[Federal Register Volume 61, Number 247 (Monday, December 23, 1996)]
[Proposed Rules]
[Pages 67518-67521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-32545]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 531

[Docket No. 96-115; Notice 1]


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

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

ACTION: Proposed decision.

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SUMMARY: This proposed decision responds to a petition filed by Lotus 
Cars Ltd. (Lotus) requesting that it be exempted from the generally 
applicable average fuel economy standard of 27.5 miles per gallon (mpg) 
for model years 1994, 1995, 1997, and 1998, and that, for Lotus, lower 
alternative standards be established. In this document, NHTSA proposes 
that the requested exemption be granted to Lotus and that alternative 
standards of 24.2 mpg be established for MY 1994, 23.3 mpg for MY 1995, 
and 21.2 mpg for MYs 1997 and 1998.

DATES: Comments on this proposed decision must be received on or before 
February 21, 1997.

ADDRESSES: Comments on this proposal must refer to the docket number 
and notice number in the heading of this document 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: Ms. Henrietta Spinner, Office Planning 
and Consumer Programs, NHTSA, 400 Seventh Street, S.W., Washington, DC 
20590. Ms. Spinner's telephone number is: (202) 366-4802.

SUPPLEMENTARY INFORMATION:

Statutory Background

    Pursuant to 49 U.S.C. 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.
    The statute permits NHTSA to establish alternative average fuel

[[Page 67519]]

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 Lotus

    Lotus was founded in England by Colin Chapman in 1955 and owned by 
Mr. Chapman until his death in 1982. After Mr. Chapman's death, the 
company was owned by several joint companies until 1986. In 1986, 
General Motors (GM) acquired total ownership of Lotus. Although GM 
owned it, Lotus continued to operate on an independent basis. For MYs 
1987-1993, Lotus' U.S. sales were incorporated into the GM import fleet 
for corporate average fuel economy (CAFE) purposes. In August 1993, 
Bugatti International SAH, a holding company with a controlling 
interest in Bugatti Automobili SpA., acquired ownership of Lotus from 
GM. Although under common ownership with Bugatti Automobili, Lotus 
continued to operate independently.
    Lotus has always provided high performance and efficiency through 
technology and weight reduction. For example, the first Lotus street 
production vehicle weighed 1,500 pounds (lbs.) and had a 1.6 liter 
engine of 100 horsepower (hp) (15 lbs./hp). For more than 30 years, 
Lotus four-cylinder engines were based on the fuel efficient four-
valve-per-cylinder design. Lotus pioneered and developed this 
technology for its own and other automotive companies worldwide. Lotus 
has exported vehicles to the United States (U.S.) for almost 30 years. 
However, the number of Lotus vehicles entering the U.S. is usually 
quite small. Lotus traditionally produces fewer than 2000 vehicles each 
year.
    For the 1994, 1995, 1997, and 1998 model years, Lotus'' product-
line for the U.S. market consists of the Lotus Esprit, a two-seat 
sports car. Lotus imported 137 Esprit cars into the U.S. in the 1994 
model year and 241 in the 1995 model year. Lotus does not anticipate 
importing any vehicles into the U.S. in 1996 and projects sales volumes 
for 1997 and 1998 that are consistent with its status as a low volume 
importer.

The Lotus Petition

    NHTSA's regulations on low volume exemptions from CAFE standards 
state that petitions for exemption are submitted ``not later than 24 
months before the beginning of the affected model year, unless good 
cause for later submission is shown.'' (49 CFR 525.6(b).)
    NHTSA received a joint petition from Bugatti Automobili S.p.A. and 
Lotus Cars Ltd. (Bugatti/Lotus) on July 18, 1994, seeking exemption 
from the passenger automobile fuel economy standards for MYs 1994-1996. 
This joint petition was filed less than 24 months before the beginning 
of MYs 1994 and 1995 and was therefore untimely under 49 C.F.R. 
526.6(b). The agency notes that Lotus was not sold by GM until August 
1993, when it was acquired by Bugatti International SAH. As both Lotus 
and Bugatti were under the common control of Bugatti International, 
they were required to file a joint petition for exemption. NHTSA 
observes that the two companies requested the agency's opinion 
concerning submitting a petition within three months of the sale of 
Lotus by GM. The agency responded to the Bugatti/Lotus request by a 
letter dated May 9, 1994 in which NHTSA indicated it would accept a 
joint Bugatti/Lotus petition. Bugatti and Lotus submitted their joint 
petition approximately two months later. Under the circumstances, NHTSA 
concludes that Bugatti and Lotus took reasonable measures to submit a 
petition in as timely a manner as possible. Therefore, the agency has 
determined that good cause exists for the late submission of the 
petition.
    In October 1994, NHTSA received an additional joint petition from 
Bugatti/Lotus seeking exemption from the passenger automobile fuel 
economy standard for MY 1997. In October 1995, NHTSA received another 
petition from Lotus seeking exemption from the passenger automobile 
fuel economy standard for MY 1998. These petitions are timely, as 
required by NHTSA's regulations at 49 C.F.R. 525.6(b).
    On September 22, 1995, Bugatti entered receivership in Italy. 
Because of Bugatti's financial instability, Lotus requested by a letter 
dated October 31, 1995, that NHTSA remove Bugatti from the pending MYs 
1994-1997 joint petitions filed previously by Bugatti and Lotus. Lotus 
also indicated that there were no Bugatti imports for MYs 1994-1995 and 
that Lotus itself would not import any vehicles into the U.S. for MY 
1996. Lotus requested that NHTSA revise its petitions for MYs 1994, 
1995, and 1997 to reflect alternative standards equal only to Lotus' 
fuel economy values.

