[Federal Register Volume 71, Number 173 (Thursday, September 7, 2006)]
[Notices]
[Pages 52851-52868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-7487]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2006-25324, Notice 2]


Automobili Lamborghini SpA; Bugatti Automobiles S.A.S. and 
Bugatti Engineering GmbH; Group Lotus Plc; Morgan Motor Company 
Limited; Maserati; Grant of Applications for a Temporary Exemption From 
Advanced Air Bag Requirements of FMVSS No. 208

AGENCY: National Highway Traffic Safety Administration (NHTSA), 
Department of Transportation (DOT).

ACTION: Grant of applications for temporary exemptions from certain 
advanced air bag provisions of Federal Motor Vehicle Safety Standard 
No. 208, Occupant Crash Protection.

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SUMMARY: This notice grants the Automobili Lamborghini SpA 
(``Lamborghini''); Bugatti Automobiles S.A.S. and Bugatti Engineering 
GmbH (collectively, ``Bugatti''); Group Lotus Plc (``Lotus''); Morgan 
Motor Company Limited (``Morgan''); and Maserati SpA (``Maserati'') 
applications for temporary exemption from certain advanced air bag 
requirements of Federal Motor Vehicle Safety Standard (FMVSS) No. 208, 
Occupant Crash Protection. The exemptions apply to the Lamborghini 
Murcielago, the Bugatti Veyron 16.4, the Lotus Elise, the Morgan Aero 
8, and the Maserati Coupe/Spyder. In accordance with 49 CFR part 555, 
the basis for each grant is that compliance would cause substantial 
economic hardship to a manufacturer that has tried in good faith to 
comply with the standard, and the exemption would have a negligible 
impact on motor vehicle safety.
    The exemptions for the Lamborghini Murcielago, the Lotus Elise, and 
the Morgan Aero 8 are effective September 1, 2006 and will remain in 
effect until August 31, 2009. The exemption for the Bugatti Veyron 16.4 
is effective from September 1, 2006 and will remain in effect until 
September 1, 2008. The exemption for the Maserati Coupe/Spyder is 
effective from September 1, 2006 and will remain in effect until 
December 31, 2007.
    In accordance with the requirements of 49 U.S.C. 30113(b)(2), we 
published a notice of receipt of the applications \1\ in the Federal 
Register and asked for public comments.\2\ We received comments from 
four of the petitioners (Lamborghini, Lotus, Morgan, and Maserati), one 
trade organization, and one individual. Please note that, as was done 
with the notice of receipt, we are publishing this decision notice for 
the five applications together to ensure efficient use of agency 
resources and to facilitate the timely processing of the applications. 
However, NHTSA considered each application individually, and our 
decision regarding the temporary exemption for each company is 
discussed separately below.
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    \1\ To view the applications, go to: http://dms.dot.gov/search/searchFormSimple.cfm and enter the Docket No. NHTSA-2006-25324.
    \2\ See 71 FR 39386 (July 12, 2006) (Docket No. NHTSA-2006-
25324-6).

DATES: The exemptions from the specified provisions of FMVSS No. 208 
for the Lamborghini Murcielago, the Lotus Elise, and the Morgan Aero 8 
are effective September 1, 2006 until August 31, 2009. The exemption 
for the Bugatti Veyron 16.4 is effective from September 1, 2006 until 
September 1, 2008. The exemption for the Maserati Coupe/Spyder is 
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effective from September 1, 2006 until December 31, 2007.

FOR FURTHER INFORMATION CONTACT: Mr. Ed Glancy or Mr. Eric Stas in the 
Office of the Chief Counsel at the National Highway Traffic Safety 
Administration (NCC-112), 400 Seventh Street, SW., Room 5215, 
Washington, DC 20590 (Phone: 202-366-2992; Fax 202-366-3820).

SUPPLEMENTARY INFORMATION

I. Advanced Air Bag Requirements and Small Volume Manufacturers

    In 2000, NHTSA upgraded the requirements for air bags in passenger 
cars and light trucks, requiring what are commonly known as ``advanced 
air bags.'' \3\ 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,

[[Page 52852]]

and other occupants, especially in low speed crashes.
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    \3\ See 65 FR 30680 (May 12, 2000) (Docket No. NHTSA-2000-7013).
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    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) are 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 
nature of the requirements for protecting out-of-position occupants, 
``off-the-shelf'' 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 always, we are concerned about the potential safety implication 
of any temporary exemptions granted by this agency. In the present 
case, we are addressing five separate petitions for a temporary 
exemption from the advanced air bag requirements, each of which is 
discussed individually below. The petitioners are all manufacturers of 
very expensive, low volume, exotic sports cars.

II. Overview of Petitions for Economic Hardship Exemption

    In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR 
part 555, Lamborghini, Bugatti, Lotus, Morgan, and Maserati have 
separately petitioned the agency for a temporary exemption from certain 
advanced air bag requirements of FMVSS No. 208. The basis for each 
application is that compliance would cause substantial economic 
hardship \4\ to a manufacturer that has tried in good faith to comply 
with the standard. The agency closely examines and considers the 
information provided by manufacturers in support of these factors, and, 
in addition, pursuant to 49 U.S.C. 30113(b)(3)(A), determines whether 
exemption is in the public interest and consistent with the Safety 
Act.\5\
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    \4\ When considering financial matters involving companies based 
in the European Union (EU), it is important to recognize that EU and 
U.S. accounting principles have certain differences in their 
treatment of revenue, expenses, and profits. Public statements by EU 
manufacturers relating to financial results should be understood in 
this context. This agency analyzes claims of financial hardship 
carefully and in accordance with U.S. accounting principles.
    \5\ The Safety Act is codified as Title 49, United States Code, 
Chapter 301.
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    A manufacturer is eligible to apply for a hardship exemption if its 
total motor vehicle production in its most recent year of production 
did not exceed 10,000 vehicles, as determined by the NHTSA 
Administrator (49 U.S.C. 30113). In determining whether a manufacturer 
of a vehicle meets that criterion, NHTSA considers whether a second 
vehicle manufacturer also might be deemed the manufacturer of that 
vehicle. The statutory provisions governing motor vehicle safety (49 
U.S.C. Chapter 301) do not include any provision indicating that a 
manufacturer might have substantial responsibility as manufacturer of a 
vehicle simply because it owns or controls a second manufacturer that 
assembled that vehicle. However, the agency considers the statutory 
definition of ``manufacturer'' (49 U.S.C. 30102) to be sufficiently 
broad to include sponsors, depending on the circumstances. Thus, NHTSA 
has stated that a manufacturer may be deemed to be a sponsor and thus a 
manufacturer of a vehicle assembled by a second manufacturer if the 
first manufacturer had a substantial role in the development and 
manufacturing process of that vehicle.
    Finally, while 49 U.S.C. 30113(b) states that exemptions from a 
Safety Act standard are to be granted on a ``temporary basis,'' \6\ the 
statute also expressly provides for renewal of an exemption on 
reapplication. Manufacturers are nevertheless cautioned that the 
agency's decision to grant an initial petition in no way predetermines 
that the agency will repeatedly grant renewal petitions, thereby 
imparting semi-permanent exemption from a safety standard. Exempted 
manufacturers seeking renewal must bear in mind that the agency is 
directed to consider financial hardship as but one factor, along with 
the manufacturer's on-going good faith efforts to comply with the 
regulation, the public interest, consistency with Safety Act, 
generally, as well as, other such matters as provided in the statute.
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    \6\ 49 U.S.C. 30113(b)(1).
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III. Lamborghini

    Background. Lamborghini is an Italian corporation formed in 1963 to 
produce high-performance sports cars. This application concerns the 
Lamborghini Murcielago, a vehicle which was developed in the mid-1990s 
and which is now scheduled to continue in production until 2009. 
Originally, Lamborghini planned to begin selling the Murcielago in 1999 
and to end production before September 2006. However, because of 
financial hardship and a change in corporate ownership, the petitioner 
did not begin sales of the Murcielago until the very end of 2001, and 
it is now forced to extend the product cycle of this vehicle.
    Lamborghini has experienced financial problems for several years. 
Over the period from 2001 to 2004, the company lost more than $180 
million. Lamborghini claims this economic hardship precluded the timely 
development of a new vehicle that could comply with advanced air bag 
requirements. With respect to the Murcielago, Lamborghini also has been 
unable to overcome a number of engineering problems associated with 
installing advanced air bags in the current vehicle configuration. If 
the exemption is not granted, the Murcielago model cannot be sold in 
the U.S. during the period 2006-2009, which the petitioner stated could 
further delay the introduction of a fully compliant vehicle. Thus, 
Lamborghini asks for a temporary exemption from the advanced air bag 
requirements for the Murcielago until it is replaced by a brand new 
vehicle in 2009.
    Eligibility. Lamborghini's total motor vehicle production in the 
most recent year of production was less than 10,000 vehicles. More 
specifically, the petitioner reported the following worldwide 
production and U.S. imports over the past few years:

------------------------------------------------------------------------
                                       Worldwide
       Lamborghini S.p.A.             production         U.S.  imports
------------------------------------------------------------------------
2002............................  434 cars..........  134 cars.
2003............................  702 cars..........  423 cars.
2004............................  2038 cars.........  645 cars.
2005 (estimate).................  1662 cars.........  665 cars.
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    However, in 1998, 100 percent of Lamborghini was acquired by Audi, 
a

[[Page 52853]]

large motor vehicle manufacturer (which is in turn 99.9 percent owned 
by Volkswagen). In discussing its eligibility for hardship relief, 
Lamborghini asserts that its relationship with Audi is ``arm's-
length.'' Lamborghini operates independently, and services provided by 
Audi or Audi affiliates are paid for by Lamborghini.
    In making our determination regarding eligibility, we note that the 
public comment \7\ of the Coalition of Small Volume Auto Manufacturers 
(COSVAM) raised the issue of whether certain of the petitioners 
(Bugatti, Lamborghini, Maserati) are eligible for temporary exemptions 
under part 555, in light of their financial relationships to larger 
parent companies which are also vehicle manufacturers. Specifically, 
COSVAM argued that Lamborghini is owned by Audi, a vehicle manufacturer 
whose sales in the U.S. market exceeds the upper limits for 
classification as a small volume manufacturer. Accordingly, the 
commenter argued that Lamborghini should be considered a brand produced 
by major vehicle manufacturer Audi, thereby making the petitioner 
ineligible for a temporary exemption under part 555 based upon higher 
production values.
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    \7\ Docket No. NHTSA-2006-25324-15.
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    Lamborghini also submitted a public comment \8\ on its own 
petition, in which it sought to further clarify its relationship with 
its parent company, arguing that it is similar to that of Ferrari and 
its parent company (Fiat). According to Lamborghini, the Murcielago 
does not resemble nor share parts with any vehicle produced by the 
parent company. The petitioner further stated that the parent company 
did not assist in the design or engineering of the Murcielago, nor did 
it have any role in the manufacturing process for that vehicle. In 
fact, the Murcielago was developed prior to Audi's acquisition of 
Lamborghini in 1998. Furthermore, Lamborghini argued that it pays for 
any testing or similar assistance provided by Audi. It also stated that 
Lamborghini has its own CEO and Board of Directors, and that the 
company has its own research and development, Sales-Marketing, and 
After-Sales departments.
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    \8\ Docket No. NHTSA-2006-25324-12.
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    The agency examined the relationship between Lamborghini and Audi. 
Lamborghini S.p.A. is 100% owned by Audi AG (which, in turn is 99.1% 
owned by Volkswagen AG). We have concluded that Lamborghini is eligible 
to apply for a temporary exemption based on the following factors. 
First, there is no similarity of design between the cars produced by 
Lamborghini and cars produced by Audi. There is no sharing of engines, 
transmissions, platforms, or interior systems, and production tooling 
is unique to Lamborghini. Second, Lamborghini has indicated that it has 
paid for all services or assistance provided by Audi in ``arms-length'' 
transactions. Third, cars are imported and sold through separate 
distribution channels independent of the Audi dealer network. 
Accordingly, NHTSA concludes that Audi is not a manufacturer of 
Lamborghini vehicles by virtue of being a sponsor.
    Requested exemptions. Lamborghini states that it intends to certify 
the Murcielago as complying with the rigid barrier belted test 
requirement using the 50th percentile adult male test dummy set forth 
in S14.5.1 of FMVSS No. 208. The petitioner states that it previously 
determined the Murcielago's compliance with rigid barrier unbelted test 
requirements using the 50th percentile adult male test dummy through 
the S13 sled test using a generic pulse rather than a full vehicle 
test. Lamborghini states that it, therefore, cannot at present say with 
certainty that the Murcielago will comply with the unbelted test 
requirement under S14.5.2, which is a 20-25 mph rigid barrier test.
    As for the Murcielago's compliance with the other advanced air bag 
requirements, Lamborghini states that it does not know whether the 
Murcielago will be compliant because to date it has not had the 
financial ability to conduct the necessary testing.
    As such, Lamborghini is requesting an exemption for the Murcielago 
from the rigid barrier unbelted test requirement with the 50th 
percentile adult male test dummy (S14.5.2), the rigid barrier test 
requirement using the 5th percentile adult female test dummy (belted 
and unbelted, S15), the offset deformable barrier test requirement 
using the 5th percentile adult female test dummy (S17), the 
requirements to provide protection for infants and children (S19, S21, 
and S23) and the requirement using an out-of-position 5th percentile 
adult female test dummy at the driver position (S25).
    Lamborghini is requesting the above exemption for the Murcielago 
for the period from September 1, 2006 to August 31, 2009.
    Economic Hardship. Lamborghini states that over the four-year 
period from 2001-2004, it lost over $180 million (145 million euros), 
with yearly losses averaging approximately $47 million (37 million 
euros). Lamborghini asserts that, notwithstanding engineering 
impracticability described below, it could not afford to develop an 
advanced air bag system for the Murcielago and to also engineer its 
fully compliant replacement by 2009.
    Lamborghini initially did not foresee that the Murcielago would 
still be in production when advanced air bags became mandatory. It was 
designed in the mid-1990s and was intended to be launched in 1999, with 
production ending in 2006. Due to financial hardship and changes in 
ownership, the Murcielago was not offered for sale until late in 2001. 
Further financial hardship, compounded by shifts in the exchange rate 
between the U.S. dollar and the euro and the need to amortize costs of 
developing the Murcielago, necessitate continued production of that 
vehicle until 2009.
    Lamborghini estimates the total cost of an advanced air bag program 
to be about $24 million (20 million euros). Lamborghini states that the 
development of an advanced air bag system for the Murcielago's 
successor can be funded through the Murcielago's continued U.S. sales.
    If the exemption is denied and U.S. sales of the Murcielago end on 
September 1, 2006, Lamborghini projects a loss of $12.7 million (10.6 
million euros) for the period between September of 2006 and September 
of 2009.
    Good faith efforts to comply. Once the petitioner realized that the 
product life of the Murcielago would have to continue beyond September 
2006, Lamborghini undertook efforts for development an advanced air bag 
system. As early as 2001, Lamborghini began contacting air bag 
manufacturers in an effort to develop a compliant advanced air bag 
system. It pursued this matter with at least four suppliers. However, 
none provided a workable solution. The efforts continued until the 
summer of 2005, at which point Lamborghini concluded that technical 
constraints prevented development of advanced air bags for the 
Murcielago. Specifics of the technical difficulties are described in 
the petition.
    Lamborghini argues that an exemption would be in the public 
interest. The petitioner argues that the number of vehicles affected by 
an exemption would be very small and will therefore have, at most, a 
negligible impact on the overall safety of U.S. highways. Further, the 
petitioner asserts that according to the company's research, the 
Murcielago is likely to be operated only on a limited basis (an average 
of 5,000 miles per year). Lamborghini also argues that granting an 
exemption will assure proper parts and service are available in the 
U.S. to support existing owners of Lamborghini

