[Federal Register Volume 69, Number 14 (Thursday, January 22, 2004)]
[Notices]
[Pages 3192-3194]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-1272]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA 2001-9362; Notice 3]


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

    This notice grants the application by Saleen, Inc., of Irvine, 
California (``Saleen''), for a renewal of a temporary exemption for its 
S7 passenger car from the requirements of Federal Motor Vehicle Safety 
Standard No. 208, Occupant Crash Protection. In accordance with 49 
U.S.C. 30113(b)(3)(B)(i), the basis of the request was that compliance 
would cause substantial economic hardship to a manufacturer that has 
made a good faith effort to comply with the standard.
    The National Highway Traffic Safety Administration (NHTSA) 
published a notice of receipt of the application on July 25, 2003, and 
afforded an opportunity for comment (68 FR 44139).

Background

    The Saleen S7 is a high performance, limited production sports car 
built in Irvine, CA. The S7 costs approximately $400,000. In June 2001, 
NHTSA granted Saleen a two-year hardship exemption from the 
requirements of S4.1.5.3 of Standard No. 208, expiring July 1, 2003.\1\ 
On April 16, 2003, Saleen petitioned to renew this exemption for an 
additional 3 years. In accordance with 49 CFR 555.8(e), the previous 
exemption has remained in effect until the publication of this notice, 
because the application for renewal was filed more than 60 days prior 
to expiration of the exemption.
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    \1\ See original Notice for additional background information on 
the company (66 FR 33298).
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    Petitioner began developing the S7 in February of 2000. Originally, 
Saleen expected to deliver the S7 vehicles to customers in the summer 
of 2001. However, product development and regulatory issues delayed 
production until March 6, 2003, when Saleen received Certificates of 
Conformity for the 2003 model year from the Environmental Protection 
Agency and the California Air Resources Board. Between March 6, 2003, 
and the date of the petition, Saleen sold eight S7s. Petitioner hopes 
to sell a total of 36 S7s by the end of 2003. In contrast, Saleen 
originally projected selling 112 S7s by the end of 2003.\2\
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    \2\ See 66 FR 33298.
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    Petitioner's other line of business consists of altering Ford 
Mustang vehicles. However, the company has ``sustained a major 
slowdown'' in the sales of these vehicles, which it attributes ``to the 
downturn in the U.S. economy.'' The company has produced only 79 
``Saleen Mustangs'' as of June 11, 2003, compared with 327 in the 
comparable period in 2002. The company currently maintains a payroll of 
96 people. Previously, Saleen employed 122 individuals, but was forced 
to downsize in an effort to complete development of the S7.

Why Saleen Needs a Renewal of a Temporary Exemption

    In the original petition, Saleen estimated that it needed 20 months 
and approximately $3,000,000 to bring the S7 into compliance with 
Standard No. 208.\3\ In the absence of sales until March of 2003, 
Saleen did not generate the necessary funds to bring the S7 into 
compliance as scheduled. According to the petitioner: ``development 
delays almost completely exhausted all of our economic resources 
necessary to stay in business, let alone the development of air bags.'' 
In the meantime, NHTSA has implemented new regulations pertaining to 
advanced air bags (49 CFR 571.208; S14). Petitioner has now asked for a 
three-year extension of its original two-year exemption in order to 
generate funds that would allow it to fully comply with the new, 
advanced air bag requirements of Standard No. 208. Petitioner now 
estimates, based on projected sales, that it will be financially able 
to begin developing advanced air bags by July 2004. Saleen anticipates 
that the project will take 24 months and cost an estimated $3,800,000. 
Petitioner expects full compliance with the requirements of

[[Page 3193]]

Standard No. 208 by September 1, 2006.\4\
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    \3\ See original petition (Docket No. NHTSA-2001-9362-2).
    \4\ Specifically, as a small volume manufacturer, Saleen is 
obligated to comply with 49 CFR 571.208; S14 by September 1, 2006.
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Why Compliance Would Cause Substantial Economic Hardship and How Saleen 
Has Tried in Good Faith To Comply With the Requirements of Standard No. 
208

