[Federal Register Volume 71, Number 166 (Monday, August 28, 2006)]
[Notices]
[Pages 50974-50977]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14247]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2006-25546, Notice 1]


Koenigsegg Automotive AB; Receipt of Application for a Temporary 
Exemption From Headlamp Requirements of FMVSS No. 108; Advanced Air Bag 
Requirements of FMVSS No. 208; and Bumper Standard of Part 581

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

ACTION: Notice of receipt of petition for temporary exemption from 
provisions of Federal Motor Vehicle Safety Standard (FMVSS) No. 108, 
Lamps, Reflective Devices, and Associated Equipment, FMVSS No. 208, 
Occupant Crash Protection, and 49 CFR part 581, Bumper Standard.

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SUMMARY: In accordance with the procedures in 49 CFR part 555, 
Koenigsegg Automotive AB (``Koenigsegg'') has petitioned the agency for 
a temporary exemption from certain head lighting requirements of FMVSS 
No. 108, advanced air bag requirements of FMVSS No. 208, and bumper 
standard requirements of 49 CFR part 581. The basis for the application 
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 application, go to: http://dms.dot.gov/search/searchFormSimple.cfm and enter the docket number set forth in the 
heading of this document.
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    This notice of receipt of an application for temporary exemption is 
published in accordance with the statutory provisions of 49 U.S.C. 
30113(b)(2). NHTSA has made no judgment on the merits of the 
application.

DATES: You should submit your comments not later than September 12, 
2006.

FOR FURTHER INFORMATION CONTACT: Mr. Ed Glancy or Mr. Eric Stas, Office 
of the Chief Counsel, NCC-112, National Highway Traffic Safety 
Administration, 400 Seventh Street, SW., Room 5219, Washington, DC 
20590. Telephone: (202) 366-2992; Fax: (202) 366-3820.
    Comments: We invite you to submit comments on the application 
described above. You may submit comments identified by docket number at 
the heading of this notice by any of the following methods:
     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.''
     Fax: 1-(202)-493-2251.
     Mail: Docket Management Facility, U.S. Department of 
Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401, 
Washington, DC 20590.
     Hand Delivery: Room PL-401 on the plaza level of the 
Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 
a.m. and 5 p.m., Monday through Friday, except Federal Holidays.
     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 a.m. and 5 p.m., 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 above. To the extent 
possible, we shall also consider comments filed after the closing date.

I. Advanced Air Bag Requirements and Small Volume Manufacturers

    In 2000, NHTSA upgraded the requirements for air bags in passenger 
cars and light trucks, requiring what are commonly known as ``advanced 
air bags.'' \2\ The upgrade was designed to meet the goals of improving 
protection for occupants of all sizes, belted and unbelted, in 
moderate-to-high-speed crashes, and of minimizing the risks posed by 
air bags to infants, children, and other occupants, especially in low-
speed crashes.
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    \2\ See 65 FR 30680 (May 12, 2000).
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    The advanced air bag requirements were a culmination of a 
comprehensive plan that the agency announced in 1996 to address the 
adverse effects of air bags. This plan also included an extensive 
consumer education program to encourage the placement of children in 
rear seats. The new requirements were phased in beginning with the 2004 
model year.
    Small volume manufacturers are not subject to the advanced air bag 
requirements until September 1, 2006, but their efforts to bring their 
respective vehicles into compliance with these requirements began 
several years ago. However, because the new requirements were 
challenging, major air bag suppliers concentrated their efforts on 
working with large volume manufacturers, and thus, until recently, 
small volume manufacturers had limited access to advanced air bag 
technology. Because of the nature of the requirements for protecting 
out-of-position occupants, ``off-the-shelf'' systems could not be 
readily adopted. Further complicating matters, because small volume 
manufacturers build so few vehicles, the costs of developing custom 
advanced air bag systems compared to potential profits discouraged some 
air bag suppliers from working with small volume manufacturers.
    The agency has carefully tracked occupant fatalities resulting from 
air bag deployment. Our data indicate that the agency's efforts in the 
area of consumer education and manufacturers' providing depowered air 
bags were successful in reducing air bag fatalities even before 
advanced air bag requirements were implemented.
    As always, we are concerned about the potential safety implication 
of any

[[Page 50975]]

temporary exemptions granted by this agency. In the present case, we 
are seeking comments on a petition for a temporary exemption from the 
advanced air bag requirements. As part of the same document, the 
petitioner also seeks a temporary exemption from the agency's headlamp 
requirements and bumper standard. The petitioner is a manufacturer of 
very expensive, low volume, exotic sports cars.