[[Page 52854]]

automobiles, thereby benefiting not only Lamborghini customers, but 
also dealers and service personnel. Finally, it argued that denial of 
its requested exemption would decrease consumer choice in the high-
performance vehicle market.
    Summary of Public Comments. The agency received three comments on 
the Lamborghini petition for a temporary exemption. The first comment 
was submitted by Lamborghini itself. In its comment, the company stated 
that its situation is similar to Ferrari's request for a temporary 
exemption from the advanced air bag provisions of FMVSS No. 208, which 
the agency granted in a notice published in the Federal Register on May 
22, 2006 (71 FR 29389) (Docket No. NHTSA-2005-23093). Specifically, 
Lamborghini presented the following arguments in support of its 
petition.
    Like Ferarri, Lamborghini stated that its product cycles must last 
longer than the industry average due to the high cost of development 
and extremely small sales volumes. Lamborghini stated that it did not 
anticipate continued production of the Murcielago after September 1, 
2006, but the company later determined that it would be necessary to 
continue production of that model. According to Lamborghini, advanced 
air bag requirements were not anticipated when designing the 
Murcielago's vehicle platform, which arose from a predecessor vehicle 
developed circa 1990. However, the petitioner stated that in order to 
meet the advanced air bag requirements, it would face the unique 
challenge of needing to completely redesign the vehicle before the end 
of its life cycle. Lamborghini stated that it made a good faith effort 
to find a practicable way to comply with the advanced air bag 
requirements, but it was unable to do so.
    As discussed previously, Lamborghini argued that it is an 
independent manufacturer eligible for an exemption under 49 CFR part 
555, despite the fact that the company is owned by Audi (see 
Eligibility section above for details).
    Lamborghini stated that its vehicle also incorporates additional 
active and passive safety systems, including anti-lock brakes (ABS), 
traction control, four-wheel drive, rollover bars, pretensioners, and 
upgraded rear fuel system integrity. The petitioner also stated that 
the vehicle has been subjected to a frontal pole test at 35 mph and a 
roof crush resistance test at 2.5 times the mass of the vehicle. 
Furthermore, the company stated that the Murcielago has been equipped 
with an air bag on-off switch.
    In terms of safety impact, Lamborghini argued that it intends to 
produce only 380 Murcielago vehicles over three years and that these 
vehicles are not normally used for daily transportation, have 
substantially lower than average annual usage, and typically are not 
used to transport children. The company added that its search of 
NHTSA's Fatality Analysis Reporting System (FARS) database from 1995-
2003 and the 2004 Annual Report File \9\ (a period covering both the 
Murcielago and its predecessor vehicle (the Diablo)) showed only one 
crash involving a Lamborghini, in which the adult female occupant 
survived. According to Lamborghini, there are no known instances of 
injury or death to infants, children, or other occupants caused by air 
bags, the problem giving rise to the advanced air bag rule. The company 
further argued that given its low sales volume, it would be aware of 
such fatalities and injuries if they were occurring. Accordingly, the 
petitioner argued that its requested exemption for these vehicles would 
have a negligible effect on safety.
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    \9\ The 2004 FARS data file--the Annual Report File--was created 
in June 2005; however, the 2004 FARS file officially closed in 
February 2006. This additional time provided the opportunity for 
submission of important variable data requiring outside sources, 
which may lead to changes in the final counts. The updated final 
counts for 2004 will be reflected in the 2005 annual report.
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    In addition, Lamborghini argued that the continued weakening of the 
U.S. dollar vis-[agrave]-vis the euro, when combined with competitive 
pressure to avoid significant vehicle price increases in the U.S. 
market, exacerbates the economic hardship problems confronting the 
company.
    The second comment was submitted by Mr. Steven Blodgett, an 
individual.\10\ (We note that Mr. Blodgett's comments applied equally 
to all five manufacturer-petitioners. Accordingly, this commenter's 
arguments will be set forth immediately below, but they will not be 
repeated in subsequent discussions involving the other four 
manufacturers.) In part, Mr. Blodgett requested a 30-day extension of 
the 15-day comment period, arguing that the agency has arbitrarily 
shortened the comment period. The commenter argued that his ability to 
seek an extension of the comment period has been compromised by the 
requirement under 49 CFR 553.19 that such requests must be received not 
later than 15 days before the time stated in the notice. He stated that 
additional time is required to allow for proper research in order to 
verify the statements of the manufacturers, as well as their 
accompanying financial data. Furthermore, he argued that a 60-day 
comment period is required under 5 CFR 1320.8(d).
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    \10\ Docket No. NHTSA-2006-25324-13 and -14.
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    Mr. Blodgett also requested that the Office of Management and 
Budget (OMB) and/or a separate independent contractor be used to 
evaluate the financial data submitted by the five petitioning 
manufacturers. The commenter also faulted the manufacturers for 
petitioning the agency not long before the September 1, 2006 compliance 
date for the advanced air bag requirements. He further suggested that 
it is presumptuous for these manufacturers to continue producing 
vehicles prior to receiving a decision on their applications for 
temporary exemption, something which should be taken into account when 
considering the manufacturers' petitions.
    Mr. Blodgett objected to the lack of supporting documentation from 
air bag suppliers to verify that the requirements for which the vehicle 
manufacturers seek an exemption cannot be met. The commenter expressed 
his opinion that the government should not be subsidizing uncompetitive 
businesses through the temporary exemption process and that granting 
exemptions unfairly penalizes other manufacturers who concomitantly 
lose market share.
    Mr. Blodgett also objected to the agency's decision to combine the 
five applications for temporary exemption into a single Federal 
Register notice, rather than publishing a separate notice for each 
petitioner. The commenter argued that this is confusing and is not 
consistent with the requirements of 49 U.S.C. 30113(b)(2).
    The third comment was submitted by the COSVAM. As discussed 
previously, COSVAM raised the issue of whether certain of the 
petitioners (Bugatti, Lamborghini, Maserati) are eligible for temporary 
exemptions under part 555, in light of their financial relationships to 
larger parent companies which are also vehicle manufacturers (see 
Eligibility section above for details and the agency's decision on that 
issue).
    Agency Decision on Lamborghini Petition. We are granting the 
Lamborghini petition to be exempted from portions of the advanced air 
bag regulation required by S14.2 (specifically S14.5.2, S15, S17, S19, 
S21, S23, and S25). The exemption does not extend to the provision 
requiring a belted 50th percentile male barrier impact test 
(S14.5.1(a)). In addition to certifying compliance with S14.5.1(a), 
Lamborghini must continue to certify to the unbelted 50th percentile 
male barrier impact test in force prior to September 1, 2006 
(S5.1.2(a)). We note that the unbelted sled test in S13 is an 
acceptable option for that requirement.

[[Page 52855]]

The agency's rationale for this decision is as follows.
    The advanced air bag requirements present a unique challenge 
because they would require Lamborghini to completely redesign its 
vehicles, in order to overcome the engineering limitations based upon 
the basic configuration of the Murcielago. While the petitioner was 
aware of the new requirements for some time, its business plans 
changed, and it was subsequently determined that the Murcielago's 
production run would need to be extended beyond 2006, thereby raising 
the problem of compliance with the advanced air bag requirements.
    Lamborghini explained the main engineering challenges precluding 
incorporation of advanced air bags into the Murcielago at this time, as 
follows. First, cockpit space limitations imposed by the windshield and 
passenger compartment height currently prevent the fitting of the six-
year-old dummies into the required out-of-position test locations, 
thereby necessitating a customized procedure. Second, the location of 
the air conditioning system precludes installation of the passenger air 
bag module in the top of the instrument panel, and the manufacturer was 
unable to identify an alternate location for the air bag module. Third, 
it was not possible to adapt Lamborghini's supplier's bladder 
technology based upon occupant sensors into the Murcielago's unique 
seating systems. Fourth, another supplier's sensor system was unable to 
distinguish between the six-year-old and 5th-percentile female dummies 
in the Murcielago environment. Fifth, the manufacturer was confronted 
with cockpit space limitations which precluded placement of occupant 
sensors in other areas of the seat structure, and it was unable to find 
suppliers willing to customize their systems to Lamborghini's 
specifications. Sixth, the top-mounted passenger air bag system 
designed for the new Lamborghini Gallardo (which will meet the advanced 
air bag requirements) cannot be retrofitted into the Murcielago.
    For a high-speed performance vehicle such as the Murcielago, 
aerodynamics are a major design consideration, so such vehicles tend to 
sit very close to the ground and have minimal cockpit space as 
essential features of their basic design. Any significant increase in 
cockpit dimensions (as might be required to meet the advanced air bag 
requirements) would necessitate a total vehicle makeover. Lamborghini 
has made clear that such a prospect would pose a unique challenge to 
the company, due to the high cost of development and its extremely 
small sales volumes.
    Based upon the information provided by the petitioner, we 
understand that Lamborghini made good faith efforts to bring the 
Murcielago into compliance with the applicable requirements until such 
time as it became apparent that there was no practicable way to do so. 
No viable alternatives remain. The petitioner is unable to design a new 
vehicle by the time the new advanced air bag requirements go into 
effect on September 1, 2006.
    After review of the income statements provided by the petitioner, 
the agency notes that the company has faced ongoing financial 
difficulties, having lost over $180 million (145 million euros) over 
the period from 2001-2004. If the petitioner is forced to discontinue 
selling the current model in the U.S. market, the resulting loss of 
sales would cause substantial economic hardship within the meaning of 
the statute, potentially amounting to the difference between 
profitability and ongoing losses. According to Lamborghini, absent the 
exemption, production of the Murcielago would cease in September 2006, 
because sales in the rest of the world would be insufficient to justify 
continued production (as the U.S. accounts for 35-40 percent of the 
market for the Murcielago). However, Lamborghini's problems would be 
compounded without its requested temporary exemption, because it needs 
the revenue from sales of the Murcielago over the next three years to 
finance development of a fully compliant vehicle for delivery to the 
U.S. market in September 2009. Granting the exemption will allow 
Lamborghini to earn the resources necessary to bridge the gap in terms 
of development of a successor vehicle for the Murcielago that meets all 
U.S. requirements.
    While some of the information submitted by Lamborghini has been 
granted confidential treatment and is not detailed in this document, 
the petitioner made a comprehensive showing of its good faith efforts 
to comply with the requirements of S14.2 of FMVSS No. 208, and detailed 
engineering and financial information demonstrating that failure to 
obtain the exemption would cause substantial economic hardship. 
Specifically, the petitioner provided the following:
    1. Chronological analysis of Lamborghini'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.
    5. Explanations as to why components from newer, compliant vehicle 
lines could not be borrowed.
    6. Corporate income statements and balance sheets for the past 
three years, and projected income statements and balance sheets if the 
petition is denied.
    We note that Lamborghini is a well-established company with a 
small, but not insignificant U.S. presence. We believe that the 
reduction of sales revenue resulting from a denial of the company's 
requested temporary exemption would have a negative impact not only on 
Lamborghini's financial circumstances, but it would also negatively 
affect U.S. employment. Specifically, reduction in sales would also 
affect Lamborghini dealers, repair specialists, and several small 
service providers that transport Lamborghini vehicles from the port of 
entry to the rest of the United States. Traditionally, the agency has 
concluded that the public interest is served in affording continued 
employment to the petitioner's U.S. work force. Furthermore, as 
discussed in previous decisions on temporary exemption applications, 
the agency believes that the public interest is served by affording 
consumers a wider variety of motor vehicle choices.
    We also note that the Murcielago features several advanced 
``active'' safety features. These features are listed in the 
petitioner's application.\11\ While the availability of these features 
is not critical to our decision, it is a factor in considering whether 
the exemption is in the public interest.
---------------------------------------------------------------------------

    \11\ See page 23 of Lamborghini's petition and page 2 of 
Lamborghini's comments.
---------------------------------------------------------------------------

    We believe that this exemption will have negligible impact on motor 
vehicle safety because of the limited number of vehicles affected (not 
more than 380 for the duration of the exemption), and because 
Lamborghini vehicles are not typically used for daily transportation. 
Their yearly usage is substantially lower compared to vehicles used for 
everyday transportation.
    In addition, Lamborghini has voluntarily included an air bag on-off 
switch for passenger air bag suppression for the protection of children 
being transported in the right front seating position. This will enable 
the passenger

