[Federal Register Volume 64, Number 217 (Wednesday, November 10, 1999)]
[Notices]
[Pages 61379-61380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29366]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration
[Docket No. NHTSA-99-6092; Notice 2]


Lotus Cars Ltd.; Grant of Application for Temporary Exemption 
From Federal Motor Vehicle Safety Standard No. 201

    This notice grants the application by Lotus Cars Ltd. (``Lotus'') 
of Norwich, England, through Lotus Cars USA, Inc., for a temporary 
exemption from S7, Performance Criterion, of Federal Motor Vehicle 
Safety Standard No. 201 Occupant Protection in Interior Impact, as 
described below. The basis of the application was that compliance would 
cause substantial economic hardship to a manufacturer that has tried in 
good faith to comply with the standard.
    We published a notice of receipt of the application on August 24, 
1999, and asked for comments (64 FR 46225) but received none.
    The material below is taken from Lotus's application.

Why Lotus Says That It Needs a Temporary Exemption

    In August 1995, when S7, the new head injury criteria portion of 
Standard No. 201, was promulgated, Lotus was owned by the Italian 
owners of Bugatti, a company then in bankruptcy. That year, Lotus was 
able to produce only 835 cars, selling 152, or 18.2%, in the United 
States.
    This country was the primary market for the Lotus Esprit, which, by 
then, was an aging design. With the limited resources that it had and 
the uncertainties of the future, in 1996 Lotus made the decision to 
invest primarily in an all-new model, the Elise, and to modernize the 
Esprit, rather than to replace it with an all-new design. Developed on 
a small budget, the Elise was not designed or intended for the American 
market. The Esprit was fitted with a new V8 engine meeting current U.S. 
emissions standards.
    At the end of 1996, Lotus was sold to its current owners, a group 
of Malaysian investors, who reviewed the company's fortunes. The Elise 
was becoming successful in its markets, while losses in the United 
States in the previous two years approached $2,000,000, primarily due 
to the declining appeal of the Esprit. The company's overall sales in 
1996 had declined to 751, including sales of 67 Esprits in the U.S. 
(8.9% of total sales). Nevertheless, the new owners decided to continue 
in the U.S. market. Sales were marginally better in the U.S. in 1997, 
72 Esprits, and vastly improved elsewhere with the great success of the 
Elise. Lotus sold 2414 cars in 1997 (with the U.S. sales representing 
only 3% of total sales, approximately the same as in 1998). However, it 
lost almost 2,000,000 Pounds in its 1996/7 fiscal year.
    In early 1997, Lotus decided to terminate production of the Esprit 
on September 1, 1999, and to homologate the Elise for the American 
market beginning in 2000. This decision allowed it to choose the option 
for compliance with S7 provided by S6.1.3, Phase-in Schedule #3, of 
Standard No. 201, to forego compliance with new protective criteria for 
the period September 1, 1998-September 1, 1999, and to conform 100% of 
its production thereafter.
    But, in addition to the new owners of Lotus, the new year saw the 
appointment of new CEOs of Lotus and Lotus Cars USA, with the result 
that a fresh look was taken at the direction of the company, and the 
plans of early 1997 were abandoned. In due course, new management 
decided to continue the Esprit in production beyond September 1, 1999, 
until September 1, 2002, while developing an all-new Esprit, and to 
remain in the American market without interruption. However, as 
described below, the company found itself unable to conform the current 
Esprit to Standard No. 201. In the meantime, the company had turned the 
corner with the success of the Elise, and had a net profit for its 
fiscal year 1997/8 of slightly more than 1,000,000 Pounds.

Lotus's Reasons Why Compliance Would Cause It Substantial Economic 
Hardship, and How It Has Tried in Good Faith To Comply With 
Standard No. 201

    When Lotus decided to continue production of the Esprit, it re-
engineered the car's front header rail and installed energy-absorbing 
material. After these modifications, the Esprit's HIC value was reduced 
from an already-complying 840 to 300.
    However, the side rail was not so simple. The small Esprit cockpit 
precluded any padding from being added at that location, without 
compromising ingress/egress and visibility. In order to comply with 
Standard No. 201, the Esprit ``greenhouse'' would have to be 
substantially modified. Modification costs could not be recovered for 
the relatively few cars that would be involved in the 1999-2002 period 
without raising the retail price to an unacceptable level. Further, 
Lotus was encountering major problems sourcing design-specific energy 
absorbing materials without being compelled to buy a 10-year supply; it 
was therefore forced to consider materials being produced for high-
volume users, with attendant problems.
    As redevelopment plans progressed in 1998, Lotus determined that a 
redesign of the ``greenhouse'' for the 1999-2002 period would cost in 
excess of $950,000, and require retesting to confirm continued 
compliance of its airbag system with Standard No. 208. But the company 
did not have the personnel to

