[Federal Register Volume 66, Number 14 (Monday, January 22, 2001)]
[Proposed Rules]
[Pages 6523-6532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1524]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 534
[Docket No. NHTSA 2001-8668]
RIN 2127-AG97
Fuel Economy Standards--Rights and Responsibilities of
Manufacturers in the Context of Changes in Corporate Relationships
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes a new regulation to define the rights
and responsibilities of manufacturers under
[[Page 6524]]
the agency's corporate average fuel economy program in the context of
changes in corporate relationships. The proposed regulation addresses
the rights and responsibilities of predecessors and successors, as well
the rights and responsibilities of manufacturers in other situations
where there have been changes in corporate relationships, e.g., changes
in control. Among other things, the proposed regulation would address
how fuel economy credits are allocated in these types of situations.
DATES: Comments must be received by March 23, 2001.
ADDRESSES: You should mention the docket number of this document in
your comments and submit your comments in writing to: Docket
Management, Room PL-401, 400 Seventh Street, S.W., Washington, D.C.
20590. Alternatively, you may submit your comments to the docket
electronically by logging onto the Dockets Management System website at
http://dms.dot.gov. Click on ``Help & Information'' or ``Help/Info'' to
obtain instructions for filing the document electronically. (This
website also enables you to view the materials in the docket for this
rulemaking.)
You may call Docket Management at 202-366-9324. You may visit the
Docket from 10:00 a.m. to 5:00 p.m., Monday through Friday.
FOR FURTHER INFORMATION CONTACT: Edward Glancy, Office of the Chief
Counsel, National Highway Traffic Safety Administration, 400 Seventh
Street, SW, Washington, DC 20590 (202-366-2992).
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Statutory Provisions
B. Past Positions Taken by NHTSA With Respect to Predecessors
and Successors
II. Proposal
A. Introduction
B. The Proposed Regulation
1. Definitions
2. Predecessors and Successors
3. Manufacturers within Control Relationships
4. Changes in Corporate Relationships Not Directly Addressed by
the Proposed Regulation
C. Supplementary Fuel Economy Reports
III. Rulemaking Analyses and Notices
A. Executive Order 12866 and DOT Regulatory Policies and
Procedures
B. Regulatory Flexibility Act
C. National Environmental Policy Act
D. Executive Order 13132 (Federalism)
E. Unfunded Mandates Act
F. Executive Order 12778 (Civil Justice Reform)
G. Paperwork Reduction Act
H. Regulation Identifier Number (RIN)
I. Plain Language
J. Executive Order 13045
K. National Technology Transfer and Advancement Act
IV. Submission of Comments
I. Background
A. Statutory Provisions
In December 1975, Congress enacted the Energy Policy and
Conservation Act (EPCA) in response to the energy crisis created by the
oil embargo of 1973-74 and the level of oil imports, particularly from
OPEC sources. Congress included a provision establishing an automotive
fuel economy regulatory program. That provision added a new Title V,
``Improving Automotive Efficiency,'' to the Motor Vehicle Information
and Cost Saving Act. Congress has made various amendments to the fuel
economy provisions since 1975, and the fuel economy provisions are now
codified in Chapter 329 of Title 49 of the United States Code.
Under Chapter 329, manufacturers are required to meet average fuel
economy standards for passenger automobiles and light trucks. While
separate fuel economy standards apply for each model year,
manufacturers that fail to achieve the level of a standard within a
particular model year do not necessarily violate the statute. Instead,
under certain circumstances, a shortfall in one year (or years) can be
offset if a manufacturer exceeds the standard in another year (or
years). Under the Act, manufacturers earn credits for exceeding average
fuel economy standards which may be carried back for three model years
or carried forward for three model years.
Chapter 329 defines the term ``manufacturer'' as ``a person engaged
in the business of manufacturing automobiles, including a predecessor
or successor of the person to the extent provided under regulations
prescribed by the Secretary * * *'' (The Secretary has delegated
responsibility for the automotive fuel economy program to NHTSA. 49 CFR
1.50(f).) To date, we have not issued any regulations concerning
predecessors and successors. We have also not issued any regulations
concerning the rights and responsibilities of manufacturers in other
situations where there have been changes in corporate relationships,
e.g., changes in control.
B. Past Positions Taken by NHTSA With Respect to Predecessors and
Successors
Under general principles of corporate law, the term ``successor''
ordinarily refers to a corporation which, through amalgamation,
consolidation, or other legal succession, becomes invested with the
rights and assumes the burdens of another corporation. See Black's Law
Dictionary, West Publishing Co.
The automotive fuel economy program contains provisions which raise
special issues related to the rights and burdens of predecessors and
successors. Of particular significance are the provisions related to
credits.
Because credits may be carried backward three years and forward
three years, compliance with a fuel economy standard for a particular
model year may actually be determined over as much as a seven-year
period. A variety of changes in corporate relationships may occur
during such a long period, e.g., mergers, acquisitions, spin-offs,
etc., and these provisions raise the issue of how credits and
shortfalls should be allocated when such changes occur.
In a 1990 letter to Chrysler, we addressed how fuel economy values
should be calculated for Chrysler and AMC during the model year in
which Chrysler acquired AMC, model year (MY) 1987. We concluded that
all of Chrysler's and AMC's vehicles should be treated as manufactured
by the same manufacturer for that model year. In reaching this
conclusion we stated the following: \1\
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\1\ Our 1990 letter referred to the language and section numbers
of the Motor Vehicle Information and Cost Savings Act. Those
provisions were codified into 49 U.S.C. Chapter 329 by Pub. L. 103-
272 (July 5, 1994). Section 1(a) of that law stated that the laws
being codified were being done so ``without substantive change''.
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Fuel economy standards apply to passenger automobiles
manufactured by a manufacturer, for a particular model year. See
section 502(a)(l). Moreover, average fuel economy is calculated
based on the total number of passenger automobiles manufactured in a
given model year by a manufacturer. See section 503(a)(l). Under
section 503(c), the term ``passenger automobiles manufactured by a
manufacturer'' includes all automobiles manufactured by persons who
control, are controlled by, or are under common control with, such
manufacturer.'' Since Chrysler controlled AMC prior to the end of
the 1987 model year, and since fuel economy standards apply to
particular model years as a whole and not to separate parts of a
model year, it is our opinion that all of the vehicles produced by
both Chrysler and AMC for model year 1987 shall be treated as if
manufactured by the same manufacturer, i.e., placed into one fleet.
