[Federal Register Volume 71, Number 166 (Monday, August 28, 2006)]
[Notices]
[Pages 50980-50982]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14252]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2006-25545, Notice 1]


YES! Sportscars; Receipt of Application for a Temporary Exemption 
From the Advanced Air Bag Requirements of FMVSS No. 208

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. 208, 
Occupant Crash Protection.

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SUMMARY: In accordance with the procedures in 49 CFR part 555, YES! 
Sportscars has petitioned the agency for a temporary exemption from 
certain advanced air bag requirements of FMVSS No. 208. 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 fourth 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. Ttlephone: (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 am 
and 5 pm, 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

[[Page 50981]]

advanced air bag requirements were implemented.
    As always, we are concerned about the potential safety implication 
of any 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 submitted by 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, YES! Sportscars has petitioned the agency for a temporary 
exemption from certain advanced air bag requirements of FMVSS No. 208. 
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. 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 YES! Sportscars

    Background. YES! Sportscars is a division of Funke & Will 
Aktiengesellschaft (AG), a German corporation formed in 2000. Funke & 
Will AG is a specialized engineering firm which offers engineering 
services to the automobile industry on small volume projects. Although 
the parent company's two founders together own 85 percent of the 
corporation's shares, the German state of Saxony does have a 15-percent 
ownership stake.\4\
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    \4\ According to the petitioner, the German state government 
took an ownership interest in the firm in exchange for subsidies for 
capital investment in facilities and equipment. According to YES! 
Sportscars, these subsidies cannot be used for operational 
expenditures and research and development funding.
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    YES! Sportscars, a separate vehicle manufacturing part of the 
company, began production in 2001 of high-performance sports cars based 
on an aluminum spaceframe. This application concerns the YES! Roadster 
(currently the company's only model) which is expected to retail for 
$59,000. To date, the primary markets for the YES! Roadster have been 
Europe and the Middle East, with the following numbers of vehicles 
being produced over the past five years: 12 vehicles in 2001; 37 
vehicles in 2002; 42 vehicles in 2003; 48 vehicles in 2004, and 54 
vehicles in 2005. None of those vehicles has been sold in the U.S. 
market.
    According to the petition, the company had originally planned to 
produce vehicles for the European market, but it has been determined to 
be a matter of financial necessity for YES! Sportscars to enter the 
U.S. market, particularly given the limited but global market for these 
high-end sports cars. The company anticipates that approximately 65 
percent of its total sales will be to the U.S. market.
    The petitioner argued that it tried in good faith, but could not 
bring the vehicle into compliance with the advanced air bag 
requirements, and would incur substantial economic hardship if it 
cannot sell vehicles in the U.S. after September 1, 2006.
    Eligibility. As discussed in the petition, YES! Sportscars is a 
division of Funke & Will AG, a German corporation formed in 2000. The 
entire organization currently employs 49 people. No other vehicle 
manufacturer has an ownership interest in either YES! Sportscars or 
Funke & Will AG, and the reverse is likewise true. Stated another way, 
YES! Sportscars is an independent automobile manufacturer which does 
not have any common control or is otherwise affiliated with any other 
vehicle manufacturer.
    The company is a small volume manufacturer whose total production 
has ranged from 12 to 54 vehicles per year over the period from 2001 to 
2005. According to its current forecasts, YES! Sportscars anticipates 
that approximately 250 vehicles would be imported into the U.S. during 
the three-year period for its requested exemption, if such request were 
granted.
    Requested exemption. YES! Sportscars stated that it intends to 
certify the YES! Roadster 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 stated that it 
previously determined the YES! Roadster'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. YES! Sportscars stated that it, therefore, cannot at 
present say with certainty that the YES! Roadster will comply with the 
unbelted test requirement under S14.5.2, which is a 25 mph rigid 
barrier test.
    As for the YES! Roadster's compliance with the other advanced air 
bag requirements, YES! Sportscars stated that it does not know whether 
the YES! Roadster will be compliant because to date it has not had the 
financial ability to conduct the necessary testing.
    As such, YES! Sportscars is requesting an exemption for the YES! 
Roadster 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).
    YES! Sportscars stated its intention to certify compliance of a 
second generation of the YES! Roadster, to be produced by September 1, 
2009, which would be certified as complying with all applicable U.S. 
standards, including advanced air bags. Accordingly, the company seeks 
an exemption from the above-specified requirements of FMVSS No. 208 
from September 1, 2006 to August 31, 2009.
    Economic hardship. Publicly available information and also the

