It was a fine day at Los Angeles International Airport on Sept. 16 when a passenger’s ThinkPad laptop, containing a Sony Corp. battery already recalled by other companies, was suddenly wreathed in smoke and started emitting sparks.
Lenovo Group Ltd., the world’s third-largest PC manufacturer and the maker of the laptop, is still investigating the cause. The computer was doused with a fire extinguisher and no one was injured.
But playing it safe, Lenovo decided to recall 526,000 Sony-made lithium-ion batteries worldwide, saying they pose a “potential fire hazard.”
Sony, meanwhile, has explained that short circuits can occur “on rare occasions” when tiny metal particles come in contact with certain parts of the batteries. It is still trying to determine the conditions under which this can happen.
Lenovo is one of several companies to recall Sony lithium-ion batteries used in their computers. Dell Inc. and Apple Computer Inc. in August said they were recalling a total of some 5.9 million batteries, while Toshiba Corp. said it is recalling 340,000.
The same model battery was in a Dell laptop that burst into flames in Osaka earlier this year. Dramatic images of the incident were posted on the Internet.
Industry watchers wonder what has happened to Sony, once highly regarded for its global brand presence and innovative products like the Walkman. They ask, “Is Sony’s technology no longer trustworthy?”
Yasunori Tateishi, a journalist and author of “Sony Inside Story,” claims a restructuring program, in which the company has laid off about 30,000 employees worldwide in the past three years, is starting to affect performance.
“The restructuring plan has sliced off both muscle and fat, depriving Sony of its ‘stamina’ as a company,” Tateishi said. “It is not just about Sony’s technological performance.”
Top management has stressed that the restructuring program is a scrap-and-build scheme, reducing personnel from unprofitable projects and transferring them to core businesses, such as flat-screen TVs. In reality, Tateishi said, employees have been laid off equally in almost all sections.
Sony’s worldwide workforce has gone down from 182,000 in 2001 to 158,500 last March.
“When a problem like this erupts under depleted ‘stamina,’ there are going to be times when the staff cannot deal with it properly,” Tateishi said.
Criticism toward Sony’s technological performance is also growing from within its own ranks.
“If asked whether the ability of Sony as a manufacturer may be declining, I would have to say yes,” a candid SCE President Ken Kutaragi said last month.
He made the comment after announcing that SCE was delaying the launch of the PlayStation 3 in Europe, initially scheduled for November. A Sony subsidiary was having problems mass-producing the machine’s Blu-ray Disc drive because of problems with the blue laser diodes.
“Sony Computer Entertainment announced the shipping plan” because Sony said it could mass-produce the Blu-ray laser, Kutaragi said.
The PS3 will hit stores in Japan and the United States in November as scheduled, but in far fewer numbers than planned — 100,000 in Japan and 400,000 in the U.S. The company first planned to ship 4 million worldwide by the end of the year.
It was the second PS3 shipment delay this year. SCE initially planned to launch the PS3 worldwide in the spring but pushed that back to November.
Handicapped by the delay and the reduced number of units, SCE faces an uphill battle against Nintendo Co.’s new Wii game console, scheduled to go on sale in Japan in December, and Microsoft Corp.’s Xbox 360.
Concerns over Sony’s declining performance in its technology — combined with the fact that it has not come out with a hit product in the core electronics section in several years — is shared by the company’s top leaders.
When Sony tapped Ryoji Chubachi as president in March 2005, he emphasized the need to revive the electronics section to boost profits. Accounting for about 70 percent of Sony’s group sales, the section posted an operating loss of 30.9 billion yen in the latest business year to last March.
Sony’s strategy of concentrating its financial resources in the TV division appears to have paid off. Its new Bravia series of flat screen TV, which hit the stores in September 2005, grabbed the top share in the global market in the October-December period for liquid crystal display TVs.
But despite that success, Sony still has a long way to go, and analysts say the problem lies in the group’s corporate management itself.
Sony is well known for its liberal and independent corporate culture, giving engineers a fair degree of freedom as they try to develop innovative technologies and products.
But the independence of each division has become so great that top management has a hard time holding onto the reins, observers say.
“(Each division) has become so independent that they lack the synergy they should be able to enjoy,” said Masahiko Ishino, an analyst at Mitsubishi UFJ Securities Co.
Even though Sony has movie and music units within its group, they lack interaction in promotion and marketing, Ishino pointed out.
The blame falls on Howard Stringer, Sony’s chief executive officer and chairman who took the post in June 2005, said journalist Tateishi.
In the battery fiasco, Sony should have agreed to bring them all back at once instead of allowing each PC maker to separately announce a recall, giving the impression the problem remains unresolved, Tateishi said.
“Stringer living in the United States instead of in Tokyo, where the company headquarters is located, is not helping him take the initiative,” he said. “It means less communication with other executives and among their staffers.
“It slows down the speed of decision-making and leads to inconsistent decisions, which was what happened in handling the battery situation.”