[Federal Register Volume 68, Number 41 (Monday, March 3, 2003)]
[Notices]
[Pages 10066-10067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-4801]


-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-02-13956, Notice 2]


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

    This notice grants the application of Lotus Cars Ltd. (``Lotus'') 
of Norwich, England, for a renewal of NHTSA Temporary Exemption No. 99-
12, 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 is that compliance would cause 
substantial economic hardship to a manufacturer that has tried in good 
faith to comply with the standard.
    We published notice of receipt of the application on December 4, 
2002, requesting public comment on it (67 FR 72267).

Background

    On November 10, 1999, NHTSA granted Lotus Cars Ltd. NHTSA Temporary 
Exemption No. 99-12 from S7, Performance Criterion, of Federal Motor 
Vehicle Safety Standard No. 201, Occupant Protection in Interior Impact 
(64 FR 61379). The basis of the grant was that compliance would cause 
substantial economic hardship to a manufacturer that has tried in good 
faith to comply with the standard. The exemption covered the Esprit 
model, and was to expire on September 1, 2002. However, Lotus applied 
for a renewal of its hardship exemption on May 10, 2002, thereby 
staying the expiration date until the agency has acted upon its 
petition (49 CFR 555.8(e)). The reader is referred to the 1999 notice 
for information on the original application and Administrator's 
decision to grant it.

Why Lotus Needs a Temporary Exemption

    In early 1997, Lotus decided to terminate production of the Esprit 
on September 1, 1999, and to homologate another model, 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 percent of its production thereafter.
    But 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 in its original petition, the company found itself unable to 
conform the current Esprit to Standard No. 201. It petitioned for, and 
received, a temporary exemption until September 1, 2002. Its continued 
need for an exemption is explained in the next section.

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

    Lotus remarked that the entity that ultimately controls Lotus Cars 
is the manufacturer of Proton cars, ``the Malaysian company Perusahan 
Otomobile Nasional Berhad (Proton).'' We noted in the December 4, 2002, 
notice that Lotus' balance sheets and income statements did not 
indicate that this Asian entity, itself a motor vehicle manufacturer, 
made capital contributions to Lotus or otherwise participated in the 
management of this British company. Lacking these indicia of control, 
we stated that we had decided not to count cumulatively the production 
of the two companies which, if totaling at least 10,000 units would 
render Lotus ineligible for a hardship exemption.
    On December 16, 2002, during the comment period, Lotus addressed 
the question of its relationship to Proton. At the time Lotus filed its 
application in May 2002, Proton owned 80 percent of the shares of Lotus 
but had since acquired total ownership of the company. Proton had in 
fact made a capital contribution to the company ``since its 
acquisition,'' which allowed Lotus ``to pay off certain debts, return 
to solvency, and thus to continue trading.'' It noted that ``the 
capital infusion also permitted continued operations from a cash-flow 
basis.'' Lotus argued that we should more properly consider the facts 
that (1) there is no similarity of design between the cars produced by 
Proton and Lotus, (2) Lotus designed and engineered the Esprit without 
assistance from Proton, and (3) Lotus's vehicles are imported and sold 
both in the U.S. and Europe by a dealer/distributor network ``totally 
independent'' of Proton. In support, Lotus reminded us that we had 
established these three criteria in deciding that Maserati (when it was 
owned by Chrysler Corporation and G.B.M. S.p.A) and Ferrari (when Fiat 
held a 90-percent ownership interest) were eligible to apply for 
hardship exemptions (See respectively, 53 FR 28324, July 27, 1988 and 
54 FR 46321, November 2, 1989). These three factors also exist in the 
Lotus case, and an additional one of relevance: the vehicle for which 
exemption is sought was designed well over 20 years ago when Lotus was 
an independent company. Therefore, we have decided that Lotus remains a 
small volume manufacturer within the meaning of the exemption 
legislation. In 1999, Lotus produced 2,569 automobiles; in 2000, 2,993 
automobiles (including 127 Opel/Vauxhall cars); and in 2001, 5,181 
automobiles (including 3,046 for Opel/Vauxhall). Over the same three-
year period it exported 112, 162, and 48 vehicles respectively to the 
United States.
    Notwithstanding the increase in production between 1999 and 2001, 
Lotus's financial submissions show the company's operating loss of 
7,513,000 Pounds for its fiscal year 2001-2002, a loss of 20,244,000 
Pounds for its fiscal year 2000-2001, and an operating profit of 
12,368,000 Pounds for its fiscal year 1999-2000. This represents a 
cumulative loss of 15,389,000 Pounds, or $24,622,400 computed at a rate 
of $1.6 = 1 Pound.
    Lotus had intended to cease production of the exempted Esprit by 
August 31, 2002, but the successor project was cancelled in early 2001 
because of lack of capital. A back-up plan was conceived for a project 
called M260, but ``was unable to launch itself.'' By the end of 2001, 
Lotus had laid off 197 employees, and, by early 2002, ``an additional 
241 employees were made redundant.'' However, it had located ``an 
additional supply of air bags and transmissions * * * permitting the 
construction of up to an additional 140 vehicles.'' The company stated 
that its ``only hope for keeping the US market alive [is] to build the 
additional 140 Esprits, ending production on December 21, 2003,'' the 
period for which it has requested an exemption. No further exemption 
will be requested for the Esprit. It hopes to ``find a way to finance'' 
the M260 project for introduction in the U.S. in 2004, a vehicle being 
designed to conform with Standard No. 201.
    Absent an exemption until 2004, Lotus will suffer the loss of the 
U.S. market, a substantial economic hardship.

