[Federal Register Volume 70, Number 93 (Monday, May 16, 2005)]
[Notices]
[Pages 25879-25881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-9707]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2005-20053, Notice 2]


Morgan Motor Company Limited Grant of Application for a Temporary 
Exemption From Part 581 Bumper Standard

AGENCY: National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION: Grant of application for a temporary exemption from Part 581 
Bumper Standard.

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SUMMARY: This notice grants the Morgan Motor Company Limited 
(``Morgan'') application for a temporary exemption from Part 581 Bumper 
Standard. In accordance with 49 CFR part 555, the basis for the grant 
is that compliance would cause substantial economic hardship to a 
manufacturer that has tried in good faith to comply with the 
standard.\1\
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    \1\ To view the petition, please got to: http://dms.dot.gov/search/searchFormSimple.cfm (Docket No. NHTSA-2005-20053).
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    The National Highway Traffic Safety Administration (NHTSA) 
published a notice of receipt of the application on January 13, 2005, 
and afforded an opportunity for comment.\2\
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    \2\ See 70 FR 2462.

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DATES: The exemption is effective from May 1, 2005, until May 1, 2008.

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]).

I. Background

    Founded in 1910, Morgan is a small privately owned vehicle 
manufacturer producing approximately 400 to 500 vehicles per year. The 
vehicles manufactured by Morgan are uniquely styled open top roadsters. 
In recent years, the only model exported into the United States was the 
Morgan Plus 8.\3\
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    \3\ See http://www.morgan-motor.co.uk/.
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    Petitioner states that in preparing to replace the Morgan Plus 8 
with a new model in the U.S., Morgan sought to use a V6 engine and a 
manual transmission supplied by Ford Motor Company (Ford). However, it 
later became apparent that Ford would be unable to supply a suitable 
engine and manual transmission due to the change in the production 
plans. The planned Morgan replacement vehicle for the U.S. market could 
not accommodate an automatic transmission. Because no other 
alternatives were available, Morgan was unable to proceed with 
designing a replacement vehicle for the U.S. market. Thus, petitioner 
stopped selling vehicles in the United States in January of 2004.
    After an unsuccessful attempt to manufacture a new vehicle that 
would replace the Morgan Plus 8, Morgan turned its attention to an 
existing vehicle designed specifically for the European market, the 
Morgan Aero 8 (Aero 8).\4\ The petition stated, that after prolonged 
efforts to develop an air bag system and to make other changes to the 
vehicle, Morgan was able to bring the Aero 8 into compliance with all 
the Federal motor vehicle safety standards. However, because Aero 8 was 
not originally intended for the U.S. market and because the petitioner 
was working on a different vehicle intended for the U.S. market, this 
latest effort required significant financial expenditures in a short 
period of time. Petitioner stated that as a consequence, it had not 
been able to develop bumpers that comply with the requirements of Part 
581, Bumper standard.
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    \4\ A description of the Aero 8 vehicle is attached to the 
petition and can be viewed online at http://dms.dot.gov/search/searchFormSimple.cfm (Docket No. NHTSA-2005-20053).
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II. Why Morgan Needs a Temporary Exemption

    Petitioner indicated that it has experienced substantial economic 
hardship, especially in light of decreasing sales and substantial costs 
incurred in bringing Aero 8 into compliance with FMVSSs. Specifically, 
Morgan indicated that it spent a total of

[[Page 25880]]

[pound]8,000,000 ([ap] 15,232,811) \5\ on developing Aero 8 for the 
U.S. market. Petitioner's financial submission showed a net loss of 
[pound]1,947,456 ([ap] $3,739,109) for the fiscal year 2003; a net loss 
of [pound]582,446 ([ap] $1,118,203) for the fiscal year 2002; and a net 
gain of [pound]148,425 ([ap] $284,952) for the fiscal year 2001. This 
represented a cumulative net loss for a period of 3 years of 
[pound]2,381,477 ([ap] $4,572,664).\6\
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    \5\ All dollar values are based on an exchange rate of [pound]1 
= $1.90 as of 4/18/2005.
    \6\ See April 16, 2005 supplement to the Morgan application 
(Docket No. NHTSA-2005-20053-13).
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    According to the petitioner, the cost of making the Aero 8 
compliant with the bumper standard was beyond the company's current 
capabilities because developing and building a compliant bumper 
requires redesigning the entire body structure of the Aero 8. Morgan 
estimated the cost of developing a Part 581-compliant bumper to be 
approximately [pound]3,000,000 ([ap] $5,710,407).
    Morgan requested a three-year exemption in order to develop 
compliant bumpers. Petitioner anticipates the funding necessary for 
these compliance efforts will come from immediate sales of Aero 8 in 
the United States.

