Article links Dell product recall, increase of stock and positive image.

A story entitled "Recall of Defect Product Works as Advertising" (in Dutch) tells us that the product recall of Dell has increased their shares on the stock exchange and is even good for their public image. The story first appeared in NRC Handelsblad, a Dutch newspaper.

The story, just published on the news site of Telenet (a telco operator) also quotes a specialized lawyer from Nauta Dutilh called Stijn Franken who said the following:

"Recall is good for 2 reasons; the company gets in the news and with a positive story, namely that it is taking active measures against damage" (translated from Dutch)

The reporter goes on to concluding that this strategy worked for Dell because their shares have increased in value with 4% on the NY stock exchange.

Now this is really jumping conclusions don't you think. Making assumptions that all this - product recall, positive impact on image and increase in share value - is linked is a real big leap of faith. I have a bit of an issue with this article, both with the content and with it's form:

• Product recalls after product failure are never "a positive thing"; it is hard work, takes up a lot of resources and has definitely an impact on the image of the company. That it will have a positive or negative impact on the image totally depends on how the company handles the recall and how it communicates about it.

• A preemptive product recall (before anything has gone wrong) has more chances to show good citizenship and business ethics than a recall after things blew up or caught fire like they did in this specific case.

• Assuming that a product recall positively influences the shares on the stock exchange is dangerous. Major recalls can affect share value but before printing this as it has been in this article requires proof and analysis, not just a quote from a specialist.

What are your thoughts on this ? Let me know.

PS: Infoworld claims in a story that both Dell and Sony already knew about the battery issues 10 months ago.

Technorati : NRC, NRC+handelsblad, Nauta+Dutilh, Stijn+Franken, crisis, dell, dell+hell, product+recall, telenet

Comments

[Charlotte]

With all of the flamin' pictures circulating around and the jokes at Dell's expense, it doesn't seem that Dell's image is being positively impacted by this recall.

I just came across Richard Levick's take. He seems to think Dell would have been better off if they were setup to predict this type of thing early on and really stamp out the fire convincingly before it got out of control.

http://www.levick.com/resources/topics/articles/dell_battery_crisis.php