II. Overview of Petition for Economic Hardship Exemption

    In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR 
part 555, Koenigsegg has petitioned the agency for a temporary 
exemption from certain headlight requirements of FMVSS No. 108 (S7), 
advanced air bag requirements of FMVSS No. 208 (S14), and bumper 
requirements of 49 CFR part 581. The basis for each portion of the 
application is that compliance would cause substantial economic 
hardship to a manufacturer that has tried in good faith to comply with 
these standards. A copy of the petition \3\ is available for review and 
has been placed in the docket for this notice.
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    \3\ The company requested confidential treatment under 49 CFR 
part 512 for certain business and financial information submitted as 
part of its petition for temporary exemption. Accordingly, the 
information placed in the docket does not contain such information 
that the agency has determined to be confidential.
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III. Statutory Background for Economic Hardship Exemptions

    A manufacturer is eligible to apply for a hardship exemption if its 
total motor vehicle production in its most recent year of production 
did not exceed 10,000 vehicles, as determined by the NHTSA 
Administrator (49 U.S.C. 30113).
    In determining whether a manufacturer of a vehicle meets that 
criterion, NHTSA considers whether a second vehicle manufacturer also 
might be deemed the manufacturer of that vehicle. The statutory 
provisions governing motor vehicle safety (49 U.S.C. Chapter 301) do 
not include any provision indicating that a manufacturer might have 
substantial responsibility as manufacturer of a vehicle simply because 
it owns or controls a second manufacturer that assembled that vehicle. 
However, the agency considers the statutory definition of 
``manufacturer'' (49 U.S.C. 30102) to be sufficiently broad to include 
sponsors, depending on the circumstances. Thus, NHTSA has stated that a 
manufacturer may be deemed to be a sponsor and thus a manufacturer of a 
vehicle assembled by a second manufacturer if the first manufacturer 
had a substantial role in the development and manufacturing process of 
that vehicle.

