[Federal Register Volume 66, Number 120 (Thursday, June 21, 2001)]
[Notices]
[Pages 33298-33299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-15606]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA 01-9362; Notice 2]


Saleen, Inc.; Grant of Application for Temporary Exemption From 
Federal Motor Vehicle Safety Standard No. 208

    This notice grants the application by Saleen, Inc., of Irvine, 
California, for a temporary exemption of its S7 passenger car from the 
automatic restraint requirements of Federal Motor Vehicle Safety 
Standard No. 208 Occupant Crash Protection. The basis of the request 
was that compliance would cause substantial economic hardship to a 
manufacturer that has tried to comply with the standard in good faith. 
49 U.S.C. 30113(b)(3)(B)(i).
    We published notice of receipt of the application on April 23, 
2001, and afforded an opportunity for comment (66 FR 20520).
    Saleen referred to itself as a ``small volume US manufacturer which 
currently produces the Saleen S281 and the XP8 Explorer.'' Saleen 
receives completed and certified Mustangs and Explorers from Ford Motor 
Company drop shipped at the direction of the dealers who own them. 
Saleen adds a supercharger, makes ``other minor engine modifications, 
front and rear bumper outer skin designs, the seat trim, [upgrades] the 
tires' wheels/suspension/brakes, and [adds] appliques to the exterior 
and interior of the vehicle. Saleen does not make any structural 
changes to the Mustang or the Explorer.'' Under NHTSA regulations, 
Saleen is considered an alterer, rather than a manufacturer, since it 
modifies previously certified vehicles. (See 49 CFR 567.7). Although it 
may have altered several hundred Ford vehicles in the year preceding 
the filing of its application, we have not previously regarded Saleen 
as a ``manufacturer.''
    Saleen now intends to manufacture a motor vehicle of its own 
design. As the vehicle has not entered production, Saleen has 
manufactured no motor vehicles in the year preceding the filing of its 
application. The vehicle is called the S7 and is a ``two seat, coupe, 
sportscar.'' The S7 has been shown in prototype form at automobile 
shows around the country. The prototype does not fully comply with the 
lighting requirements of Motor Vehicle Safety Standard No. 108, Lamps, 
Reflective Devices and Associated Equipment, but Saleen has assured us 
that the next prototype and the production models to follow will meet 
Standard No. 108 and all other standards as well, with the exception of 
the automatic restraint requirements of Standard No. 208, paragraph 
S4.1.5.3.
    Saleen asked for a three-year exemption for the S7 and anticipates 
that it will sell a total of 112 of them by the end of 2003. According 
to the petition, preliminary compliance-related development of the S7 
was started in July 2000. By the time it filed its petition in December 
2000, the company had ``spent an estimated total of 180 man-hours and 
$18,000 relating to the installation of a driver and passenger side 
airbag system on the S7.'' The monies spent thus far ``have been in the 
areas of exterior and interior design necessary for the installation of 
airbags.'' It has been advised that the airbag development process 
would cost approximately $1,000,000 not including the cost of test 
prototype vehicles and airbags, and tooling. This process cannot be 
completed by the time the company expects to launch the S7, in the 
summer of 2001. Indeed, the company estimated that it will take up to 
20 months to fully develop a system and that the total costs will 
approach $3,000,000.
    Saleen had cumulative net losses before taxes for the past three 
fiscal years of $9,716,334. It states that it ``simply cannot afford to 
develop the airbags in either the first (2001) or second (2002) year'' 
because of these losses. The company ``has exhausted all of its 
borrowing capacity and must sell and ship S7 vehicles (as well as its 
other products) to generate cash flow sufficient to defray airbag 
development costs as well as other S7 development costs.'' Although 
``funding for the S7 was secured through a private investor,'' Saleen 
states that ``all further funding for airbags must come from our 
ordinary income.'' Even with an exemption, Saleen projected net losses 
continuing through the end of the period though earnings before 
interest, taxes, depreciation and amortization would be positive. It 
plans to spread out air bag development costs over the next three years 
to achieve compliance by the end of the exemption period. If the 
petition is denied, the company believes that it would lose credibility 
with dealers and negatively impact the demand for altered Saleen 
vehicles.
    The company argued that a temporary exemption is in the public 
interest because the S7 ``is a unique super car designed and produced 
in the U.S. utilizing many U.S. sourced components.'' An exemption 
would also allow it to maintain its payroll of 122 full time employees 
and to continue its purchase of U.S. sourced components for the 
Mustangs and Explorers that it modifies. Its business with U.S. 
suppliers ``indirectly provides employment for several hundred other 
Americans.'' An exemption is consistent with vehicle safety objectives 
because the S7 otherwise will conform to all applicable Federal motor 
vehicle safety standards.
    We received no comments from the public on Saleen's application.
    Saleen is typical of small volume manufacturers who have received 
temporary exemptions in the past on hardship grounds. It is commencing 
to manufacture high-priced automobiles for a specialty market with 
limited resources to do so, and its income statements show net losses 
for previous fiscal years. It is manifest that to require compliance 
with Standard No. 208 now would cause Saleen substantial economic 
hardship through preventing it from the opportunity to enter a new 
market, although a denial of its application would not appear to NHTSA 
to have a material effect on its current operations as an alterer.
    Saleen is typical, too, in extending its compliance development 
efforts over a period of time in recognition of its limited finances. 
NHTSA notes that the company estimates that it will take up to 20 
months to fully develop an automatic restraint system. This would 
appear to justify a 24-month exemption rather than one of 36 months.
    The agency has traditionally found that the public interest is 
served in affording continued employment to a small volume 
manufacturer's work force and to those of its U.S.-sourced component 
suppliers, as well as affording the public a wider variety of motor 
vehicles. An exemption in this case would appear to afford an 
opportunity for new jobs and part suppliers connected with 
manufacturing the S7. In the usual case, the vehicle that is the 
subject of the application complies with all other applicable Federal 
motor vehicle safety standards and will be made in quantities that will 
have a negligible impact on the overall level of safety on the roads of 
this country.
    All these factors are present in this case. In consideration of the 
foregoing, it is hereby found that compliance with the automatic 
restraint requirements of Standard No. 208 would cause substantial 
economic hardship to a

[[Page 33299]]

manufacturer that has tried in good faith to comply with the standard. 
It is further found that the granting of an exemption would be in the 
public interest and consistent with the objectives of traffic safety.
    Accordingly, Saleen, Inc., is hereby granted NHTSA Temporary 
Exemption No. 2001-6 from S4.1.5.3 of 49 CFR 571.208, Standard No. 208, 
Occupant Crash Protection, for the Saleen S7, expiring July 1, 2003.

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

    Issued on June 18, 2001.
L. Robert Shelton,
Executive Director.
[FR Doc. 01-15606 Filed 6-20-01; 8:45 am]
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