[[Page 52856]]

air bag to be manually turned off when a child is present, which 
supports our findings that this exemption would have a negligible 
impact on motor vehicle safety.
    Furthermore, the agency examined the FARS (1995-2004) and the 
National Automotive Sampling System Crashworthiness Data System (NASS 
CDS) (1995-2005) for information on the vehicle in question.\12\ These 
data indicate that over that period, there were no NASS CDS cases for 
the Murcielago and one FARS case for the Murcielago predecessor 
(injured female passenger). Thus, there were no children or small women 
involved in crashes of the later Lamborghini Murcielago included in 
these databases.
---------------------------------------------------------------------------

    \12\ For fatalities, the agency has a high level of confidence 
that we would know if one of the petitioners' vehicles had been 
involved in a fatal crash due to reporting in FARS. However, the 
agency's ability to track injuries in this context is more limited, 
primarily because NASS CDS operates differently. NASS CDS is not a 
census of all vehicle-related injuries, but instead it is a 
statistical sample which is unlikely to randomly capture air bag-
related fatalities. Although the agency's Special Crash 
Investigations office searches for air bag-related deaths and 
injuries, there may be lesser injuries that go unreported. This 
observation applies to all five petitions covered by the notice.
---------------------------------------------------------------------------

    We note that, as explained below, prospective purchasers will be 
notified that the vehicle is exempted from the specified advanced air 
bag requirements of Standard No. 208. Under Sec.  555.9(b), a 
manufacturer of an exempted passenger car must affix securely to the 
windshield or side window of each exempted vehicle a label containing a 
statement that the vehicle conforms to all applicable Federal motor 
vehicle safety standards in effect on the date of manufacture ``except 
for Standard Nos. [listing the standards by number and title for which 
an exemption has been granted] exempted pursuant to NHTSA Exemption No. 
------.'' This label notifies prospective purchasers about the 
exemption and its subject. Under Sec.  555.9(c), this information must 
also be included on the vehicle's certification label.
    The text of Sec.  555.9 does not expressly indicate how the 
required statement on the two labels should read in situations where an 
exemption covers part but not all of a Federal motor vehicle safety 
standard. In this case, we believe that a statement that the vehicle 
has been exempted from Standard No. 208 generally, without an 
indication that the exemption is limited to the specified advanced air 
bag provisions, could be misleading. A consumer might incorrectly 
believe that the vehicle has been exempted from all of Standard No. 
208's requirements. Moreover, we believe that the addition of a 
reference to such provisions by number without an indication of its 
subject matter would be of little use to consumers, since they would 
not know the subject of those specific provisions. For these reasons, 
we believe the two labels should read in relevant part, ``except for 
S14.5.2, S15, S17, S19, S21, S23, and S25 (Advanced Air Bag 
Requirements) of Standard No. 208, Occupant Crash Protection, exempted 
pursuant to * * *.'' We note that the phrase ``Advanced Air Bag 
Requirements'' is an abbreviated form of the title of S14 of Standard 
No. 208. We believe it is reasonable to interpret Sec.  555.9 as 
requiring this language.
    Although our response to the supplementary comments provided by the 
petitioner is reflected above, we would offer the following response to 
the other public comments received on the Lamborghini petition.
    We have decided not to grant Mr. Blodgett's request for extension 
of time to comment on the five applications contained in our July 12, 
2006 Federal Register notice announcing receipt of those applications. 
First, the commenter pointed to requirements under part 553, Rulemaking 
Procedures (specifically paragraph 553.19, Petitions for extension of 
time to comment), which states that persons wishing to request 
extension of a comment period must do so in writing 15 days prior to 
expiration of the time stated in the notice. However, the notice of 
receipt in question was issued under part 555, Temporary Exemption From 
Motor Vehicle Safety and Bumper Standards, which does not contain any 
time limitations either for the public comment period or related 
requests for extension of time. In the present case, the agency decided 
to shorten the length of the comment period to 15 days, in light of the 
rapidly approaching deadline for small volume manufacturer compliance 
with the advanced air bag requirements of FMVSS No. 208. That 
determination reflected our careful balancing of the need to provide an 
adequate opportunity for public comment and the need to issue a 
decision prior to the standard's compliance deadline. Contrary to what 
Mr. Blodgett's comment suggests, his request for an extension of the 
comment period was received and considered by the agency, although we 
decided that it would not be in the public interest to grant that 
request.\13\
---------------------------------------------------------------------------

    \13\ We note further that Mr. Blodgett asserted that, pursuant 
to 5 U.S.C. 1320.8(d), a 60-day comment period is required on the 
notice of receipt of an application for temporary exemption. 
However, 5 CFR part 1320, Controlling Paperwork Burdens on the 
Public, implements the provisions of the Paperwork Reduction Act of 
1995 (44 U.S.C. Chapter 35). Those provisions deal with specified 
types of collections of information from the public (which require 
OMB approval and clearance), and the 60-day comment period 
referenced above is related to such collections of information. 
Furthermore, in defining the term ``information,'' 5 CFR 
1320.3(h)(4) states that that term does not generally include:
    Factors or opinions submitted in response to general 
solicitation of comments from the public, published in the Federal 
Register or other publications, regardless of the form or format 
thereof, provided that no person is required to supply specific 
information pertaining to the commenter, other than that necessary 
for self-identification, as a condition of the agency's full 
consideration of the comment.
    Thus, the provision pointed to by the commenter is not relevant 
in the present case.
---------------------------------------------------------------------------

    We likewise do not agree with Mr. Blodgett that it is necessary to 
submit the manufacturers' financial data to OMB or an independent 
contractor for evaluation. NHTSA routinely evaluates such information 
in making its determinations, as it has done with prior requests for 
temporary exemption under part 555. Furthermore, we do not agree with 
Mr. Blodgett's contention that negative inferences should be drawn from 
the timing of manufacturers' submission of their part 555 applications 
or their continuation of manufacturing activities pending the agency's 
decision. The timing of the submission of a manufacturer's application 
may be predicated upon good faith efforts to achieve compliance with 
our safety standards, although in the end, those efforts may prove 
unsuccessful. Likewise, a company's business decision to continue 
production of vehicles subject to an application for temporary 
exemption has no bearing on the agency's decision to grant or deny an 
application, particularly since it is conceivable that such vehicles 
could be sold in non-U.S. markets.
    We do not believe that vehicle manufacturers seeking an exemption 
should be required to prove that there are no advanced air bag systems 
available which would allow their vehicles to comply with FMVSS No. 
208, because in essence, that would require the companies to prove a 
negative. Instead, the companies must demonstrate that they made good 
faith efforts to comply with the standard and show how they plan to 
achieve compliance in the future. By statute, manufacturers are 
entitled to apply for a temporary exemption under part 555, provided 
that they meet all relevant requirements.
    We likewise do not agree with Mr. Blodgett's suggestion that the 
agency improperly combined the present five part 555 applications in 
one Federal

[[Page 52857]]

Register notice or that this somehow increased burdens on commenters. 
The notice of receipt clearly set forth in its title the companies 
seeking exemptions and discussed each of the applicants separately. In 
light of the similarity of the issues to be addressed, we believe that 
such consolidation was appropriate.
    As noted previously, the comments of COSVAM were addressed under 
the discussion of Eligibility above.
    In sum, the agency concludes that Lamborghini has demonstrated good 
faith effort to bring the Murcielago into compliance with the advanced 
air bag requirements of FMVSS No. 208, and has also demonstrated the 
requisite financial hardship. Further, we find the exemption to be in 
the public interest.
    In consideration of the foregoing, we conclude that compliance with 
the advanced air bag requirements of FMVSS No. 208, Occupant Crash 
Protection, would cause substantial economic hardship to a manufacturer 
that has tried in good faith to comply with the standard. We further 
conclude that granting of an exemption would be in the public interest 
and consistent with the objectives of traffic safety.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), Lamborghini 
Murcielago is granted NHTSA Temporary Exemption No. EX 06-2, from 
S14.5.2, S15, S17, S19, S23, and S25 of 49 CFR 571.208. The exemption 
is effective from September 1, 2006 to August 31, 2009.

IV. Bugatti

    Background. Bugatti was a manufacturer of high performance motor 
vehicles from 1909 until the outbreak of World War II. In the past two 
decades, several attempts were made to revive the marquee. Finally, 
under the new ownership in 1998, the petitioner began designing a new 
vehicle called the Veyron 16.4 (Veyron). Only 300 vehicles are to be 
made (about half of which are expected to be imported to the U.S.), 
each costing in excess of $1,000,000. Bugatti originally planned to 
begin selling the vehicle in September of 2003 and to end production 
before the advanced air bag requirements went into effect. However, 
significant development issues delayed the start of production until 
September of 2005. Once this shift in the production schedule became 
apparent, the petitioner argues that it tried in good faith but could 
not bring the vehicle into compliance with the advanced air bag 
requirements, and it would incur substantial economic hardship if it 
cannot sell approximately 100 vehicles in the U.S. after September 1, 
2006.
    Eligibility. Bugatti just began producing vehicles and its total 
production has not reached 100. However, in 1998, Bugatti was acquired 
by Volkswagen AG (VW), a large motor vehicle manufacturer. According to 
Bugatti, the Veyron 16.4 does not resemble any vehicle built or sold by 
any other VW company. The petitioner also states that the Veyron 16.4 
was engineered entirely by Bugatti, and that it will similarly be 
manufactured and marketed solely by Bugatti. Bugatti stated that almost 
all parts for its vehicle are provided by suppliers that do not provide 
any parts to any other VW companies. In discussing its eligibility for 
hardship relief, Bugatti asserts that its relationship with VW is 
``arm's-length.'' Bugatti operates independently, and services provided 
by Bugatti affiliates were paid for by Bugatti.
    In making our determination regarding eligibility, we note that the 
public comment from COSVAM raised the issue of whether certain of the 
petitioners (Bugatti, Lamborghini, Maserati) are eligible for temporary 
exemptions under part 555, in light of their financial relationships to 
larger parent companies which are also vehicle manufacturers. 
Specifically, COSVAM argued that Bugatti is owned by VW, a vehicle 
manufacturer whose sales in the U.S. market exceeds the upper limits 
for classification as a small volume manufacturer. COSVAM further 
questioned why an otherwise advanced performance vehicle such as the 
Bugatti Veyron 16.4 would be unable to comply with the requirements of 
FMVSS No. 208, particularly when other vehicles within its ``corporate 
family'' are or will be in compliance. Accordingly, the commenter 
argued that Bugatti should be considered a brand produced by major 
vehicle manufacturer VW, thereby making the petitioner ineligible for a 
temporary exemption under part 555 based upon higher production values.
    The agency examined the relationship between Bugatti and VW. We 
have concluded that Bugatti is eligible to apply for a temporary 
exemption based on the following factors. First, there is no similarity 
of design between the cars produced by Bugatti and cars produced by VW. 
Second, Bugatti operated independently from VW in designing and 
developing the Veyron 16.4. Third, almost all of the parts used in the 
Veyron production are obtained from suppliers that do not supply parts 
to VW. In addition, when Bugatti has used test tracks or other 
facilities of VW in the course of developing the Veyron, it has 
reimbursed Volkswagen AG for the costs of those facilities on an 
``arms-length'' basis. Accordingly, NHTSA concludes that VW is not a 
manufacturer of Bugatti vehicles by virtue of being a sponsor.
    Requested exemptions. Bugatti stated its intention to certify 
compliance of the Veyron model, produced on and after September 1, 2006 
for sale in the United States, with rigid barrier belted and unbelted 
test requirements using the 50th percentile adult male test dummy 
(S14.5.1 and S14.5.2), the rigid barrier test requirements using the 
5th percentile adult female test dummy (belted and unbelted, S15), and 
the offset deformable barrier test requirement using the 5th percentile 
adult female test dummy (S17).
    As for the other advanced air bag requirements, Bugatti states that 
it does not know whether the Veyron will be compliant as it has not had 
the financial ability to conduct the necessary development and testing.
    Bugatti is requesting an exemption from the requirements to provide 
protection for infants and children (S19, S21, and S23) and the 
requirement using an out-of-position 5th percentile adult female test 
dummy at the driver position (S25).
    Bugatti is requesting the above exemption for the Veyron 16.4 for 
the period from September 1, 2006 to September 1, 2008.
    Economic hardship. Publicly available information and also the 
financial documents submitted to NHTSA by the petitioner indicate that 
the Veyron project will result in financial losses whether or not 
Bugatti obtains a temporary exemption. At the time of the application, 
Bugatti had spent over $360 million on the Veyron project--the 
company's only model--with little or no return on its investment. If 
the exemption is granted, Bugatti projects a net loss of $3.7 million. 
If the exemption is denied, Bugatti projects a net loss of $22.5 
million. Further, denial of the petition would likely preclude the 
petitioner from developing new, fully compliant vehicles. The 
petitioner argues that a denial of this petition could ultimately put 
Bugatti out of business.
    Good faith efforts to comply. As stated above, Bugatti originally 
anticipated that all of the Veyrons destined for the U.S. market would 
be manufactured prior to September 1, 2006. As such, the company did 
not believe the vehicles would need to be equipped with advanced air 
bag systems. However, due to delays in completing the design and 
engineering of the vehicle, Bugatti did not begin production of the 
Veyron until the fall of 2005, nearly two years after the anticipated 
initial start date.

