[Federal Register Volume 71, Number 173 (Thursday, September 7, 2006)]
[Notices]
[Pages 52869-52871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-14829]



[[Page 52869]]

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2006-25323; Notice 2]


Saleen, Inc.; Response to Application for Temporary Exemption 
From Certain Provisions of Federal Motor Vehicle Safety Standard No. 
208

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

ACTION: Grant in part and denial in part of application for temporary 
exemption from certain provisions of Federal Motor Vehicle Safety 
Standard No. 208, Occupant Crash Protection.

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SUMMARY: This document grants in part and denies in part the Saleen 
application for an extension of a temporary exemption from the 
automatic restraint requirements of Federal Motor Vehicle Safety 
Standard (FMVSS) No. 208, Occupant Crash Protection, and grants an 
additional exemption from the advanced air bag requirements of that 
standard, both for the Saleen S7. The basis for the request was that 
compliance would cause substantial economic hardship to a low-volume 
manufacturer that has tried in good faith to comply with the standard. 
The extension of the exemption from the automatic restraint 
requirements is effective September 1, 2006 and will remain in effect 
until August 31, 2007. The exemption from the advanced air bag 
requirements is effective September 1, 2006 and will remain in effect 
until August 31, 2009.

FOR FURTHER INFORMATION CONTACT: Ed Glancy or Eric Stas in the Office 
of Chief Counsel, NCC-112, (Phone: 202-366-2992; Fax 202-366-3820).

SUPPLEMENTARY INFORMATION:

I. Background

    Under 49 U.S.C. 30113(b), NHTSA may grant a temporary exemption 
from a motor vehicle safety standard in situations where compliance 
would cause substantial economic hardship to a low-volume manufacturer 
that has tried in good faith to comply with the standard. A 
manufacturer is eligible to apply for an economic hardship exemption if 
its total motor vehicle production in its most recent year of 
production does not exceed 10,000, as determined by the NHTSA 
Administrator (49 U.S.C. 30113(d)). Saleen has manufactured less than 
20 Saleen S7's a year between model years 2003 and 2005. The 
applicant's other line of business consists of altering vehicles. 
Saleen stated that it produced approximately 1500 Saleen Mustangs in 
model year 2005. It indicated that sales of these vehicles are expected 
to increase in 2006. Saleen also stated that it is adding new models 
such as the 2007 Ford 150-based Saleen S331. Saleen will also be 
considered an alterer for these new vehicles (other than the S7).
    In June 2001, NHTSA granted Saleen a two-year hardship exemption 
from the automatic restraint requirements of FMVSS No. 208, expiring on 
April 16, 2003 (66 FR 33298; June 21, 2001). On January 22, 2004, we 
granted a renewal of the exemption for an additional three years, 
expiring on September 1, 2006.\1\
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    \1\ In accordance with 49 CFR 555.8(e), Saleen's original 
exemption remained in effect until the publication of the 2004 grant 
notice because the application for renewal was filed more than 60 
days prior to the expiration of the exemption.
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    In September of 2005, Saleen submitted an application for further 
exemption from the automatic restraint requirements of FMVSS No. 208, 
as well as an exemption from the advanced air bag requirements of the 
standard. Saleen subsequently withdrew the petition, and later 
resubmitted the application in January of 2006. Saleen then provided 
supplemental information on May 11, 2006. In its petition, Saleen 
requested that both the further exemption for the automatic restraint 
requirements (``basic'' air bag requirements) and the exemption for the 
advanced air bag requirements remain in effect for three years, i.e., 
until September 1, 2009.
    We note that, in 2000, NHTSA upgraded the requirements for air bags 
in passenger cars and light trucks, requiring what is 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-scale 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 de-powered air 
bags were successful in reducing air bag fatalities even before 
advanced air bag requirements were implemented.
    As indicated above, Saleen requested not only an exemption from the 
advanced air bag requirements, but also a continued exemption from the 
automatic restraint requirements altogether.
    On July 12, 2006, NHTSA published in the Federal Register (71 FR 
39392) a notice of receipt of Saleen's application for temporary 
exemption, and invited public comments.

