Federal Register: February 2, 2007 (Volume 72, Number 22)

DOCID: fr02fe07-104 FR Doc E7-1735

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

Docket ID: [Docket No. NHTSA-2006-25592]

NOTICE: NOTICES

DOCID: fr02fe07-104

ACTION: Motor vehicle safety standards; exemption petitions, etc.:

DOCUMENT ACTION: Denial of application for a temporary exemption from air bag provisions of Federal Motor Vehicle Safety Standard No. 208, Occupant Crash Protection.

SUBJECT CATEGORY:

Morgan Motor Company Limited; Denial of Application for a Temporary Exemption From Air Bag Provisions of Federal Motor Vehicle Safety Standard No. 208

DOCUMENT SUMMARY:

This notice denies the petition of Morgan Motor Company, Limited (Morgan) for a temporary exemption from the air bag requirements of Federal Motor Vehicle Safety Standard (FMVSS) No. 208, [[Page 5100]]
Occupant Crash Protection, for the Morgan ``traditional roadster'' from September 2006 through September 2009. The basis of the application is that compliance would cause substantial economic hardship to a manufacturer that states it has tried in good faith to comply with the standard. NHTSA notes that Morgan has known since 1997 that it could not procure more air bags, but provided no evidence of attempts to secure an alternate source of air bags.

In accordance with the requirements of 49 U.S.C. 30113(b)(2), we published a Federal Register document on August 15, 2006 announcing receipt of Morgan's application.

SUMMARY:

Morgan Motor Co. Ltd.,

SUPPLEMENTAL INFORMATION

I. Background

Founded in 1909, Morgan is a small, privatelyowned vehicle manufacturer producing approximately 600 specialty sports cars per year.\1\ Morgan manufactures several models, but at present, only sells the Aero 8 in the U.S. Morgan intended to produce a vehicle line specific to the U.S. market, with Ford supplying the engine and transmission. However, for technical reasons, the project did not come to fruition, and Morgan temporarily stopped selling vehicles in the U.S. in 2004. In May 2005, Morgan obtained a temporary exemption from this agency's bumper standard and began selling the Aero 8 in the U.S. \1\ A manufacturer is eligible to apply for a hardship exemption if its total motor vehicle production in its most recent year of production does not exceed 10,000, as determined by the NHTSA Administrator (15 U.S.C. 1410(d)(1)).

On July 12, 2006 (71 FR 39386), NHTSA published a notice of receipt of five applications for temporary exemptions from the advanced air bag requirements \2\ of Federal Motor Vehicle Safety Standard (FMVSS) No. 208, Occupant Crash Protection. Among these petitions was an October 4, 2005 one from Morgan, for the Aero 8, which is discussed at pages 3939039391. Morgan's petition is included in the docket for that notice, i.e., Docket NHTSA200625324.
\2\ In 2000, NHTSA upgraded the requirements for air bags in passenger cars and light trucks, requiring what are commonly known as ``advanced air bags.'' The upgrade was designed to meet the goals of improving protection for occupants of all sizes, belted and unbelted, in moderate to high speed crashes, and of minimizing the risks posed by air bags to infants, children, and other occupants, especially in low speed crashes. See 65 FR 30680 (May 12, 2000) (Docket No. NHTSA20007013).

That notice of receipt did not address a second request by Morgan. In correspondence dated February 6, 2006, Morgan petitioned for an exemption for a different vehicle, its ``traditional roadster,'' from all air bag requirements in FMVSS No. 208 (i.e., the standard's requirement that vehicles be equipped with air bags as well as the advanced air bag requirements) from September 2006 through September 2009. That company titled this correspondence ``Supplement to Pending Morgan Part 555 Temporary Exemption.'' Morgan explained that it did not file a petition for the traditional roadster at the same time as it petitioned for the Aero 8 because in October 2005 (when the Aero 8 petition was filed), Morgan planned to sell only the Aero 8 in the U.S. from September 2006September 2009. The company did not plan to sell the traditional roadster during that period because the Rover engine used in the U.S. version of the traditional roadster for 35 years was no longer able to meet more stringent U.S. emissions standards.

