Why It’s So Hard to Crack Down on Deadly Counterfeit Air-Bag Parts

0:00This podcast is brought to you by ReliaQuest. Cyber criminals are constantly attacking. They want your data. They want your identity. They want your innovation. ReliaQuest fortifies your business with agentic defense, AI that detects, contains, and eliminates cyber threats in minutes. It helps your security team move faster at the work that matters most to protect the business now and delivers insights to help them predict what's next. ReliaQuest, agentic defense for the enterprise. Learn more at ReliaQuest.com. That's R-E-L-I-A-Q-U-E-S-T.com.

0:34Rebecca Picciotto:Continued exchanges of fire with Iran could put the U.S.'s energy security at risk. And why it's so difficult to crack down on airbags with counterfeit parts that have killed at least 10 people. Plus, the Manhattan high-rise scare is a reality check moment for developers. Ultimately, there's a question on, are lenders and investors going to have to reprice the risk of doing an office-to-residential conversion? It's Thursday, July 9th. I'm Alex Osileff for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today. We're going to be talking about the real estate industry later on today's show.

1:14Rebecca Picciotto:But first, a bit of data on the housing market. The spring selling season has ended, and it wasn't great. The National Association of Realtors said today that U.S. existing home sales fell 2.4 percent in June, worse than expected. Economists have dimmed their projections for the year. That's because of higher mortgage rates and record home prices. The Federal Reserve has named more than a dozen external advisors to lead five task forces that will examine the central bank's operations. The picks are mainly academics, but there's also the former CEO of Walmart, Doug McMillan, and venture capitalist Mark Andreessen, who's a big supporter of the Trump administration.

1:51Rebecca Picciotto:The task forces are part of a reform effort from Fed Chairman Kevin Warsh. They'll look at the Fed's approach to the jobs market, inflation, economic data, the Fed's bond portfolio, and how it handles communications with the public. Turning to the auto industry, a federal safety regulator is warning that robo-taxis are a danger to the public because there are times when they drive into active emergency scenes and they block the way for ambulances and firefighters. The National Highway Traffic Safety Administration says that the cars also haven't been able to recognize traffic cones, flashing lights, and other safety threats like smoke and fire.

2:27Rebecca Picciotto:The robotaxi industry is active in Texas, California, Arizona, and other states. Alphabet-owned Waymo has become the early leader. The traffic safety regulator says the industry has the potential to reduce traffic fatalities. But the agency also says that cars need to be held to the same standard as human drivers when they're dealing with law enforcement. The agency is setting up meetings with the companies to hear their solutions. Waymo and Tesla say their vehicles are designed to respond to emergency responders. There's no doubt that airbags in cars have saved tens of thousands of lives. But sometimes they're also dangerous.

3:02Rebecca Picciotto:The latest problem? Airbags with counterfeit parts that are marked as being made by a company from China. Federal safety officials have known about these for a while, and they've tied the dangerous part to at least 10 deaths in the U.S. since 2023. Now they're trying to stop more drivers from being killed or injured. Journal Auto's reporter Ryan Felton has been digging into this, and he says it's a pretty narrow segment of vehicles that are affected. If your car has been in an accident severe enough to cause airbags to deploy, that's really the key category of vehicles that could be at risk, because to safely get back on the road, people want to have the airbags that are functioning.

3:40Rebecca Picciotto:The issue comes from airbag parts that appear to originate from a Chinese manufacturer known as DTN airbag. Often, mechanics and dealerships will buy these replacement airbags from sites like eBay and Facebook Marketplace. And sometimes they're even labeled with counterfeit logos of American car makers. Ryan says this complicated market makes it a lot more difficult for regulators to crack down on the dangerous parts. This isn't tracked diligently like the way that new car parts or authenticated parts are tracked. So regulators and investigators have to really do some forensic digging to figure out like who brought these in, who sold them, what person bought the car and who installed this airbag.

4:22And it gets unwieldy pretty fast with every single incident. And that's kind of just been the key challenge. DTN itself has claimed that it believes the products themselves that are being found in these airbags here aren't actually their own and were counterfeited of their own products. And so regulators took that point into consideration. And when these airbag parts were banned, they banned specifically the airbag parts with this particular part number that's been in question. About a decade ago, there was this recall involving this Japanese supplier named Takata, and Takata made airbags for new cars.

5:01They had airbags that were similarly rupturing and exploding in terrible ways in otherwise survivable crashes. What's different here is regulators and investigators are dealing with what's essentially a gray market for secondary products where Takata, you could at least put a number on it. Like X million, tens of millions of vehicles have these airbags that need to be fixed. Like here, they can roughly ballpark how many people might have airbags like it, but you really can't pin it down oftentimes until an incident happens. And that's kind of the scary part.

5:36Rebecca Picciotto:So what can listeners do? Ryan says the good news is that a mechanic can check your car. The bad news is it might not be free. Understanding your vehicle's history and if it's been in an accident where airbags have deployed, that's kind of one big tell to go get it checked. There's guidance out there now for technicians on what to be looking for. And unfortunately, that is something that costs money. In a traditional recall, the fix is done for free by law. You bring it in and the automakers cover the cost. But because we're dealing with an unknown variable and no one knows who brought them in or who assembled them, there's no free fix to make.