[[Page 10067]]

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

    In its application, Lotus simply said that ``the extension will 
continue to be consistent with the public interest and the objectives 
of the Safety Act.'' On December 16, 2002, it repeated and confirmed 
the assertions made in the past that, after many years of sales of the 
Esprit with its current body shape, the company knew 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.
    If Lotus USA is required to close because of a denial, its 
employees will be out of work and its dealers ``significnatly adversely 
affected.'' In its new application, the company adds that its ``image 
and credibility would be ruined.'' An exemption would be consistent 
with the public policy of affording consumers a wide choice of motor 
vehicles.

Comments Received on the Lotus Petition

    We received five comments on the Lotus petition, all of which 
supported an extension of the exemption. Three of the comments 
emphasized the importance of adequate repair facilities and 
availability of spare parts for the continued safe operation of Lotus 
cars in the United States.

The Agency's Findings

    Both the 1999 and 2002 petitions by Lotus clearly demonstrate the 
financial turmoil that the company has experienced in the past few 
years. With recent losses cumulating over $24,000,000, Lotus has 
experienced some temporary relief by the infusion of capital from 
Proton. This relief will allow it to manufacturer from existing parts 
the final 140 Esprits and to sell them in the Untied States (cars 
which, built to American specifications, might not be saleable 
elsewhere). In engineering the M260 to comply with Standard No. 201, 
Lotus has made a good faith effort to comply with that standard. The 
term of the exemption would be short and only a limited number of 
vehicles produced under it. An exemption would assure an adequate 
supply of spare parts and afford a continuing, uninterrupted commercial 
relationship with Lotus dealers and their employees in the United 
States.
    According, for the reasons discussed above, it is hereby found that 
to require compliance with Standard No. 201 would cause substantial 
economic hardship to a manufacturer that has tried in good faith to 
comply with the standard. It is further found that a temporary 
exemption from Standard No. 201 would be in the public interest and 
consistent with the objectives of traffic safety. Therefore, NHTSA 
Temporary Exemption No. 99-12, exempting the Esprit model from 49 CFR 
571.201 Standard No. 201, Occupant Protection in Interior Impact, is 
hereby extended to February 1, 2004.
    (49 U.S.C. 30113; delegations of authority at 49 CFR 1.50. and 
501.8)

    Issued on: February 25, 2003.
Jeffrey W. Runge,
Administrator.
[FR Doc. 03-4801 Filed 2-28-03; 8:45 am]
BILLING CODE 4910-59-M