In late 2005, Morgan found a U.S.certified Ford V6 engine for the U.S. traditional roadster and built a limited production run of 80 vehicles. The traditional roadster ``immediately sold out.'' In order to maintain U.S. sales and to produce revenue, Morgan then decided to continue to sell the U.S. traditional roadster. However, while the traditional roadster had had a mechanical Breed standard air bag system (i.e., nonadvanced air bag system) since 1996, those air bags are now out of production and are no longer available. Morgan indicated that the final limited production run of 80 vehicles using the Ford V6 engine used the last of these air bag systems. In addition, Morgan stated that the Aero 8 standard air bag system cannot be fitted to the traditional roadster because the interiors and chassis are completely different.

We note that in its February 2006 correspondence, Morgan asked that its exemption requests for the traditional roadster and Aero 8 be considered independently. On September 7, 2006 (71 FR 52851), NHTSA issued its determinations of five manufacturers petitioning for temporary exemptions from the advanced air bag requirements of Standard No. 208. Morgan's Aero 8 petition was addressed at pages 5286252865.

As noted above, NHTSA upgraded the requirements for air bags in 2000 to require advanced air bags in passenger cars and light trucks. The advanced air bag requirements were a culmination of a comprehensive plan that the agency announced in 1996 to address the adverse effects of air bags. This plan also included an extensive consumer education program to encourage the placement of children in rear seats. The new requirements were phased in beginning with the 2004 model year.

Small volume manufacturers (i.e., original vehicle manufacturers producing or assembling fewer than 5,000 vehicles annually for sale in the United States) were not subject to the advanced air bag requirements until September 1, 2006, but their efforts to bring their respective vehicles into compliance with these requirements began several years ago. However, because the new requirements were challenging, major air bag suppliers concentrated their efforts on working with large volume manufacturers and thus, until recently, small volume manufacturers had limited access to advanced air bag technology. Because of the complex nature of the requirements for protecting out ofposition occupants, ``offtheshelf'' systems could not be readily adopted. Further complicating matters, because small volume manufacturers build so few vehicles, the costs of developing custom advanced air bag systems, compared to potential profits, discouraged some air bag suppliers from working with small volume manufacturers.

The agency has carefully tracked occupant fatalities resulting from air bag deployment. Our data indicate that the agency's efforts in the area of consumer education and manufacturers' providing depowered air bags were successful in reducing air bag fatalities even before advanced air bag requirements were implemented.

As indicated above, for its traditional roadster, Morgan is requesting an exemption not only from the advanced air bag requirements, but also from the standard's requirements for air bags altogether. As always, we are concerned about the potential safety implications of any temporary exemptions granted by this agency. II. Morgan's Statement of Economic Hardship

In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR Part 555, Morgan petitioned NHTSA for a temporary exemption from standard and advanced air bag requirements of FMVSS No. 208. The basis for its application is that compliance would cause substantial economic hardship to a manufacturer that has tried in good faith to comply with the standard. The agency closely examines and considers the information provided by
[[Page 5101]]
manufacturers in support of these factors and in addition, pursuant to 49 U.S.C. 30113(b)(3)(A), determines whether an exemption is in the public interest and consistent with 49 U.S.C. Chapter 301.

Morgan stated that without the sales of the U.S. traditional roadster from September 2006September 2009, it would lose an additional $315,000 on top of the losses estimated in the October 2005 petition for the Aero.\3\ It further stated that if it were able to sell the traditional roadster in the U.S. during that period, ``the resulting revenues would also be critical to funding the development of the new advanced air bag for use in all Morgan vehicles destined for the U.S. after September 2009.'' Morgan's previous financial submission indicates that the company's losses over the last 5 years have totaled more than $3,600,000. In 2004, Morgan made a small profit for the first time in three years. Morgan predicted a net loss for fiscal year 2005. \3\ Estimated to be between $3,196,179 and $5,066,938. When costs for interior redesign, crash cars, and tooling are included, the estimate rises to between $5,648,679 and $7,519,438. (See 71 FR at 39391.)

