Samsung Electronics Co.'s recall of its fire-prone Galaxy Note 7 smartphone will be one of the biggest recalls ever in the technology industry. The South Korean conglomerate pulled the plug on the entire product line and slashed its third-quarter profit forecast by $2.3 billion.
On a 10-point scale measuring financial and reputational damage to a company, Samsung's recall ranks between 4 and 7, said Srinivas Reddy, director of the Center for Marketing Excellence at Singapore Management University who has researched product and brand failures. That's because the exploding phones -- while still "a calamity" for the company -- haven't killed anyone, Reddy said.
A damaged Samsung Galaxy Note 7.
Photographer: Shawn L. Minter via AP Photo
"The threat for Samsung is how soon they can get back," Reddy said. "If they don't get back soon, it provides a vacuum for others to creep in."
In a marketplace where everything from cars to cows can have deadly defects, Samsung's product failure is far from the worst in history. Merck & Co.'s 2004 scandal with its drug Vioxx -- which studies showed could increase the chance of heart attacks and strokes in some patients -- was a "catastrophic disaster," rating a 10 on Reddy's scale. Payouts from lawsuits and government investigations tallied more than $8.5 billion[1].
Other notorious recalls include:
1. Some versions of Ford Motor Co.'s Pinto compact car first introduced in 1971 came with a fatal design flaw -- impacts to the rear of the vehicle could cause fuel leaks and explosions. Ford recalled about 1.5 million Pintos in 1978 amid a U.S. government investigation and criminal charges in the state of Indiana. Ford shut down Pinto production soon thereafter.
A 1975 Ford Pinto with a warning sign.
Photographer: JCH/AP Photo
2. The largest car-related recall in history is yet to be completed and could result in bankruptcy[2] with billions of dollars in costs. Takata Corp.'s air-bags were meant to save lives in the event of a crash. Instead, the defective products became deadly cannons that shot shards of materials at passengers -- at least 16 people[3] have died in relation to the product.
3. Food staples like chicken, beef and peanut butter have been recalled because of mistakes or unhygienic conditions in manufacturing processes. Peanut Corp. of America used the eponymous nut in more than 800 products that were tainted with salmonella in 2009. The result was nine deaths, more than 700 illnesses and one of the biggest recalls in US history. The company collapsed and the former chief executive officer was sentenced to prison.
4. Even medicines taken to ease the pain have proven to be fatal. In 1982, Johnson & Johnson recalled about 31 million bottles of Tylenol after seven people in the Chicago area died from swallowing cyanide-spiked capsules.
A Dora the Explorer doll in 2007.
Photographer: Marco Flagg/Bloomberg
5. Some of the highest-profile cases have involved children. Mattel Inc. recalled about 21 million Chinese-made toys, including those based on characters from "Sesame Street" and "Dora the Explorer," after they were found to contain more than 180 times the allowable levels of lead paint. If ingested by children, lead can cause brain damage, learning problems and even death.
— With assistance by David Ramli, and Yoolim Lee
References
- ^ Merck to Pay $830 Million to Settle Vioxx Securities Claims (2) (www.bloomberg.com)
- ^ Takata Slumps as Bankruptcy Said to Be Weighed With Law Firm (2) (www.bloomberg.com)
- ^ Takata Lifelines Scrutinized by Carmakers Stuck in Cost Bind (2) (www.bloomberg.com)