[[Page 52858]]

    To install an advanced air bag system on the Veyron, modifications 
would be required to the steering wheel, the seats, the air bag system, 
the safety belts, the knee bolsters, and the instrument panel. Bugatti 
sought proposals from several potential suppliers for the development 
of an advanced air bag system for the Veyron, but received only one 
proposal. According to the petitioner, the proposal showed that the 
development and implementation costs for such a system were far beyond 
its current financial capabilities, particularly when considered in 
terms of amortizing those costs over a population of just 100 vehicles. 
The proposal indicated that total development, testing, and 
implementation of an advanced air bag system for the Veyron would cost 
over $12 million. More important, development would take at least 24 
months, which would have required Bugatti to completely shut down its 
operations. The petitioner argued this scenario is not feasible for a 
manufacturer intending to produce a total of 300 vehicles. For further 
details, see the petition.
    Bugatti argues that an exemption would be in the public interest. 
The petitioner put forth several arguments in favor of a finding that 
the requested exemption is consistent with the public interest. 
Specifically, Bugatti asserted that there is consumer demand in the 
U.S. for the Veyron, and granting this application will allow the 
demand to be met. Bugatti also states that granting the exemption will 
``have negligible impact on motor vehicle safety because of the limited 
number of vehicles sold and because each vehicle is likely to travel on 
the public roads only infrequently.'' Further, Bugatti states that it 
is extremely unlikely that young children would often be passengers in 
this vehicle, and, therefore, permitting a vehicle to be sold without 
an air bag designed to protect small children is unlikely to have any 
adverse impact on safety. Finally, Bugatti indicates that the Veyron, 
which is equipped with standard air bags, also incorporates many safety 
features that are not required by the FMVSSs, including anti-lock 
brakes, electronic stability control, all-wheel drive, run-flat tires, 
a tire pressure monitoring system (installed ahead of the required date 
for small volume manufacturers under FMVSS No. 138, Tire Pressure 
Monitoring Systems), and a dynamic rear spoiler that acts as a 
``parachute brake'' during high speed emergency braking.
    Summary of Public Comments. The agency received two comments on the 
Bugatti petition for a temporary exemption. As noted above, the first 
comment was submitted by Mr. Steven Blodgett (see the summary of public 
comments under Lamborghini for a complete discussion of this comment). 
Specific to Bugatti, Mr. Blodgett requested the OMB and/or a separate 
independent contractor be used to evaluate the company's financial 
data. The commenter also objected to the lack of supporting 
documentation from air bag suppliers to verify that the requirements 
for which the vehicle manufacturer seeks an exemption cannot be met. As 
further factors for consideration by the agency in reviewing the 
company's temporary exemption request, Mr. Blodgett highlighted what he 
perceived to be the manufacturer's delay in submitting a part 555 
petition from the advanced air bag requirements and its presumed 
continuation of vehicle production prior to receiving the agency's 
decision.
    The second comment was submitted by the COSVAM. As discussed 
previously, COSVAM raised the issue of whether certain of the 
petitioners (Bugatti, Lamborghini, Maserati) are eligible for temporary 
exemptions under part 555, in light of their financial relationships to 
larger parent companies which are also vehicle manufacturers (see 
Eligibility section above for details and the agency's decision on that 
issue).
    Agency Decision on Bugatti Petition. We are granting the Bugatti 
petition to be exempted from portions of the advanced air bag 
regulation required by S14.2 (specifically S19, S21, S23, and S25). The 
extent of the exemption is limited to those provision requiring testing 
with child dummies (S19, S21 and S23) and the 5th percentile female 
dummy out-of-position testing (S25). Bugatti must certify to 50th 
percentile male barrier testing (S14.5.1 and S14.5.2), 5th percentile 
female barrier testing (S15) and 5th percentile female offset frontal 
testing (S17). The agency's rationale for this decision is as follows.
    The advanced air bag requirements present a unique challenge 
because they would require Bugatti to undertake a major redesign of its 
vehicles. Specifically, incorporation of the advanced air bags would 
require significant modifications to the Veyron's steering wheel, 
seats, air bag system, safety belts, knee bolsters, and instrument 
panel. While the petitioner was aware of the new requirements for some 
time, manufacturing delays required the Veyron 16.4's production run to 
extend beyond 2006, thereby raising the problem of compliance with the 
advanced air bag requirements. Bugatti has made clear that such a 
prospect would pose a unique challenge to the company, due to the high 
cost of development and its extremely small sales volumes. In addition, 
in light of the fact that it projects sales of only 100 vehicles per 
year, the company also faced difficulties in finding a supplier of 
advanced restraint systems, because such suppliers were focused on 
large volume manufacturers.
    Based upon the information provided by the petitioner, we 
understand that Bugatti made good faith efforts to try to bring the 
Veyron 16.4 into compliance with the applicable requirements until such 
time as it became apparent that there was no practicable way to do so. 
No viable alternatives remain. The petitioner is unable to redesign its 
vehicle by the time the new advanced air bag requirements go into 
effect on September 1, 2006.
    After review of the income statements provided by the petitioner, 
the agency notes that the company has faced ongoing financial 
difficulties with its manufacturing operations. Even with a temporary 
exemption, Bugatti projects a net loss of over $3 million for 2006-
2009, and without an exemption, that figure would grow to a loss of 
approximately $23 million. If the petitioner is forced to discontinue 
selling its current and only model in the U.S. market, the resulting 
loss of sales would cause substantial economic hardship within the 
meaning of the statute, potentially driving the company out of 
business. Bugatti's problems would be compounded without its requested 
temporary exemption, because it needs the revenue from sales of the 
Veyron 16.4 over the next two years to finance development of a fully 
compliant successor vehicle for delivery to the U.S. market. Granting 
the exemption will allow Bugatti to earn the resources necessary to 
bridge the gap in terms of development of a successor vehicle for the 
Veyron 16.4 that meets all U.S. requirements.
    While some of the information submitted by Bugatti has been granted 
confidential treatment and is not detailed in this document, the 
petitioner made a comprehensive showing of its good faith efforts to 
comply with the requirements of S14.2 of FMVSS No. 208, and detailed 
engineering and financial information demonstrating that failure to 
obtain the exemption would cause substantial economic hardship. 
Specifically, the petitioner provided the following:
    1. Chronological analysis of Bugatti'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.

[[Page 52859]]

    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 (including original equipment 
manufacturer (OEM) price-volume quotations).
    5. Explanations as to why components from newer, compliant vehicle 
lines could not be borrowed.
    6. Corporate income statements and balance sheets for the past 
three years, and projected income statements and balance sheets if the 
petition is denied.
    We note that, as discussed in previous decisions on temporary 
exemption applications, the agency believes that the public interest is 
served by affording consumers a wider variety of motor vehicle choices.
    We also note that the Veyron 16.4 features several advanced 
``active'' safety features. These features are listed in the 
petitioner's application.\14\ While the availability of these features 
is not critical to our decision, it is a factor in considering whether 
the exemption is in the public interest.
---------------------------------------------------------------------------

    \14\ See page 9 of Bugatti's petition.
---------------------------------------------------------------------------

    We believe that this exemption will have negligible impact on motor 
vehicle safety because of the limited number of vehicles affected (not 
more than 300 for the duration of the exemption), and because Bugatti 
vehicles are not typically used for daily transportation. Their yearly 
usage is also expected to be substantially lower compared to vehicles 
used for everyday transportation.
    We note that, as explained below, prospective purchasers will be 
notified that the vehicle is exempted from the specified advanced air 
bag requirements of Standard No. 208. Under Sec.  555.9(b), a 
manufacturer of an exempted passenger car must affix securely to the 
windshield or side window of each exempted vehicle a label containing a 
statement that the vehicle conforms to all applicable Federal motor 
vehicle safety standards in effect on the date of manufacture ``except 
for Standard Nos. [listing the standards by number and title for which 
an exemption has been granted] exempted pursuant to NHTSA Exemption No. 
------ .'' This label notifies prospective purchasers about the 
exemption and its subject. Under Sec.  555.9(c), this information must 
also be included on the vehicle's certification label.
    The text of Sec.  555.9 does not expressly indicate how the 
required statement on the two labels should read in situations where an 
exemption covers part but not all of a Federal motor vehicle safety 
standard. In this case, we believe that a statement that the vehicle 
has been exempted from Standard No. 208 generally, without an 
indication that the exemption is limited to the specified advanced air 
bag provisions, could be misleading. A consumer might incorrectly 
believe that the vehicle has been exempted from all of Standard No. 
208's requirements. Moreover, we believe that the addition of a 
reference to such provisions by number without an indication of its 
subject matter would be of little use to consumers, since they would 
not know the subject of those specific provisions. For these reasons, 
we believe the two labels should read in relevant part, ``except for 
S19, S21, S23, and S25 (Advanced Air Bag Requirements) of Standard No. 
208, Occupant Crash Protection, exempted pursuant to * * *.'' We note 
that the phrase ``Advanced Air Bag Requirements'' is an abbreviated 
form of the title of S14 of Standard No. 208. We believe it is 
reasonable to interpret Sec.  555.9 as requiring this language.
    In terms of our response to the comment submitted by Mr. Blodgett, 
we note that the issues raised in that comment (e.g., extension of the 
comment period, duration of the comment period, documentation) are 
identical for all five petitioners. Accordingly, please see our 
decision for Lamborghini (Section IV of this notice) for the agency's 
response to this comment submission. As noted previously, the comments 
of COSVAM were addressed under the discussion of Eligibility above.
    In sum, the agency concludes that Bugatti has demonstrated good 
faith effort to bring the Veyron 16.4 into compliance with S14.2 of 
FMVSS No. 208, and has also demonstrated the requisite financial 
hardship. Further, we find the exemption to be in the public interest.
    In consideration of the foregoing, we conclude that compliance with 
the requirements of the advanced air bag requirements of FMVSS No. 208, 
Occupant Crash Protection, would cause substantial economic hardship to 
a manufacturer that has tried in good faith to comply with the 
standard. We further conclude that granting of an exemption would be in 
the public interest and consistent with the objectives of traffic 
safety.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), the Bugatti Veyron 
16.4 is granted NHTSA Temporary Exemption No. EX 06-3, from S19, S21, 
S23, and S25 of 49 CFR 571.208. The exemption is effective from 
September 1, 2006 to September 1, 2008.

V. Lotus

    Background. Lotus, which was founded in 1955, produces small 
quantities of performance cars. The company has experienced significant 
financial difficulties for many years. In 1998, Lotus began to develop 
a fully compliant vehicle for the U.S. market. However, due to lack of 
capital, the project was cancelled in 2001. The petitioner instead 
decided to sell a vehicle designed for the European market, the Lotus 
Elise, in the U.S. Prior to the U.S. launch of the Elise in 2004 
(currently Lotus's only U.S. model), Lotus requested and received a 
part 555 temporary exemption for the bumper standard and certain 
headlamp requirements (see 69 FR 5658 (Feb. 5, 2004)). Over the last 18 
months, the petitioner continued to experience economic hardship. 
Nevertheless, Lotus has worked on the development of compliant bumpers 
and headlamps at the cost of $27 million. Compliant headlamp systems 
have already been put into production, and compliant bumpers likewise 
will be put into production in advance of the expiration of Lotus's 
existing temporary exemption on January 1, 2007. However, the 
petitioner has been unable to develop an advanced air bag system for 
the Elise (which has both a coupe and a convertible version). According 
to Lotus, sales of a fully compliant vehicle are slated to begin in 
2008, but only if it is able to derive revenue from the U.S. sales of 
the Elise in the interim.
    Eligibility. Lotus produced approximately 5,600 vehicles in 2005. 
More specifically, the petitioner reported the following worldwide 
production and U.S. imports over the past few years:

------------------------------------------------------------------------
                                       Worldwide
         Group Lotus Plc              production         U.S. imports
------------------------------------------------------------------------
2002............................  4810 cars.........  120 cars.
2003............................  2955 cars.........  85 cars.
2004............................  3710 cars.........  1330 cars.
2005 (estimate).................  5518 cars.........  3390 cars.
------------------------------------------------------------------------

    The issue of Lotus's eligibility for a financial hardship exemption 
was previously addressed by NHTSA on three separate occasions.\15\ 
Although Lotus is owned by Proton Holdings Berhad, Lotus remains an 
operationally independent small volume manufacturer and the material 
facts regarding its ownership have not changed. Accordingly, NHTSA

[[Page 52860]]

concludes that Lotus is eligible to apply for a hardship exemption.
---------------------------------------------------------------------------

    \15\ See 64 FR 61379 (Nov. 10, 1999)(Docket No. NHTSA-1999-
6092); 68 FR 10066 (March 3, 2003)(Docket No. NHTSA-2002-13956); 69 
FR 5658 (Feb. 5, 2004)(Docket No. NHTSA-2003-16341).
---------------------------------------------------------------------------

    Requested exemptions. Lotus states that its United States vehicle 
production on and after September 1, 2006 will comply with the rigid 
barrier belted test requirement using the 50th percentile adult male 
test dummy (S14.5.1). The petitioner states that it previously 
determined the Elise's compliance with rigid barrier unbelted test 
requirements using the 50th percentile adult male test dummy through 
the S13 sled test using a generic pulse rather than a full vehicle 
test. Therefore, Lotus states, it cannot at present say with certainty 
that the Elise would comply with the unbelted test requirement under 
S14.5.2, which is a 20-25 mph rigid barrier test.
    As for the other advanced air bag requirements, Lotus states that 
it does not know whether the Elise would be compliant as Lotus has not 
had the financial ability to conduct the necessary research and 
development.
    As such, Lotus is requesting an exemption for the Elise from the 
rigid barrier unbelted test requirement with the 50th percentile adult 
male test dummy (S14.5.2), the rigid barrier test requirement using the 
5th percentile adult female test dummy (belted and unbelted, S15), the 
offset deformable barrier test requirement using the 5th percentile 
adult female test dummy (S17), the requirements to provide protection 
for infants and children (S19, S21, and S23) and the requirement using 
an out-of-position 5th percentile adult female test dummy at the driver 
position (S25).
    Lotus is requesting the above exemption for the Elise for the 
period from September 1, 2006 to August 31, 2009.
    Economic Hardship. Lotus has suffered substantial economic hardship 
for many years. In the past five years, its losses have totaled almost 
$125 million. When Lotus successfully petitioned NHTSA for an exemption 
in 2004, it forecasted profits for fiscal years 2004 and 2005. However, 
these profits never materialized, and Lotus instead lost $13 million in 
2004 and approximately $5 million in 2005.\16\
---------------------------------------------------------------------------