Otherwise, one or both of the manufacturers would have two separate
CAFE values, pre-acquisition (or pre-control) and post-acquisition
(or post-control), for the same model year.
We also addressed generally the issue of how credits may be applied
between predecessors and successors, along with the legal and policy
issues associated with applying credits between predecessors and
successors. Among other things, we stated the following:
[[Page 6525]]
We will now address generally the issue of how credits may be
used where one manufacturer is the successor of another. In
discussing the issue, we will refer to the following hypothetical
example: A and B are both car manufacturers. After consolidation, A
is the only surviving corporation and is invested with the rights
and assumes the burdens of B. Thus, A is the ``successor'' of B.
While this example and subsequent discussion is for passenger
automobiles, the relevant requirements concerning the earning and
availability of credits are essentially identical for passenger
automobile standards and light truck standards. Compare section
502(l)(1)(B) and 49 CFR Part 535, and see 45 FR 83233-36, December
18, 1980. Thus, our analysis for passenger automobile standards is
also relevant to light truck standards.
Section 502(l)(1)(B) states:
Whenever the average fuel economy of the passenger automobiles
manufactured by a manufacturer in a particular model year exceeds an
applicable average fuel economy standard * * *, such manufacturer
shall be entitled to a credit calculated under subparagraph (C),
which--
(i) shall be available to be taken into account with respect to
the average fuel economy of that manufacturer for any of the three
consecutive model years immediately prior to the model year in which
such manufacturer exceeds such applicable average fuel economy
standard, and
(ii) to the extent that such credit is not so taken into account
pursuant to clause (i), shall be available to be taken into account
with respect to the average fuel economy of that manufacturer for
any of the three consecutive model years immediately following the
model year in which such manufacturer exceeds such applicable
average fuel economy standard.
We note first that credits earned by a particular manufacturer are
only ``available to be taken into account with respect to the average
fuel economy of that manufacturer,'' for any of the three model years
before, or after, the model year in which the credits are earned.
(Emphasis added.) In the example set forth above, B is no longer a
manufacturer under the Cost Savings Act. (Indeed, it is no longer a
``person'' under section 501(8).) Thus, in the absence of some
provision concerning ``successors,'' any unused credits that B had
earned prior to the consolidation would expire unused, since the only
manufacturer to which they are available no longer exists. However, for
some purposes B continues to exist as part of A, its ``successor.''
Section 501(8)'s definition of ``manufacturer'' does not provide
that the term ``manufacturer'' necessarily includes any predecessor or
successor but instead provides that the term does so ``to the extent
provided under rules which the Secretary shall prescribe.'' This
provision was added by the Automobile Fuel Efficiency Act of 1980 as a
conforming amendment to the section concerning modification of local
content requirements to encourage domestic production of fuel efficient
automobiles and not to the section concerning credits. The legislative
history does not provide any indication as to why the provision was
added, and, to date, NHTSA's administration of the statutory provisions
concerning modification of the local content requirements has not
turned up a situation for which such rules would be relevant. Should
rules be issued under section 501(8), NHTSA would do so by notice-and-
comment rulemaking, taking account of the purposes of that section and
the statutory scheme as a whole.
Notwithstanding the absence of rules, we do not believe that
Congress intended to require the forfeit of a manufacturer's unused
credits in a situation where that manufacturer's substance continues to
exist as part of a ``successor.'' Thus, taking account of section
501(8) and the statutory scheme as a whole, we conclude that, in the
example set forth above, B can be deemed as continuing to exist as part
of A, from the time of succession.
This conclusion does not, however, permit the general integration
of A's and B's credits and shortfalls. Under section 502(l)(1)(B),
credits earned by a particular manufacturer are only ``available to be
taken into account with respect to the average fuel economy of that
manufacturer.'' Since B's existence as part of A only dates from the
time of succession, B is not the same manufacturer as A prior to the
time of succession. Thus, any credits earned by B would only be
available to offset A's shortfalls for the model years during which B
exists as part of A, since it is only at that time that the credits
earned by B and applied to A can be considered to be taken into account
with respect to the average fuel economy of ``that manufacturer.''
Similarly, the only credits earned by A which would be available to B
would be those credits earned during the time when B exists as part of
A.
The general integration of A's and B's credits would be
inconsistent with the basic structure of section 502(l)(1). Assume, for
example, that A and B are separate manufacturers for model years 1
through 6, and A is the successor of B for model year 7. If general
integration of credits were permitted, credits earned by B in model
year 4 could be applied to A's CAFE for model years 1-6, as well as
model year 7. However, the structure of section 502(l)(1) does not
permit this result. Under paragraph (B)(i), any credits earned by B in
model year 4 are available to be carried back with respect to B's CAFE
for any of model years 1, 2 and 3. To the extent that such credits are
not so used, paragraph (B)(ii) makes those credits available to be
carried forward with respect to B's CAFE for any of model years 5, 6
and 7. In order for credits earned by B in model year 4 to be applied
to A's CAFE for model years 1-6, B's credits would first have to be
carried forward to model year 7 (the model year where A is B's
successor) and then be carried back to model years 1-6 (for application
to A's CAFE), a process which has no statutory basis.
We will now apply the general analysis discussed above to the
particular facts cited in Chrysler's letter. Prior to MY 1987, Chrysler
and AMC were two separate manufacturers. Chrysler acquired AMC during
MY 1987, and became the ``successor'' to AMC at that time. Under
section 502(l)(1)(B), credits earned by a particular manufacturer are
only ``available to be taken into account with respect to the average
fuel economy of that manufacturer.'' Since AMC's existence as part of
Chrysler only dates from MY 1987, AMC was not the same manufacturer as
Chrysler prior to MY 1987. Thus, any credits earned by AMC would only
be available to Chrysler to offset CAFE shortfalls incurred in the
model years during which AMC exists as part of Chrysler, i.e., MY 1987
and thereafter, since it is only at that time that the credits earned
by AMC and applied to Chrysler can be considered to be taken into
account with respect to the average fuel economy of ``that
manufacturer.'' Similarly, the only credits earned by Chrysler which
would be available to AMC would be those credits earned during the time
when AMC exists as part of Chrysler, i.e., credits earned in MY 1987
and thereafter.
