[Federal Register Volume 68, Number 206 (Friday, October 24, 2003)]
[Notices]
[Pages 61035-61037]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-26873]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-03-16341, Notice 1]


Group Lotus Plc.; Receipt of Application for a Temporary 
Exemption From Federal Motor Vehicle Safety Standard No. 108 and Part 
581 Bumper Standard

    In accordance with the procedures of 49 CFR part 555, Group Lotus 
Plc. (``Lotus'') has applied for a Temporary Exemption from S7. 
Headlighting requirements, of Federal Motor Vehicle Safety Standard 
(``FMVSS'') No. 108, Lamps, reflective devices, and associated 
equipment; and Part 581 Bumper Standard. 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 are publishing this notice of receipt of the application in 
accordance with the requirements of 49 U.S.C. 30113(b)(2), and have 
made no judgment on the merits of the application.

I. Background

    Lotus, which was founded in 1955, produces small quantities of 
performance cars. In the past five years, Lotus has sold a total of 550 
automobiles in the United States. The only current Lotus vehicle sold 
in the United States is Lotus Esprit (``Esprit''). In the same time 
period, Lotus has manufactured a total of 18,888 vehicles worldwide, 
including Lotus Elise (``Elise'').
    The Elise was introduced in 1996, but it was not originally 
designed or intended for the U.S. market. However, after deciding to 
terminate production of the Esprit by 1999,\1\ petitioner sought to 
introduce the Elise in the United States. Significant management, 
ownership and financial hardship issues contributed to the delay in 
introducing the Elise model. Recently, Peruashan Otomobile Nasional 
Berhad (``Proton'') has taken a 100% ownership of Lotus. Petitioner is 
now ready to introduce the Elise vehicle into the U.S. Market. A 
description of the Elise vehicle is set forth in the Exhibit 1 of the 
petition (Docket No. NHTSA-03-16341). For additional information on the 
vehicle, please go to http://www.LotusCars.com.
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    \1\ Espirit produciton was eventually extended by three years 
while petitioner sought to bring Elise into compliance with FMVSS. 
Espirit will cease production on 12/31/2003.
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II. Why Lotus Needs a Temporary Exemption

    Lotus has continued to experience substantial economic hardship, 
previously discussed by the agency in a March 3, 2003 Renewal of a 
Temporary Exemption from FMVSS No. 201 (68 FR 10066).\2\ Lotus' latest 
financial submissions show the company's operating loss of 
[pound]43,228,000 ([ap]$69,000,000) for the fiscal year 2000; a loss 
[pound]18,055,000 ([ap] $29,000,000) for the fiscal year 2001; and a 
loss of [pound]2,377,000 ([ap] $4,000,000) for its fiscal year 2002. 
This represents a cumulative loss for a period of 3 years of 
[pound]63,660,000 ([ap] $102,000,000).\3\
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    \2\ We note that the Elise vehicle is FMVSS No. 201 compliant.
    \3\ All dollar values are based on an exchange rate of [pound]1= 
$1.60.
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    According to the petitioner, the cost of making the Elise compliant 
with the headlighting requirements of FMVSS 108 and the bumper standard 
is beyond the company's current capabilities. Petitioner contends that 
developing and building FMVSS-compliant headlamps and Part 581-
compliant bumpers cannot be done without redesigning the entire body 
structure of the Elise. Specifically, developing Part 581-compliant 
bumpers would cost $6 million dollars over a period of 2 years. 
Producing an actual FMVSS-compliant headlamp would cost approximately 
$1.1 million. In addition, there are unspecified costs of body 
modifications in order to accommodate the new headlamp, because there 
is insufficient space in the current body structure to permit an FMVSS-
compliant headlamp.
    Lotus requests a three-year exemption in order to concurrently 
develop compliant bumpers and headlamps and make necessary adjustments 
to the current body structure. Petitioner anticipates the funding 
necessary for these compliance efforts will come from immediate sales 
of Elise vehicles in the United States.

III. Why Compliance Would Cause Substantial Economic Hardship and How 
Lotus Has Tried in Good Faith To Comply With Standard No. 108 and the 
Bumper Standard

    Petitioner contends that Lotus cannot return to profitability 
unless it receives the temporary exemption. In support of their 
contention, Lotus prepared alternative forecasts for the next 3 fiscal 
years. The first forecast assumes that the petitioner receives 
exemptions from S7 of FMVSS No. 108 and the bumper standard. The second 
forecast assumes the exemptions are denied.\4\ In the event of denial, 
Lotus anticipates extensive losses through the fiscal year 2006, 
because it cannot bring the Elise into full compliance any earlier.
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    \4\ See Petition Exhibit 2 (Docket No. NHTSA-03-16341).m

[[Page 61036]]