    \16\ Lotus also derives profits from engineering consulting for 
other small volume manufacturers. However, that business has 
declined. Fluctuations in the value of the dollar have also had a 
major effect on profits.
---------------------------------------------------------------------------

    Lotus asserts that if the exemption is not granted, the company 
will be forced out of the U.S. market starting in September 2006 until 
sometime in 2008 for lack of any product to sell. Without an exemption, 
Lotus predicts losses totaling over $100 million in the next three 
years. Lotus argues that the cash required for Lotus to maintain a 
presence in the U.S. and to compensate its dealers for no product would 
not be sustainable. Further, there would not be funds to develop a new 
fully compliant vehicle. In short, the company could be forced entirely 
out of business.
    Good faith efforts to comply. Lotus asserts that it has tried in 
good faith to comply with the advanced air bag requirements. The 
development work for advanced air bags did not begin until June 2003 
because Lotus was not originally planning on selling the Elise in the 
U.S. Instead, as noted above, a new fully compliant vehicle was 
intended to be sold in the U.S., but that project was cancelled.
    In seeking an advanced air bag system for the Elise, Lotus 
encountered a number of difficulties and has been unable to acquire an 
``off-the-shelf'' advanced air bag system. First, many existing 
advanced air bag designs, technical specifications, and tooling are the 
intellectual property of the original equipment manufacturer (OEM) and 
not the supplier. Lotus experienced reluctance to allow the transfer of 
this intellectual property for its use. Second, the passenger air bag 
size, inflator pressure, venting, and deployment angle in those pre-
existing air bag systems have been specifically designed for the 
original OEM vehicle crash pulse and interior geometry. Therefore, to 
source a passenger air bag requires reverse engineering, suiting the 
vehicle's interior package, and modifying the vehicle crash pulse to 
suit the OEM air bag. Third, the suppression option for compliance was 
not possible due to the lack of available sensor technology. Instead, 
to pursue the low risk deployment option, Lotus would need a top 
mounted passenger air bag. However, to package the top mounted 
passenger air bag in the Elise would require a complete redesign of a 
major structural part of the extruded aluminum chassis. At the location 
where the passenger air bag would need to be situated, there is a major 
structural cross beam that is bonded into the chassis. New tooling for 
the instrument panel would also be required, along with a new air bag 
cover. The air bag cover would require a new unique design to overcome 
the issues of out-of-position, small occupant air bag deployments. 
Fourth, advanced air bag occupant classification systems require a 
compliant seat frame base. The Lotus Elise has a rigid shell seat with 
only a minimum level of foam; therefore, another technical solution 
would be required, such as seat frame weight sensors. Currently, this 
solution is under development by suppliers but is not now available as 
a production solution.
    Lotus argues that an exemption would be in the public interest. 
First, Lotus asserts that the current Elise standard air bag system 
does not pose a safety risk. Lotus indicates that it knows of no 
injuries or deaths to infants, children, or other occupants caused by 
the Elise's current standard air bag system. Lotus further notes that 
the passenger seat is fixed in its rearmost position, thereby reducing 
air bag risks to children.
    Second, Lotus argues that denial of the petition would result in 
loss of jobs within Lotus and by independent dealers and repair 
specialists in the U.S. because the petitioner would be forced to 
abandon the U.S. market, which could also compromise the flow of proper 
parts and service to existing Lotus owners. Lotus also argued that 
consumer choice would be adversely affected.
    Summary of Public Comments. The agency received two comments on the 
Lotus petition for a temporary exemption. The first comment was 
submitted by Lotus itself.\17\ In its comment, the company stated that 
its situation is similar to Ferrari's request for a temporary exemption 
from the advanced air bag provisions of FMVSS No. 208, which the agency 
granted in a notice published in the Federal Register on May 22, 2006 
(71 FR 29389) (Docket No. NHTSA-2005-23093). Specifically, Lotus 
presented the following arguments in support of its petition.
---------------------------------------------------------------------------

    \17\ Docket No. NHTSA-2006-25324-11.
---------------------------------------------------------------------------

    Like Ferarri, Lotus stated that it product cycles must last longer 
than the industry average due to the high cost of development and 
extremely small sales volumes. Lotus stated that advanced air bags were 
not anticipated when the Elise's vehicle platform was designed (in 
conjunction with its predecessor vehicle (the Elan)), and when the 
advanced air bag requirements were established, the company originally 
planned to introduce advanced air bag in the successor vehicle, the 
Lotus Esprit, and then to use the same technology for its Elise model. 
However, the company stated that due to unforeseen circumstances, the 
Esprit successor vehicle was delayed. Lotus stated that once this 
situation became clear, the company immediately tried to shift its 
advanced air bag program's focus to the Elise, with subsequent 
introduction into the Esprit successor. However, Lotus argued that 
despite its good faith efforts, it is not practicable to comply with 
the advanced air bag requirements in time to meet the September 1, 2006 
deadline.

[[Page 52861]]

    Lotus argued that it is an independent manufacturer eligible for an 
exemption under 49 CFR part 555, despite the fact that the company is 
owned by Proton Holdings Berhad. The petitioner argued that its 
relationship to its parent company is similar to that of Ferarri and 
its parent company (Fiat). Lotus also noted that denial of its 
exemption request would have a negative employment impact on both its 
U.S. subsidiary and its U.S. dealerships.
    In terms of safety impact, Lotus argued that the Elise would be 
equipped with standard air bags and that these vehicles are not 
typically used for daily transportation, have substantially lower than 
average annual usage, and typically are not used to transport children. 
Accordingly, the petitioner argued that its requested exemption for 
these vehicles would have a negligible effect on safety. The company 
added that its search of NHTSA's Fatality Analysis Reporting System 
(FARS) database from 1995-2003 and 2004 Annual Report File showed no 
fatal crashes for Lotus vehicles after the 1995 model year, no crashes 
for Elise vehicles, and no crashes involving children.
    In addition, Lotus argued that the continued weakening of the U.S. 
dollar vis-[agrave]-vis the British Pound, when combined with 
competitive pressure to avoid significant vehicle price increases in 
the U.S. market, exacerbates the economic hardship problems confronting 
the company.
    As noted above, the second comment was submitted by Mr. Steven 
Blodgett (see the summary of public comments under Lamborghini for a 
complete discussion of this comment). Specific to Lotus, Mr. Blodgett 
requested the OMB and/or a separate independent contractor be used to 
evaluate the company's financial data. The commenter also objected to 
the lack of supporting documentation from air bag suppliers to verify 
that the requirements for which the vehicle manufacturer seeks an 
exemption cannot be met. As further factors for consideration by the 
agency in reviewing the company's temporary exemption request, Mr. 
Blodgett highlighted what he perceived to be the manufacturer's delay 
in submitting a part 555 petition from the advanced air bag 
requirements and its presumed continuation of vehicle production prior 
to receiving the agency's decision.
    Agency Decision on Lotus Petition. We are granting the Lotus 
petition to be exempted from portions of the advanced air bag 
regulation required by S14.2 (specifically S14.5.2, S15, S17, S19, S21, 
S23, and S25). The exemption does not extend to the provision requiring 
a belted 50th percentile male barrier impact test (S14.5.1(a)). In 
addition to certifying compliance with S14.5.1(a), Lotus must continue 
to certify to the unbelted 50th percentile male barrier impact test in 
force prior to September 1, 2006 (S5.1.2(a)). We note that the unbelted 
sled test in S13 is an acceptable option for the requirement. The 
agency's rationale for this decision is as follows.
    The advanced air bag requirements present a unique challenge 
because they would require Lotus to completely redesign a major 
structural part of the extruded aluminum chassis in its vehicles. While 
the petitioner was aware of the new requirements for some time, it was 
not able to introduce a fully compliant vehicle by September 2006 as 
originally intended. Accordingly, it was determined that the Elise 
model, designed for the European market, would need to be sold in the 
U.S. market in order to generate revenue for a successor vehicle that 
complies with all U.S. requirements, including the advanced air bag 
requirements of FMVSS No. 208. Although Lotus immediately engaged in 
homologation efforts, the company experienced a number of technical 
challenges precluding incorporation of advanced air bag into the Elise 
at this time, as follows.
    Lotus has been unable to acquire an ``off-the-shelf'' advanced air 
bag system. First, many existing advanced air bag designs, technical 
specifications, and tooling are the intellectual property of the 
original equipment manufacturer (OEM) and not the supplier. Lotus 
experienced reluctance to allow the transfer of this intellectual 
property for its use. Second, the passenger air bag size, inflator 
pressure, venting, and deployment angle in those pre-existing air bag 
systems have been specifically designed for the original OEM vehicle 
crash pulse and interior geometry. Therefore, to source a passenger air 
bag requires reverse engineering, suiting the vehicles' interior 
package, and modifying the vehicle crash pulse to suit the OEM air bag. 
Third, the suppression option for compliance was not possible due to 
the lack of available sensor technology. Instead, to pursue the low 
risk deployment option, Lotus would need a top mounted passenger air 
bag. However, to package the top mounted passenger air bag in the Elise 
would require a complete redesign of a major structural part of the 
extruded aluminum chassis. At the location where the passenger air bag 
would need to be situated, there is a major structural cross beam that 
is bonded into the chassis. New tooling for the instrument panel would 
also be required, along with a new air bag cover. The air bag cover 
would require a new unique design to overcome the issues of out-of-
position, small occupant air bag deployments. Fourth, advanced air bag 
occupant classification systems require a compliant seat frame base. 
The Lotus Elise has a rigid shell seat with only a minimum level of 
foam; therefore, another technical solution would be required, such as 
seat frame weight sensors. Currently, this solution is under 
development by suppliers but is not now available as a production 
solution. Lotus has made clear that such a prospect would pose a unique 
challenge to the company, due to the high cost of development and its 
extremely small sales volumes.
    Based upon the information provided by the petitioner, we 
understand that Lotus made good faith efforts to bring the Elise into 
compliance with the applicable requirements until such time as it 
became apparent that there was no practicable way to do so. No viable 
alternatives remain. The petitioner is unable to redesign its vehicle 
by the time the new advanced air bag requirements go into effect on 
September 1, 2006.
    After review of the income statements provided by the petitioner, 
the agency notes that the company has faced ongoing financial 
difficulties, having lost over $125 million over the past five years. 
If the petitioner is forced to discontinue selling the current model in 
the U.S. market, the resulting loss of sales would cause substantial 
economic hardship within the meaning of the statute, potentially 
forcing the company out of business in the U.S. According to Lotus, 
absent the exemption, the company would have no product to sell in the 
U.S. until sometime in 2008, and losses could swell to over $100 
million in the next three years. However, Lotus's problems would be 
compounded without its requested temporary exemption, because it needs 
the revenue from sales of the Elise over the next three years to 
finance development of a fully compliant vehicle for delivery to the 
U.S. market. Granting the exemption will allow Lotus to earn the 
resources necessary to bridge the gap in terms of development of a 
successor vehicle for the Elise that meets all U.S. requirements.
    While some of the information submitted by Lotus has been granted 
confidential treatment and is not detailed in this document, the 
petitioner made a comprehensive showing of its good faith efforts to 
comply with the requirements of S14.2 of FMVSS No. 208, and detailed 
engineering and

[[Page 52862]]

financial information demonstrating that failure to obtain the 
exemption would cause substantial economic hardship. Specifically, the 
petitioner provided the following:
    1. Chronological analysis of Lotus'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 (including OEM price-volume quotations).
    5. Explanations as to why components from newer, compliant vehicle 
lines could not be borrowed.
    6. Corporate income statements and balance sheets for the past 
three years, and projected income statements and balance sheets if the 
petition is denied.
    We note that Lotus is a well-established company with a small, but 
not insignificant U.S. presence. We believe that the reduction of sales 
revenue resulting from a denial of the company's requested temporary 
exemption would have a negative impact not only on Lotus's financial 
circumstances, but it would also negatively affect U.S. employment. 
Specifically, reduction in sales would also affect not only employees 
of Lotus Cars USA, but also Lotus dealers and repair specialists. 
Traditionally, the agency has concluded that the public interest is 
served in affording continued employment to the petitioner's U.S. work 
force. Furthermore, as discussed in previous decisions on temporary 
exemption applications, the agency believes that the public interest is 
served by affording consumers a wider variety of motor vehicle choices.
    We believe that this exemption will have negligible impact on motor 
vehicle safety, because Lotus vehicles are not typically used for daily 
transportation.
    The agency examined the FARS (1995-2004) and the National 
Automotive Sampling System Crashworthiness Data System (NASS CDS) 
(1995-2005) for information on the vehicle in question. These data 
indicate that over that period, there were no NASS CDS cases for the 
Elise and three fatalities in FARS for the Elise predecessor (two adult 
male and one adult female occupants). There were no children or small 
women involved in crashes of the later Lotus Elise included in these 
databases.
    We note that, as explained below, prospective purchasers will be 
notified that the vehicle is exempted from the specified advanced air 
bag requirements of Standard No. 208. Under Sec.  555.9(b), a 
manufacturer of an exempted passenger car must affix securely to the 
windshield or side window of each exempted vehicle a label containing a 
statement that the vehicle conforms to all applicable Federal motor 
vehicle safety standards in effect on the date of manufacture ``except 
for Standard Nos. [listing the standards by number and title for which 
an exemption has been granted] exempted pursuant to NHTSA Exemption No. 
------.'' This label notifies prospective purchasers about the 
exemption and its subject. Under Sec.  555.9(c), this information must 
also be included on the vehicle's certification label.
    The text of Sec.  555.9 does not expressly indicate how the 
required statement on the two labels should read in situations where an 
exemption covers part but not all of a Federal motor vehicle safety 
standard. In this case, we believe that a statement that the vehicle 
has been exempted from Standard No. 208 generally, without an 
indication that the exemption is limited to the specified advanced air 
bag provisions, could be misleading. A consumer might incorrectly 
believe that the vehicle has been exempted from all of Standard No. 
208's requirements. Moreover, we believe that the addition of a 
reference to such provisions by number without an indication of its 
subject matter would be of little use to consumers, since they would 
not know the subject of those specific provisions. For these reasons, 
we believe the two labels should read in relevant part, ``except for 
S14.5.2, S15, S17, S19, S21, S23, and S25 (Advanced Air Bag 
Requirements) of Standard No. 208, Occupant Crash Protection, exempted 
pursuant to * * *.'' We note that the phrase ``Advanced Air Bag 
Requirements'' is an abbreviated form of the title of S14 of Standard 
No. 208. We believe it is reasonable to interpret Sec.  555.9 as 
requiring this language.
    Although our response to the supplementary comments provided by the 
petitioner is reflected above, in terms of our response to the comment 
submitted by Mr. Blodgett, we note that the issues raised in that 
comment (e.g., extension of the comment period, duration of the comment 
period, documentation) are identical for all five petitioners. 
Accordingly, please see our decision for Lamborghini (Section IV of 
this notice) for the agency's response to this comment submission.
    In sum, the agency concludes that Lotus has demonstrated good faith 
effort to bring the Elise into compliance with the advanced air bag 
requirements of FMVSS No. 208, and has also demonstrated the requisite 
financial hardship. Further, we find the exemption to be in the public 
interest.
    In consideration of the foregoing, we conclude that compliance with 
the advanced air bag requirements of FMVSS No. 208, Occupant Crash 
Protection, would cause substantial economic hardship to a manufacturer 
that has tried in good faith to comply with the standard. We further 
conclude that granting of an exemption would be in the public interest 
and consistent with the objectives of traffic safety.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), the Lotus Elise is 
granted NHTSA Temporary Exemption No. EX 06-4, from S14.5.2, S15, S17, 
S19, S21, S23, and S25 of 49 CFR 571.208. The exemption is effective 
from September 1, 2006 to August 31, 2009.