The issue of the extent to which Chrysler could use AMC's credits
was subsequently raised in the context of an enforcement proceeding
brought by NHTSA staff concerning Chrysler's apparent violation of the
light truck CAFE standard for MY 1984. On January 8, 1992, DOT Chief
Administrative Law Judge John J. Mathias issued an Initial Decision and
Order (I.D.) in which he stated that he agreed with the substance of
NHTSA Complaint Counsel's position but concluded that the Complaint
should be dismissed because NHTSA had not prescribed rules pursuant to
section 501(8) of the Act (since recodified at 49 U.S.C.
32901(a)(13)(A)) that define the extent to which the term
``manufacturer'' includes any predecessor or successor of a
[[Page 6526]]
manufacturer of automobiles. CHRYSLER CORPORATION (NHTSA--Fuel Economy
Standards Enforcement), U.S. Dep't. of Transportation, Office of
Hearings, Washington, D.C., Docket 47414 (January 8, 1992). Later,
NHTSA's Administrator set aside the I.D. and issued an order directing
that the agency commence a proceeding to prescribe such rules. In re
CHRYSLER CORPORATION; Corporate Average Fuel Economy Enforcement
Proceeding, U.S. Dep't. of Transportation, National Highway Traffic
Safety Administration, Docket No. 47414 (March 31, 1992).
II. Proposal
A. Introduction
Our initial purpose in developing this proposal was to define the
extent to which predecessors and successors of manufacturers of
automobiles should be included within the term ``manufacturer.''
However, during the development of the proposal, we decided to expand
that purpose. We recognized that a number of the issues concerning how
credits may be used between predecessors and successors also arise in
the context of other changes in corporate relationships, e.g., changes
in control. While we could handle issues related to changes in control
by interpretation of the statute, we believe it would be helpful for
both the industry and the agency to have a regulation in place which
provides guidance in this area.
In developing this proposal, we have attempted to achieve two key
goals. First, we would like the regulation to be as faithful as
possible to the purpose of the statute and the overall statutory
scheme. Second, we would like the regulation to be as simple as
possible, while still providing the necessary guidance for the agency
and the industry to use in determining how changes in corporate
relationships are to be considered in determining compliance with fuel
economy standards.
The purpose of Chapter 329 is, of course, energy conservation. As
to the overall statutory scheme, we believe there are several aspects
that are relevant to how we should treat changes in corporate
relationships.
First, to promote flexibility, Congress decided to allow compliance
with fuel economy standards to be determined over a multi-year period.
In particular, a manufacturer may offset a shortfall for any given
model year by using credits it has earned or will earn in the three
prior model year or three succeeding model years.
Second, Congress limited the use of credits to the manufacturer
which earned them; credits may not be bought or sold.
Third, average fuel economy is measured, and compliance with fuel
economy standards determined, for groups of companies within a control
relationship rather than for individual companies.
We believe that each of these aspects of the statutory scheme needs
to be reflected in the regulation concerning the rights and
responsibilities of manufacturers in the context of changes in
corporate relationships.
As to our desire to keep the regulation as simple as possible, we
are concerned that an effort to comprehensively address all of the
various ways corporate relationships may change over time could get the
agency bogged down in defining endless situations that it would
probably never have to deal with in practice. At the same time, we
believe there is a need for the regulation to provide the necessary
guidance for the agency and the industry to use in determining how
changes in corporate relationships are to be considered in determining
compliance with fuel economy standards. We are proposing a regulation
that we believe would accomplish this. A discussion of the proposed
regulation follows.
B. The Proposed Regulation
The proposed regulation is relatively short. It begins by setting
forth definitions of several key terms, including predecessor,
successor and control relationship. It includes a section which
specifically addresses several situations concerning predecessors and
successors which have either already occurred or might reasonably be
expected to occur. Examples, in the form of specific factual
situations, are provided for purposes of clarity. It also includes a
section which specifically addresses several potential situations
regarding changes in control relationships. The details of the proposed
regulation are discussed below. We specifically request comments on
whether the regulation should specifically address any additional types
of changes in corporate relationships, or provide additional examples
in the form of factual situations and, if so, how. To the extent that a
situation arose that was not directly addressed by the regulation, the
agency would make necessary determinations based on interpretation of
the statute and the principles reflected in the regulation.
We note that the proposed regulation would adopt the same positions
concerning predecessors and successors as we did in our 1990 letter to
Chrysler.
1. Definitions
The proposed regulation includes four definitions.
Control relationship. ``Control relationship'' is defined to mean
the relationship that exists between manufacturers that control, are
controlled by, or are under common control with, one or more other
manufacturers. This definition reflects the provision at 49 U.S.C.
32901(a)(4) which specifies that the automobiles manufactured by a
manufacturer include automobiles manufactured by a person that
controls, is controlled by, or is under common control with the
manufacturer.
Successor. ``Successor'' is defined to mean ``a manufacturer which
has become vested with the rights and assumed the burdens of another
manufacturer.'' This definition reflects the ordinary corporate law
meaning of the term ``successor.''
Predecessor. ``Predecessor'' is defined to mean ``a manufacturer
whose rights have been vested in and whose burdens have been assumed by
another manufacturer.'' This definition reflects the ordinary corporate
law meaning of the term and mirrors the proposed definition for
``successor.''
Identity. Under the proposed regulation, ``identity'' is defined to
mean ``the relationship between a predecessor and a successor during
the time in which the successor owns 50 percent or more of the assets,
based on valuation, that had belonged to the predecessor.'' This is the
time when we believe it is reasonable to view the predecessor
manufacturer as continuing to exist as part of the successor. The
proposed limitation with respect to owning 50 percent or more of the
assets is to address a possible situation where one company might
purchase another, become the successor, but then quickly sell the
assets to a third company. As discussed below, we use the concept of
identity, in the context of predecessors and successors, as part of
specifications to ensure that credits are only used by a manufacturer
which can reasonably be considered to have earned them.
