[Federal Register Volume 64, Number 129 (Wednesday, July 7, 1999)]
[Notices]
[Pages 36742-36743]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-17236]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration
[Docket No. NHTSA-99-5607; Notice 2]


Qvale Automotive Group SrL; Grant of Application for Temporary 
Exemption From Federal Motor Vehicle Safety Standard No. 208

    For the reasons given below, we are granting the application by 
Qvale Automotive Group, SrL of Modena, Italy (``Qvale''), for an 
exemption until March 31, 2001, from the automatic restraint 
requirements of Federal Motor Vehicle Safety Standard No. 208 Occupant 
Crash Protection. Qvale applied for the exemption on the basis that 
``compliance would cause substantial economic hardship to a 
manufacturer that has tried in good faith to comply with the 
standard.'' 49 CFR 555.6(a).
    We published a notice of receipt of the application on May 5, 1999 
(64 FR 24216), and received no comments in response.
    The discussion that follows is based on information contained in 
Qvale's application.

Why Qvale Needs a Temporary Exemption

    Qvale is an Italian corporation, formed in January 1998. It is 
controlled by an American corporation owned by the Qvale family of San 
Francisco, California, which was also formed in January 1998. The 
American corporation does business as DeTomaso Automobiles, Ltd.
    DeTomaso Modena SpA, a small manufacturer of automobiles which 
produces less than 100 motor vehicles a year, developed a convertible 
passenger car, the Bigua, but was financially unable to produce it. 
Qvale has obtained the worldwide rights to manufacture and sell the 
Bigua under the name DeTomaso Mangusta. As of March 1999, Qvale had 
invested more than $7,000,000 in the Mangusta project, and anticipates 
an additional investment of $3,000,000 by the time production begins in 
September 1999.
    When the project began in early 1998, Qvale expected that a Ford 
Mustang air bag system could be easily integrated into the Mangusta, 
because DeTomaso Modena had anticipated that the U.S. would be the 
primary market for the car. However, it has developed that significant 
re-engineering will be required to incorporate an inflatable restraint 
system that complies with S4.1.5.3 of Standard No. 208. Qvale believes 
that it will be able to manufacture a conforming car beginning in May 
2000, but says that it needs an exemption so that it may sell the 
Mangusta in the United States, beginning in November 1999, to generate 
funds under its business plan. It has asked to be exempted through 
March 31, 2001, to allow for unforeseen problems during development. 
The applicant intends to retrofit exempted vehicles with air bag 
systems when they become available. It anticipates sales of 200-250 
Mangustas under the exemption.

Why Compliance Would Cause Qvale Substantial Economic Hardship

    Neither Qvale nor its American parent has had any income or sales 
since their inception in January 1998. Qvale had a net loss of $685,000 
for 1998, with a negative cash flow of $511,000. If an exemption is not 
granted and U.S. sales do not begin until May-June 2000, the company 
anticipates total net losses of approximately $4,800,000 in 1999 with a 
total negative cash flow of over $3,000,000. Even with an exemption 
that would permit U.S. sales to begin in November 1999, Qvale expects a 
net loss for 1999 of $4,124,025 and a negative cash flow of $2,502,025. 
In fact, even with an exemption, Qvale anticipates net losses through 
at least 2001 though the cash flow would become positive in 2000 and 
increase slightly in 2001.
    Qvale's U.S. parent has already hired a sales and distribution 
staff, and would suffer losses of $1,800,000 if it cannot begin sales 
of the Mangusta in November 1999.

How Qvale Has Tried To Comply With the Standard in Good Faith

    Qvale's production plan involves the use of the 4.6L Ford Cobra V-8 
engine as well as a significant number of Ford parts including the air 
bag system. Ford's parts division, Visteon, is the prime subcontractor 
responsible for the interior and air bags. Isis Automotive, an 
engineering company in the United Kingdom, has been chosen as the 
safety engineering project manager.
    It was anticipated that the Ford air bag system could be integrated 
into the Mangusta but the final chassis engineering that had continued 
during the Fall of 1998 indicated otherwise. Visteon found it necessary 
to redesign the dashboard, including the passenger side air bag door in 
order to make the Mangusta commercially viable, but is not able to 
furnish the redesigned interior parts until the Summer of 1999. Without 
these parts, an air bag system cannot be properly tested. In addition, 
the construction of 10 pre-production prototypes necessary for safety 
testing has been delayed until July 1999 because of problems with the 
prototype manufacturer (an outside supplier) and ongoing design 
changes. Finally additional time is needed to organize the supplier and 
engineering personnel and resources necessary for the air bag system 
development work (e.g., laboratory testing and sensor calibration).
    Because of these factors, Qvale's plans to incorporate an air bag 
system have been delayed from September 1999 to May or June 2000.