VI. Morgan <SUP>18</SUP>
---------------------------------------------------------------------------

    \18\ We note that Morgan submitted a supplement to its 
application, seeking a temporary exemption from all FMVSS No. 208 
air bag requirements for a separate vehicle (i.e., its traditional 
Roadster model) (see Docket No. NHTSA-2006-25324-4 (included with 
original application)). Although the Morgan Roadster previously had 
been equipped with standard air bags, the company stated that it has 
lost its original supplier for air bags for this vehicle and has 
been unable to find an alternate supplier. Due to the different 
issues involved, the agency will be addressing the supplemental 
request involving the Morgan Roadster in a separate Federal Register 
notice.
---------------------------------------------------------------------------

    Background. Founded in 1909, Morgan is a small privately-owned 
vehicle manufacturer producing approximately 600 specialty sports cars 
per year. Morgan manufactures several models, but 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 work out, and Morgan 
temporarily stopped selling vehicles in the U.S. in 2004. In May of 
2005, Morgan obtained a temporary exemption from the Bumper Standard 
and began selling the Aero 8 in the U.S. Morgan now asks for a 
temporary exemption from advanced air bag requirements because of 
financial hardship. If its exemption request is granted, the company 
anticipates importing into the U.S. 25 vehicles in 2006, 250 vehicles 
in 2007, 250 in 2008, and 200 vehicles in 2009.
    Eligibility. Morgan produces approximately 600 vehicles per year. 
Morgan is an independent company. Accordingly, NHTSA concludes that 
Morgan is eligible to apply for a hardship exemption.
    Requested exemptions. Morgan stated that it intends for its U.S. 
Aero 8

[[Page 52863]]

production on and after September 1, 2006 to comply with the rigid 
barrier belted test requirement using the 50th percentile adult male 
test dummy (S14.5.1) and the rigid barrier belted test requirement 
using the 5th percentile adult female test dummy (S15.1).
    Morgan states that the Aero 8's compliance with the rigid barrier 
unbelted test requirement using the 50th percentile adult male test 
dummy was determined through the S13 sled test using a generic pulse, 
rather than a full vehicle test. This petitioner further states that it 
cannot at present say with certainty that the Aero 8 would comply with 
the unbelted test requirement under S14.5.2, which is a 20-25 mph rigid 
barrier test.
    As for the other advanced air bag requirements, Morgan states that 
it does not know whether the Aero 8 would be compliant, as Morgan has 
not had the financial ability to conduct the necessary development and 
testing.
    Morgan is requesting an exemption for the Aero 8 from the rigid 
barrier unbelted test requirement with the 50th percentile adult male 
test dummy (S14.5.2), the rigid barrier unbelted test requirement using 
the 5th percentile adult female test dummy (S15.2), the offset 
deformable barrier test requirement using the 5th percentile adult 
female test dummy (S17), the requirements to provide protection for 
infants and children (S19, S21, and S23) and the requirement using an 
out-of-position 5th percentile adult female test dummy at the driver 
position (S25).
    Morgan is requesting the above exemption for the Aero 8 for the 
period from September 1, 2006 to August 31, 2009.
    Economic Hardship. Morgan argues that meeting the advanced air bag 
requirements is estimated to cost between $3,196,179 and $5,066,938 and 
is not within the financial capability of the company.\19\ Morgan's 
financial submission indicates the company's losses over the last five 
years have totaled more than $3.6 million. In its initial petition, 
Morgan stated that it made a small profit in 2004 for the first time in 
three years. However, Morgan later supplied the agency with updated 
financial information for 2004 and 2005, which showed net losses for 
both of those fiscal years.
---------------------------------------------------------------------------

    \19\ When costs for interior redesign, crash cars, and tooling 
are included, the estimate rises to between $5,648,679 and 
$7,519,438.
---------------------------------------------------------------------------

    Without an exemption, Morgan would be forced once again to withdraw 
from the U.S. market. With no income from U.S. sales, Morgan asserts 
that it will not be able to fund an advanced air bag program for a 
future vehicle or return to profitability. For the period between 2006 
and 2009, Morgan projects that the outcome of the agency's decision on 
its exemption request will amount to the difference between a profit of 
over $3 million and a loss of over $6 million. Morgan further asserts 
that if the petition is denied, it could soon become insolvent.
    Good faith efforts to comply. Morgan 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 timely 
implementation of an advanced air bag system for the Aero 8. The 
minimum time needed to develop an advanced air bag system (provided 
that there is a source of revenue) is two years. With no other product 
to sell in the meantime, Morgan needs to rely on Aero 8 sales to 
finance this project.
    Specific technical challenges include the following. Morgan does 
not have access to 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.
    Morgan argues that an exemption would be in the public interest. 
Morgan put forth several arguments in favor of a finding that the 
requested exemption is consistent with the public interest. 
Specifically, Morgan asserts the current Aero 8's standard air bag 
system does not pose a safety risk. Morgan knows of no injuries caused 
by the Aero 8's current standard air bag system. If the exemption is 
denied and Morgan stops U.S. sales, Morgan's U.S. dealers would 
unavoidably have numerous lay-offs, resulting in decreased U.S. 
unemployment. Denial of an exemption would reduce the consumer choice 
in the specialty sports car market sector into which Morgan cars are 
offered. The Aero 8 will not be used extensively by owners, and is 
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 from the U.S. market, and Morgan 
dealers will find it difficult to support existing customers.
    Summary of Public Comments. The agency received two comments 
related to the Morgan petition for a temporary exemption. The first 
comment was submitted by Morgan itself.\20\ In its comment, the company 
stated that its situation is similar to Ferrari's request for a 
temporary exemption from the advanced air bag provisions of FMVSS No. 
208, which the agency granted in a notice published in the Federal 
Register on May 22, 2006 (71 FR 29389) (Docket No. NHTSA-2005-23093). 
Specifically, Morgan presented the following arguments in support of 
its petition.
---------------------------------------------------------------------------

    \20\ Docket No. NHTSA-2006-25324-9.
---------------------------------------------------------------------------

    Like Ferrari, Morgan stated that its product cycles must last 
longer than the industry average due to the high cost of development 
and extremely small sales volumes. Morgan stated that it did not 
anticipate sale of the Aero 8 in the U.S., but the company later 
determined that it would be necessary to market this vehicle in the 
U.S. Once such decision was made, Morgan stated that it made a good 
faith effort to find a practicable way to comply with the advanced air 
bag requirements, but it was unable to do so. However, the petitioner 
stated that in order to meet the advanced air bag requirements, it 
would face the unique challenge of needing to completely redesign the 
vehicle before the end of its life cycle.
    Morgan stated that its vehicle also incorporates additional active 
and passive safety systems, including load limiters, electronic 
brakeforce distribution (EBD), ABS, drag torque control (for 
stability), and a tire pressure monitoring system (in advance of the 
compliance date for small volume manufacturers under FMVSS No. 138, 
Tire Pressure Monitoring Systems).
    In terms of safety impact, Morgan argued that it intends to produce 
only 400 Aero 8 vehicles over three years and that these vehicles are 
not typically used for daily transportation, have substantially lower 
than average annual usage, and typically are not used to transport 
children. Accordingly, the petitioner argued that its requested 
exemption for these vehicles would have a negligible effect on safety. 
The company added that its search of NHTSA's Fatality Analysis 
Reporting System (FARS) database from 1995-2003 and 2004 Annual Report 
File did not show any crashes involving Morgan's vehicle during that 
timeframe.
    In addition, Morgan argued that the continued weakening of the U.S. 
dollar vis-a-vis the British Pound, when combined with competitive 
pressure to avoid significant vehicle price increases in the U.S. 
market, exacerbates the economic hardship problems confronting the 
company. Morgan also argued that denial of its exemption request would 
have a negative employment impact on its U.S. dealerships.

[[Page 52864]]

    As noted above, the second comment was submitted by Mr. Steven 
Blodgett (see the summary of public comments under Lamborghini for a 
complete discussion of this comment). Specific to Morgan, Mr. Blodgett 
requested the OMB and/or a separate independent contractor be used to 
evaluate the company's financial data. The commenter also objected to 
the lack of supporting documentation from air bag suppliers to verify 
that the requirements for which the vehicle manufacturer seeks an 
exemption cannot be met. As further factors for consideration by the 
agency in reviewing the company's temporary exemption request, Mr. 
Blodgett highlighted what he perceived to be the manufacturer's delay 
in submitting a part 555 petition from the advanced air bag 
requirements and its presumed continuation of vehicle production prior 
to receiving the agency's decision.
    Agency Decision on Morgan Petition. We are granting the Morgan 
petition to be exempted from portions of the advanced air bag 
regulation required by S14.2 (specifically S15.2, S17, S19, S21, S23, 
and S25). The extent of the exemption is limited to those provision 
requiring an unbelted 5th percentile female barrier impact (S15.2), a 
belted 5th percentile female offset frontal impact (S17), testing with 
child dummies (S19, S21 and S23) and the 5th percentile female dummy 
out-of-position testing (S25). Morgan must certify to 50th percentile 
male barrier testing (S14.5.1(a) and S14.5.2), and 5th percentile 
female belted barrier testing (S15.1). The agency's rationale for this 
decision is as follows.
    The advanced air bag requirements present a unique challenge 
because they would require Morgan to undertake a major redesign of its 
vehicles, in order to overcome the engineering limitations of the Aero 
8. While the petitioner was aware of the new requirements for some 
time, its business plans to introduce a fully U.S. compliant vehicle 
did not materialize due to technical problems. As a result, Morgan 
subsequently determined that it would be necessary to introduce the 
Aero 8 into the U.S. market in order to finance the development of a 
fully compliant successor vehicle, thereby raising the problem of 
compliance with the advanced air bag requirements.
    Morgan explained the main engineering challenges precluding 
incorporation of advanced air bag into the Aero 8 at this time, as 
follows. The company does not have access to necessary sensor 
technology to pursue the ``full suppression'' passenger air bag option. 
In addition, due to the design of the Aero 8 platform dashboard, an 
entirely new interior solution and design must be developed, and 
chassis modifications are anticipated due to the originally stiff 
chassis design. The petitioner states that it would take approximately 
two years to resolve these technical issues surrounding advanced air 
bags, given adequate funding. Morgan has made clear that such a 
prospect would pose a unique challenge to the company, due to the high 
cost of development and its extremely small sales volumes.
    Based upon the information provided by the petitioner, we 
understand that Morgan made good faith efforts to bring the Aero 8 into 
compliance with the applicable requirements until such time as it 
became apparent that there was no practicable way to do so. The company 
had a difficult time in gaining access to advanced air bag technology 
(which presumably reflects suppliers' initial focus on meeting the 
needs of large volume manufacturers), and this further reduced the lead 
time available for development. Furthermore, because Morgan is a fully 
independent company, there was no possibility of technology transfer 
from a larger parent company. Consequently, no viable alternatives 
remain. The petitioner is unable to redesign its vehicle by the time 
the new advanced air bag requirements go into effect on September 1, 
2006.
    After review of the income statements provided by the petitioner, 
the agency notes that the company has faced ongoing financial 
difficulties, experiencing financial losses of about $4 million over 
the past five years (2001-2005). If the petitioner is forced to 
discontinue selling the current model in the U.S. market, the resulting 
loss of sales would cause substantial economic hardship within the 
meaning of the statute, potentially amounting to the difference between 
a profit of over $3 million and a loss of over $6 million over the 
period from 2006-2009. Ultimately, denial of the exemption request 
could threaten the company's solvency.
    According to Morgan, absent the exemption, the company anticipates 
being forced to withdraw from the U.S. market. However, Morgan's 
problems would be compounded without its requested temporary exemption, 
because it needs the revenue from sales of the Aero 8 over the next 
three years to finance development of a fully compliant vehicle for 
delivery to the U.S. market. Granting the exemption will allow Morgan 
to earn the resources necessary to bridge the gap in terms of 
development of a successor vehicle for the Aero 8 that meets all U.S. 
requirements.
    While some of the information submitted by Morgan has been granted 
confidential treatment and is not detailed in this document, the 
petitioner made a comprehensive showing of its good faith efforts to 
comply with the requirements of S14.2 of FMVSS No. 208, and detailed 
engineering and financial information demonstrating that failure to 
obtain the exemption would cause substantial economic hardship. 
Specifically, the petitioner provided the following:
    1. Chronological analysis of Morgan'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. List of air bag suppliers that were approached in hopes of 
procuring necessary components (including OEM price-volume quotations).
    4. Explanations as to why components from newer, compliant vehicle 
lines could not be borrowed.
    5. Corporate income statements and balance sheets for the past 
three years, and projected income statements and balance sheets if the 
petition is denied.
    We note that reduction of sales revenue resulting from a denial of 
the company's requested temporary exemption would have a negative 
impact not only on Morgan's financial circumstances, but it would also 
negatively affect U.S. employment. Specifically, reduction in sales 
would also affect Morgan dealers and repair specialists, negatively 
impacting their ability to provide parts and services to current Morgan 
owners. Traditionally, the agency has concluded that the public 
interest is served in affording continued employment to the 
petitioner's U.S. work force. Furthermore, as discussed in previous 
decisions on temporary exemption applications, the agency believes that 
the public interest is served by affording consumers a wider variety of 
motor vehicle choices.
    We also note that the Aero 8 features several advanced ``active'' 
safety features. These features are listed in the petitioner's 
application.\21\ While the availability of these features is not 
critical to our decision, it is a factor in considering whether the 
exemption is in the public interest.
---------------------------------------------------------------------------