2. Predecessors and Successors
The proposed regulation has four specifications which define the
extent to which predecessors and successors of manufacturers of
automobiles are included within the definition of ``manufacturer,'' for
purposes of the automotive fuel economy program. Examples, in the form
of specific factual
[[Page 6527]]
situations, are provided for purposes of clarity.
Specification (a). The first proposed specification provides that
``(s)uccessors are responsible for any civil penalties that arise out
of fuel economy shortfalls incurred by predecessors.'' We recognize
that this specification could be considered unnecessary in the sense
that it simply states what follows directly from corporate law: the
assumption of the burdens of a predecessor corporation, as well as the
vesting of the rights of that corporation, is an inherent part of being
a successor under corporate law. However, we believe that any
regulation which specifies the extent to which predecessors and
successors of manufacturers of automobiles are included within the
definition of ``manufacturer,'' for purposes of the automotive fuel
economy program, should make this clear at the outset.
Specification (b). The second specification provides that ``(i)f
one manufacturer becomes the successor of another manufacturer during a
model year, all of the vehicles produced by those manufacturers during
the model year are treated as though they were manufactured by the same
manufacturer.'' It also provides that ``(a) manufacturer is considered
to have become the successor of another manufacturer during a model
year if it is the successor on September 30 of the corresponding
calendar year and was not the successor for the preceding model year.''
As we discussed in our 1990 letter to Chrysler, fuel economy
standards apply to passenger automobiles manufactured by a
manufacturer, for a particular model year, and average fuel economy is
calculated based on the total number of passenger automobiles
manufactured in a given model year by a manufacturer. We recently
reiterated that view in a January 13, 2000 letter to Volvo Cars of
North America. Since fuel economy standards apply to particular model
years as a whole and not to separate parts of a model year, we believe
that if one manufacturer acquires another during a model year, they
should be deemed the same manufacturer, with a single CAFE value, for
that model year.
In a 1990 letter to Ford, we concluded that, for purposes of
deciding the model year in which one manufacturer acquires another, the
``traditional model year,'' starting approximately October 1, is the
appropriate frame of reference. The second sentence in specification
(b) reflects this interpretation.
Specification (c). The third proposed specification provides that
``(c)redits earned by a predecessor may be used by a successor for
those model years in which there is an identity between the predecessor
and successor, subject to availability of the credits and the general
three-year restriction on carrying credits forward.''
As we discussed in our letter to Chrysler, the statute provides
that credits are available only to the manufacturer which earned them.
Therefore, in the absence of some regulatory provision concerning
successors, any unused credits of a predecessor would simply expire
unused.
However, we continue to believe that Congress did not intend to
require the forfeit of a manufacturer's unused credits in a situation
where that manufacturer's substance continues to exist as part of a
``successor.'' We are therefore proposing that credits earned by a
predecessor may be used by a successor for those model years in which
there is identity between the predecessor and successor.
Credits earned by a predecessor could not, however, be used by a
successor for model years in which there was no identity between the
predecessor and successor. We believe that, in such a situation, the
credits could not reasonably be considered to be used by the
manufacturer which had earned them.
The following example helps illustrate how this provision would
work in practice:
A purchases B in model year x and becomes the successor of B. A's
CAFE in model year x (which includes the combined production of what
had been A and B) is less than the applicable CAFE standard for that
model year. B had credits at the time of the acquisition because it
exceeded the applicable fuel economy standard in the previous model
year. The credits of B (the predecessor) could be used by A in model
year x, model year x+1 and model year x+2, because there would be an
identity between B and A in those model years. However, the credits of
B could not be used to offset any shortfall incurred by A in model year
x-1 or before, since there was no identity between B and A during those
model years.
As indicated above, we believe that the use of B's credits (the
predecessor's credits) by A (the successor) for model years x-1 or
before (model years before the acquisition) could not reasonably be
considered to be use by the manufacturer which had earned them. There
was no relationship between A and B model year x-1 and before; they
were two completely different manufacturers.
Moreover, as we discussed in our 1990 letter to Chrysler, the
statute does not provide for the same credits being carried both
forward and backward; e.g., forward to A from before the time it
acquired B and then backward to A for the model years prior to the
acquisition when A had shortfalls.
Finally, it would be inappropriate to allow A (the successor) to
succeed to rights with respect to B's credits that are greater than B
had at the time of the acquisition. As of the time of the acquisition,
the only right B had with respect to carrying its existing credits
backward was the right to apply them to its own fleet; it did not have
the right to apply them to the fleets of other manufacturers or to sell
them to be applied to such fleets.
Specification (d). The fourth proposed specification provides that
``(c)redits earned by a successor during model years in which there is
an identity between the successor and predecessor may be used to offset
a predecessor's shortfall, subject to availability of the credits and
the general three-year restriction on carrying credits backward.''
Under the statute, a manufacturer that experiences a shortfall
which it cannot offset by using credits it has earned during the past
three model years has three additional model years to earn offsetting
credits. However, given that the statute provides that credits may only
be used by the manufacturer that earned them, there would be no way of
offsetting a predecessor's remaining shortfalls in the absence of a
regulatory provision.
We do not believe that Congress intended to require the forfeiture
of a manufacturer's ability to offset CAFE shortfalls by earning future
credits simply because it was acquired by another manufacturer; i.e.,
in a situation where that manufacturer's substance continues to exist
as part of a ``successor.'' We are therefore proposing that credits
earned by a successor during model years in which there is an identity
between the successor and predecessor may be applied to a predecessor's
shortfall.