[[Page 61380]]

deploy to both the redesigned and new Esprit projects, and it has 
chosen to devote its human resources to the all-new Esprit.
    The Elise continues to contribute to the company's newly found 
financial solidarity, and its cumulative net income for the past three 
fiscal years is 2,466,000 Pounds, or, $4,068,900 (at an exchange rate 
of 1.65 to 1). Although a denial of the petition would substantially 
reduce Lotus's net income but not result in a net loss, the decrease 
would come primarily at the expense of Lotus Cars USA which Lotus 
believes could not remain in existence without cars to sell during the 
period required to develop the new Esprit. Lotus estimates that it 
would sell 200 Esprits in the U.S. during the period of a 3-year 
exemption.

Lotus's Reasons Why an Exemption Would Be in the Public Interest 
and Consistent With the Objectives of Motor Vehicle Safety

    After 10 years of sales of the Esprit with its current body shape, 
Lotus knows of no head injuries suffered by occupants contacting the 
upper interior of the cockpit. The number of vehicles anticipated to be 
sold during the exemption period is insignificant in terms of the 
number of vehicles already on the roads. The Esprit will be in full 
compliance by the same date that the phase-in ends for all 
manufacturers and when there will be 100% compliance across the board, 
September 1, 2002.
    If Lotus USA is required to close because of a denial, its 10 
employees will be out of work. In addition, a denial is bound to affect 
Lotus dealers in unknown ways. An exemption would be consistent with 
the public policy of affording consumers a wide choice of motor 
vehicles.

Our Decision To Grant Lotus's Application, and the Reasons for This 
Decision

    It is evident that Lotus Cars Ltd. has experienced severe 
management problems during the 1980s and 1990s with successive changes 
of ownership, from an independent company in the United Kingdom to an 
acquisition of General Motors which sold it to Bugatti of Italy, which, 
in turn, on the verge of bankruptcy, accepted an offer from a group of 
Malaysian investors. The company's fortunes and product decisions were 
necessarily affected by these continuing changes which, in themselves, 
worked an understandable hardship upon the core company, Lotus Cars 
Ltd. We note, also, that in the years 1996-97 Lotus sold a total of 
less than 150 cars in the United States through Lotus Cars U.S.A.
    We accept, therefore, Lotus's arguments that it had intended to 
remove the Esprit from the American market at the end of the delayed 
optional compliance date of September 1, 1999, but, as a result of a 
subsequent management decision, now must retain it in the U.S. to 
assist it in its continuing recovery while a new Esprit is prepared, 
and to enable its American subsidiary, Lotus Cars USA, to remain 
viable. We note that it is the only Lotus offered in the U.S. market, 
and that the applicant's estimate of a total of 200 Esprit sales over 
the next three years is consistent with the sales figures of this model 
in recent years. We understand that the next generation Esprit is being 
designed to comply with S7, as of the date that all vehicles must 
comply with the standard, September 1, 2002. Accordingly we find that 
compliance would cause substantial economic hardship to a manufacturer 
that has tried to comply with the standard in good faith.
    We concur that an exemption would be consistent with the public 
policy of affording consumers a wide choice of motor vehicles. We note 
Lotus's remark that it knows of no head injuries suffered by occupants 
contacting the upper interior of the Esprit cockpit during the 
production run of the current vehicle, and that the small number of 
vehicles anticipated to be covered by the exemption further reduces the 
number of occupants to possibility of injury. Accordingly we also find 
that an exemption would be in the public interest and consistent with 
the objectives of motor vehicle safety.
    For these reasons, Lotus Cars Ltd. is hereby granted NHTSA 
Temporary Exemption No. 99-12 from S7 Performance criterion of 49 CFR 
571.201 Standard No. 201 Occupant Protection in Interior Impact. This 
exemption applies only to the Esprit model that is currently in 
production, and expires on September 1, 2002.

(49 U.S.C. 30113; delegation of authority at 49 CFR 1.50)

    Issued on: November 3, 1999.
L. Robert Shelton,
Executive Director.
[FR Doc. 99-29366 Filed 11-9-99; 8:45 am]
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