Battery recall to cost Matsushita $172 mn

Nokia Oyj, the world's biggest maker of mobile phones, said Matsushita Electric will pay for a recall of as many as 46 million batteries, which the Japanese company said will cost $172 million (20 billion yen).

Matsushita Electric, the world's largest consumer- electronics maker, will incur the expense in the first half ending September 30 and do not plan to revise earnings forecasts, according to a statement from the Osaka-based company today. Nokia said Matsushita would cover direct costs of replacements, including logistics and call center expenses.

Finland-based Nokia issued a product advisory on August 14 saying it would provide replacements worldwide for the lithium-ion batteries made by Matsushita, after about 100 cases of overheating. Matsushita said this month it was increasing production of batteries and has set up a team to organise shipments of replacements to Nokia.

"We are moving quickly to put a system in place supporting the replacement of batteries and help us regain trust,'' Matsushita said in the statement.

Matsushita wants to minimise the fallout after Sony Corp. faced criticism and possible lawsuits for its slow response in recalling 9.6 million batteries for laptops. Deutsche Securities analyst Yasuo Nakane had estimated Matsushita's recall would cost 40 billion yen.

"We are pleased with the good cooperation between Nokia and Matsushita,'' Robert Andersson, the head of Nokia customer and market operations, said in a separate statement distributed via the Hugin newswire.

Nokia rose 22 cents, or 1 per cent, to ¤22.50 in Helsinki trading. Matsushita closed down 10 yen, or 0.5 per cent, at 2,015 yen in Tokyo.

The Finnish company said some of the batteries may overheat because of a short circuit while they are being charged. The affected Nokia-branded BL-5C batteries were made by Matsushita Battery Industrial Company from December 2005 to November 2006.

Nokia aims to complete the replacement operation by the end of this year. Nokia shipped about 101 million handsets in the second quarter, or 13 every second. Its market share rose to 39.1 per cent in the quarter. It was followed by Samsung Electronics with 14.5 per cent, and Motorola with 13.8 per cent, according to researcher Strategy Analytics.