Matsushita to Pony Up $172M for Nokia Battery Recall

The maker of the batteries that prompted Finnish cell phone maker Nokia to recall up to 46 million handset batteries will pay up to US$172 million of the costs associated with replacing them.

Japanese electronics giant Matsushita, perhaps best known for its Panasonic brand of electronics gear, agreed to fund the direct costs associated with the replacing the BL-5C 3.7 volt batteries used in dozens of Nokia handsets.

Nokia issued the recall early last week after receiving reports that as many as 100 of the batteries had problems connecting to overheating during charging. Nokia at the time said the problem could cause the batteries to “dislodge” but emphasized there had been no reports of injuries as a result.

Matsushita will pay for the costs of logistics, operation of a call center connected to the advisory and the cost of replacement batteries, said Masatsugu Kondo, the president of the company’s battery division.

“The safety of our customers and the reliability and quality of our products are our top priorities,” said Robert Andersson, head of Nokia customer and market operations. “We are pleased with the good cooperation between Nokia and Matsushita. Together, we aim to serve consumers in the best possible manner and minimize the inconvenience this issue could cause them.”

Quick Recovery

Word of the recall had hit Nokia’s stock price hard, though it recovered most of the initial losses amid confidence the financial losses tied to the event would be contained.

On Friday, after the two companies announced the agreement on the recall costs, Nokia shares were up more than 2 percent in afternoon action to $30.75.

Nokia probably didn’t face too much hardship from the recall beyond the potential dent to its public image, Strategy Analytics analyst Chris Ambrosio told the E-Commerce Times.

Nokia also managed to get the recall in the works before the battery problems caused any injuries, in contrast to the worldwide laptop battery recall from last summer that impacted a slew of PC makers. In that case, some consumers reported serious burns stemming from overheating batteries.

Now that Matsushita has stepped forward to essentially accept responsibility for the battery issues, Nokia should be able to quickly move past the issue. “If necessary, it can turn to other suppliers, but it sounds like Matsushita has made good and will stay in the loop,” Ambrosio said.

Though the replacement program covered up to 46 million handset batteries, it was likely far fewer than that number would be returned, since many of the batteries were in devices sold some two years ago and were likely already replaced by their owners.

The incident could have been a costly one for Nokia. As the clear market share leader in the handset market, it would have had numerous competitors trying to capitalize on its misfortune had the problem escalated.

Bigger Fish

Getting the recall issue settled quickly avoided distraction during a key time for Nokia, said JupiterResearch analyst Mark Mulligan. Nokia is scheduled to make several product announcements next week, with speculation suggesting a new music download strategy may be in the offing, along with new handsets and, reportedly, its first-ever retail store.

“With Apple about to launch iPhone in Europe, Nokia is girding for battle and they want the focus to be on what they announce, not on the recall,” Mulligan told the E-Commerce Times.

Meanwhile, Nokia holds a firm grasp on the top spot in terms of handset market share, according to data released Thursday by research firm Gartner. Nokia increased its market share to 36.9 percent in the second quarter of 2007 compared to 33.7 percent in the same time last year.

Nokia sold more than 100 million phones into distribution channels in the second quarter, Gartner reported, with strong sales of both high-end phones in Europe and the U.S. and lower-cost models in emerging markets.