Morgan stated that even adding the projected sales of the traditional roadster, the total U.S. ``exemptedcar sales'' forecast for September 2006September 2009 remain about the same: for 2006, 50 vehicles; for 2007, 250 vehicles; for 2008, 250 vehicles; and for 2009, 250 vehicles. Morgan also provided information on the sales of the 80 model year 2005 traditional roadsters (with the Ford V6 engine).

We note that in commenting on the agency's July 2006 notice concerning its request for a temporary exemption for the Aero 8, Morgan indicated that the temporary exemptions it was seeking would involve 400 Aero 8s over three years, and 400 traditional roadsters over three years.

III. Morgan's Statement of Good Faith Efforts to Comply

In its October 2005 submission, Morgan stated that it has been working with the air bag supplier Siemens to develop an advanced air bag system for the Aero 8. However, a lack of funds and technical problems precluded the implementation of an advanced air bag system for the Aero 8. It said that the minimum time needed to develop an advanced air bag system (provided that there is a source of revenue) is 2 years. Specific technical challenges include the following matters. Morgan does not have access to the necessary sensor technology to pursue the ``full suppression'' passenger air bag option. Due to the design of the Aero 8 platform dashboard, an entirely new interior solution and design must be developed. Chassis modifications are anticipated due to the originally stiff chassis design.

In its February 2006 petition, Morgan stated that it cannot install air bags in the U.S. traditional roadsters expected to be built between September 2006 and September 2009, even though the Aero 8 vehicles built during that period will have standard air bags. Morgan provided two reasons why the traditional roadster ``cannot have air bags'' even though the Aero 8 can. First, since 1996, the traditional roadsters have had a mechanical Breed standard air bag system. In 1997, Breed stopped production of the air bags fitted to the traditional roadsters. Thus, these bags are no longer available. Morgan states that it cannot obtain any more components. The final run of the 80 traditional roadsters with the Ford V6 engine used the last of the air bag systems.

Second, the Aero 8 standard air bag system cannot be fitted into the traditional roadster because the interiors and chassis are completely different. Morgan asserts that it would not be possible to integrate the Aero 8 air bag components into the traditional roadster's design because of both physical and operational differences. The Aero 8 air bag steering wheel will not fit in the traditional roadster's design, and the Aero 8 passenger air bag will not fit into the traditional roadster's instrument panel. In terms of air bag operation, to use the Aero 8 system in the traditional roadster, there would have to be a new deployment control/trigger system developed due to the significantly different crash pulses between the Aero 8 aluminum tub and the traditional roadster steel chassis.

Morgan stated that the traditional roadster will have an advanced air bag system at the same time that the Aero 8 will. At present, the traditional roadster uses the same design as it has had since 1936, a steel chassis with a wooden frame for the body panels. As part of the development of the advanced air bag system, Morgan plans to switch the traditional roadster onto the aluminum tub chassis used by the Aero 8. In this way, the advanced air bag program (through Siemens) that Morgan outlined in its Part 555 exemption petition for the Aero 8 will also be applicable to the traditional roadster. Morgan believes that when its advanced air bag system is ready in 2009, the air bag system will simultaneously be installed in both the Aero and traditional roadster models. Morgan asserts that it ``obviously cannot expend the resources to develop an air bag systemadvanced or standard'' for the traditional roadster that is separate from the air bag system being developed for the Aero 8. Morgan cites this inability as the reason why there cannot be an interim standard air bag system for the traditional roadster during the period September 2006September 2009.

IV. Morgan's Statement of Public Interest

In its original petition, which concerned the Aero 8, Morgan made several arguments supporting its view that the requested exemption is consistent with the public interest. According to Morgan, if the exemption were denied and Morgan stopped U.S. sales, Morgan's U.S. dealers would unavoidably have numerous layoffs, resulting in some loss of jobs in the U.S. Denial of an exemption would reduce consumer choice in the specialty sports car market sector in which Morgan cars compete. That company argued further that the Morgan vehicles would not be used extensively by owners, and would be unlikely to carry small children. Finally, according to Morgan, granting an exemption would assure the continued availability of proper parts and service support for existing Morgan owners. Without an exemption, Morgan would be forced out of the U.S. market, making it difficult for Morgan dealers to support existing customers.