    \21\ See page 12 of Morgan's petition and page 1 of Morgan's 
comments.
---------------------------------------------------------------------------

    We believe that this exemption will have negligible impact on motor 
vehicle safety because of the limited number of

[[Page 52865]]

vehicles affected (approximately 400 imported for the duration of the 
exemption), and because Morgan vehicles are not typically used for 
daily transportation. Their annual usage (approximately 5,000 miles per 
year) is substantially lower compared to vehicles used for everyday 
transportation.
    Furthermore, the agency examined the FARS (1995-2004) and the 
National Automotive Sampling System Crashworthiness Data System (NASS 
CDS) (1995-2005) for information on the vehicle in question (which 
began sales in May 2005) or its predecessor vehicle (the Plus 8). These 
data indicate that over that period, there were no NASS CDS and no FARS 
cases for the Aero 8 or its predecessor. Thus, there were no children 
or small women involved in crashes of these Morgan vehicles included in 
these databases.
    We note that, as explained below, prospective purchasers will be 
notified that the vehicle is exempted from the specified advanced air 
bag requirements of Standard No. 208. Under Sec.  555.9(b), a 
manufacturer of an exempted passenger car must affix securely to the 
windshield or side window of each exempted vehicle a label containing a 
statement that the vehicle conforms to all applicable Federal motor 
vehicle safety standards in effect on the date of manufacture ``except 
for Standard Nos. [listing the standards by number and title for which 
an exemption has been granted] exempted pursuant to NHTSA Exemption No. 
------.'' This label notifies prospective purchasers about the 
exemption and its subject. Under Sec.  555.9(c), this information must 
also be included on the vehicle's certification label.
    The text of Sec.  555.9 does not expressly indicate how the 
required statement on the two labels should read in situations where an 
exemption covers part but not all of a Federal motor vehicle safety 
standard. In this case, we believe that a statement that the vehicle 
has been exempted from Standard No. 208 generally, without an 
indication that the exemption is limited to the specified advanced air 
bag provisions, could be misleading. A consumer might incorrectly 
believe that the vehicle has been exempted from all of Standard No. 
208's requirements. Moreover, we believe that the addition of a 
reference to such provisions by number without an indication of its 
subject matter would be of little use to consumers, since they would 
not know the subject of those specific provisions. For these reasons, 
we believe the two labels should read in relevant part, ``except for 
S15.2, S17, S19, S21, S23, and S25 (Advanced Air Bag Requirements) of 
Standard No. 208, Occupant Crash Protection, exempted pursuant to * * 
*.'' We note that the phrase ``Advanced Air Bag Requirements'' is an 
abbreviated form of the title of S14 of Standard No. 208. We believe it 
is reasonable to interpret Sec.  555.9 as requiring this language.
    Our response to the supplementary comments provided by the 
petitioner is reflected above. In terms of our response to the comment 
submitted by Mr. Blodgett, we note that the issues raised in that 
comment (e.g., extension of the comment period, duration of the comment 
period, documentation) are identical for all five petitioners. 
Accordingly, please see our decision for Lamborghini (Section IV of 
this notice) for the agency's response to this comment submission.
    In sum, the agency concludes that Morgan has demonstrated good 
faith effort to bring the Aero 8 into compliance with the advanced air 
bag requirements of FMVSS No. 208, and has also demonstrated the 
requisite financial hardship. Further, we find the exemption to be in 
the public interest.
    In consideration of the foregoing, we conclude that compliance with 
the advanced air bag requirements of FMVSS No. 208, Occupant Crash 
Protection, would cause substantial economic hardship to a manufacturer 
that has tried in good faith to comply with the standard. We further 
conclude that granting of an exemption would be in the public interest 
and consistent with the objectives of traffic safety.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), the Morgan Aero 8 
is granted NHTSA Temporary Exemption No. EX 06-5, from S15.2, S17, S19, 
S21, S23, and S25 of 49 CFR 571.208. The exemption is effective from 
September 1, 2006 to August 31, 2009.

VII. Maserati

    Background. Maserati is a small volume Italian automobile 
manufacturer formed in 1914 that produces performance sports cars and 
luxury automobiles. Over the years, Maserati has experienced frequent 
changes in ownership and financial hardship. The exemption is being 
sought for the Maserati Coupe/Spyder \22\ for a period of 16 months.
---------------------------------------------------------------------------

    \22\ The Maserati vehicles in question differ only in that one 
is a hardtop version (the Coupe) and the other is a convertible 
softtop version (the Spyder).
---------------------------------------------------------------------------

    Eligibility. Maserati produced less than 6,000 vehicles in the most 
recent year of production. More specifically, the petitioner reported 
the following worldwide production and U.S. imports over the past few 
years:

------------------------------------------------------------------------
                                       Worldwide
         Maserati S.p.A               production         U.S. imports
------------------------------------------------------------------------
2003............................  2900 cars.........  1073 cars.
2004............................  4722 cars.........  1747 cars.
2005............................  5571 cars.........  2061 cars.
------------------------------------------------------------------------

    However, Maserati is owned by Fiat, a large vehicle manufacturer. 
The petitioner stated that there is no similarity of design between the 
cars produced by Maserati and Fiat, and that Maserati designed and 
engineered the Coupe/Spyder without the direct involvement of Fiat. In 
addition, Maserati stated that its vehicles are imported and sold 
though its own dealer networks, not those of Fiat. In sum, Maserati 
asserts that its relationship with Fiat is ``arm's-length.'' Maserati 
operates independently, and services provided by Fiat are paid for by 
Maserati.
    In making our determination regarding eligibility, we note that the 
public comment of the COSVAM raised the issue of whether certain of the 
petitioners (Bugatti, Lamborghini, Maserati) are eligible for temporary 
exemptions under part 555, in light of their financial relationships to 
larger parent companies which are also vehicle manufacturers. 
Specifically, COSVAM argued that the Maserati vehicle has been 
engineered by Ferrari and that the technology for compliance with the 
requirements of FMVSS No. 208 should be readily available. The 
commenter asserted that at one point, the two companies shared the same 
staff for certification (homologation) and that the two companies have 
a long history of technology sharing. COSVAM stated that the two 
companies' recent corporate separation was defined in the public record 
as ``administrative rather than technological,'' and it stated that 
Maserati continues to use powertrains and other engineering equipment 
developed by and for Ferrari (which is majority-owned by Fiat S.p.A.). 
Thus, the commenter expressed doubt as to whether Maserati would be 
unable to comply with the advanced air bag requirements of FMVSS No. 
208. Accordingly, the commenter argued that Maserati should be 
considered ineligible for a temporary exemption under part 555.
    Maserati also submitted a public comment \23\ on its own petition, 
in which it sought to clarify its relationship with its parent company, 
arguing that it is similar to that of Ferrari which is also majority-
owned by Fiat.

[[Page 52866]]

    The agency examined the relationship between Maserati and Fiat (and 
its subsidiary Ferrari). We have concluded that Maserati is eligible to 
apply for a temporary exemption based on the following factors. First, 
there is no similarity of design between the cars produced by Maserati 
and cars produced by Fiat (or Ferrari), and Maserati has stated that 
its Coupe/Spyder was designed without assistance from Fiat (or 
Ferrari). Second, Maserati cars are imported and sold through separate 
distribution channels independent of Fiat, which does not sell vehicles 
in the U.S, and of Ferrari. Accordingly, NHTSA concludes that Fiat (and 
Ferrari) are not manufacturers of Maserati vehicles by virtue of being 
a sponsor.
    Requested exemptions. Maserati stated that it intends for the 
Coupe/Spyder produced for the United States market on and after 
September 1, 2006 to comply with the rigid barrier belted and unbelted 
test requirements using the 50th percentile adult male test dummy 
(S14.5).
---------------------------------------------------------------------------

    \23\ Docket No. NHTSA-2006-25324-10.
---------------------------------------------------------------------------

    As for the Coupe/Spyder's compliance with the other advanced air 
bag requirements, Maserati states that it does not know whether the 
Coupe/Spyder will be compliant as it has not had the financial ability 
to conduct the necessary development and testing.
    Accordingly, Maserati is requesting an exemption from the rigid 
barrier test requirement using the 5th percentile adult female test 
dummy (belted and unbelted, S15), the offset deformable barrier test 
requirement using the 5th percentile adult female test dummy (S17), the 
requirements to provide protection for infants and children (S19, S21, 
and S23) and the requirement using an out-of-position 5th percentile 
adult female test dummy at the driver position (S25).
    Maserati is requesting the above exemption for the Coupe/Spyder for 
the period from September 1, 2006 to December 31, 2007.
    Economic hardship. Over the period of 2000-2005, the company lost 
$385,195,998 (320,996,665 euros).\24\ The petitioner argues that an 
exemption is needed in order to avoid massive disruptions to the 
Maserati production system and loss of revenue until a fully-compliant 
model is introduced in early 2008. The exempted vehicles will ``bridge 
the gap'' between the current Coupe/Spyder, with standard air bags, and 
the next version of the model line arriving in 2008 with advanced air 
bags. The petitioners stated that it does not have the resources to 
fund advanced air bag development for both the Coupe/Spyder and the 
successor vehicle due in 2008, and that an advanced air bag system 
tailored to the one vehicle could not be subsequently used in the 
other, due to completely different vehicle platforms. Furthermore, even 
if it were technically possible to install advanced air bags in the 
Coupe/Spyder, Maserati stated that the added cost on a per-vehicle 
basis would price the model out of the market. If the exemption is 
denied, the petitioner anticipates layoffs, negative impacts for 
Maserati dealers and owners in the U.S., and a delay in introducing a 
new, fully complaint vehicle.
---------------------------------------------------------------------------

    \24\ The dollar-euro exchange rate used herein is 1 euro = 
$1.20.
---------------------------------------------------------------------------

    Good faith efforts to comply. Maserati states that it has been 
unable to overcome engineering problems associated with installing 
advanced air bags in the current Coupe/Spyder, a vehicle platform that 
is soon to go out of production. The design of the current Coupe/Spyder 
started in 1996, before the advanced air bag rule was promulgated. In 
the late 1990s, when Maserati decided to re-enter the U.S. market, it 
made the decision that the Coupe/Spyder would have a life span in the 
U.S. of five years, from 2002 through 2006. This decision was based on 
the fact that the model was introduced in Europe in 1997, and that the 
basic platform would, therefore, have a total life span of nine years. 
Only in late 2005, Maserati concluded that it had to extend the life 
span of the Coupe/Spyder, by 16 months beyond the planned 2006 end 
date, because a fully compliant vehicle is not yet ready.
    According to Maserati, it tried, but could not overcome the 
technical challenges associated with borrowing the advanced air bag 
system from Maserati's other model, the Quattroporte, because the 
steering column and steering wheel are incompatible with the electrical 
system in the Coupe/Spyder. Use of the Quattroporte's passenger air bag 
would require redesigning the entire Coupe/Spyder dashboard. To 
position the Quattroporte's sensors in the Coupe/Spyder, it would have 
been necessary to change the seats. The sensors also could not be 
packaged in the Coupe/Spyder due to space problems, and the sensor 
software was incompatible with the Coupe/Spyder's electrical system.
    Maserati argues that an exemption would be in the public interest. 
Maserati put forth several arguments in favor of a finding that the 
requested exemption is consistent with the public interest. 
Specifically, Maserati asserts the current Coupe/Spyder's air bag 
system does not pose a safety risk. Maserati knows of no injuries 
caused by the Coupe/Spyder's current standard air bag system. If the 
exemption is denied and Maserati stops U.S. sales, Maserati states that 
its goodwill with its U.S. dealers would be negatively impacted. 
Further, Maserati asserts that denial of an exemption would reduce 
consumer choice in the specialty sports car market sector into which 
Maserati cars are offered. Masearti asserts that the Coupe/Spyder will 
not be used extensively by owners, and is unlikely to carry small 
children. Finally, according to Maserati, granting an exemption would 
assure the continued availability of proper parts and service support 
for existing Maserati owners.
    Summary of Public Comments. The agency received three comments on 
the Maserati petition for a temporary exemption. The first comment was 
submitted by Maserati itself. In its comment, the company stated that 
its situation is similar to Ferrari's request for a temporary exemption 
from the advanced air bag provisions of FMVSS No. 208, which the agency 
granted in a notice published in the Federal Register on May 22, 2006 
(71 FR 29389) (Docket No. NHTSA-2005-23093). Specifically, Maserati 
presented the following arguments in support of its petition.
    Like Ferarri, Maserati stated that it product cycles must last 
longer than the industry average due to the high cost of development 
and extremely small sales volumes. Maserati stated that it did not 
anticipate continued production of the Coupe/Spyder after September 1, 
2006, but the company later determined that it would be necessary to 
continue production of that model. According to Maserati, advanced air 
bag requirements were not anticipated when designing the Coupe/Spyder's 
vehicle platform, which arose from a predecessor vehicle developed 
circa 1995. However, the petitioner stated that in order to meet the 
advanced air bag requirements, it would face the unique challenge of 
needing to completely redesign the vehicle before the end of its life 
cycle. Maserati stated that it made a good faith effort to find a 
practicable way to comply with the advanced air bag requirements, but 
it was unable to do so.
    As discussed previously, Maserati argued that it is an independent 
manufacturer eligible for an exemption under 49 CFR part 555, despite 
the fact that the company is majority-owned by Fiat. The petitioner 
argued that its relationship to its parent company is similar to that 
of Ferarri, which is also majority-owned by Fiat. Maserati also noted 
that denial of its exemption request would have a negative