Specifications (c) and (d), taken together, give the successor all
the rights the predecessor had with respect to credits, both as to the
use of existing credits and the ability to earn future credits to
offset existing shortfalls. We are aware that some manufacturers would
like the successor to somehow have greater rights than those enjoyed by
the predecessor. For example, while AMC's rights to its MY 1984
credits, as
[[Page 6528]]
of the time of its acquisition in MY 1987, were to apply them to its
own fleet in MY 1981-1983 and 1985-1986 (since it had no successor in
that time period) and to apply them to itself (as part of Chrysler) in
MY 1987, Chrysler, as successor to AMC, wanted to be able to apply
AMC's 1984 credits to offset shortfalls incurred by its own
(Chrysler's) pre-MY 1987 fleet. However, such use of AMC's credits
could not reasonably be considered a use by the manufacturer which had
earned them and therefore would be inconsistent with the statute.
We also note that permitting such use of credits would discourage
energy conservation. For example, to the extent that a successor had
been planning to exceed standards in the future to earn credits that
could be carried back to cover pre-acquisition shortfalls, permitting
the successor to use the predecessor's previously earned credits to
cover those shortfalls would remove the incentive to exceed those
standards.
3. Manufacturers within Control Relationships
The proposed regulation has eight specifications concerning the
rights and responsibilities of manufacturers within control
relationships. These specifications are generally based on the same
principles we considered in developing the proposed specifications
concerning predecessors and successors. A discussion of the eight
specifications follows.
Specification (a). The first proposed specification provides that
``(i)f a civil penalty arises out of a fuel economy shortfall incurred
by a group of manufacturers within a control relationship, each
manufacturer within that group is jointly and severally liable for the
civil penalty.'' This specification follows directly from the statutory
provisions which provide that average fuel economy is measured, and
compliance with fuel economy standards determined, for groups of
companies within a control relationship rather than for individual
companies. However, we believe that any regulation which specifies the
rights and responsibilities of manufacturers within control
relationships should make this clear at the outset. As a practical
matter, we would initially seek payment of any civil penalties arising
from the fuel economy performance of a group of manufacturers within a
control relationship from whoever that group designated as being
responsible.
Specification (b). The second proposed specification provides that
``(a) manufacturer is considered to be within a control relationship
for an entire model year if and only if it is within that relationship
on September 30 of the calendar year in which the model year ends.''
This specification corresponds directly to the proposed specification
(b) for predecessors and successors, and reflects the same rationale.
Specification (c). The third proposed specification provides that
``(t)o the extent that a manufacturer within a control relationship was
outside that relationship for a previous model year and not within any
other control relationship, credits earned by the manufacturer during
such model year may be used by the group of manufacturers within the
control relationship for those model years in which the manufacturer is
within that relationship, subject to the agreement of the manufacturer,
the availability of the credits, and the general three-year restriction
on carrying credits forward.''
This specification is very similar to the proposed specification
(c) for predecessors and successors. If a previously independent
manufacturer has been purchased or otherwise brought within a control
relationship, its credits do not expire but can continue to be used by
it under the same conditions as before. For model years in which it is
now part of a group of manufacturers, application of its credits to
itself would mean application to the entire group of manufacturers
since average fuel economy is measured, and compliance with fuel
economy standards determined, for groups of companies within a control
relationship rather than for individual companies.
We note that one difference between this proposed specification and
the corresponding one we are proposing for predecessors and successors
is the statement that use of the credits is subject to the agreement of
the manufacturer which earned them. In the case of a predecessor/
successor situation, the predecessor no longer exists and the successor
has assumed all of its rights and duties. In this situation, however,
the previously independent company continues to exist and could have
different interests than the group of manufacturers. We therefore
believe it is appropriate to make use of the credits subject to the
agreement of that company. Similar provisions are included in several
of the other proposed specifications for manufacturers within control
relationships.
Specification (d). The fourth proposed specification provides that
``(t)o the extent that a manufacturer within a control relationship was
outside that relationship for a previous model year and not within any
other control relationship, shortfalls incurred by the manufacturer for
such model year may be offset by credits earned by the group of
manufacturers within the control relationship for subsequent model
years in which the manufacturer is within the relationship, subject to
the agreement of the other manufacturers, the availability of the
credits, and the general three-year restriction on carrying credits
backward.''
This specification is very similar to the proposed specification
(d) for predecessors and successors.
Specifications (e) through (h). The final four proposed
specifications for manufacturers within control relationships address
situations in which a manufacturer which is controlled by another
manufacturer is sold or otherwise spun off. We note that, given the
general trend toward consolidation in the auto industry, this situation
appears less likely to arise than the ones discussed earlier.
Nonetheless, we believe that there is sufficient possibility that spin-
offs may occur that it is reasonable to address spin-offs in the
proposed regulation.
The proposed specifications generally provide that a company which
has been spun off may use credits that were earned while it was part of
a group of manufacturers, subject to the agreement of the other
manufacturer or manufacturers in the group. They also generally provide
that credits which the spun-off company earns may be carried back to
the group of manufacturers for model years in which it was part of the
group, subject to the spun-off company's approval.
We recognize that in situations where a manufacturer which is
controlled by another manufacturer is sold to a third manufacturer,
there is a possibility that the manufacturers might wish to transfer a
greater number of credits than can reasonably be considered to be
related to the transaction at issue. The following example illustrates
such a possibility:
A, a very large manufacturer with a large credit balance,
controls B, a very small manufacturer which only produces vehicles
with low fuel economy, by virtue of owning B's stock. A sells B to
C, a very large manufacturer with a large credit deficit. C would
like to get as many credits as possible in this transaction.
In this situation, we believe it would be reasonable to permit B to
take some credits with it. It was part of the group of manufacturers
which earned the credits. Moreover, B might be able to argue that it
did not improve its fuel economy in the past because it was part
[[Page 6529]]
of a group of manufacturers that together exceeded the CAFE standard.
However, given that the statute does not permit the selling of
credits, we do not believe it would be reasonable to permit B to take
with it a greater number of credits than it could use if it had become
independent. B has not produced any vehicles which exceed the fuel
economy standard, and, if we permitted a large-scale transfer of
credits, the sale of B might be nothing more than a disguised
transaction to transfer credits. We have therefore included provisions
in the proposed specifications to limit the transfer of credits in this
and similar types of situations to numbers that can reasonably be
considered to be directly related to the sale of the company at issue.