III. Why Compliance Would Cause Substantial Economic Hardship, and How 
Morgan Has Tried in Good Faith To Comply With the Bumper Standard

    Petitioner contends that it cannot return to profitability unless 
it receives a temporary exemption from the bumper standard for the Aero 
8. Specifically, if the exemption is granted, Morgan anticipates a net 
profit of [pound]596,923 ([ap] $1,136,444) for the first year of Aero 8 
being sold in the U.S. Morgan also projects that an exemption would 
have a similar impact in the next year. If the exemption is denied, 
Morgan will not be able to sell Aero 8 in the U.S. Resulting loss in 
sales revenue will result in a projected net loss of [pound]2,242,527 
([ap] $4,269,536.37). Morgan indicates that a temporary exemption would 
provide U.S. Morgan dealers with a source of revenue. Without Aero 8 
being available in the U.S., some dealers will find it difficult to 
remain in business and support existing customers. The petitioner will 
also be forced to cut back on existing customer support in the U.S.
    According to its petition, Morgan examined a number of bumper 
solutions in order to bring the Aero 8 into compliance with Part 581. 
First, Morgan considered mounting bumpers from another Morgan vehicle 
onto Aero 8. However, because of Aero 8's unique shape, there were no 
structures that would accommodate suitable bumper mountings without 
interference with headlamps. Second, Morgan considered installing 
rubber bumpers. However, they too caused interference with lighting 
equipment. Finally, Morgan considered foam-based bumpers. This proved 
to be the only solution that did not result in interference with 
lighting equipment. However, it required a change to front and rear 
aluminum body panels and chassis at a cost of approximately 
[pound]3,000,000.

IV. Why an Exemption Would Be in the Public Interest

    Petitioner put forth several arguments in favor of a finding that 
the requested exemption is consistent with the public interest. 
Specifically:
    1. Petitioner noted that Aero 8 complies with all Federal motor 
vehicle safety standards and therefore, the exemption would not 
increase the safety risks on U.S. highways.
    2. Although the Aero 8 bumpers do not comply with Part 581, the 
cost of bumper repairs is comparable to similarly priced vehicles.
    3. Petitioner argues that denial of the petition would limit 
consumer choices by permanently eliminating Morgan from the 
marketplace.\7\
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    \7\ As previously discussed, Morgan manufactures unique 
automobiles for which there is no direct competition or a 
substitute.
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    4. Morgan remarks that due to the nature of the Aero 8, it will, in 
all likelihood, be utilized infrequently and each car would not travel 
in excess of 3,000-4,000 miles annually.
    5. Morgan does not anticipate selling more than 100 vehicles 
annually, and therefore, the impact of the exemption is expected to be 
minimal.

V. Comments Regarding the Morgan Application

    The agency received ten comments in response to the notice of the 
application. The commenters were: The Coalition of Small Volume Auto 
Manufacturers (COSVAM); Stephen Stierman; Peter S. Roberts; Andrew 
Bradley; W. James Franks; Dave Houser; Mark Jehan; Jeff Smith; Thomas 
Ellsworth; Carlton Shriver.\8\ All commenters were in favor of granting 
the exemption. COSVAM indicated that current U.S. owners of Morgan 
vehicles are entirely dependent on Morgan for their continued support 
in the routine maintenance and restoration. COSVAM also stated that the 
denial of the petition would restrict consumer choice in the U.S. 
COSVAM noted that specialized vehicles like Aero 8 are used only 
occasionally and do not average more than 4,000 to 5,000 thousand miles 
annually. The individual commenters urged the agency to grant the 
exemption because of Aero 8's unique characteristics would make the car 
a collector's item, and because they believed that Morgan's low 
production output would have a negligible effect on motor vehicle 
safety in the United States. Others indicated that they were in favor 
of the exemption because the purchasers would be aware that their 
vehicles do not comply with the Federal bumper standards, and would not 
drive these rare and expensive cars frequently.
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    \8\ See Docket No. NHTSA-2005-20053.
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VI. The Agency's Findings

    The agency concludes that the Morgan application for a temporary 
exemption demonstrates that the company has made a good faith effort to 
bring the Aero 8 into compliance with the Bumper Standard. Morgan has 
also demonstrated the requisite financial hardship.
    Traditionally, the agency has found that the public interest is 
served in affording continued employment to a small volume 
manufacturer's work force. 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 is likely to put 
Morgan out of business in the U.S. and cause the company to suffer 
losses in excess of $4,000,000. Further, an exemption would assure an 
adequate supply of spare parts to existing U.S. Morgan owners.
    The term of this exemption will be limited to three years and the 
agency anticipates that the Aero 8 will be sold in very limited 
quantities. We anticipate that with the help of revenues derived from 
U.S. sales, Morgan will be able to introduce a fully compliant vehicle 
by the time this exemption expires.
    Because Morgan Aero 8 will be manufactured in limited quantities 
and because each vehicle is likely to be operated only on a limited 
basis, the agency finds that this exemption will likely 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 
applicable Federal motor vehicle safety standards.
    In consideration of the foregoing, it is hereby found that 
compliance with the requirements of 49 CFR part 581 Bumper Standard 
would cause substantial economic hardship to a manufacturer that has 
tried in good faith to comply with the standard. It is

[[Page 25881]]

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. Sec.  30113(b)(3)(B)(i), Morgan Aero 8 
is granted NHTSA Temporary Exemption No. EX 05-1, from 49 CFR part 581 
Bumper Standard. The exemption shall remain in effect until May 1, 
2008.

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

    Issued on: May 9, 2005.
Jeffrey W. Runge,
Administrator.
[FR Doc. 05-9707 Filed 5-13-05; 8:45 am]
BILLING CODE 4910-59-P