Methodology Used To Project Maximum Feasible Average Fuel Economy Level 
for Lotus

Baseline Fuel Economy

    To project the level of fuel economy which could be achieved by 
Lotus in the 1994, 1995, 1997, and 1998 model years, NHTSA considered 
whether there were technical or other improvements that would be 
feasible for these vehicles, and whether the company currently plans to 
incorporate such improvements in the 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 Lotus for use on its 1994, 1995, 
1997, and 1998 model year automobiles, and which would improve the fuel 
economy of those automobiles. The areas examined for technologically 
feasible improvements were weight reduction, aerodynamic improvements, 
engine improvements, drive line improvements, and reduced rolling 
resistance.
    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 1994, 
1995, 1997, and 1998 model year automobiles. In assuming that 
capability, the agency has always considered market demand as 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 Lotus automobiles. Since NHTSA assumes 
that Lotus will continue to build high performance cars, design changes 
that would remove items traditionally offered on these cars were not 
considered. Such changes to the basic design would 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.

Technology for Fuel Economy Improvement

    The nature of Lotus vehicles generally do not result in high fuel 
economy values. Also, Lotus lags in having the latest developments in 
fuel efficiency technology because suppliers generally provide 
components and technology to small manufacturers only after supplying 
large manufacturers.

[[Page 67520]]

    Lotus states that the requested alternative fuel economy values 
represent the best possible CAFE that Lotus can achieve for the 1994, 
1995, 1997, and 1998 model years. However, the alternative fuel economy 
values decrease from 24.2 mpg in MY 1994 to 23.3 mpg in MY 1995 (a 
decrease of 0.9 mpg). For MYs 1997 and 1998, Lotus stated that the fuel 
economy value of 21.2 mpg represents the best possible CAFE that it can 
achieve. The shift from 23.3 mpg in MY 1995 to 21.2 mpg in MYs 1997-
1998 represents a decrease of 2.1 mpg. The fuel economy values will 
decrease over the course of these model years because Lotus has 
increased the Esprit's horsepower, and will replace the engine with a 
V-8 after MY 1995 for higher performance. Lotus' decision to use a V-8 
in the Esprit after MY 1995 is a response to market demand for more 
powerful engines. Lotus has produced small lightweight innovative 
sports vehicles for more than 40 years. Performance is achieved through 
obtaining maximum output from a small engine displacement, the use of 
glass fiber body panels, and reliance on a backbone chassis design. The 
vehicle's compact dimensions provide efficient performance coupled with 
a strong and relatively light-weight aerodynamic body construction.
    The body and chassis have been continuously improved to satisfy 
legal and customer requirements, and the MYs 1994-1995 vehicles have an 
equivalent test weight of 3,250 pounds and a weight-to-horsepower ratio 
of 12.31 lbs./hp and 11.36 lbs./hp respectively.
    The current Lotus' engine family series, the 900, has been in 
production for over 20 years. This engine is an in- line four-cylinder 
unit of 2.2 liters with intercooled turbocharging to maximize air 
density. The engine provides a high power/torque package that is a very 
efficient balance of fuel economy versus engine power. In MYs 1997-
1998, Lotus will employ a new turbocharged 3.5 liter V-8 engine with 
four valves per cylinder, high tumble combustion, and a high 
compression ratio. This engine will also be highly efficient. Because 
of Lotus' financial constraints and its decreased research and 
development budget, the manufacturer must use an engine that fits the 
existing Esprit chassis/body configuration and uses the present gearbox 
while maintaining Lotus' performance image. Other vehicle 
specifications for the MYs 1994, 1995, 1997, and 1998 Lotus' models 
remain relatively constant, with a slight increase in vehicle weight 
due to powertrain and regulatory requirements.

Model Mix

    Lotus is a small vehicle manufacturer that produces a modest range 
of high performance exotic sport vehicles. The current Lotus 900 engine 
series has been successful in complying with world-wide emission 
standards; however, in MY 1997, Lotus will alter its engine design to 
increase performance and to comply with increasingly stringent U.S. 
emission requirements. There is little opportunity to improve fuel 
economy by changing model mix since Lotus will make only one basic 
model in each model year.

