Samsung, US Agree to Expanded Recall of 1.9 Million Galaxy Note 7 Units

Samsung, US Agree to Expanded Recall of 1.9 Million Galaxy Note 7 Units

Samsung Electronics Co. and the US Consumer Product Safety Commission agreed to terms for an expanded recall of original and replacement Galaxy Note 7 smartphones, increasing the number of devices that can be returned to 1.9 million.

All owners of the Galaxy Note 7s will be able to exchange their devices for another Samsung smartphone or receive a refund under the plan approved by the CPSC, the company said in a statement. Customers who exchange the Galaxy Note 7 for a Samsung device will get a $100 credit, while those opting for an alternative brand will receive $25 credit.

(Also see: Samsung Galaxy Note 7 Recall: The Name That Wasn't Meant to Be)

Samsung cut its third-quarter operating profit by $2.3 billion on Wednesday after deciding to permanently end production of the troubled smartphone. The Galaxy Note 7 devices were overheating and catching fire even after a recall that was supposed to fix the problem.

"We are committed to doing everything we can to make this right," said Tim Baxter, president and chief operating officer, Samsung Electronics America.

The US consumer agency had announced voluntary recall of 1 million Galaxy Note 7s on September 15. The CPSC mainly enters into agreements with companies for recalls rather than going to court to compel action.

(Also see: Samsung Reassures Consumers That Galaxy S7 Is Safe, Hasn't Been Recalled)

"The recall expansion announcement made just now won't make any difference on the cost that Samsung has reflected on its latest revised earnings estimates," said Song Myung-sup, a Seoul-based analyst at HI Investment & Securities Co. "However, winning back the customers' trust is a different issue. That side effect will linger until early next year."

(Also see: Samsung Confirms It Is Sending Fire-Proof Boxes for Galaxy Note 7 Returns)

After three straight days of declines, Samsung shares rebounded today, rising 1.4 percent in Seoul trading. The stock has slumped 10 percent in the previous three trading days, wiping $21 billion (roughly Rs. 1,50,511 crores) from its market value.

 

© 2016 Bloomberg L.P.

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