Samsung struggles to limit damage from smartphone recall

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Samsung struggles to limit damage from smartphone recall
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Heated meetings, sacrificed holidays and teams monitoring social media round-the-clock to track whether there have been any new smartphone fires: Samsung Electronics is still trying to limit the damage of a record global recall announced more than a month ago.

Samsung said most of the fire-prone Galaxy Note 7s have been recovered in major markets.

But the trouble is not over for either South Korea's largest listed company or mobile division chief Koh Dong-jin, who bowed in a public apology last month, less than a year into the job.

Samsung's hopes of finally getting ahead of the crisis took a knock on Wednesday. A replacement model began smoking inside a US plane on Wednesday, the family that owns it said, prompting fresh investigations by safety regulators.

And on top of that, Samsung is being pressured by one of the world's most aggressive hedge funds, Elliott Management, to split the company and pay out US$27 billion in a special dividend.

Unlucky turn

Ahead of the Note 7's August launch, Koh told other executives how lucky he was: taking charge of the world's largest smartphone business just before it began to reverse two years of declining sales and market share.

Instead, he was soon weathering international aviation bans on the phone, online jokes and criticism over Samsung's handling of the process. It initially wiped almost US$16 billion off the company's market value.

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.

Samsung told Reuters in a statement it was not thinking about management or organizational changes, and is focused on the Note 7 replacement process.

Samsung insiders say that the unassuming Koh needs to get sales moving again so that the company can salvage the fourth quarter and defend market share against Apple and other rivals.

"If this doesn't get fixed quickly, everybody loses," said a second Samsung source, who didn't want to be named due to the sensitivity of the issue, adding that as yet there was no finger-pointing at Koh or other executives.

TV ads for the Note 7 resumed in South Korea last week, with additional incentives for those buying the device in October.

"We will give Note 7 all the support we were going to give it in the first place," David Lowes, Samsung's chief marketing officer in Europe, told Reuters. "There is no backing away from it."

Too much, too soon?

Some of the toughest criticism levelled at Samsung has been over its fumbling of the recall.

It warned affected users to immediately turn off their phones only after the same warning was issued by the US consumer protection agency. The regulator criticised Samsung for not following proper recall procedures.

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.

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