[Federal Register Volume 61, Number 173 (Thursday, September 5, 1996)]
[Proposed Rules]
[Pages 46756-46759]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22536]



[[Page 46756]]

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration (NHTSA)

49 CFR Part 531

[Docket No. 96-085; Notice 1]


Passenger Automobile Average Fuel Economy Standards; Proposed 
Decision To Grant Exemption

ACTION: Proposed decision.

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SUMMARY: This proposed decision responds to a petition filed by Rolls-
Royce Motors, Ltd. (Rolls-Royce) requesting that it be exempted from 
the generally applicable average fuel economy standard of 27.5 miles 
per gallon (mpg) for model years 1998 and 1999 and that a lower 
alternative standard be established. In this document, NHTSA proposes 
that the requested exemption be granted and that an alternative 
standard of 16.3 mpg be established for MYs 1998 and 1999 for Rolls-
Royce.

DATES: Comments on this proposed decision must be received on or before 
October 21, 1996.

ADDRESSES: Comments on this proposal must refer to the docket number 
and notice number in the heading of this notice and be submitted, 
preferably in ten copies, to: Docket Section, Room 5109, National 
Highway Traffic Safety Administration, 400 Seventh Street, S.W., 
Washington, DC 20590. Docket hours are 9:30 a.m. to 4 p.m., Monday 
through Friday.

FOR FURTHER INFORMATION CONTACT: The following persons at the National 
Highway Traffic Safety Administration, 400 Seventh Street, S.W., 
Washington, D.C. 20590:
    For non-legal issues: Mr. P.L. Moore, Motor Vehicle Requirements 
Division, Office of Market Incentives, National Highway Traffic Safety 
Administration, 400 Seventh Street SW, Washington, DC 20590, (202) 366-
5222.
    For legal issues: Otto Matheke, Office of the Chief Counsel, NCC-
20, telephone (202) 366-5253, facsimile (202) 366-3820.

SUPPLEMENTARY INFORMATION:

Statutory Background

    Pursuant to 49 U.S.C. section 32902(d), NHTSA may exempt a low 
volume manufacturer of passenger automobiles from the generally 
applicable average fuel economy standards if NHTSA concludes that those 
standards are more stringent than the maximum feasible average fuel 
economy for that manufacturer and if NHTSA establishes an alternative 
standard for that manufacturer at its maximum feasible level. Under the 
statute, a low volume manufacturer is one that manufactured (worldwide) 
fewer than 10,000 passenger automobiles in the second model year before 
the model year for which the exemption is sought (the affected model 
year) and that will manufacture fewer than 10,000 passenger automobiles 
in the affected model year. In determining the maximum feasible average 
fuel economy, the agency is required under 49 U.S.C. 32902(f) to 
consider:
    (1) Technological feasibility;
    (2) Economic practicability;
    (3) The effect of other Federal motor vehicle standards on fuel 
economy, and
    (4) The need of the United States to conserve energy.
    Section 32902(d)(2) permits NHTSA to establish alternative average 
fuel economy standards applicable to exempted low volume manufacturers 
in one of three ways: (1) A separate standard for each exempted 
manufacturer; (2) a separate average fuel economy standard applicable 
to each class of exempted automobiles (classes would be based on 
design, size, price, or other factors); or (3) a single standard for 
all exempted manufacturers.