4. Changes in Corporate Relationships Not Directly Addressed by the
Proposed Regulation
We believe the proposed regulation addresses the types of changes
in corporate relationships that are most likely to occur. Moreover, we
are requesting comments on whether the regulation should specifically
address any additional types of changes in corporate relationships, or
provide additional examples in the form of factual situations and, if
so, how. Depending on the comments, we may include provisions in the
final rule addressing additional types of changes in corporate
relationships and/or additional examples in the form of factual
situations. Since we do not believe it would be possible to
comprehensively address every conceivable situation that could arise,
the proposed regulation includes a provision stating that to the extent
that the regulation does not directly address an issue concerning the
rights and responsibilities of manufacturers in the context of a change
in corporate relationships, the agency will make determinations based
on interpretation of the statute and the principles reflected in the
regulation.
C. Supplementary Fuel Economy Reports
One of our regulations, 49 CFR Part 537, Automotive Fuel Economy
Reports, requires automobile manufacturers to submit to the agency
reports concerning their plans to comply with fuel economy standards.
While we are not proposing any changes to Part 537, we would note that
successors must submit supplementary reports if required by section
537.8 of that regulation.
III. Rulemaking Analyses and Notices
A. Executive Order 12866 and DOT Regulatory Policies and Procedures
NHTSA has considered the impact of this rulemaking action under
Executive Order 12866 and the Department of Transportation's regulatory
policies and procedures. This rulemaking document is not economically
significant. It was reviewed by the Office of Management and Budget
under E.O. 12866, ``Regulatory Planning and Review.'' The rulemaking
action has been determined to be significant under the Department's
regulatory policies and procedures, given the public interest in the
automotive fuel economy program.
The proposed regulation would not create any new obligations. It
would adopt the same positions concerning predecessors and successors
as we have previously taken in interpretation letters.
As discussed earlier in this notice, if we did not adopt
regulations governing the use of CAFE credits by predecessors and
successors, a predecessor's unused credits would simply expire, since
the only manufacturer which could use them would no longer exist.
Similarly, there would be no way of offsetting a predecessor's
remaining CAFE shortfalls in the absence of some provision concerning
successors. The successor would thus be required to pay the
predecessor's penalties, a responsibility which it assumed with the
rest of the predecessor's obligations, but would have no ability to
earn future credits to offset the predecessor's shortfalls.
To address this inequity, the proposed rule, like our prior
interpretation, would give the successor all the rights the predecessor
had with respect to the use of preexisting credits and the ability to
earn future credits.
The proposed provisions concerning the rights and responsibilities
of manufacturers in other situations where there have been changes in
corporate relationships, e.g., changes in control, are essentially a
statement of our interpretation of the statute and reflect the same
principles as the provisions relating to predecessors and successors.
B. Regulatory Flexibility Act
We have considered the effects of this rulemaking action under the
Regulatory Flexibility Act (5 U.S.C. Sec. 601 et seq.) I hereby certify
that the proposed rule would not have a significant economic impact on
a substantial number of small entities. Therefore, a regulatory
flexibility analysis is not required for this action. As discussed
above, the proposed regulation would not create any new obligations but
would simply adopt the same positions concerning predecessors and
successors as we have previously taken in interpretation letters.
Similarly, the proposed provisions concerning the rights and
responsibilities of manufacturers in other situations where there have
been changes in corporate relationships, e.g., changes in control, are
essentially a statement of our interpretation of the statute and
reflect the same principles as the provisions relating to predecessors
and successors. Moreover, as a practical matter, the acquiring
corporations most likely to be affected by this regulation are not
small businesses.
C. National Environmental Policy Act
NHTSA has analyzed this proposed amendment for the purposes of the
National Environmental Policy Act and determined that it would not have
any significant impact on the quality of the human environment.
D. Executive Order 13132 (Federalism)
The agency has analyzed this proposal in accordance with the
principles and criteria set forth in Executive Order 13132 and has
determined that it does not have sufficient federalism implications to
warrant consultation with State and local officials or the preparation
of a federalism summary impact statement. The proposed rule would have
no substantial effects on the States, or on the current Federalism-
State relationship, or on the current distribution of power and
responsibilities among the various local officials.
E. Unfunded Mandates Act
The Unfunded Mandates Reform Act of 1995 requires agencies to
prepare a written assessment of the costs, benefits and other effects
of proposed or final rules that include a Federal mandate likely to
result in the expenditure by State, local or tribal governments, in the
aggregate, or by the private sector, of more than $100 million annually
(adjusted for inflation with base year of 1995). The proposed rule
would not result in the expenditure by State, local or tribal
governments, in the aggregate, or by the private sector, of more than
$100 million annually.
F. Executive Order 12778 (Civil Justice Reform)
This proposed rule does not have any retroactive effect. However,
we would, as a practical matter, consider the regulation in any
enforcement action regarding predecessors and successors
[[Page 6530]]
that involved conduct that occurred before the regulation became
effective.
As discussed earlier, the proposed regulation would not create any
new obligations but would adopt the same positions concerning
predecessors and successors as we have previously taken in
interpretation letters. If we did not adopt special provisions
governing the use of CAFE credits by predecessors and successors, a
predecessor's unused credits would simply expire, since the only
manufacturer which could use them would no longer exist. Similarly,
there would be no way of offsetting a predecessor's remaining CAFE
shortfalls in the absence of some provision concerning successors.
The proposed rule, like our prior interpretation, would address
this inequity and give the successor all the rights the predecessor had
with respect to credits. Thus, to the extent we considered and followed
the approach of the proposed rule in any enforcement action regarding
predecessors and successors that involved conduct that occurred before
the regulation became effective, any effect on the amount of penalties
would be beneficial for the manufacturers.
We would similarly consider the regulation in any enforcement
action regarding other situations where there have been changes in
corporate relationships, e.g., changes in control, that involved
conduct that occurred before the regulation became effective. However,
the proposed provisions are essentially a statement of our
interpretation of the statute.
States are preempted from promulgating laws and regulations
contrary to the provisions of this rule. The rule does not require
submission of a petition for reconsideration or other administrative
proceedings before parties may file suit in court.