Effect of Other Federal Motor Vehicle Standards

    The new, stringent California emission standards and the similarly 
stringent Federal Clean Air Act Amendments will apply to Lotus in MYs 
1995, 1997, and 1998. Lotus will likely achieve lower fuel economy due 
to compliance with these standards. In addition, a portion of its 
limited engineering resources will have to be expended to comply with 
these more stringent emissions standards including, but not limited to, 
evaporative emission standards.
    Federal motor vehicle safety standards (FMVSS) and regulations also 
have an adverse effect on the fuel economy of Lotus vehicles. These 
standards include 49 CFR Part 581 (energy absorbing bumpers), FMVSS 202 
(head restraints), FMVSS 207 (seating systems), FMVSS 208 (occupant 
crash protection), FMVSS 214 (side door strength), and FMVSS 216 (roof 
crush resistance). These standards tend to reduce achievable fuel 
economy values, since they result in increased vehicle weight.
    Lotus is a small company and engineering resources are limited. 
Priority must be given to meeting mandatory standards to remain in the 
marketplace.

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 Lotus to 
achieve an average fuel economy in MYs 1994 through 1998 above the 
levels set forth in this proposed decision. Granting an exemption to 
Lotus 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 Lotus cannot attain those generally applicable 
standards. Nevertheless, the agency estimates that the additional fuel 
consumed by operating the MYs 1994, 1995, 1997, and 1998 fleets of 
Lotus vehicles at the CAFE of 24.2 mpg for MY 1994, CAFE of 23.3 mpg 
for MY 1995, projected CAFE of 21.2 mpg for MYs 1997 and 1998 (compared 
to a hypothetical 27.5 mpg fleet) is 21,159 barrels of fuel. This 
averages about 3 barrels of fuel per day over the 20-year period that 
these vehicles will be an active part of the fleet. Obviously, this is 
insignificant compared to the fuel used daily by the entire motor 
vehicle fleet which amounts to 4.81 million barrels per day for 
passenger cars in the United States in 1994.

Maximum Feasible Average Fuel Economy for Lotus

    The agency has tentatively concluded that it would not be 
technologically feasible and economically practicable for Lotus to 
improve the fuel economies of its MYs 1994, 1995, 1997, and 1998 fleets 
above an average of 24.2 mpg for MY 1994, 23.3 mpg for MY 1995 and 21.2 
mpg for MYs 1997 and 1998. Federal automobile standards would not 
adversely affect achievable fuel economy beyond the amount already 
factored into Lotus' 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 Lotus is 24.2 mpg for MY 1994, 23.3 
mpg for MY 1995, and 21.2 mpg for MYs 1997 and 1998.
    NHTSA tentatively concludes that it would be appropriate to 
establish a separate standard for Lotus for the following reasons. The 
agency has already granted petitions submitted by Rolls Royce for 
alternative standards of 14.6 mpg for MYs 1995-96 and 15.1 mpg for MY 
1997. NHTSA has also granted a petition from Mednet, Inc. (successor 
company to Dutcher Motors) for an alternative standard of 17.0 mpg for 
MYs 1996-98. Therefore, the agency cannot use the second (class 
standards) or third (single standard for all exempted manufacturers) 
approaches for MYs 1995, 1996, 1997, and 1998.

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

[[Page 67521]]

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 Lotus Cars Ltd., as 
discussed in this document. 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 the maximum feasible levels for Lotus for MYs 1994, 1995, 1997, and 
1998, no fuel would be saved by establishing a higher alternative 
standard. NHTSA finds in the Section on ``The Need of the United States 
to Conserve Energy'' that because of the small size of the Lotus fleet, 
that incremental usage of gasoline by Lotus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 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 exemptions 
and alternative standards. Further, since the exempted passenger 
automobiles cannot achieve better fuel economy than is proposed herein, 
granting these proposed exemptions 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.
    All 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 
under 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.

List of Subjects in 49 CFR Part 531

    Energy conservation, Gasoline, Imports, Motor vehicles.
    In consideration of the foregoing, 49 CFR part 531 is proposed to 
be amended as follows:

PART 531--[AMENDED]

    1. The authority citation for part 531 would be revised to read as 
follows:

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

    2. In Sec. 531.5, the introductory text of paragraph (b) is 
republished for the convenience of the reader and paragraph (b)(6) 
would be added 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:
* * * * *
    (6) Lotus Cars Ltd.

------------------------------------------------------------------------
                                                  Average fuel economy  
                  Model year                      standard  (miles per  
                                                        gallon)         
------------------------------------------------------------------------
1994.........................................  24.2                     
1995.........................................  23.3                     
1997.........................................  21.2                     
1998.........................................  21.2                     
------------------------------------------------------------------------

* * * * *
    Issued on: December 18, 1996.
L. Robert Shelton,
Associate Administrator for Safety Performance Standards.
[FR Doc. 96-32545 Filed 12-20-96; 8:45 am]
BILLING CODE 4910-59-P