We note that in its February 2006 correspondence requesting an exemption for the traditional roadster, Morgan generally did not discuss whether or how these arguments would apply to its request concerning the traditional roadster. We invited Morgan to address this issue. As indicated above, Morgan did argue that revenues from selling the traditional roadster would be critical to funding the development of the new advanced air bag for use in all Morgan vehicles destined for the U.S. after September 2009.

V. Notice of Receipt of Petition and Public Comments

On August 15, 2006 (71 FR 46974) (Docket No. NHTSA200625592), NHTSA published a Notice of Receipt of Application for a Temporary Exemption from Air Bag Provisions of Federal Motor Vehicle Safety Standard No. 208, and asked for public comment. In response, NHTSA received two sets of comments, both from Morgan and both undated.

In the first set of comments, Morgan compared its petition with the grant of a Part 555 advanced air bag exemption to Ferrari (see 71 FR 29389, May 22,
[[Page 5102]]
2006). Morgan stated that, like Ferrari, its product cycles must last longer than those typical in the industry. Morgan also stated that, as did Ferrari, it made a good faith effort, but could not find a practicable way to meet the air bag requirements. Morgan stated that its air bag supplier went out of business, which resulted in a lack of components. Morgan concluded that it needed the exemption in order to implement a new advanced air bag system on a new chassis. Morgan also commented on the safety implications of granting the petition and provided additional points on why granting Morgan's petitions would be ``in the public interest.''

Finally, Morgan updated its 2004 and 2005 financial statements as follows. Morgan's original submission indicated that in 2004, Morgan made a ``profit of 372,504 pounds.'' It was subsequently determined that Morgan showed a loss of 11,207 pounds (approximately $21,000). Morgan explained that the difference resulted from ``certain vehicle sales that in fact did not materialize.'' Morgan further stated that although it earlier stated that ``the results predicted * * * for 2005 were a small loss of [pound]3,248'' (approximately $6,000), the final accounts showed a larger loss of [pound]386,140 (approximately $723,000). Morgan explained that the difference arises out of the amortization of additional R & D costs.

In the second set of comments, Morgan compared its petition to that of Saleen, which recently received a oneyear extension of a complete air bag exemption, which was a partial grant of Saleen's petition for extension for three more years. Morgan stated that its petition differed from that of Saleen, which already had five years under a complete air bag exemption when it asked for an initial exemption. Morgan stressed that it was petitioning for an initial exemption, not an extension, and for a period of time that is ``half the total number of exemption years that Saleen has now received.'' Morgan also once again emphasized that it made good faith efforts to meet the air bag requirements, citing again that it used an air bag system that was in production for eight years, which can no longer be used because the supplier went out of business. Morgan also stated that the fact that it can no longer source components for its already existing air bag system further distinguishes Morgan from Saleen.

VI. Agency Decision

NHTSA denies Morgan's petition for the ``traditional roadster.'' Morgan has informed NHTSA that the traditional roadster will have the same advanced air bag system as the Aero 8 in 2009, when the traditional roadster's chassis will be modified to accommodate the advanced air bag system. In the following discussion, NHTSA focuses on Morgan's attempts to secure a standard air bag for its traditional roadsters for September 2006September 2009. In the background information regarding Morgan's attempts to secure both the standard and advanced air bags, Morgan states that its last source of standard air bags was in 1997 from Breed. Since Breed no longer manufactures the standard air bags, they are no longer available. In late 2005, after it found a U.S.certified Ford V6 engine for the U.S. traditional roadster, Morgan built a limited production run of 80 traditional roadsters, installing in them the last of the Breed standard air bags. Morgan informs us that the standard air bag system on its Aero 8 cannot be fitted to the traditional roadster because the interiors and chassis are completely different.

