Samsung Galaxy Note 7 replacement model emits smoke on plane
Samsung has been struggling to limit the damage done to its business, reputation and funds caused by its fire-prone Note 7 smartphone just as a replacement model began smoking inside a US plane yesterday.
While the South Korean technology giant has said that most of the dangerous phones have been recovered in major markets, fresh investigations have been started by the Consumer Product Safety Commission and the Federal Aviation Administration following the plane incident.
A problem with the newly manufactured, supposedly safe, Note 7 models would create an additional embarrassing and potentially costly chapter to the global scandal.
Indiana passenger Brian Green’s phone began emitting smoke inside a Southwest Airlines Co flight to Baltimore from Louisville, Kentucky. This is despite Green replacing his Note 7 about two weeks ago after getting a text message from Samsung.
Samsung said in a statement it was working to recover the device and to understand the cause. “Until we are able to retrieve the device, we cannot confirm that this incident involves the new Note 7,” it said.
The world’s largest smartphone maker announced a global recall of at least 2.5 million of its flagship Note 7 smartphones in 10 markets last month due to faulty batteries causing some phones to catch fire.
The cause of the fault has been blamed on its accelerated phone development cycles, resulting from its attempt to compete with Apple, which may have taken a hit to its quality testing procedures.
Samsung is also being pressured by one of the world’s most aggressive hedge funds, Elliott Management, to split the company and pay out $27bn (£21bn) in a special dividend. Almost $16bn was wiped off the company’s market value after details of the exploding devices emerged.
The crisis is worse than any other the company has faced, said one Samsung insider, who declined to be named due to the sensitivity of the subject. “It directly impacts our products, our brand, and trust with consumers,” this person said.
“If this doesn't get fixed quickly, everybody loses,” said a second Samsung source.
The company has been criticised for the way in which it has handled the recall. Some consumers also complained about the replacement phones, either saying they lose power too quickly or run too hot.
In China, where Samsung says its Note 7 uses safe batteries, some users claimed their phones caught fire, while it was forced to delay resuming sales in South Korea due to a slow recall progress.
Eric Schiffer, brand strategy expert and chairman of Reputation Management Consultants based in Los Angeles, said Samsung needs to woo its customers.
“They need to be very transparent. Invite customers who have been affected to the plants, let go of whoever was in charge of this debacle and accept responsibility and show goodwill by sending new phones, giving discounts - anything to show the importance of the customer relationship,” he said.
Samsung has formed a dedicated team of public relations staff to speed up decision making and contain damage, the company sources said.
Missed sales and recall expenses could cost Samsung nearly $5bn this year, analysts say, but the risk to its brand is as yet unquantifiable.