How Samsung Botched Its Galaxy Note 7 Recall

U.S. Consumer Product Safety Commission plans to announce recall of Samsung phone soon

 
The Korean tech giant is trying to replace some of the 2.5 million smartphones it has recalled in 10 countries, citing fire-prone batteries. The recall has hit its market value.

Samsung Electronics Co., faced with a crisis over exploding batteries in some of its new phones, appears to have exacerbated the situation in the way it has communicated with regulators and consumers, say former U.S. officials and people familiar with recalls.

The discovery that batteries on the smartphone could ignite created a tricky task for Samsung: orchestrate a recall of 2.5 million devices spanning 10 countries for a product that is increasingly essential to daily life.

But the effort has been dogged by conflicting information and Samsung’s apparent failure at the outset to coordinate efforts with U.S. safety authorities, according to former officials with the agency. This has led to delays in providing replacement devices and providing a resolution to customers in the U.S., where Samsung is trying to expand and is No. 2 in market share after Apple.

The two sides are working together and a formal recall announcement could come soon.

U.S. carriers have begun offering to take back the phone and provide replacement devices, but some customers have run into trouble with such returns.

Samsung’s Global Recall

The world’s biggest smartphone maker is reeling from the fallout of a huge phone recall

August 2016
Reports of Samsung’s Galaxy Note 7 catching fire begin to circulate in the global press.
 .
Sept. 2, 2016
In one of the smartphone industry’s biggest recalls, Samsung says it will voluntarily recall 2.5 million Galaxy Note 7 phones in 10 markets due to faulty batteries. It also outlines a trade-in program for the U.S. and other markets.
 .
Sept. 8, 2016
The U.S. Federal Aviation Administration issues a warning urging airline passengers to avoid using Galaxy Note 7 phones on planes.
 .
Sept. 9, 2016
Samsung loses more than $10 billion in market value after the FAA warning. The U.S. Consumer Product Safety Commission issues an advisory urging consumers to stop using the device, noting that it is working with Samsung to announce a formal recall in the U.S.
 .
Sept. 12, 2016
Samsung shares plunge again, erasing an additional $20 billion of its market value. It nominates heir apparent Lee Jae-yong as a board member in a move that could speed up decision-making at the tech giant. Samsung also says it will sell its printer business to HP for more than $1 billion.
 .
Sept. 13, 2016
Samsung shares rebound, closing up more than 4% and adding back more than $10 billion in market value.
 .
Sept. 14, 2016
Samsung says it will offer a software update for users in South Korea, enabling the Galaxy Note 7 to charge up to only 60%. A China regulator issues the recall of some test phones in China.
.

The ordeal, about to enter its third week, is denting Samsung’s credibility with longtime customers such as Michael Lees, 51, of Wallingford, Penn.

“They want you to return your phone, but that’s just not an option for me,” said Mr. Lees, who uses his smartphone to manage an equipment database for a packaging company. Samsung has offered loaner phones, but Mr. Lees said he would have to invest “a week of time getting that ready, and then I’m going to get a replacement phone and have to set that up again.”

With smartphones so essential to the daily lives of their users, some analysts think the recall could hurt Samsung’s credibility for years to come in the U.S., where it has spent billions of dollars to beef up its brand image through advertisements and product placement at events such as the Academy Awards.

“The U.S. is Samsung’s biggest smartphone market so the company must fix any problems there as a top priority,” said Neil Mawston, an analyst at Strategy Analytics. “Samsung cannot afford to lose an inch of competitive ground to Apple in its home U.S. market.”

Samsung launched its top-of-the-line Galaxy Note 7 smartphone on Aug. 19, bringing it to market just ahead of Apple Inc.’s iPhone 7. Two weeks later, it was forced to launch the global recall because of faulty batteries that could explode while charging.

Samsung launched a global recall of its Galaxy Note 7 because of faulty batteries that can explode while charging. Shown, a blown-up Galaxy Note 7.
Samsung launched a global recall of its Galaxy Note 7 because of faulty batteries that can explode while charging. Shown, a blown-up Galaxy Note 7. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

In announcing the recall, however, experts say, the South Korean company appears to have neglected to first coordinate with the U.S. Consumer Product Safety Commission. By U.S. American law the agency must be notified within 24 hours after a safety risk has been identified, and recall announcements are generally then carried out jointly with the CPSC.

Neither Samsung nor the CPSC would say when the agency was first contacted. But the U.S. agency didn’t issue a statement until Sept. 9, a week after Samsung’s initial announcement. At that point, the CPSC urged consumers to stop using the Galaxy Note 7  immediately.

“This is completely unusual; companies just don’t issue recalls without the CPSC,” says Pamela Gilbert, a partner with Washington’s Cuneo Gilbert & LaDuca LLP and a former executive director of the CPSC. If a company cooperates and contacts the CPSC first, the CPSC can issue a warning to consumers immediately, and then issue a recall after determining how to fix the problem, Ms. Gilbert says.

As a result, the software update that it has offered to customers in South Korea won’t be available in the U.S. amid the company’s continuing negotiations with federal officials on a resolution.

As of Thursday afternoon, the CPSC and Samsung haven’t issued a formal U.S. recall. The delay stems from questions over the precise problem with the phones and how best to correct it, according to a person working for a major U.S. carrier with knowledge of the situation.

“We are working as hard as we can and as fast as we can to announce an official recall in conjunction with Samsung,” a CPSC official said this week. In response to the criticism, Samsung said it was working with partners and carriers in each market to execute exchange programs as quickly as possible.

Even so, Samsung’s message to U.S. consumers has been unclear in other ways.

In an initial statement on its U.S. website on Sept. 2, Samsung said there were battery issues with the phone but didn’t detail the problem, nor did it advise customers to turn off their phones. It also said owners could exchange their phones as early as that week.

A week later, Samsung revised the release, advising people to turn off their phones and saying exchanges would be available “pending CPSC approval.”

Adding to the confusion, some customers say they have been given contradictory information when they seek to exchange their devices.

Manny Mendez, an information technology consultant in Miami said a Samsung representative told him on the phone that he could get a loaner phone from his carrier. He said he went to a T-Mobile store but was unable to get a loaner.

“I love my Note 7, but this is a freakin’ headache,” Mr. Mendez said.

Samsung has sent some replacement Galaxy Note 7 phones to carriers, but the carriers aren’t allowed to distribute them to customers until the CPSC approves them, according to the person working for the large U.S. carrier.

Samsung has said it is working as quickly as it can with the CPSC and its carrier partners to resolve the problem.

“Samsung is committed to producing the highest-quality products, and we take every incident report from our valued customers very seriously,” the company said Thursday.

In South Korea, Samsung is putting out a software update that limits how much users can charge the Galaxy Note 7 smartphone—a bid to reduce the risk of the phones catching fire by limiting the maximum battery charge to 60%.

In China, Samsung recalled a limited number of test devices and those will be replaced with new models.

Write to Georgia Wells at Georgia.Wells@wsj.com and Yun-Hee Kim at yun-hee.kim@wsj.com

Tags: , , , , , , , , , , , , ,

One Response to “How Samsung Botched Its Galaxy Note 7 Recall”

  1. daveyone1 Says:

    Reblogged this on World Peace Forum.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: