Sanyo slips on Lenovo recall of ThinkPad batteries

TOKYO, March 2 (Reuters) - Japan's loss-making Sanyo Electric Co. Ltd. (6764.T) shed 2.1 percent on Friday after Chinese computer maker Lenovo Group Ltd. (0992.HK) recalled 205,000 Sanyo-made computer battery packs because they pose a fire hazard.

The news, which comes as Sanyo is being investigated by Japan's securities watchdog, is reminiscent of similar recalls of millions of Sony Corp.-made (6758.T) batteries in laptops from Dell Inc. (DELL.O), Apple Inc. (AAPL.O) and Toshiba Corp. (6502.T) last year.

That recall put a big hole in Sony earnings.

Sanyo, the world's biggest maker of lithium-ion batteries, is in talks with Lenovo about how to split the cost of the recall, Sanyo spokesman Akihiko Oiwa said.

"We don't expect the sum to have an impact on earnings," Oiwa said. He declined to give an estimate for the total replacement bill.

The lithium-ion extended-life battery packs, jointly designed by Lenovo and Sanyo and tested by Lenovo, can overheat and spark if thrown hard onto the ground, the two companies said.

There were four reports in the United States of batteries overheating and damaging the notebook and one case in Europe. One of the cases caused minor property damage and another case caused minor eye irritation from smoke and sparks, according to Lenovo.

Sanyo is set to post a loss for the year ending March 31 for a third straight year due to sluggish digital camera sales and heavy restructuring costs -- conditions that forced it to issue 300 billion yen worth of preferred shares to Goldman Sachs (GS.N) and two other banks at a deep discount last year.

In September, Lenovo and IBM (IBM.N) recalled more than half a million notebook computer batteries made by Sony after a computer caught fire at Los Angeles International Airport.

Sony shares fell 3.6 percent during morning trade to 5,950 yen, while the benchmark Nikkei average .N225 fell 1.33 percent.

Both Sanyo, whose shares fell to 185 yen, and Lenovo said the defect this time is in the joint design of the battery packs, not in the internal battery cell, as in Sony's case.

Sanyo earlier this week said it is considering restating its parent earnings for the four years to March 2004, following a report that it may have failed to account for more than $1 billion in losses, mainly at subsidiaries.

The company said last week it was being investigated by Japan's Securities and Exchange Surveillance Commission.