Why Exempting Qvale Would Be Consistent With the Public Interest 
and Objectives of Motor Vehicle Safety

    Qvale believes that the small number of vehicles that will be 
produced under an exemption will have no discernable effect upon 
safety. It intends to equip all of its U.S. vehicles with manual three 
point belts, and will meet the injury criteria specified in S4.1.5.3 
when tested with belted dummies. The company will affix a label to the 
instrument panel informing occupants of the exemption and the need to 
fasten their safety belts. Qvale plans to re-engineer its air bag 
system so that it may be installed as a retrofit in exempted vehicles. 
Mangustas will comply with all other applicable Federal motor vehicle 
safety standards.
    In Qvale's opinion, an exemption would permit the availability in 
the U.S. of the Mangusta's ``high technology, light weight TRM 
composite body.'' The success of the project will have a beneficial 
effect upon Visteon, a division of Ford Motor Company, as well as 
employment elsewhere in the U.S. of sales and service personnel.

[[Page 36743]]

Our Finding That Compliance Would Cause Substantial Economic 
Hardship to a Manufacturer That Has Tried in Good Faith To Comply 
With Standard No. 208

    It is manifest that Qvale has already invested considerable sums in 
its attempt to make the Bigua/Mangusta a viable commercial product, 
taking over the project from DeTomaso Automobili who lacked the 
financial resources to bring it to market. By the time production is 
scheduled to begin in September 1999, Qvale will have committed 
$10,000,000 to the enterprise. While denial of an exemption would not 
cause the failure of Qvale, it would result in total net losses of 
$4,800,000 before a car conforming to Standard No. 208 could be 
produced in 2000, as compared with total net losses of $4,124,025 with 
an exemption that would permit cars to be sold in the United States as 
of November 1999. Although an added loss of $700,000 may not appear 
significant in the overall context of an investment of $10,000,000, we 
note that Qvale cannot begin to generate any income at all until it is 
able to sell the Mangusta. Under the best of circumstances, the company 
anticipates net losses through 2001.
    From Qvale's application, we surmise that DeTomaso Automobili 
intended to equip the Bigua with a Ford Mustang air bag system, but 
that its own financial difficulties prevented it from fully assessing 
its suitability to the vehicle's design. Since beginning the project 
early in 1998, Qvale has reviewed these efforts and determined that 
``significant re-engineering'' is required to incorporate a conforming 
automatic restraint system. With its compliance project partners, 
Visteon and Isis, Qvale is working towards a conformance date less than 
a year away, May 2000. To allow for unanticipated difficulties it has 
asked for an exemption of 10 months past the anticipated date that the 
Mangusta will comply.
    After reviewing these arguments, we find that compliance would 
cause substantial economic hardship to a manufacturer that has tried in 
good faith to comply with Standard No. 208.

Our Finding That an Exemption Would Be in the Public Interest and 
Consistent With the Objectives of Motor Vehicle Safety

    We note with approval Qvale's intent to retrofit exempted vehicles 
with air bag systems when they become available for the estimated 200-
250 Mangustas that will be sold under an exemption. We also note that 
the Mangusta will comply with all other applicable Federal motor 
vehicle safety standards.
    Qvale is owned by a new American company which is hiring a sales 
and distribution staff for marketing the Mangusta in the United States. 
The principal subcontractor responsible for the engine, interior, air 
bags, and other parts, is also an American corporation.
    After reviewing these arguments, we find that a temporary exemption 
is in the public interest and consistent with the objectives of motor 
vehicle safety.

Grant of NHTSA Temporary Exemption No. 99-8

    For the reasons expressed above, Qvale Automotive Group, SrL, is 
hereby granted NHTSA Temporary Exemption No. 99-8, from S4.1.5.3 of 49 
CFR 571.208 Occupant Crash Protection, expiring April 1, 2001.

    Authority: 49 U.S.C. 30113; delegation of authority at 49 CFR 
1.50.

    Issued on: July 1, 1999.
Ricardo Martinez,
Administrator.
[FR Doc. 99-17236 Filed 7-6-99; 8:45 am]
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