II. Saleen's Statement of Need and Good Faith Effort

    Saleen stated that its previous exemption extension request was 
intended to provide sufficient time for Saleen to sell and ship the 
Saleen S7 vehicles to generate the necessary cash flow to support the 
development of an air bag system that would be compliant with the 
advanced air bag requirements. The applicant stated that it intended to 
produce and sell a total of 36 vehicles by the end of 2003, with 
production slowly increasing to a rate of 50 vehicles per year. Saleen 
projected that this sales rate would have generated approximately $12.8 
million in annual gross revenue by the end of 2003, which would then 
increase to approximately $17.8 million in annual gross revenue with 
the annual production of 50 vehicles. Saleen presented its actual 
annual sales as 13 vehicles, 8 vehicles, and 14 vehicles, in model 
years 2003, 2004, and 2005, respectively.
    In the January 2006 application, Saleen stated that it intended to 
sell a total of 25 vehicles in the United States per year, and an 
additional 10 vehicles in Europe. Maintaining an annual sales level of 
35 vehicles, Saleen would

[[Page 52870]]

generate a total of approximately $17.8 million. Saleen subsequently 
revised these projections stating that it was uncertain whether it 
would manufacture the Saleen S7 for international sale, as European 
homologation is pending.
    However, Saleen stated that increased sales of its other products 
in conjunction with the sales of the Saleen S7 will allow it to develop 
an air bag system that is compliant with FMVSS No. 208 by the end of 
calendar year 2008 at a cost of approximately $3.8 million. Saleen 
stated that this timeframe does not account for any delays, and as 
such, it is requesting a three year exemption, expiring September 1, 
2009.
    Saleen noted that in its previous application it explained that 
Saleen's relationship with Ford Motor Company in assisting in the 
manufacture of the Ford GT, an exotic sports car, would allow Saleen to 
rely on many of the components from the Ford GT. However, Saleen stated 
that the Ford GT was not manufactured as complying with the advanced 
air bag requirements. As such, Saleen stated that it was not able to 
rely on the advanced air bag technology used in the Ford GT.
    Since the original air bag exemption, Saleen stated that it has 
hired an engineering project manger responsible for air bag 
development, has been working with engineers at Takata, Autoliv, and 
Bosch in researching all of the program requirements as well as 
developing a test plan and component designs for development of a 
system compliant with the advanced air bag requirement. Saleen also 
stated that it is working with Kettering University in Flint Michigan 
for additional research and testing.

III. Saleen's Statement of Public Interest

    The applicant put forth several arguments in favor of a finding 
that the requested exemption is consistent with the public interest. 
Specifically, Saleen stated that the Saleen S7 is a unique vehicle 
designed and produced in the United States utilizing many domestic 
sourced components. If an exemption were granted, Saleen stated that it 
would be able to maintain its current payroll of 150 full time 
employees and continue the purchase of domestic sourced components. 
Further, Saleen stated that the Saleen S7 otherwise conforms to all 
applicable FMVSSs.

IV. Public Comments

    NHTSA received eight comments concerning Saleen's application for a 
temporary exemption. All were from private individuals, and all favored 
granting the petition.
    Commenters argued that S7 is constructed to provide driver and 
passenger safety at levels well above those of other passenger 
vehicles. They cited a fully welded roll cage, aluminum honeycomb 
passenger compartment, and carbon fiber bodywork. They stated that the 
vehicle is used in racing applications. They cited the extremely small 
number of S7's that are produced, and that they are driven very few 
miles. They cited economic hardship to Saleen if the petition is 
denied, and stated that jobs would be lost.

