- Second recall likely if replacement Galaxy Note 7 fire report confirmed
- Company’s earnings rose at the slowest pace in five quarters
- Owner of the phone involved in the incident said device was a replacement
Samsung could face an unusual second recall of its Galaxy Note 7 smartphones if one that caught fire aboard an airliner this week is a replacement device as its owner says, two former US safety officials said.
The Federal Aviation Administration and the Consumer Product Safety Commission are investigating Wednesday’sincident, when a passenger’s phone emitted smoke on a Southwest Airlines Co. plane readying for departure from Louisville, Kentucky. A flight attendant doused it with a fire extinguisher, and the plane was evacuated without injury.
(Also see: Samsung Galaxy Note 7 Fires Risk Hurting Demand for Other Products)
“If it’s the fixed phone and it started to smoke in his pocket, I’m going to guess there’ll be another recall,” said Pamela Gilbert, a former executive director of the consumer agency. “That just doesn’t sound right.”
Samsung has been engulfed in crisis since the Galaxy Note 7 smartphones began to burst into flames just days after hitting the market in August. The Suwon, South Korea-based company announced last month that it would replace all 2.5 million phones sold globally at that point. Samsung said it had uncovered the cause of the battery fires and that it was certain new phones wouldn’t have the same flaws.
The first indications of the existing recall’s financial impact could be seen Friday with the company’s release of earnings that rose at the slowest pace in five quarters. Operating income increased just 5.5 percent to KRW 7.8 trillion ($7 billion or roughly Rs. 46,812 crores) in the three months ended September 30.
The US safety commission could decide as early as next week on what steps to take, said Gilbert, a partner in Cuneo Gilbert & LaDuca, LLP in Washington. “This is not something you want to leave hanging out there,” she said.
Nancy Nord, a former acting chairwoman of the safety commission, said a second recall doesn’t happen very often.
“Certainly they could do another recall, if it appears this is something beyond an aberration,” she said.
“They need to determine if this was a remediated phone, and if so why did this happen?” said Nord, who is of counsel at Olsson Frank Weeda Terman Matz PC in Washington.
CPSC spokesman Scott Wolfson declined to comment on what action may be taken.
Bloomberg News last week interviewed a customer in China who said his new Galaxy Note 7 had exploded less than 24 hours after it was delivered. The company said it was investigating the incident.
The owner of the phone involved in Wednesday’s incident told investigators it was a replacement Galaxy Note 7, said Captain Kevin Fletcher of the Louisville Metro Arson Squad.
(Also see: Samsung Says Over 1 Million People Using ‘Safe’ Galaxy Note 7 Globally)
“Due to the damage to the phone itself, we have not been able to physically confirm that yet,” Fletcher said during an interview. “We’re in the process of trying to attempt that.”
Samsung and US officials announced the recall after 92 reports of batteries overheating in the US, with 26 cases involving burns.
Samsung, FAA and Consumer Product Safety Commission representatives were in Louisville and working with arson investigators, Fletcher said. The phone remains in the possession of the arson squad, which is trying to schedule laboratory tests on the phone. It hasn’t been determined where or when those tests will occur, Fletcher said.
There was “extensive heat damage” to the phone and the plane’s carpet, he said.
Brian Green, the phone’s owner, told WAVE television news in Louisville that he got a replacement phone at a retail store after receiving an e-mail about the recall. “It was a good phone, by all indications, from all the information Samsung provided,” Green said. “But it just had its issues.”
On the plane, he turned the phone off and put it in his pocket. The device made a popping sound and sent “smoke just billowing out of my clothes,” Green said. He dropped it to avoid getting hurt.
Samsung said in a statement Wednesday that it couldn’t confirm that the incident involved the new phone but would have more information after examining the device. The company didn’t offer an update Thursday and a spokeswoman had no immediate reply to a request for comment on the possibility of another recall.
(Also see: Samsung Apologises for Sowing Confusion About Galaxy Note 7 in China)
The CPSC and Samsung have a range of options, from a broad new recall if systemic flaws are discovered in the replacement devices to no action if they don’t find any broader safety issues.
While the safety agency has legal authority to order recalls, that requires court action and could take months. Instead, it almost always operates in collaboration with companies, as it did with Samsung.
Samsung had raced to complete the introduction of the Galaxy Note 7 before Apple could unveil its new iPhone 7. The Galaxy Note 7 features a larger battery that can store more power than its predecessor.
(Also see: Samsung Galaxy Note 7 Recall: Rush to Beat Apple Sees Firm Trip on Quality Control)
A battery supplier made the power packs slightly too large for the phone’s compartment, the consumer safety commission said when announcing the recall September 15. As a result, the battery components were sometimes pinched, which could cause a short circuit, according to the agency.
Rechargeable lithium-ion cells like those in the Samsung phones are made with highly flammable chemicals. When they fail, they can generate intense heat or sparks that can ignite those chemicals.
The United Nations International Civil Aviation Organization earlier this year banned bulk shipments of lithium-ion cells from passenger flights after tests showed that they could violently explode even after being doused with fire extinguishers.
Three cargo aircraft have been destroyed in fires linked to lithium battery shipments since 2006.
© 2016 Bloomberg L.P.
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