    As previously stated, after commencing development of the Saleen S7 
in 2000, petitioner has only recently received the necessary approval 
to begin deliveries to customers. Based on financial records 
accompanying the petition, Saleen lost $3,480,372 in the fiscal year 
2000. In the fiscal year 2001, Saleen lost $4,738,588. In the fiscal 
year 2002, Saleen lost an additional $614,039. For a three-year period, 
petitioner experienced a cumulative net loss of $8,832,999.\5\ In the 
spring of 2003, Saleen was finally able to begin recouping its losses 
by delivering the first eight S7 vehicles to customers. If this 
petition is denied, Saleen will have to immediately cease production 
and sales of the S7. Petitioner estimates that denial of the petition 
would decrease the earnings before taxes from $2,707,000 to $7,000. 
Further, denial of the petition would cast serious doubt over the long-
term financial viability of the company, and would likely result in 
downsizing of the current workforce.
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    \5\ See Docket No. NHTSA-2001-9362-5.
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    In order to comply with the requirements of Standard No. 208, 
petitioner would have to redesign the following equipment: (1) Steering 
wheel; (2) Steering column; (3) Dash panel (4) Gauge pod; (5) Seats and 
seat brackets; (6) Center console; (7) Interior trim panels; and (8) 
Wiring harness. Petitioner expects to rely on the continuous sales of 
S7 vehicles in order to fund a redesign of the above components. As 
previously stated, sales of the vehicle were delayed until March of 
2003. As a result, petitioner did not have the resources necessary to 
bring the S7 in compliance with the non-advanced air bag requirements 
of Standard No. 208.\6\ Petitioner notes that there are no available 
alternative means of compliance.
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    \6\ Saleen is currently under contract with Ford Motor Company 
to assist in production of another ``super-car,'' Ford GT. Ford GT 
is due to be completed in the spring of 2004. Petitioner anticipates 
that the technological experience derived from this project will 
enable Saleen to bring the S7 into compliance with the requirements 
of Standard No. 208.
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Why a Renewal of an Exemption Would Be in the Public Interest and 
Consistent With the Objectives of Motor Vehicle Safety

    Petitioner argues that a renewal of a temporary exemption is in the 
public interest because the S7 is a unique ``super-car,'' the only one 
of its kind to be designed and produced in the United States. An 
exemption would allow Saleen to continue producing these unique 
vehicles and to maintain its payroll of 96 full time employees. 
Petitioner notes that the S7 also utilizes many U.S.-sourced 
components. According to Saleen, production of the S7 indirectly 
provides employment for several hundred Americans who work for S7 
domestic suppliers. Petitioner contends that an exemption would be 
consistent with vehicle safety objectives because the S7 will otherwise 
conform to all applicable Federal motor vehicle safety standards.

Comments Received on the Saleen Petition

    The agency received a single comment in response to the notice 
requesting comment on the petition. The commenter, identified as Alan, 
H., was in favor of granting the petition. Specifically, Alan H. 
commented that Saleen S7 is the only U.S.-built ``super car,'' and that 
it compared favorably to such vehicles as Ferrari and Porsche. With 
respect to vehicle safety objectives, Alan H. noted that a $395,000 
vehicle produced in very limited numbers would most likely be purchased 
as an ``investment,'' and would be subject to very infrequent and 
especially careful use.

The Agency's Findings

    Saleen is typical of small volume manufacturers who have received 
temporary exemptions in the past on hardship grounds. With limited 
resources, petitioner developed a high-priced automobile for a 
specialty market. Unfortunately, Saleen was unable to take advantage of 
the original exemption, granted on June 21, 2001, due to regulatory and 
production delays. Petitioner had anticipated using the profits it 
derived from sales of S7 automobiles to bring the vehicle into 
compliance by July 30, 2003. Because the sales did not commence until 
March of 2003, petitioner was unable to do so. Accordingly, Saleen has 
asked for additional time to bring the S7 into compliance with Standard 
No. 208.
    If the petition is denied, the sale of S7 automobiles will cease 
immediately and the petitioner will be unable to derive financial 
resources necessary to bring the S7 into compliance with Standard No. 
208. Saleen's financial statements show a net loss for the previous 
three fiscal years. Thus, it appears the petitioner does not have 
immediate resources available to bring the vehicle into compliance with 
Standard No. 208. Additionally, Saleen will be required to meet the 
new, advanced air bag requirements of Standard No. 208 once the 
exemption expires. In evaluating Saleen's current situation, the agency 
finds that to require immediate compliance with Standard No. 208 would 
cause petitioner substantial economic hardship.
    Traditionally, the agency has 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. The agency has also found that the public interest is served 
by affording the consumers a wider variety of motor vehicles. In this 
instance, denial of the petition would put Saleen's current payroll of 
96 people in jeopardy. Denial of the petition may also affect the 
payrolls of U.S.-sourced component suppliers.
    The vehicle in question will be manufactured in extremely limited 
quantities.\7\ The current Manufacturer's Suggested Retail Price is 
$395,000. In light of these factors, the agency anticipates that the S7 
vehicles will be operated on a very limited basis and will have a 
negligible impact on the overall safety of U.S. highways. The agency 
notes that the vehicle subject to this petition complies with all other 
applicable Federal motor vehicle safety standards.
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    \7\ Petitioner anticipates selling 37 vehicles this year and 50 
vehicles annually thereafter. See Docket No. NHTSA-2001-9362-5.
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    In consideration of the foregoing, it is hereby found that 
compliance with the requirements of Standard No. 208 would cause 
substantial economic hardship to a 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.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), NHTSA Temporary 
Exemption No. 2001-6, exempting Saleen S7 from the requirements of 49 
CFR 571.208; Standard No. 208, Occupant Crash Protection, is hereby 
extended until September 1, 2006.

(49 U.S.C. 30113; delegation 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-

[[Page 3194]]

2992; Fax 202-366-3820; E-mail: [email protected]).

    Issued on: January 15, 2004.
Jeffrey W. Runge,
Administrator.
[FR Doc. 04-1272 Filed 1-21-04; 8:45 am]
BILLING CODE 4910-59-P