Background Information on Rolls-Royce

    Rolls-Royce is a small company concentrating wholly on the 
production of high quality, prestigious cars. Rolls-Royce markets cars 
under the Bentley and Rolls-Royce nameplates and currently seeks an 
exemption for both Bentley and Rolls-Royce cars. The annual production 
rate for these cars is less than 2,500 automobiles, of which one-third 
are sold in the United States. The corporate philosophy concentrates on 
this limited production as the only way to maintain their reputation 
for producing what is widely perceived as the best car in the world. It 
believes that its customers will continue to demand substantial cars, 
craftsman-built, using traditional materials and equipped to the 
highest standards. Rolls-Royce operates as an independent unit within 
the Vickers group of companies and is required to generate its own 
financial resources. The limited financial resources of this small 
company and its market position preclude Rolls-Royce from improving 
fuel economy by any means involving significant changes to the basic 
concept of a Rolls-Royce car.
    Fuel economy improvements are particularly difficult in the short 
run. Rolls-Royce traditionally manufactures its own engine and bodies 
and is a very low volume manufacturer. Because of this integration of 
component manufacturing and low volume, model changes are much less 
frequent than with larger manufacturers. Rolls-Royce may manufacture a 
body shell for fifteen years before making a major change. The 
opportunities for improving fuel economy through changing the model mix 
are also quite limited as Rolls-Royce manufactures only one basic model 
in different configurations and all have similarly low fuel economy.
    Rolls-Royce's ability to make long term fuel economy improvements 
is also very limited. Any change in the basic concept of its cars to 
reduce size or downgrade the specifications would not, according to the 
petitioner, be acceptable to its customers.
    Nevertheless, Rolls-Royce states that it is making every effort to 
achieve the lowest possible fuel consumption consistent with meeting 
emission, safety, and other standards while maintaining customer 
expectations of its product. In the 18-year period from 1978, when 
Federal fuel economy standards were introduced, Rolls-Royce has 
achieved fuel economy improvements by substituting lighter weight 
components and tuning its powertrain while leaving basic features of 
the vehicles unchanged.
    Rolls-Royce states that technical innovation and switching to 
lighter weight materials should result in worthwhile improvements in 
its vehicles. The company believes that it has been conscious of the 
need for weight saving for many years, and since the introduction of 
the Silver Shadow, has made many parts of aluminum. These include the 
engine block and cylinder heads, transmission and axle casings, doors, 
hood and deck lid.
    In addition to discussing opportunities for weight reduction, 
Rolls-Royce also included in its petition discussions of improving its 
fuel economy through mix shifts, engine improvements, and drive train 
and transmission improvements.

Rolls-Royce's Petition

    On December 15, 1995, Rolls-Royce petitioned NHTSA for an exemption 
from the average fuel economy standards for vehicles to be manufactured 
by Rolls-Royce in model years (MYs) 1998 and 1999. The petition also 
requested an alternative standard be established, not to exceed 16.3 
mpg, for each model year, 1998 and 1999. A number of petitions have 
been filed by Rolls-Royce covering all model years from 1978. The last 
was submitted in November 1994, which resulted in Rolls-Royce being 
granted an exemption

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from the generally applicable fuel economy standard for MY 1997.

Methodology Used to Project Maximum Feasible Average Fuel Economy Level 
for Rolls-Royce

Baseline Fuel Economy

    To project the level of fuel economy which could be achieved by 
Rolls-Royce in MYs 1998 and 1999, the agency considered whether there 
were technical or other improvements that would be feasible for these 
Rolls-Royce vehicles, whether or not the company currently plans to 
incorporate such improvements in those vehicles. The agency reviewed 
the technological feasibility of any changes and their economic 
practicability.
    NHTSA interprets ``technological feasibility'' as meaning that 
technology which would be available to Rolls-Royce for use on its MYs 
1998 and 1999 automobiles, and which would improve the fuel economy of 
those automobiles. The areas examined for technologically feasible 
improvements were weight reduction, engine improvements, and drive line 
improvements.
    The agency interprets ``economic practicability'' as meaning the 
financial capability of the manufacturer to improve its average fuel 
economy by incorporating technologically feasible changes to its MYs 
1998 and 1999 automobiles. In assessing that capability, the agency has 
always considered market demand since it is an implicit part of the 
concept of economic practicability. Consumers need not purchase what 
they do not want.
    In accordance with the concerns of economic practicability, NHTSA 
has considered only those improvements which would be compatible with 
the basic design concepts of Rolls-Royce automobiles. NHTSA assumes 
that Rolls-Royce will continue to produce a five-passenger luxury car. 
Hence, design changes that would make the cars unsuitable for five 
adult passengers with luggage or would remove items traditionally 
offered on luxury cars, such as air conditioning, automatic 
transmission, power steering, and power windows, were not examined. 
Such changes to the basic design could be economically impracticable 
since they might well significantly reduce the demand for these 
automobiles, thereby reducing sales and causing significant economic 
injury to the low volume manufacturer.