G. Paperwork Reduction Act
This rulemaking action does not include any collections of
information.
H. Regulation Identifier Number (RIN)
The Department of Transportation assigns a regulation identifier
number (RIN) to each regulatory action listed in the Unified Agenda of
Federal Regulations. The Regulatory Information Service Center
publishes the Unified Agenda in April and October of each year. You may
use the RIN contained in the heading at the beginning of this document
to find this action in the Unified Agenda.
I. Plain Language
Executive Order 12866 and the President's memorandum of June 1,
1998, require each agency to write all rules in plain language.
Application of the principles of plain language includes consideration
of the following questions:
--Have we organized the material to suit the public's needs?
--Are the requirements in the rule clearly stated?
--Does the rule contain technical language or jargon that is not clear?
--Would a different format (grouping and order of sections, use of
headings, paragraphing) make the rule easier to understand?
--Would more (but shorter) sections be better?
--Could we improve clarity by adding tables, lists, or diagrams?
--What else could we do to make the rule easier to understand?
If you have any responses to these questions, please include them
in your comments on this NPRM.
J. Executive Order 13045
Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any
rule that: (1) is determined to be ``economically significant'' as
defined under E.O. 12866, and (2) concerns an environmental, health or
safety risk that NHTSA has reason to believe may have a
disproportionate effect on children. This regulatory action does not
meet either of those criteria.
K. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act (NTTAA) requires NHTSA to evaluate and use existing voluntary
consensus standards \2\ in its regulatory activities unless doing so
would be inconsistent with applicable law (e.g., the statutory
provisions regarding NHTSA's vehicle safety authority) or otherwise
impractical. This requirement is not relevant to this rulemaking
action.
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\2\ Voluntary consensus standards are technical standards
developed or adopted by voluntary consensus standards bodies.
Technical standards are defined by the NTTAA as ``performance-based
or design-specific technical specifications and related management
systems practices.'' They pertain to ``products and processes, such
as size, strength, or technical performance of a product, process or
material.''
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IV. Submission of Comments
How do I prepare and submit comments?
Your comments must be written and in English. To ensure that your
comments are correctly filed in the Docket, please include the docket
number of this document in your comments.
Your comments must not be more than 15 pages long. (49 CFR 553.21).
We established this limit to encourage you to write your primary
comments in a concise fashion. However, you may attach necessary
additional documents to your comments. There is no limit on the length
of the attachments.
Please submit two copies of your comments, including the
attachments, to Docket Management at the address given above under
ADDRESSES.
Comments may also be submitted to the docket electronically by
logging onto the Dockets Management System website at http://dms.dot.gov. Click on ``Help & Information'' or ``Help/Info'' to obtain
instructions for filing the document electronically.
How can I be sure that my comments were received?
If you wish Docket Management to notify you upon its receipt of
your comments, enclose a self-addressed, stamped postcard in the
envelope containing your comments. Upon receiving your comments, Docket
Management will return the postcard by mail.
How do I submit confidential business information?
If you wish to submit any information under a claim of
confidentiality, you should submit three copies of your complete
submission, including the information you claim to be confidential
business information, to the Chief Counsel, NHTSA, at the address given
above under FOR FURTHER INFORMATION CONTACT. In addition, you should
submit two copies, from which you have deleted the claimed confidential
business information, to Docket Management at the address given above
under ADDRESSES. When you send a comment containing information claimed
to be confidential business information, you should include a cover
letter setting forth the information specified in our confidential
business information regulation. (49 CFR Part 512.)
Will the agency consider late comments?
We will consider all comments that Docket Management receives
before the close of business on the comment closing date indicated
above under DATES. To the extent possible, we will also consider
comments that Docket Management receives after that date. If Docket
Management receives a comment too late for us to consider it in
developing a final rule (assuming that one is issued), we will consider
that
[[Page 6531]]
comment as an informal suggestion for future rulemaking action.
How can I read the comments submitted by other people?
You may read the comments received by Docket Management at the
address given above under ADDRESSES. The hours of the Docket are
indicated above in the same location.
You may also see the comments on the Internet. To read the comments
on the Internet, take the following steps:
(1) Go to the Docket Management System (DMS) Web page of the
Department of Transportation (http://dms.dot.gov/).
(2) On that page, click on ``search.''
(3) On the next page (http://dms.dot.gov/search/), type in the
four-digit docket number shown at the beginning of this document.
Example: If the docket number were ``NHTSA-1998-1234,'' you would type
``1234.'' After typing the docket number, click on ``search.''
(4) On the next page, which contains docket summary information for
the docket you selected, click on the desired comments. You may
download the comments.
Please note that even after the comment closing date, we will
continue to file relevant information in the Docket as it becomes
available. Further, some people may submit late comments. Accordingly,
we recommend that you periodically check the Docket for new material.
List of Subjects in 49 CFR Part 534
Fuel economy, Motor vehicles.
In consideration of the foregoing, we propose to amend chapter V of
title 49 of the Code of Federal Regulations by adding a new part 534 to
read as follows:
PART 534--RIGHTS AND RESPONSIBILITIES OF MANUFACTURERS IN THE
CONTEXT OF CHANGES IN CORPORATE RELATIONSHIPS
Sec.
534.1 Scope.
534.2 Applicability.
534.3 Definitions.
534.4 Predecessors and successors.
534.5 Manufacturers within control relationships.
534.6 Situations not directly addressed by this regulation.
Authority: 49 U.S.C. 32901; delegation of authority at 49 CFR
1.50.
Sec. 534.1 Scope.
This part defines the rights and responsibilities of manufacturers
in the context of changes in corporate relationships for purposes of
the automotive fuel economy program established by 49 U.S.C. chapter
329.
Sec. 534.2 Applicability.
This part applies to manufacturers of passenger automobiles and
light trucks.
Sec. 534.3 Definitions.
(a) Statutory definitions and terms. All terms used in 49 U.S.C.
chapter 329 are used according to their statutory meaning.
(b) As used in this part--
Control relationship means the relationship that exists between
manufacturers that control, are controlled by, or are under common
control with, one or more other manufacturers.
