BYD Dives After Nokia Recall
Hana R. Alberts, 11.10.09, 04:00 AM EST
One of China's wealthiest faces a speed bump.
HONG KONG -- Wang Chuanfu, now the second-richest man in China, dreams of turning his company into one of the world's leading electric car makers. But one of the divisions under his purview has hit a speed bump.
Nokia ( NOK - news - people ) is recalling millions of cellphone chargers manufactured this year by the battery-making arm of Chuanfu's Shenzhen-based BYD Co. Nokia, the largest mobile phone maker globally, announced Monday that it will offer a free replacement for three kinds of defective chargers, citing a risk of electrocution due to a loose plastic cover on some of the models.
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Yahoo! BuzzIt's a precautionary measure, both companies said, since no injury has been reported. While Nokia did not name the number of customers affected, reports have estimated the recall applies to 14 million chargers.
Investment by American billionaire Warren Buffett catapulted Wang, founder and chairman of BYD Electronic's parent company, BYD Co., to the top of the latest China rich list. Wang was China's wealthiest person, with a net worth of $5.8 billion, according to the Forbes ranking, which was based on Oct. 16 stock prices. His wealth was surpassed on Nov. 5 by Xu Jiayin, whose stake in property developer Evergrande Real Estate was worth $6.2 billion after the company's shares started trading on the Hong Kong Stock Exchange that day.
Buffett's MidAmerican Energy ( MDPWL.PK - news - people ) owns a 9.9% stake in BYD, which stands for "Build Your Dreams." As a result of that vote of confidence, BYD's stock has risen more than sixfold in the past seven months; its shares are trading at 97 times their 2008 earnings. Wang's wealth has ballooned to $5.8 billion, compared with $1.06 billion a year ago.
The specific phone charger models affected by the recall are the AC-3E and AC-3U made between June 15 and Aug. 9 of this year, as well as the AC-4U model made between Apr. 13 and Oct. 25, according to a BYD statement. Nokia's last recall was in 2007, when it found 40 million lithium-ion batteries produced by Japanese manufacturer Matsushita Battery Industrial posed a risk of overheating.
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Post a CommentBYD, which also makes chargers for Motorola ( MOT - news - people ), will cover the costs of the recall. In the statement BYD filed Monday with the Hong Kong stock exchange, it said it predicts no "material impact on its financial and operating conditions or its business prospects."
After Credit Suisse lowered its rating on the company, BYD Electronic's Hong-Kong traded shares fell 5.1% Tuesday, closing at 6.65 Hong Kong dollars (85 cents). It underperformed the benchmark Hang Sang Index, which gained 0.3% on the day. Meanwhile, parent company BYD Co.'s shares dropped only slightly, by 0.1%.
But while the recall will likely take little financial toll on BYD Electronic, it could mar its reputation and, as a result, dampen some of its recent successes, according to Credit Suisse.
It's a good thing for Wang that what's driving BYD's success is automobiles -- not rechargeable battery or mobile phone component sales. Revenues from cars soared by 133% in the first half of the year of 2009, to $1.3 billion, accounting for 55% of BYD's sales, compared with a 31% share a year ago; net profits nearly doubled from a year earlier, to $176 million.
Thomson Reuters contributed to this article.
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