IV. Petition of Koenigsegg

    Background. Koenigsegg Automotive is a Swedish corporation formed 
in 1999 to produce high-performance sports cars. This application 
concerns the Koenigsegg CCX which was developed as the next generation 
of Koenigsegg vehicles, after production of the CCR model ended on 
December 30, 2005. The CCX model (the company's only model at this 
point) is scheduled to go into production in 2006 and to continue at 
least through the end of 2009. Originally, Koenigsegg planned to sell 
vehicles only in the European, Mid-East, and Far-East markets, but the 
company decided in late 2005 to seek entry to the U.S. market for 
reasons related to ongoing financial viability.
    The petitioner argues that it tried in good faith, but could not 
bring the vehicle into compliance with the headlamp, advanced air bag, 
and bumper requirements, and would incur substantial economic hardship 
if it cannot sell vehicles in the U.S. after January 1, 2007.
    Eligibility. Koenigsegg is a small, privately-owned company with 30 
full-time staff members and several part-time employees. The company is 
a small volume manufacturer whose total production is less than 50 cars 
per year, having produced between four and eight vehicles per year for 
the past four years. According to the company, its sales revenues have 
averaged approximately $3.7 million per year. Koenigsegg is not 
affiliated with any other automobile manufacturer.
    According to its current forecasts, Koenigsegg anticipates the 
following number of CCX vehicles would be imported into the United 
States, if its requested exemptions were to be granted: 25 in calendar 
year (CY) 2007; 30 in CY 2008, and 30 in CY 2009.
    Requested exemptions. Koenigsegg states that it intends to certify 
the CCX as complying with the rigid barrier belted test requirement 
using the 50th-percentile adult male test dummy set forth in S14.5.1 of 
FMVSS No. 208. The petitioner states that it previously determined the 
CCX's compliance with rigid barrier unbelted test requirements using 
the 50th-percentile adult male test dummy through the S13 sled test 
using a generic pulse rather than a full vehicle test. Koenigsegg 
states that it, therefore, cannot at present say with certainty that 
the CCX will comply with the unbelted test requirement under S14.5.2, 
which is a 25 mph rigid barrier test.
    As for the CCX's compliance with the other advanced air bag 
requirements, Koenigsegg states that it does not know whether the CCX 
will be compliant because to date it has not had the financial ability 
to conduct the necessary testing.
    As such, Koenigsegg is requesting an exemption for the CCX from the 
rigid barrier unbelted test requirement with the 50th-percentile adult 
male test dummy (S14.5.2), the rigid barrier test requirement using the 
5th-percentile adult female test dummy (belted and unbelted, S15), the 
offset deformable barrier test requirement using the 5th-percentile 
adult female test dummy (S17), the requirements to provide protection 
for infants and children (S19, S21, and S23) and the requirement using 
an out-of-position 5th-percentile adult female test dummy at the driver 
position (S25).
    Koenigsegg further requests an exemption from the headlamp 
requirements set forth in S7 of FMVSS No. 108 and the bumper standard 
in 49 CFR part 581.
    Koenigsegg stated its intention to produce a second generation of 
the CCX model by late 2009, which would be certified as complying with 
all applicable U.S. standards, including ones for headlamps (FMVSS No. 
108 S7), advanced air bags (FMVSS No. 208 S14), and bumpers (49 CFR 
part 581). Accordingly, Koenigsegg seeks an exemption from the 
enumerated requirements from January 1, 2007 through December 31, 2009.
    Economic hardship. Publicly available information and also the 
financial documents submitted to NHTSA by the petitioner indicate that 
the CCX project will result in financial losses unless Koenigsegg 
obtains a temporary exemption.
    In the past three years (2003 to 2005), the company has had losses 
totaling $1,637,399, and during this time period, the company's factory 
burned to the ground and had to be rebuilt. Koenigsegg did make a 
profit of $58,341 in 2003 and $722,406 in 2004, but it incurred a 
substantial loss of $2,418,416 in 2005.
    As of the time of the application, Koenigsegg has invested over 
$3.2 million on the CCX project in order to have the vehicle meet U.S. 
standards--not including the three provisions which are the subject of 
the present petition for temporary exemption. The company has stated 
that it cannot hope to attain profitability if it incurs additional 
research and development expenses at this time.
    Koenigsegg stated that costs for external assistance with 
developing an

[[Page 50976]]