Identity means the relationship between a predecessor and a
successor during the time in which the successor owns 50 percent or
more of the assets, based on valuation, that had belonged to the
predecessor.
Predecessor means a manufacturer whose rights have been vested in
and whose burdens have been assumed by another manufacturer.
Successor means a manufacturer which has become vested with the
rights and assumed the burdens of another manufacturer.
Sec. 534.4 Predecessors and successors.
For purposes of the automotive fuel economy program,
``manufacturer'' includes ``predecessors'' and ``successors'' to the
extent specified in paragraphs (a) through (d) of this section.
(a) Successors are responsible for any civil penalties that arise
out of fuel economy shortfalls incurred by predecessors.
Example: A purchases B in model year x and is generally invested
with the rights and duties of B. B had a fuel economy shortfall two
model years before (model year x-2) for which credits are not
available and is subject to civil penalties which have not yet been
paid. A is responsible for those civil penalties.
(b) If one manufacturer has become the successor of another
manufacturer during a model year, all of the vehicles produced by those
manufacturers during the model year are treated as though they were
manufactured by the same manufacturer. A manufacturer is considered to
have become the successor of another manufacturer during a model year
if it is the successor on September 30 of the corresponding calendar
year and was not the successor for the preceding model year.
(c) Credits earned by a predecessor may be used by a successor for
those model years in which there is an identity between the predecessor
and successor, subject to availability of the credits and the general
three-year restriction on carrying credits forward.
Example: A purchases B in model year x and becomes the successor
of B. A's CAFE in model year x (which includes the combined
production of what had been A and B) is less than the applicable
CAFE standard for that model year. B had credits at the time of the
acquisition because it exceeded the applicable fuel economy standard
in the previous model year. The credits of B (the predecessor) could
be used by A in model year x, model year x+1 and model year x+2,
because there would be an identity between B and A in those model
years. However, the credits of B could not be used to offset any
shortfall incurred by A in model year x-1 or before, since there was
no identity between B and A during those model years.
(d) Credits earned by a successor during model years in which there
is an identity between the successor and predecessor may be used to
offset a predecessor's shortfall, subject to availability of the
credits and the general three-year restriction on carrying credits
backward.
Example: A purchases B in model year x and becomes the successor
of B. B had a fuel economy shortfall two model years before (model
year x-2). Any credits earned by A in model year x and model year
x+1 could be applied to B's shortfall, since there is an identity
between A and B in model year x and model year x+1. However, credits
earned by A in any model year before model year x could not be
applied to B's shortfall, since there was no identity between A and
B in model year x-1.
Sec. 534.5 Manufacturers within control relationships.
(a) If a civil penalty arises out of a fuel economy shortfall
incurred by a group of manufacturers within a control relationship,
each manufacturer within that group is jointly and severally liable for
the civil penalty.
(b) A manufacturer is considered to be within a control
relationship for an entire model year if and only if it is within that
relationship on September 30 of the calendar year in which the model
year ends.
(c) To the extent that a manufacturer within a control relationship
was outside that relationship for a previous model year and not within
any other control relationship, credits earned by the manufacturer
during such model year may be used by the group of manufacturers within
the control relationship for those model years in which the
manufacturer is within that relationship, subject to the agreement of
the manufacturer, the availability of the credits, and the general
three-year restriction on carrying credits forward.
[[Page 6532]]
(d) To the extent that a manufacturer within a control relationship
was outside that relationship for a previous model year and not within
any other control relationship, shortfalls incurred by the manufacturer
for such model year may be offset by credits earned by the group of
manufacturers within the control relationship for subsequent model
years in which the manufacturer is within the relationship, subject to
the agreement of the other manufacturers, the availability of the
credits, and the general three-year restriction on carrying credits
backward.
(e) If a manufacturer which is controlled by another manufacturer
is sold or otherwise spun off so that it is no longer within that
control relationship and is not within any other control relationship,
it may use credits that were earned by the group of manufacturers
within the control relationship while the manufacturer was within that
relationship, subject to the agreement of the other manufacturers, the
availability of the credits and the general restriction on carrying
credits forward.
(f) If a manufacturer which is controlled by another manufacturer
is sold or otherwise spun off so that it is no longer within that
control relationship but is within another control relationship, it may
use credits that were earned by the group of manufacturers within the
former control relationship while the manufacturer was within that
relationship, subject to the agreement of the other manufacturers, the
availability of the credits, and the general restriction on carrying
credits forward, and subject to a demonstration by the manufacturer,
and approved by the Administrator, that the credits to be used are no
more than the manufacturer could use if it were not within another
control relationship.
(g) If a manufacturer which is controlled by another manufacturer
is sold or otherwise spun off so that it is no longer within that
control relationship and is not within any other control relationship,
credits earned by that manufacturer may be used by the manufacturer or
group of manufacturers previously within the control relationship for
model years in which the manufacturer was within that relationship,
subject to the agreement of the previously controlled manufacturer, the
availability of the credits and the general restriction on carrying
credits backward.
(h) If a manufacturer which is controlled by another manufacturer
is sold or otherwise spun off so that it is no longer within that
control relationship but is within another control relationship,
credits earned by manufacturers within the latter control relationship
for model years in which the manufacturer is within that relationship
may be used by the manufacturer or group of manufacturers within the
former control relationship for model years in which the manufacturer
was within that relationship, subject to the agreement of the group of
manufacturers within the latter control relationship, the availability
of the credits, and the general restriction on carrying credits
backward, and subject to a demonstration by the manufacturer, and
approved by the Administrator, that the credits to be used are no more
than the manufacturer would have earned if it were not within another
control relationship.
Sec. 534.6 Situations not directly addressed by this regulation.
To the extent that this regulation does not directly address an
issue concerning the rights and responsibilities of manufacturers in
the context of a changes in corporate relationships, the agency will
make determinations based on interpretation of the statute and the
principles reflected in the regulation.
Issued on: January 10, 2001.
Stephen R. Kratzke,
Associate Administrator for Safety Performance Standards.
[FR Doc. 01-1524 Filed 1-19-01; 8:45 am]
BILLING CODE 4910-59-P