disclosing that the recall will involve 19 of its laptop models. Hitachi issued a statement of non-committal to any participation in Sony's replacement program. Without knowing the total number of Fujitsu batteries to be recalled, the Toshiba announcement brings the total number of Sony batteries recalled to date to more than 7 million.

The negative publicity surrounding the battery recalls follows recent press reports involving a series of bans on Dell and Apple laptop usage by several large airlines. Virgin Atlantic, Quantas, and Korean Airlines had all issued blanket bans on Dell and Apple computers, with Virgin announcing this week that it will now have its airport staff check the serial numbers of Dell and Apple laptops to determine if they can be used on board. It remains to be seen if the additional recalls announced this week will result in a more far-reaching and restrictive reaction by the airline industry.

Following the Dell and Apple announcements in August, Sony had stated that the recalls would cost the company between $170 and $250 million. The higher figure equaled approximately 25% of Sony's net profit for the current business year to March. Sony shares had already lost 8.6% since the initial Dell recall, and the degree of negative impact on the company's stock in relation to the more recent recall actions remains to be seen.