advanced air bag system would cost over $3 million (over $9 million if 
internal costs are included for interior redesign, testing, and 
tooling), and meeting the headlamp and bumper requirements would entail 
an additional $1 million in expenditures.
    In its petition, Koenigsegg reasoned that worldwide sales 
(including the U.S. market) of the current CCX in higher volumes over 
the next 3 years is necessary to reduce production costs and to make 
available funding for development of the next generation of the CCX, 
which would be compliant with all U.S. air bag, headlamp, and bumper 
requirements. In essence, Koenigsegg argued that the exemption is 
necessary to allow the company to ``bridge the gap'' until fully 
compliant vehicles can be funded, developed, tooled, and introduced.
    If the exemption is denied, Koenigsegg projects a net loss of $82.4 
million over the period from 2006-2009. However, if the petition is 
granted, the company anticipates a profit of over $27 million during 
that same period. The petitioner argued that a denial of this petition 
could preclude entry into the U.S. market until 2010 or later, a 
development which would have a highly adverse impact on the company. 
According to the petitioner, if the exemption request is not granted, 
the company would face a ``virtually insurmountable problem'' in terms 
of funding and introducing a vehicle that meets all applicable U.S. 
requirements, and it might ultimately drive the company out of business 
because the rest of the world export market would be inadequate to 
ensure profitability.
    Good faith efforts to comply. As stated above, Koenigsegg initially 
planned to produce vehicles for the European, Mid-East, and Far-East 
markets, but once it was determined in 2005 that entry into the U.S. 
market was a necessary part of its business plan, the company invested 
over $3.2 million on research and development and tooling for its U.S. 
CCX program. In 18 months, the company was able to bring the vehicle 
into compliance with all applicable NHTSA regulations (other than those 
which are the subject of the present exemption petition), as well as 
the emissions regulations administered by the Environmental Protection 
Agency (EPA).
    In light of limited resources, the petitioner stated that it was 
necessary to first develop the vehicle with a standard U.S. air bag 
system. The company reengineered the CCX with an Audi TT driver air bag 
system and developed a new passenger air bag system, a $641,000 project 
which is nearing completion.
    According to its petition, Koenigsegg anticipates that 2 years will 
be needed to install an advanced air bag system on the CCX. 
Modifications would involve development of new components, such as 
changes to the instrument panel design and advanced air bag 
installation components such as mountings and brackets. Vehicle testing 
would also be conducted during that time.
    Furthermore, because the vehicle was not originally designed for 
the U.S. market, it likewise did not have headlamps or a bumper system 
or an underlying bumper structure that complies with U.S. requirements. 
According to Koenigsegg, achieving compliance with those requirements 
will necessitate a redesign of the vehicle body and headlamps at the 
same time, so to that extent, the petitioner argued that these two 
modifications should be considered together.
    To provide a part 581-compliant bumper would require re-engineering 
and retooling the current CCX bumper system. The company explained that 
it has undertaken redesign of its front and rear bumper systems in an 
effort to achieve compliance with U.S. bumper standard requirements, 
including inserting foam and reinforcements, increasing rear deck 
offset, and moving the front bumper cut line as high and inboard as 
possible. However, Koenigsegg stated that it has been unable to fully 
meet the requirements of part 581, for the following reasons.
    First, the petitioner stated that extremely low vehicle height and 
aerodynamic requirements for the vehicle dictate that the standard 20-
inch pendulum height falls above the current bumper cut lines. In 
addition, the company stated that packaging constraints for the 
structure required to fulfill the high-speed crash requirements of 
FMVSS No. 208 and the requirements of the roof stowage under the front 
hood dictate the maximum size of the front bumpers. Koenigsegg argued 
that despite its good faith efforts, additional time will be required 
to achieve full compliance with part 581, and the company does not 
currently have the resources to fund the requisite development efforts.
    As to headlamps, Koenigsegg explained that it has undertaken 
significant efforts in pursuit of CCX compliance with the headlamp 
requirements of FMVSS No. 108, but problems have stemmed from the 
company's inability to find a supplier. The petitioner stated that 
given the unique shape of the CCX, there is no available ``off-the-
shelf'' headlamp system available, and efforts to find a supplier 
willing to undertake the project to produce a FMVSS No. 108-compliant 
headlamp for the CCX have been unavailing, presumably due to the ultra-
low quantity of vehicles involved.\4\ Instead, Koenigsegg decided to 
produce a headlamp for the CCX in-house (homologated to European Union 
requirements), utilizing a lighting source from a major lighting 
manufacturer (Hella). The petitioner stated that the plexiglass lens of 
the headlamp box is an integral part of the vehicle body and design. 
The company explained that despite its good faith efforts, the 
headlamps for the CCX as yet do not fully comply with the headlamp 
requirements of FMVSS No. 108. Specifically, while the CCX headlamps 
have been designed to pass the geometry requirements of FMVSS No. 108, 
the required aerodynamic lens will not pass environmental testing and 
must be re-engineered.
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    \4\ In an August 10, 2006 supplement to its application 
(included in this docket, following the Koenigsegg petition), 
Koenigsegg stated that it may have now identified a large lighting 
manufacturer interested in developing a FMVSS No. 108-compliant 
headlighting system for the CCX, but it would be ``at a price higher 
than the $500,000 thus far estimated.''
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    According to Koenigsegg, the company did explore the possibility of 
developing an ``interim U.S. headlamp'' without a polycarbonate cover. 
However, that alternative was determined to be unworkable for the 
following reasons. First, there were concerns that the absence of the 
polycarbonate lens ``ruins the design of the body,'' a result which 
customers were deemed unlikely to accept and which was expected to 
result in decreased sales.\5\ Second, it was determined that an interim 
headlamp without a polycarbonate lens would have unacceptable 
aerodynamic effects which would negatively impact vehicle performance. 
Third, there were concerns that by engineering an interim headlamp 
exclusively for the U.S. market, the company would lose the advantages 
associated with producing a ``world car'' which can be introduced into 
any market, something of great importance for an ultra-low-volume 
manufacturer. In addition, Koenigsegg determined that the cost of 
developing the interim headlamp could not be justified when amortized 
over the small number of units involved.
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    \5\ The petitioner asserted that such considerations were a 
factor in the agency's earlier decision to grnt a ``waiver'' for the 
headlamp of the Lotus Elise.
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    In light of the above, the company again stated that because of the 
cost and length of this project, such headlighting