[[Page 52867]]

employment impact on both its U.S. subsidiary and its U.S. dealerships.
    Maserati stated that in addition to standard air bags, its vehicle 
also incorporates additional active and passive safety systems, 
including electronic stability control, ABS, side air bags, and a fixed 
rollover bar on the convertible. Furthermore, the company stated that 
the Coupe/Spyder has been equipped with an air bag on-off switch.
    In terms of safety impact, Maserati argued that it intends to 
produce only about 700 Coupe/Spyder vehicles over 16 months and that 
these vehicles are not typically used for daily transportation, have 
substantially lower than average annual usage, and typically are not 
used to transport children. Accordingly, the petitioner argued that its 
requested exemption for these vehicles would have a negligible effect 
on safety. The company added that its search of NHTSA's Fatality 
Analysis Reporting System (FARS) database from 1995-2003 and 2004 
Annual Report File showed no accident involving a Maserati vehicle 
built by the ownership-management post-DeTomaso.\25\
---------------------------------------------------------------------------

    \25\ According to the petitioner, Maserati operated under one 
corporate ownership-management structure (DeTomaso), which last 
produced vehicles for sale in the U.S. during model year 1991. The 
company was subsequently sold to its current leadership, which 
resumed sales in the U.S. in 2001. According to the petitioner, the 
two generations of vehicles were significantly different, although 
both shared the same Maserati name.
---------------------------------------------------------------------------

    In addition, Maserati argued that the continued weakening of the 
U.S. dollar vis-a-vis the euro, when combined with competitive pressure 
to avoid significant vehicle price increases in the U.S. market, 
exacerbates the economic hardship problems confronting the company.
    The second comment was submitted by Mr. Steven Blodgett (see the 
summary of public comments under Lamborghini for a complete discussion 
of this comment). Specific to Maserati, Mr. Blodgett requested the OMB 
and/or a separate independent contractor be used to evaluate the 
company's financial data. The commenter also objected to the lack of 
supporting documentation from air bag suppliers to verify that the 
requirements for which the vehicle manufacturer seeks an exemption 
cannot be met. As further factors for consideration by the agency in 
reviewing the company's temporary exemption request, Mr. Blodgett 
highlighted what he perceived to be the manufacturer's delay in 
submitting a part 555 petition from the advanced air bag requirements 
and its presumed continuation of vehicle production prior to receiving 
the agency's decision.
    The third comment was submitted by COSVAM. As discussed previously, 
COSVAM raised the issue of whether certain of the petitioners (Bugatti, 
Lamborghini, Maserati) are eligible for temporary exemptions under part 
555, in light of their financial relationships to larger parent 
companies which are also vehicle manufacturers (see Eligibility section 
above for details and the agency's decision on that issue).
    Agency Decision on Maserati Petition. We are granting the Maserati 
petition to be exempted from portions of the advanced air bag 
regulation required by S14.2 (specifically S15, S17, S19, S21, S23, and 
S25). The exemption does not extent to the provisions requiring 50th 
percentile male barrier impact tests (S14.5.1(a) and S14.5.2). Thus, 
Maserati must certify to S14.5.1(a) and S14.5.2. The agency's rationale 
for this decision is as follows.
    The advanced air bag requirements present a unique challenge 
because they would require Maserati to conduct a major redesign its 
vehicles, in order to overcome the existing engineering and technical 
limitations based upon design of the Coupe/Spyder. While the petitioner 
was aware of the new requirements for some time, its business plans 
changed, and it was subsequently determined that the Coupe/Spyder's 
production run would need to be extended beyond 2006 (i.e., for an 
additional 16 months) because a successor vehicle is not ready, thereby 
raising the problem of compliance with the advanced air bag 
requirements. The petitioner requested a temporary exemption in order 
to prevent a gap in its U.S. product portfolio, thereby maintaining its 
market position in the U.S. and avoiding financial harm to its dealer 
network.
    Maserati explained the main engineering challenges precluding 
incorporation of advanced air bag into the Coupe/Spyder at this time, 
as follows. After examining available options, Maserati determined that 
its best chance of meeting the advanced air bag requirements would 
involve borrowing the advanced air bag system from Maserati's other 
model, the Quattroporte. However, this strategy did not work, because 
the Quattroporte's steering column and steering wheel are incompatible 
with the electrical system in the Coupe/Spyder. Furthermore, it was 
determined that use of the Quattroporte's passenger air bag would 
require redesigning the entire Coupe/Spyder dashboard and that to 
position the Quattroporte's sensors in the Coupe/Spyder, it would have 
been necessary to change the seats. The sensors also could not be 
packaged in the Coupe/Spyder due to space problems, and the sensor 
software was incompatible with the Coupe/Spyder's electrical system. 
Thus, Maserati has made clear that such a prospect would pose a unique 
challenge to the company, due to the high cost of development and its 
extremely small sales volumes.
    Based upon the information provided by the petitioner, we 
understand that Maserati made good faith efforts to bring the Coupe/
Spyder into compliance with the applicable requirements until such time 
as it became apparent that there was no practicable way to do so. No 
viable alternatives remain. The petitioner is unable to redesign its 
vehicle by the time the new advanced air bag requirements go into 
effect on September 1, 2006.
    After review of the income statements provided by the petitioner, 
the agency notes that the company has faced ongoing financial 
difficulties, having lost over $385 million (320 million euros) over 
the period from 2001-2005. If the petitioner is forced to discontinue 
selling the current model in the U.S. market, the resulting loss of 
sales and revenue would cause substantial economic hardship within the 
meaning of the statute. However, Maserati's problems would be 
compounded without its requested temporary exemption, because it needs 
the revenue from sales of the Coupe/Spyder over the next 16 months to 
finance development of a fully compliant vehicle for delivery to the 
U.S. market in 2008. Granting the exemption will allow Maserati to earn 
the resources necessary to bridge the gap in terms of development of a 
successor vehicle for the Coupe/Spyder that meets all U.S. 
requirements.
    While some of the information submitted by Maserati has been 
granted confidential treatment and is not detailed in this document, 
the petitioner made a comprehensive showing of its good faith efforts 
to comply with the requirements of S14.2 of FMVSS No. 208, and detailed 
engineering and financial information demonstrating that failure to 
obtain the exemption would cause substantial economic hardship. 
Specifically, the petitioner provided the following:
    1. Chronological analysis of Maserati's efforts to comply, showing 
the relationship to the rulemaking history of the advanced air bag 
requirements.
    2. Discussion of alternative means of compliance and reasons for 
rejecting these alternatives.
    3. Explanations as to why components from newer, compliant vehicle 
lines could not be borrowed.

[[Page 52868]]

    4. Corporate incomes statements and balance sheets for the past 
three years.\26\
---------------------------------------------------------------------------

    \26\ Because the company is wholly owned by Fiat and does not 
publish financial statements, Maserati did not include pro forma 
projected statements. Nevertheless, the financial statements for 
prior years provided by Maserati suggest that the company has a ways 
to go before achieving profitability on its operations. Given its 
cumulative losses, the company is not in a position to incur the 
costs of a new development program to be spread over only 700 units, 
thereby raising the retail price of the Coupe/Spyder significantly.
---------------------------------------------------------------------------

    Although Maserati did not supply OEM price-volume quotation from 
air bag suppliers in terms of a compliant system for the Coupe/Spyder, 
we nevertheless believe that such discussions took place, as the 
company explored the alternatives of either upgrading the existing 
standard air bag on the Coupe/Spyder or adapting the Quattroporte's 
advanced air bag system to that vehicle. Neither of these alternatives 
proved feasible, either developmentally or commercially.
    We note that Maserati is a well-established company with a small, 
but not insignificant U.S. presence. We believe that the reduction of 
sales revenue resulting from a denial of the company's requested 
temporary exemption would have a negative impact not only on Maserati's 
financial circumstances, but it would also negatively affect U.S. 
employment. Specifically, reduction in sales would also affect 
Maserati's U.S. subsidiaries, dealers, and repair specialists, which 
could in turn negatively impact the availability of parts and services 
to existing Maserati owners. Traditionally, the agency has concluded 
that the public interest is served in affording continued employment to 
the petitioner's U.S. work force. Furthermore, as discussed in previous 
decisions on temporary exemption applications, the agency believes that 
the public interest is served by affording consumers a wider variety of 
motor vehicle choices.
    We also note that the Coupe/Spyder features several advanced 
``active'' safety features. These features are listed in the 
petitioner's application.\27\ While the availability of these features 
is not critical to our decision, it is a factor in considering whether 
the exemption is in the public interest.
---------------------------------------------------------------------------

    \27\ See page 13 of Maserati's petition and page 1 of Maserati's 
comments.
---------------------------------------------------------------------------

    We believe that this exemption will have negligible impact on motor 
vehicle safety because of the limited number of vehicles affected (not 
more than 700 for the duration of the exemption), and because Maserati 
vehicles are not typically used for daily transportation. Their annual 
usage (less than 10,000 miles per year on average) is substantially 
lower compared to vehicles used for everyday transportation.
    In addition, Maserati has voluntarily included an air bag on-off 
switch for passenger air bag suppression for the protection of children 
being transported in the right front seating position. This will enable 
the passenger air bag to be manually turned off when a child is 
present, which supports our findings that this exemption would have a 
negligible impact on motor vehicle safety.
    Furthermore, the agency examined the FARS (1995-2004) and the 
National Automotive Sampling System Crashworthiness Data System (NASS 
CDS) (1995-2005) for information on the vehicle in question. These data 
indicate that over that period, there were no NASS CDS cases and one 
FARS case for a model year 1987 Coupe/Spyder (male driver). Thus, there 
were no children or small women involved in crashes of the Maserati 
Coupe/Spyder included in these databases.
    We note that, as explained below, prospective purchasers will be 
notified that the vehicle is exempted from the specified advanced air 
bag requirements of Standard No. 208. Under Sec.  555.9(b), a 
manufacturer of an exempted passenger car must affix securely to the 
windshield or side window of each exempted vehicle a label containing a 
statement that the vehicle conforms to all applicable Federal motor 
vehicle safety standards in effect on the date of manufacture ``except 
for Standard Nos. [listing the standards by number and title for which 
an exemption has been granted] exempted pursuant to NHTSA Exemption No. 
------.'' This label notifies prospective purchasers about the 
exemption and its subject. Under Sec.  555.9(c), this information must 
also be included on the vehicle's certification label.
    The text of Sec.  555.9 does not expressly indicate how the 
required statement on the two labels should read in situations where an 
exemption covers part but not all of a Federal motor vehicle safety 
standard. In this case, we believe that a statement that the vehicle 
has been exempted from Standard No. 208 generally, without an 
indication that the exemption is limited to the specified advanced air 
bag provisions, could be misleading. A consumer might incorrectly 
believe that the vehicle has been exempted from all of Standard No. 
208's requirements. Moreover, we believe that the addition of a 
reference to such provisions by number without an indication of its 
subject matter would be of little use to consumers, since they would 
not know the subject of those specific provisions. For these reasons, 
we believe the two labels should read in relevant part, ``except for 
S15, S17, S19, S21, S23, and S25 (Advanced Air Bag Requirements) of 
Standard No. 208, Occupant Crash Protection, exempted pursuant to * * 
*.'' We note that the phrase ``Advanced Air Bag Requirements'' is an 
abbreviated form of the title of S14 of Standard No. 208. We believe it 
is reasonable to interpret Sec.  555.9 as requiring this language.
    Although our response to the supplementary comments provided by the 
petitioner is reflected above, we would offer the following response to 
the other public comments received on the Maserati petition. In terms 
of our response to the comment submitted by Mr. Blodgett, we note that 
the issues raised in that comment (e.g., extension of the comment 
period, duration of the comment period, documentation) are identical 
for all five petitioners. Accordingly, please see our decision for 
Lamborghini (Section IV of this notice) for the agency's response to 
this comment submission. As noted previously, the comments of COSVAM 
were addressed under the discussion of Eligibility above.
    In sum, the agency concludes that Maserati has demonstrated good 
faith effort to bring the Coupe/Spyder into compliance with the 
advanced air bag requirements of FMVSS No. 208, and has also 
demonstrated the requisite financial hardship. Further, we find the 
exemption to be in the public interest.
    In consideration of the foregoing, we conclude that compliance with 
the advanced air bag requirements of FMVSS No. 208, Occupant Crash 
Protection, would cause substantial economic hardship to a manufacturer 
that has tried in good faith to comply with the standard. We further 
conclude that granting of an exemption would be in the public interest 
and consistent with the objectives of traffic safety.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), the Maserati Coupe/
Spyder is granted NHTSA Temporary Exemption No. EX 06-6, from S15, S17, 
S19, S21, S23, and S25 of 49 CFR 571.208. The exemption is effective 
from September 1, 2006 to December 31, 2007.

    Issued on: August 31, 2006.
Nicole R. Nason,
Administrator.
[FR Doc. 06-7487 Filed 9-6-06; 8:45 am]
BILLING CODE 4910-59-P