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Sanyo, Lenovo to share costs of laptop battery recall

Sanyo Electric Co., the world's biggest maker of rechargeable batteries, and Lenovo Group Ltd. will share the cost of recalling 205,000 ThinkPad laptop computers equipped with batteries that may overheat.

The lithium-ion extended-life cells, half of which are being replaced in the US, can become fire hazards if the battery pack is struck forcefully on the corner, the US Consumer Product Safety Commission said in a statement yesterday. Both Osaka-based Sanyo Electric Co. and Lenovo Group Ltd. said they haven't determined cost estimates for the recall or how the expense will be split up.
The recall follows Sony Corp.'s decision to spend ¥51 billion ($430 million) last year replacing a record 9.6 million cells used in laptops made by Dell Inc., Hewlett-Packard Co. and other computer makers. Lenovo said the recall will have a „minimal” impact on finances, while Sanyo said it was too early to tell. „This case isn't the first battery problem that's been reported so I don't think it will make consumers shy away from buy Lenovo computers,” Marvin Lo, an analyst at BNP Paribas SA in Hong Kong, said by telephone today.

Still, „Lenovo's recall could trigger another examination of whether Dell or HP might have also used these Sanyo batteries.” Lo, who rates Lenovo's shares „buy,” expects the recall will reduce Lenovo's net income by less than 3%. The batteries, made by Sanyo, can overheat if the ThinkPad laptop is dropped from a height of at least 1 meter (3 feet), Lenovo spokesman Ray Gorman said from the company's Raleigh, North Carolina, headquarters. The 9-by-3-inch (23-by-8-centimeter) battery pack, weighing about a pound (0.5 kilogram), is clipped to the outside of the computer, in the back. Shares of Sanyo fell 2.7% to ¥184 in Tokyo, while Lenovo declined 4.3% to HK$2.90 in Hong Kong.

 

„The recall will make Sanyo's operation more difficult because the battery business is the only strength it has,” said Shuichi Hida, who helps oversee $850 million in assets at Plaza Asset Management Co. in Tokyo. Lenovo has received five reports of accidents, including minor eye irritation by one customer and damage to the computers and nearby property, said Lenovo's Gorman. The battery pack smoked and sparked upon impact, he said.

Other countries likely to have the most number of recalls are Japan, Germany, France, China and the UK, he said. He said he didn't have a country-by-country breakdown of the numbers. „There's not a problem with the battery cells but with the design of the battery pack,” said Richard Sedgwick, a spokesman for Osaka-based Sanyo today. „Lenovo and Sanyo jointly designed the battery packs. Sanyo made the battery cells.”

The recall of the $180 battery packs began yesterday, Gorman said. About half the Lenovo battery customers are unlikely to return them, he said. Rachel Zhou, a Beijing-based spokeswoman for Lenovo, said the financial effect to Lenovo „is expected to be minimal,” without providing more details. Lenovo plans to send e-mails to all of the customers it can locate to notify them of the recall and instruct them to return the batteries.

Once the company receives the batteries, customers can expect to receive free replacements in about four weeks, Gorman said. Recall information will also be posted on the company's Web site. The affected laptop models are the R60, R60e, T60, T60p, Z60m, Z61e, Z61m, and Z61p. The nine-cell batteries are tagged with „FRU P/N 92P1131” on the label. (Bloomberg)