In its petition, Morgan simply states that it ``obviously cannot expend the resources to develop an air bag systemadvanced or standard'' for the traditional roadster that is separate from the air bag system being developed for the Aero 8. It appears that Morgan had no plans to sell the traditional roadster in the U.S. after 1997. It appears that it was only in late 2005, when Morgan equipped U.S. certified engine vehicles with the last of the standard air bags and had better than expected sales that it decided to attempt to reintroduce the traditional roadster into the U.S. market. However, the agency has no information indicating that Morgan attempted to find a new source for the standard air bag. Although Morgan may not have been able to develop its own standard air bag system for the traditional roadster, it did not describe any contacts it made with potential suppliers of standard air bags, or provide quotations (even on a confidential basis) from possible sources that would be qualified to develop standard air bags for the traditional roadster. Without this information, NHTSA is unable to determine the extent of the economic hardship it would cause Morgan to procure standard air bags in the Aero 8.

In its comments, Morgan compared its petition with those of Ferrari and Saleen (which received a one year temporary exemption out of the three years for which it petitioned). The major difference between Morgan's petition and those of Ferrari and Saleen is that Morgan's petition lacks the detail provided by Ferrari and Saleen describing how each company attempted to secure alternate sources of air bags, and how much it would cost each company, if a source were available.

In its petition, Ferrari provided the following:

1. Chronological analysis of Ferrari's efforts to comply, showing the relationship to the rulemaking history of the advanced air bag requirements.

2. Itemized costs of each component that would have to be modified in order to achieve compliance.

3. Discussion of alternative means of compliance and reasons for rejecting these alternatives.

4. List of air bag suppliers that were approached in hopes of procuring necessary components.

* * *

6. Corporate balance sheets for the past 3 years, and projected balance sheets if the petition is denied.\4\
\4\ See Ferrari S.p.A. and Ferrari North America, Inc. Grant of Application for a Temporary Exemption from S14.2. of Federal Motor Vehicle Safety Standard No. 208 (71 FR 29389, May 22, 2006) (Docket No. NHTSA200523093), at page 29390.

In its petition dated January 24, 2006, Saleen cited by name the air bag developers and suppliers it approached about assisting Saleen in developing an advanced air bag system (see page 3 of the petition). Saleen also provided pursuant to 49 CFR Part 555.6(a)(1), ``Engineering and financial information demonstrating in detail how compliance or failure to obtain an exemption would cause substantial economic hardship,'' and included information such as the vehicle components that would have to be modified to accommodate an air bag system (pages 34), and the itemized costs to modify each component (page 4).

Because Morgan did not provide a similar level of detail about the efforts it undertook to find alternative sources of a standard air bag and costs that would be entailed in modifying the traditional roadster to accommodate a standard air bag, NHTSA was unable to conclude that meeting the air bag requirements for Morgan would ``cause substantial economic hardship to a manufacturer that has tried to comply with the standard in good faith.''

Finally, NHTSA notes that in the August 15, 2006 notice of receipt of Morgan's application for a temporary exemption for the traditional roadster, we invited Morgan to address the issue of how granting Morgan's petition for exemption for the traditional roadster would be in the public interest. We noted that all the public interest arguments raised in the August 2006 notice were taken from Morgan's petition for the Aero 8. Morgan did not respond to NHTSA's request on this [[Page 5103]]
issue, and did not provide an independent basis for the agency's determining how granting Morgan's petition for the traditional roadster would be in the public interest.

Authority: 49 U.S.C. 30113; delegations of authority at 49 CFR 1.50. and 501.8.

Issued on: January 30, 2007.
Nicole R. Nason,
Administrator.
[FR Doc. E71735 Filed 2107; 8:45 am]
BILLING CODE 491059P

FOR FURTHER INFORMATION CONTACT

Ms. Dorothy Nakama in the Office of Chief Counsel, NCC112, (Phone: 2023662992; Fax 2023663820).