Matsushita to pay up to $172M on faulty Nokia batteries

With all eyes upon the two parties-Nokia Corp. and one of its suppliers, Matsushita Battery Industrial Co. Ltd. of Japan-the latter agreed today to cover the direct costs of a battery replacement program for Nokia handset owners affected by potentially faulty batteries.
The potential damage to Nokia’s brand value is debatable but undoubtedly huge. The cost to Matsushita Battery: an estimated $86 million to $172 million, the company said. Nokia has not outlined what costs, if any, it will have to pay due to the issue.
With worldwide media repeating a drumbeat of phrases such as “the largest battery recall in history”-though Nokia has consistently pointed out that it had made a voluntary, timely product advisory and not a recall-the handset vendor undoubtedly felt pressure to clear its name. That pressure surely made its way to Matsushita Battery’s executive suites.
Nokia announced its product advisory a week ago.
The situation illustrated, in part, how a hot-button issue, fueled by media, could threaten one of the world’s largest companies. Only 100 incidents of overheating Nokia batteries, which popped out of their handsets during recharging, have been documented worldwide, according to Nokia, with no injuries reported. The suspect batteries were traced to a batch of 46 million such units-Nokia-branded BL-5C lithium-ion battery units, to be precise-manufactured by Matsushita Battery and delivered to Nokia between December 2005 and November 2006.
But indelible images of faulty laptop batteries bursting into flames from past, unrelated incidents-forever blazed into the collective memory-apparently brought eager, worldwide media attention to Nokia’s proactive warning to consumers. The potential scale of the Nokia-Matsushita Battery problem also stirred interest. Forty-six million batteries, if replaced, would dwarf other recent, actual battery recalls.
The larger issue, of course, is that portable devices are offering greater functionality and demanding greater and longer-lasting power. At the same time, lithium-ion technology is reaching limits on what it can deliver. The past year has been littered with actual battery recalls and tarnished reputations involving numerous parties. For Nokia, the recent situation was apparently the first taste of such battery-based schadenfreude.
The two companies delivered a joint press release this morning in which Masatsugu Kondo, president of Matsushita Battery, said his company would cover the direct costs of the battery replacement effort.
But in the parlance of scripted corporate statements, Kondo referred to the two companies’ “long business relationship” and their “cooperation.” Nokia spoke only of “the safety of our customers,” “the quality of our products” and “the good cooperation” between the companies.
Nokia has recently reiterated its goal of becoming “the world’s best-loved brand” and its brand value is measured in the tens of billions of dollars.
The Finnish handset vendor has offered to replace any of the suspect batteries at no cost.
Nokia also labeled as “rumors” a report by Japan’s Corporate News Network that Nokia had informed Matsushita as long ago as December 2006 that the batteries could overheat. The handset vendor’s public outreach began Aug. 14, within days of “confirming the pattern” of defective batteries, according to Nokia spokeswoman Laurie Armstrong.