[[Page 50982]]

financial documents submitted to NHTSA by the petitioner indicate that 
the YES! Roadster project will result in financial losses unless YES! 
Sportscars obtains a temporary exemption.
    Over the period 2001-2005, the YES! Sportscars division of Funke & 
Will AG has had net operational losses totaling 484,000 euros ($618,000 
at an exchange rate of 1 euro = $1.277).\5\ As of the time of the 
application, YES! Sportscars has invested over $3.0 million on the 
design, development, and homologation of the YES! Roadster project in 
order to have the vehicle meet U.S. standards--not including the 
advanced air bag requirements 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.
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    \5\ According to the YES! petition, the engineering portion of 
Funke & Will AG has made a modest profit in the past few years, but 
in total, such profits would only amount to 45 percent of the 
funding needed to finance the requisite advanced air bag work.
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    YES! Sportscars stated that costs associated with advanced air bag 
engineering and development (including research and development, 
testing, tooling, and test vehicles) have been estimated to be $1.7 
million (including internal costs). In its petition, YES! Sportscars 
reasoned that sales in the U.S. market must commence in order to 
finance this work and that non-U.S. sales alone cannot generate 
sufficient income for this purpose. In essence, YES! Sportscars 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 for the U.S. market.
    If the exemption is denied, YES! Sportscars projects a net loss of 
$1.1 million over the period from 2006-2008 (assuming a delayed start 
of U.S. sales until 2008). However, if the petition is granted, the 
company anticipates a profit of nearly $1.4 million during that same 
period. The petitioner argued that a denial of this petition could 
preclude financing of the project for USA-compliant vehicles, a 
development which would have a highly adverse impact on the company.
    Good faith efforts to comply. As stated above, YES! Sportscars 
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 $3.0 million on research and development and tooling for 
its U.S. YES! Roadster program. In that time, the company was able to 
bring the vehicle into compliance with all applicable NHTSA 
regulations, except for than the advanced air bag provisions of FMVSS 
No. 208.
    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 has spent over $630,000 to reengineer the YES! 
Roadster to include a standard air bag system, which it stated will 
then be ``expanded'' into an advanced air bag system.
    According to its petition, even though advanced air bags are beyond 
its current capabilities, YES! Sportscars is nonetheless planning for 
the introduction of these devices. The company stated that Siemens 
Restraint Systems will spearhead this effort, and current plans 
estimate a cost of $1.1 million (excluding internal costs) and a 
minimum lead time of 24 months for the advanced air bag project. YES! 
Sportscars stated that the following engineering efforts are needed to 
upgrade the YES! Roadster's standard air bag system to an advanced air 
bag system: (1) Interior redesign work to the dashboard, steering 
column, and electronic systems; (2) sourcing and organization of 
supplier and engineering personnel and resources for development work 
(including sensor calibration); (3) construction of prototypes, and (4) 
testing.
    In addition, YES! Sportscars stated that finding suppliers willing 
to work with a manufacturer with very low production volumes has proven 
extremely difficult, and as a result, the company must wait for 
technology to ``trickle down'' from larger manufacturers and suppliers. 
YES! Sportscars further stated that small volume manufacturers simply 
do not have the internal resources to do full U.S. homologation 
projects without reliance on outside suppliers of advanced engineering 
technologies.
    In short, YES! Sportscars 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 YES! 
Roadsters, the company expects that additional development efforts 
could start in 2007, thereby allowing production of a fully compliant 
vehicle in September 2009.
    YES! Sportscars 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 and would not have a significant adverse impact on safety. 
Specifically, YES! Sportscars argued that the vehicle would be equipped 
with a fully-compliant standard U.S. air bag system (i.e., one meeting 
all requirements of FMVSS No. 208 prior to implementation of S14). 
Furthermore, the company emphasized that the YES! Roadster will comply 
with all other applicable FMVSSs.
    The company asserted that granting the exemption will benefit U.S. 
employment, companies, and citizens, because YES! Roadsters will be 
sold and serviced through a network of U.S. dealers. YES! Sportscars 
also argued that denial of the exemption request would have an adverse 
impact on consumer choice, suggesting that there is domestic demand for 
a performance vehicle in the YES! Roadster's price range. The company 
also argued that an exemption is unlikely to have a significant safety 
impact because these vehicles are not expected to be used extensively 
by their owners, due to their ``second vehicle'' nature and 
``minimalist design.'' The company also reasoned that given the nature 
of the vehicle, it is less likely to be used to transport young 
children than most other vehicles.
    As an additional basis for showing that its requested exemption 
would be in the public interest, YES! Sportscars stated that the YES! 
Roadster has an extremely strong and protective chassis, which is 
composed of aluminum tubes and composite structure parts. According to 
YES! Sportscars, the vehicle design is such that occupants are 
effectively placed in a ``protective `cell' '' with the chassis 
structure built around them.

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. E6-14252 Filed 8-25-06; 8:45 am]
BILLING CODE 4910-59-P