Mix Shift

    Rolls-Royce has little opportunity for improving fuel economy by 
changing the model mix since it makes only one basic model in various 
configurations, all with similarly low fuel economy. The differences in 
fuel economy values among the different models available in MYs 1998 
and 1999 will likewise be small. For the 1998 and 1999 model years, 
Rolls-Royce and Bentley cars will fall into five fuel economy 
configurations, three from the naturally aspirated engine family and 
two from the turbocharged engine family. The differences in fuel 
economy values between the different models are small, and the models 
with the lower projected fuel economies have significantly lower 
projected volumes. The Rolls-Royce model mix is essentially fixed by 
the market demand, and variations in sales percentages between the 
models would produce negligible improvement in CAFE.

Weight Reduction

    Rolls-Royce is conscious of the need to improve automotive fuel 
economy of its passenger vehicles. For MYs 1998 and 1999, aerodynamic 
improvements to the basic Rolls-Royce platform are expected to yield 
some fuel economy benefits. However, Rolls Royce, being a small 
manufacturer of prestigious automobiles, cannot afford to change the 
design of its cars by downsizing since its customers desire traditional 
size cars.

Engine and Drivetrain Improvements

    Rolls Royce has a tradition of attempting to reconcile improved 
fuel economy with its limited technical resources and a need for 
powerplants suitable for large heavy cars. Past developmental 
activities include test and evaluation of various technologies applied 
to the Rolls-Royce engine. These included the Texaco Controlled 
Combustion system, the Honda Compound Vortex Controlled Combustion 
system, diesel engines, cylinder disablement, increased engine 
displacement (to reduce NOX emissions and permit timing for 
improved fuel economy), the May ``Fireball'' combustion chamber, and 
overall downsizing of the engine and car incorporating all new features 
including bodyshell, engine, transmission, and suspension. Each of 
these approaches was discarded in turn as failing to provide a feasible 
option for simultaneously meeting fuel economy and emission 
requirements, and exacting customer expectations.
    For MYs 1998 and 1999, Rolls-Royce intends to implement several 
engine and drivetrain improvements. Changes to the induction and 
exhaust systems will produce greater efficiency. Other planned 
improvements will lower friction losses and further enhance fuel 
economy. Modified transmission shift patterns and torque converter 
characteristics will also result in improved economy. However, because 
of the nature of Rolls Royce automobiles and the need to retain large 
displacement engines, the fuel economy gains expected will not be 
large.

Effect of Other Motor Vehicle Standards

    The Rolls-Royce petition cites several emission and safety 
standards as having a significant impact on its ability to improve fuel 
economy. As with other low volume manufacturers, the demands of meeting 
these standards place a strain on Rolls Royce's relatively limited 
technical resources.
    Calfiornia emission regulations for the 1998 model year will 
require Rolls Royce and Bentley cars to meet new ``enhanced'' 
evaporative emission standards for all models. Meeting these new 
requirements will require substantial revisions to the fuel and 
emission control systems along with the introduction of an onboard 
diagnostic leak detection system, increasing vehicle weight and 
reducing fuel economy. Rolls Royce also contends that changes to the 
Federal Emission Test Procedures for the 1998 model year will also have 
a negative impact on fuel economy, particularly for the heavier models.
    The Rolls Royce petition also claims that compliance with safety 
standards will impair its ability to improve fuel economy. In 
particular, Rolls Royce indicates that compliance with FMVSS 208 
(Occupant Crash Protection) continues to impose fuel economy costs by 
forcing some models to move into a higher test weight class. Rolls 
Royce also contends in its petition that 49 CFR Part 581 (energy 
absorbing bumpers) and FMVSS 214 (side intrusion beam in doors) will 
also have fuel economy impacts for the 1998 and 1999 model years. 
Rolls-Royce is a small company, and engineering resources are limited, 
and priority must be given to meeting mandatory standards to remain in 
the marketplace. Conflict often exists between the priority of meeting 
standards and the need to remain competitive.