6:17So essentially it's people have to be able to pay for inspections to get the car looked at to see if these airbag parts are inside.

6:24Rebecca Picciotto:Coming up, in court today, evidence in the Charlie Kirk case shows the accused killer appearing to take responsibility for Kirk's death. More after the break.

6:37Rebecca Picciotto:Hi, this is Alex Osula, host of the WSJ's What's News podcast. We bring you the biggest news of the day, from business and finance to global and political developments that move markets. If you're looking for more insights and tools to understand the latest headlines, consider becoming a subscriber to The Wall Street Journal. Visit subscribe.wsj.com slash what's news to subscribe now.

7:06Rebecca Picciotto:With the U.S. and Iran trading fire in the largest escalation since last month's peace deal, the ceasefire framework is in limbo. It's not clear if the latest strikes signal a return to all-out war or if they're a violent detour back to negotiations. Though global oil prices started the day near their highest point since late June, they fell throughout the day, with Brent crude hovering this afternoon around$76 a barrel. But some energy executives and analysts are wary. U.S. oil stockpiles are low, and they will take a while to replenish. If there's another disruption, like another closure of the Strait of Hormuz, and the U.S.

7:41Rebecca Picciotto:has to draw down its stockpiles again, that would potentially limit the country's ability to respond to things like natural disasters, and it could also push fuel prices up again. Meanwhile, worries about war subsided for stock investors today. All three indexes were up, led by the Nasdaq, which rose 1.3 percent. The 10-year Treasury broke a seven-day streak of rising yields. In Utah, the man charged in the killing of Charlie Kirk is in court this week for hearings where prosecutors must demonstrate that they have enough evidence for a trial. Prosecutors today played tape testimony from Lance Twiggs.

8:16Rebecca Picciotto:That's the former roommate and romantic partner of the suspect, Tyler Robinson. Twiggs said Robinson had sent messages taking responsibility for Kirk's death. Twiggs told prosecutors that he spoke with Robinson in person the day after. I just asked him in person if what he said was true the night before, and he said it was. I started crying a little bit and said he wishes he hadn't done it. Robinson has been in custody since his arrest days after the shooting in September. He faces a charge of aggravated murder that could carry a death penalty sentence.

8:52Rebecca Picciotto:Earlier this week, we told you about a Manhattan high-rise that was at risk of a partial collapse. City officials say this building could face what they're calling a localized collapse. You can see here these are columns on the 21st floor that have started to buckle. Tonight construction teams working around the clock to stabilize that high rise. City officials said yesterday that the building is now stable and hasn't shown any new movement. And the contractor and the city are discussing long-term solutions for the building. That building is the site of the largest ever planned office to residential conversion in the U.S.

9:26Rebecca Picciotto:Developers were working on turning the former Pfizer headquarters into 1 ,600 new residences, along with a rooftop pool, fitness center, and ground floor shops. In fact, the past five years have been a boom time for office-to-residential conversions. Now, though, some fear the Manhattan incident could be a reality check. WSJ residential real estate reporter Rebecca Picciotto is here to discuss. Rebecca, the apartment search website Rent Cafe says more than 90 ,000 units from office-to-apartment conversions were in the pipeline across the U.S. at the start of this year. That's up 28 percent from a year earlier.

9:59Rebecca Picciotto:Why have office to apartment conversions become so popular? Private developers, they see it as a cost-saving, time-saving construction technique compared to building from scratch. And public officials like it because it feels like a win-win. They are addressing their dire housing shortages in their cities with the empty office space that's plaguing their downtowns and lingering from the pandemic shift to remote work. Some developers you spoke with are concerned that the incident with the Manhattan building might have a chilling effect on other office-to-apartment conversion projects. Where might that new reluctance come from?

10:35Metroloft, the developer on the old Pfizer headquarters, is one of the most prolific office-to-residential conversion developers in New York City. So for this to happen to their project raises a real question. They were widening 15 of the top floors and adding a ton of extra weight to the building. And that's ultimately what the developer says caused the structural damage. A lot of investors and lenders are now rethinking the calculus on how complicated do we want to make this already complex real estate transformation, even if this is a freak accident. Builders' insurance could become more expensive.

11:10You might have lenders and investors requiring developers to provide more extensive safety reviews and safety assurances, that could take extra time. Debt might become less available. So all of the momentum that was driving this office-to-apartment conversion boom could start to slow down.

11:30Rebecca Picciotto:That was The Journal's Rebecca Picciotto. Thanks, Rebecca. Thanks for having me. And that's what's news for this Thursday afternoon. Today's show is produced by Anthony Bansi and Danny Lewis with supervising producer Tali Arbel. I'm Alex Osaleff of The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.

12:13If you're looking for more news and tools that you can use to help navigate the markets, consider becoming a subscriber to The Wall Street Journal.