----------------------------------------------------------------------------------------------------------------
                                                                           Forecast if           Forecast if
                             Fiscal Year                               exemptions granted     exemptions denied
                                                                             (in $)                (in $)
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2003................................................................          [ap]$975,000       [ap]-$1,700,000
2004................................................................       [ap]$12,520,000      [ap]-$15,402,000
2005................................................................       [ap]$11,749,000      [ap]-$22,718,000
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    According to the petition, Lotus expended substantial resources 
(approximately $27,000,000) in the past 12 months in order to bring 
Elise into compliance with the Federal Motor Vehicle Safety Standards 
and other U.S. regulations. Specifically, Lotus invested approximately 
$5,000,000 in order to obtain a suitable engine supplier capable of 
complying with U.S. emissions standards. Next, Lotus developed an FMVSS 
208 compliant air bag system. Significant resources are currently being 
expended in order to bring Elise in compliance with all other Federal 
Motor Vehicle Safety Standards, including FMVSSs 208, 210, 212, 214, 
219 and 301.
    As previously discussed, the Elise was not designed for the U.S. 
market and does not have a conventional bumper system or the underlying 
bumper structure. Instead, it was designed with ``clam shell'' body 
parts. According to the petitioner, installing a compliant bumper 
system would require re-designing the entire body of the automobile.
    Petitioner considered equipping the Elise with an ``interim 
headlamp'' that would comply with FMVSS No. 108. This headlamp would 
not feature a polycarbonate cover currently on the vehicle, and would 
have been assembled from ``off-the-shelf'' parts. However, the 
development of this ``interim headlamp'' would cost $500,000. Because 
Lotus anticipates introducing an all-new, fully compliant Elise in 
2006, the projected number of vehicles sold until the introduction of 
the new 2006 model could not justify this investment.
    Petitioner contends that installation of ``an interim headlamp'' 
without a polycarbonate cover would also significantly decrease 
forecasted sales because aesthetic appearance of the automobile would 
be compromised. Lotus marketing research forecasted a sales decline of 
as much as 30%. Further, the absence of the polycarbonate cover would 
have a negative effect on vehicle aerodynamics, and would decrease fuel 
economy. Finally, Lotus indicated that installation of ``interim 
headlamps'' could result in U.S. customers purchasing aftermarket or 
``European-spec'' headlamps and installing these headlamps on their 
vehicles.
    As previously stated, Lotus plans to introduce the second 
generation Elise in late 2006. This vehicle will feature compliant 
headlamps, bumpers and advanced air bags.

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

    Petitioner put forth several arguments in favor of a finding that 
the requested exemption is consistent with the public interest and the 
objectives of the Safety Act. Specifically:
    1. Petitioner notes that the current Elise headlamp does not pose a 
safety risk because the headlamp's photometrics are very close to the 
requirements of FMVSS 108. The headlamp has also been subjected to 
environmental testing, and has a good warranty record.
    2. Petitioner argues that the clamshell body system utilized by the 
Elise vehicle acts to reduce low-speed damage even in the absence of 
conventional bumpers. In a situation involving greater damage, the cost 
of an entire fiberglass clamshell is comparable to bumper-related 
repair costs of other ``high-end'' vehicles.
    3. Petitioner suggests that denial of the petition would prevent 
Lotus from introducing the Elise for a period of three years and would 
in fact cause Lotus to seize U.S. operations. This would in turn result 
in loss of jobs by Lotus employees in the U.S.\5\
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    \5\ In the event the petition is granted, Lotus anticipates 
hiring more employees and expanding its dealer network.
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    4. With respect to consumers, petitioner argues that denial of the 
petition would limit consumer choices by eliminating Lotus from the 
marketplace. Lotus contends that its continued presence in the U.S. is 
needed in order to provide parts and service for the existing Lotus 
Esprit customers.
    5. Lotus remarks that due to the nature of the Elise vehicle, it 
will, in all likelihood, be utilized infrequently as a ``second'' or a 
recreational vehicle.
    6. Finally, Lotus notes that the Elise does comply with all other 
Federal Motor Vehicle Safety Standards, and features above-average fuel 
economy.

V. How You May Comment on Lotus's Application

    We invite you to submit comments on the application described 
above. You may submit comments [identified by DOT Docket Number NHTSA-
03-16341] by any of the following methods:
    [sbull] Web site: http://dms.dot.gov. Follow the instructions for 
submitting comments on the DOT electronic docket site by clicking on 
``Help and Information'' or ``Help/Info.''
    [sbull] Fax: 1-202-493-2251.
    [sbull] Mail: Docket Management Facility, U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590.
    [sbull] Hand Delivery: Room PL-401 on the plaza level of the Nassif 
Building, 400 Seventh Street, SW., Washington, DC, between 9 am and 5 
pm, Monday through Friday, except Federal Holidays.
    [sbull] Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Instructions: All submissions must include the agency name and 
docket number or Regulatory Identification Number (RIN) for this 
rulemaking. Note that all comments received will be posted without 
change to http://dms.dot.gov, including any personal information 
provided.
    Docket: For access to the docket in order to read background 
documents or comments received, go to http://dms.dot.gov at any time or 
to Room PL-401 on the plaza level of the Nassif Building, 400 Seventh 
Street, SW., Washington, DC, between 9 am and 5 pm, Monday through 
Friday, except Federal Holidays.
    Privacy Act: Anyone is able to search the electronic form of all 
comments received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit 
http://dms.dot.gov.
    We shall consider all comments received before the close of 
business on the comment closing date indicated below. To the extent 
possible, we shall

[[Page 61037]]

also consider comments filed after the closing date. We shall publish a 
notice of final action on the application in the Federal Register 
pursuant to the authority indicated below.
    Comment closing date: November 24, 2003.

(49 U.S.C. 30113; delegations of authority at 49 CFR 1.50. and 
501.8)


FOR FURTHER INFORMATION CONTACT: George Feygin in the Office of Chief 
Counsel, NCC-112, (Phone: 202-366-2992; Fax 202-366-3820; E-Mail: 
[email protected]).

    Issued on: October 20, 2003.
Stephen R. Kratzke,
Associate Administrator for Rulemaking.
[FR Doc. 03-26873 Filed 10-23-03; 8:45 am]
BILLING CODE 4910-59-P