The Need of the United States To Conserve Energy

    The agency recognizes there is a need to conserve energy, to 
promote energy security, and to improve balance of payments. However, 
as stated above, NHTSA has tentatively determined that it is not 
technologically feasible or economically practicable for Rolls-Royce to 
achieve an average fuel economy in MYs 1998 and 1999 above

[[Page 46758]]

16.3 mpg. Granting an exemption to Rolls-Royce and setting an 
alternative standard at that level would result in only a negligible 
increase in fuel consumption and would not affect the need of the 
United States to conserve energy. In fact, there would not be any 
increase since Rolls-Royce cannot attain those generally applicable 
standards. Nevertheless, for illustrative purposes the agency estimates 
that the additional fuel consumed by operating the MYs 1998 and 1999 
fleet of Rolls-Royce vehicles over their operating lifetime at the 
company's projected CAFE of 16.3 mpg (compared to an hypothetical 27.5 
mpg fleet) is 115,959 barrels of fuel. This averages about 15.9 bbls. 
of fuel per day over the 20-year period that these cars will be an 
active part of the fleet. Obviously, this is insignificant compared to 
the daily fuel used by the entire motor vehicle fleet which amounts to 
some 4.8 million bbls. per day for passenger cars in the U.S. in 1994.

Maximum Feasible Average Fuel Economy for Rolls-Royce

    This agency has tentatively concluded that it would not be 
technologically feasible and economically practicable for Rolls-Royce 
to improve the fuel economy of its MYs 1998 and 1999 automobiles above 
an average of 16.3 mpg, that compliance with other Federal automobile 
standards would not adversely affect achievable fuel economy beyond the 
amount already factored into Rolls-Royce's projections, and that the 
national effort to conserve energy would not be affected by granting 
the requested exemption and establishing an alternative standard. 
Consequently, the agency tentatively concludes that the maximum 
feasible average fuel economy for Rolls-Royce in MYs 1998 and 1999 is 
16.3 mpg.

Proposed Level and Type of Alternative Standard

    The agency proposes to exempt Rolls-Royce from the generally 
applicable standard of 27.5 mpg and to establish an alternative 
standard for Rolls-Royce for MYs 1998 and 1999 at its maximum feasible 
average fuel economy of 16.3 mpg. NHTSA tentatively concludes that it 
would be appropriate to establish a separate standard for Rolls-Royce 
for the following reasons. The agency has already established (60 FR 
47877) an alternate standard of 17.0 mpg for MedNet, Inc. for MYs 1996, 
1997, and 1998. Therefore, the agency cannot use the second (class 
standards) or third (single standard for all exempted manufacturers) 
approaches for MY 1998. The agency also anticipates that it will 
receive petitions from other manufacturers seeking alternate standards 
for MY 1999. NHTSA tentatively concludes that the use of class 
standards or a single standard for all manufacturers would not provide 
sufficient flexibility for those manufacturers the agency anticipates 
will be filing petitions for MY 1999. Given the limited resources of 
these small manufacturers and their relative lack of ability to make 
significant changes to their product lines over the short term, the 
agency believes that establishing alternative standards for individual 
manufacturers is the most appropriate course of action for the 1999 
model year. Accordingly, NHTSA is proposing that an alternate standard 
be established for Rolls Royce in MY 1999.

