FirstFT: VW cars impounded in US ports over banned Chinese part

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Good morning. Thousands of Porsche, Bentley and Audi cars have been impounded in US ports after a supplier to parent group Volkswagen found a Chinese subcomponent in the vehicles that breached anti-forced labour laws.

According to two people with knowledge of the matter, the carmaker has delayed delivery of the vehicles until as late as the end of March as it replaces an electronic component that was found to have come from “western China”.

The people stressed that VW was not aware of the origin of the part, which was sourced by an indirect supplier further down its supply chain, until the supplier alerted it to the issue. They added that VW notified US authorities as soon as it was made aware of the part’s origin.

The US prohibits the import of products that have been made with forced labour in the western Xinjiang region and other areas in China under the Uyghur Forced Labor Prevention Act of 2021. The people would not confirm whether the part in question was produced in Xinjiang itself.

Separately, VW yesterday said it would discuss “the future direction of business” in the Xinjiang region with its Chinese joint venture partner SAIC, following the publication of fresh allegations of forced labour in German media.

Here’s what else we know about the car backlog.

And here’s what I’m keeping tabs on today:

• Economic data: Japan announces preliminary fourth-quarter GDP estimate.

• Reports: International Energy Agency publishes its Oil Market Report.

• Nato: The military alliance holds its defence ministers meeting in Brussels, chaired by secretary-general Jens Stoltenberg.

Five more top stories

1. Controversial former general Prabowo Subianto won a decisive victory in Indonesia’s presidential election yesterday, according to early projections by polling groups. Prabowo’s pledge to continue outgoing President Joko Widodo’s policies has reassured investors and the Indonesian public. But some political analysts have raised concerns over Widodo’s unusual tacit endorsement of Prabowo as his successor and the ex-general’s alleged past involvement in human rights abuses.

2. Israel has warned that negotiations on a deal to secure the release of hostages held in Gaza would not advance until Hamas changed its position. The statement rejecting Hamas’s “delusional demands” came a day after Israeli spy chiefs held talks with CIA director Bill Burns in Cairo, in a sign that talks brokered by the US, Qatar and Egypt have struggled to make any breakthrough.

• Cross-border fire: Three Lebanese civilians were killed yesterday as Israel retaliated with air strikes for a suspected Hizbollah rocket barrage that had earlier killed an Israeli soldier and injured several others.

3. Mike Gallagher, head of the US House China committee, will visit Taipei next week with a group of lawmakers in a show of support for Lai Ching-te ahead of his May inauguration as president of Taiwan. The hawkish Wisconsin Republican will arrive in Taiwan on February 21, according to three people familiar with his plan. Here’s more on the rising US-China tensions over Taiwan.

• More US news: The Republican chair of the House Intelligence Committee has called on the White House to declassify information about a “serious national security threat”, and emailed members of Congress about a “destabilising foreign military capability”.

4. A long-standing US investor in one of Toyota’s largest subsidiaries has blamed the sprawling car group’s structure for recent data scandals and called for an urgent governance overhaul. GMO’s head of Japan equities Drew Edwards said in a letter, seen by the FT, that recent scandals were “just one symptom of a larger problem of broken corporate governance and culture at TIC and Toyota Group as a whole”.

5. Uber unveiled an inaugural $7bn share buyback programme yesterday, days after reporting its first full year of operating profit, making it the latest Silicon Valley company to step up its returns to shareholders. The news sent Uber’s shares up as much as 10 per cent in early New York trading yesterday. Here’s what the buybacks mean for the tech companies.

News in-depth

Once the only option for merchants, factory owners in rural China say Alibaba’s ecommerce platforms do not guarantee sales and are beginning to put their wares on rival online stores such as Pinduoduo, JD.com and ByteDance’s Douyin. The diversification of online sales in China underlines the problems facing Alibaba, which is attempting an ambitious restructuring while also trying to resurrect its main ecommerce business.

We’re also reading . . . 

• China’s economy: Given the biggest economic problem is lack of confidence in government, wiping out bad economic data will only backfire, writes Cornell University’s Eswar Prasad.

• India opposition alliance fractures: India’s best chance of challenging Narendra Modi is disintegrating months before national elections, John Reed and Jyotsna Singh report.

• AI hype: The buzz around the new technology brings to mind the dotcom bubble era, writes June Yoon, and transformation may take years longer than record share prices and funding targets suggest.

Map of the day

Attacks on ships in the Red Sea by Yemen’s Houthis have led car-carrier operators like Wallenius Wilhelmsen to avoid the trading route and instead divert vessels around the Cape of Good Hope. Despite what it described as “uncertainties” over the Red Sea route, WW predicted strong results for 2024 after making record profits last year as growing exports of Chinese electric vehicles helped drive demand.

Take a break from the news

Enjoy this deep dive into Australia’s other great reef: the Rowley Shoals. Isolated far off north-west Australia and protected from commercial fishing, only a few hundred people get to see the corals each year. But the Rowley Shoals are one of the world’s finest places to scuba and snorkel.

Additional contributions from Tee Zhuo and Gordon Smith