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efforts must await the second generation of the U.S. CCX.
    In short, Koenigsegg argued that, despite good faith efforts, 
limited resources prevent it from bringing the vehicle into compliance 
with all applicable requirements, and it is beyond the company's 
current capabilities to bring the vehicle into full compliance until 
such time as additional resources become available as a result of U.S. 
sales. With funding from sale of the current generation of U.S. CCX, 
the company expects that additional development efforts could start in 
2007, thereby allowing production of a fully compliant vehicle in late 
2009.
    Koenigsegg argues that an exemption would be in the public 
interest. The petitioner put forth several arguments in favor of a 
finding that the requested exemption is consistent with the public 
interest. Specifically, Koenigsegg argued that the vehicle would be 
equipped with a fully-compliant standard U.S. air bag system (i.e., one 
meeting the requirements of FMVSS No. 208 except for the advanced air 
bag requirements). As to headlamps, Koenigsegg stated that the CCX's 
current headlamps (designed to European specifications) are very close 
to meeting the photometric requirements of FMVSS No. 108, and 
consequently, they do not pose a safety risk. The petitioner stated 
that the CCX's carbonfibre body system should reduce low-speed damage 
repair costs even in the absence of a conventional bumper that meets 
the requirements of part 581. However, the company stated that it would 
also place information in the vehicle owner's manual regarding the need 
for greater care due to the absence of a conventional bumper system. In 
all other areas, Koenigsegg emphasized that the CCX will comply with 
applicable FMVSSs.
    As additional bases for showing that its requested exemption would 
be in the public interest, Koenigsegg offered the following. The 
company asserted that there is consumer demand in the U.S. for the CCX, 
and granting this application will allow the demand to be met, thereby 
expanding consumer choice. The company also suggested another reason 
why granting the exemption would not be expected to have a significant 
impact on safety, specifically because the vehicle is unlikely to be 
used extensively by owners, due to its ``sporty (second car) nature.'' 
Koenigsegg reasoned that given its very low production volume and 
customer base, the possibility of any child being in the vehicle is 
extremely small. Finally, Koenigsegg indicated that the CCX 
incorporates advanced engineering and certain advanced safety features 
that are not required by the FMVSSs, including racing brakes with anti-
lock capability and traction control. In addition, the company argued 
that the CCX has enhanced fuel efficiency due to its highly aerodynamic 
design.

V. Issuance of Notice of Final Action

    We are providing a 15-day comment period, in light of the short 
period of time between now and the time the advanced air bag 
requirements become effective for small volume manufacturers (i.e., 
September 1, 2006). After considering public comments and other 
available information, we will publish a notice of final action on the 
application in the Federal Register.

     Issued on: August 18, 2006.
Ronald L. Medford,
Senior Associate Administrator for Vehicle Safety.
 [FR Doc. E6-14247 Filed 8-25-06; 8:45 am]
BILLING CODE 4910-59-P