Regulatory Impact Analyses

    NHTSA has analyzed this proposal and determined that neither 
Executive Order 12866 nor the Department of Transportation's regulatory 
policies and procedures apply. Under Executive Order 12866, the 
proposal would not establish a ``rule,'' which is defined in the 
Executive Order as ``an agency statement of general applicability and 
future effect.'' The proposed exemption is not generally applicable, 
since it would apply only to Rolls-Royce, Inc., as discussed in this 
notice. Under DOT regulatory policies and procedures, the proposed 
exemption would not be a ``significant regulation.'' If the Executive 
Order and the Departmental policies and procedures were applicable, the 
agency would have determined that this proposed action is neither major 
nor significant. The principal impact of this proposal is that the 
exempted company would not be required to pay civil penalties if its 
maximum feasible average fuel economy were achieved, and purchasers of 
those vehicles would not have to bear the burden of those civil 
penalties in the form of higher prices. Since this proposal sets an 
alternative standard at the level determined to be Rolls-Royce's 
maximum feasible level for MYs 1998 and 1999, no fuel would be saved by 
establishing a higher alternative standard. NHTSA finds that, because 
of the minuscule size of the Rolls-Royce fleet, incremental usage of 
gasoline by Rolls-Royce's customers would not affect the United 
States's need to conserve gasoline. There would not be any impacts for 
the public at large.
    The agency has also considered the environmental implications of 
this proposed exemption in accordance with the National Environmental 
Policy Act and determined that this proposed exemption, if adopted, 
would not significantly affect the human environment. Regardless of the 
fuel economy of the exempted vehicles, they must pass the emissions 
standards which measure the amount of emissions per mile traveled. 
Thus, the quality of the air is not affected by the proposed exemption 
and alternative standard. Further, since the exempted passenger 
automobiles cannot achieve better fuel economy than is proposed herein, 
granting this proposed exemption would not affect the amount of fuel 
used.
    Interested persons are invited to submit comments on the proposed 
decision. It is requested but not required that 10 copies be submitted.
    Comments must not exceed 15 pages in length (49 CFR 553.21). 
Necessary attachments may be appended to these submissions without 
regard to the 15 page limit. This limitation is intended to encourage 
commenters to detail their primary arguments in a concise fashion.
    If a commenter wishes to submit certain information under a claim 
of confidentiality, three copies of the complete submission, including 
purportedly confidential business information, should be submitted to 
the Chief Counsel, NHTSA, at the street address given above, and seven 
copies from which the purportedly confidential business information has 
been deleted, should be submitted to the Docket Section. A request for 
confidentiality should be accompanied by a cover letter setting forth 
the information specified in the agency's confidential business 
information regulation. 49 CFR part 512.
    All comments received before the close of business on the comment 
closing indicated above for the proposal will be considered, and will 
be available for examination in the docket at the above address both 
before and after that date. To the extent possible, comments filed 
after the closing date will also be considered. Comments received too 
late for consideration in regard to the final rule will be considered 
as suggestions for further rulemaking action. Comments on the proposal 
will be available for inspection in the docket. NHTSA will continue to 
file relevant information as it becomes available in the docket after 
the closing date, and it is recommended that interested persons 
continue to examine the docket for new material.
    Those persons desiring to be notified upon receipt of their 
comments in the rules docket should enclose a self-addressed, stamped 
postcard in the envelope with their comments. Upon receiving the 
comments, the docket supervisor will return the postcard by mail.

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List of Subjects in 49 CFR Part 531

    Energy conservation, Gasoline, Imports, Motor vehicles.

    In consideration of the foregoing, 49 CFR part 531 would be amended 
as follows:

PART 531--[AMENDED]

    1. The authority citation for part 531 continues to read as 
follows:

    Authority: 49 U.S.C. 32902, delegation of authority at 49 CFR 
1.50.

    2. In 49 CFR 531.5, the introductory text of paragraph (b) is 
republished and paragraph (b)(2) is revised to read as follows:


Sec. 531.5  Fuel economy standards.

* * * * *
    (b) The following manufacturers shall comply with the standards 
indicated below for the specified model years:
* * * * *
    (2) Rolls-Royce Motors, Inc.

------------------------------------------------------------------------
                                                               Average  
                                                                 fuel   
                                                               economy  
                         Model year                            standard 
                                                              (miles per
                                                               gallon)  
------------------------------------------------------------------------
1978.......................................................         10.7
1979.......................................................         10.8
1980.......................................................         11.1
1981.......................................................         10.7
1982.......................................................         10.6
1983.......................................................          9.9
1984.......................................................         10.0
1985.......................................................         10.0
1986.......................................................         11.0
1987.......................................................         11.2
1988.......................................................         11.2
1989.......................................................         11.2
1990.......................................................         12.7
1991.......................................................         12.7
1992.......................................................         13.8
1993.......................................................         13.8
1994.......................................................         13.8
1995.......................................................         14.6
1996.......................................................         14.6
1997.......................................................         15.1
1998.......................................................         16.3
1999.......................................................         16.3
------------------------------------------------------------------------

* * * * *
[Docket No. 96-085; N.1]

    Issued on: August 29, 1996.
Patricia Breslin,
Acting Associate Administrator for Safety Performance Standards.
[FR Doc. 96-22536 Filed 9-4-96; 8:45 am]
BILLING CODE 4910-59-P