V. Agency Decision

    NHTSA has decided to grant Saleen's petition in part and deny it in 
part. In particular, we are granting Saleen a one-year extension of its 
existing exemption from the automatic restraint requirements of FMVSS 
208, and denying its request as to the additional two years. This 
extension will begin on September 1, 2006 and will remain in effect 
through August 31, 2007. We are granting Saleen's request for a three 
year exemption from the standard's advanced air bag requirements. This 
exemption will begin September 1, 2006, and remain in effect through 
August 31, 2009.
    In discussing this decision, we begin by noting that, in order to 
grant an economic hardship petition, the agency must, under 49 U.S.C. 
30113(b), find both that compliance with a standard would cause 
substantial economic hardship and that the manufacturer has tried to 
comply with the standard in good faith, as well as that the exemption 
is in the public interest and consistent with the Safety Act.\3\
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    \3\ The Safety Act is codified as Title 49, United States Code, 
Chapter 301.
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    In this case, Saleen has previously received a temporary exemption 
from FMVSS No. 208's automatic restraint requirements (the standard's 
``basic'' air bag requirements), as well as an extension of that 
temporary exemption. These previous exemptions covered the period from 
June 2001 through August 31, 2006.
    In granting the first application in June 2001, NHTSA noted that 
Saleen estimated that it would take up to 20 months to fully develop an 
automatic restraint system. 66 FR 33298, June 21, 2001. In granting the 
application for extension of that exemption in January 2004, NHTSA 
noted that Saleen then anticipated that it would be able to begin 
developing advanced air bags by July 2004 and expected full compliance 
with the requirements of FMVSS No. 208 by September 1, 2006. 69 FR 
3192, January 22, 2004.
    Since this type of exemption is temporary, and given the important 
safety benefits provided by air bags, in evaluating Saleen's latest 
application we particularly considered whether a further extension 
would be in the public interest and consistent with the Safety Act, and 
whether Saleen has continued to make good faith efforts to comply with 
this requirement.
    In considering this issue, we recognize that Saleen was only able 
to take limited advantage of the original exemption, granted on June 
21, 2001, due to production delays. Sales did not commence until March 
of 2003, only a few months before the July 1, 2003 expiration date for 
the original exemption. We also recognize that by September 1, 2006, 
Saleen faced the need (absent a new temporary exemption) to meet the 
advanced air bag requirements.
    That company indicated in its petition that it considered 
implementing a ``basic'' air bag system. However, it determined that 
``such a system would only provide approximately $500,000.00 in 
savings, with a resulting estimated development cost of 
$3,300,000.00.'' Saleen concluded that this cost was prohibitive, given 
that the system would be outdated as of September 1, 2006.
    While we understand that Saleen prefers for economic reasons to go 
directly to advanced air bags, NHTSA must also consider the safety 
benefits provided by ``basic'' air bags in assessing whether a further 
extension of the exemption from the ``basic'' air bag requirements is 
consistent with the Safety Act and the public interest, and in whether 
Saleen has made good faith efforts to meet these particular 
requirements.
    Given the facts before us, including the previous exemptions 
granted to Saleen, and taking account of all of the efforts Saleen has 
made, we have decided to grant a one year extension of Saleen's 
exemption from FMVSS No. 208's ``basic'' air bag requirements, and to 
deny its request as to the additional two years. We believe that 
extending this exemption further would not be in the public interest or 
consistent with the Safety Act. We believe that there is a considerable 
difference between providing a company such as Saleen some additional 
time to develop an air bag system, and granting repeated ``temporary'' 
exemptions. With the one-year extension, Saleen will have had an 
exemption for a full six years, and been producing vehicles under it 
for about four and one-half years.

[[Page 52871]]

    As to advanced air bags, and as indicated above, Saleen has hired 
an engineering project manager responsible for air bag development, has 
been working with engineers at Takata, Autoliv, and Bosch in 
researching all of the program requirements as well as developing a 
test plan and component designs for development of a system compliant 
with the advanced air bag requirement. Saleen is also working with 
Kettering University in Flint Michigan for additional research and 
testing.
    We have concluded that Saleen has made good faith efforts to meet 
the advanced air bag requirements. We note that Saleen's situation in 
needing additional time to meet the advanced air bag requirements, 
which apply to low volume manufacturers beginning September 1, 2006, is 
not unlike that of several other low volume manufacturers.
    If the petition were denied, the sale of S7 automobiles would cease 
immediately. In evaluating Saleen's current situation, the agency finds 
that to require immediate compliance with Standard No. 208 would cause 
the petitioner substantial economic hardship. While Saleen also alters 
motor vehicles, the S7 is the only model that Saleen manufactures.
    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 in jeopardy the jobs of 150 
full time employees at Saleen dedicated to the design, manufacture, and 
certification of the S7. Denial of the petition could also affect the 
payrolls of U.S.-sourced component suppliers.
    The vehicle in question will be manufactured in extremely limited 
quantities. Saleen anticipates selling no more than 25 of the vehicles 
per year in the United States. The current Manufacturer's Suggested 
Retail Price is $555,000. The vehicles are also driven on an extremely 
limited basis. Saleen stated that the vehicles generally do not accrue 
more than 2,000 miles per year. In light of these factors, the agency 
anticipates that the S7 vehicles will have a negligible impact on the 
overall safety of U.S. highways. The agency also notes that Saleen has 
indicated that the vehicle subject to this petition complies with all 
other applicable Federal motor vehicle safety standards.
    We are granting Saleen a three-year exemption from the advanced air 
bag requirements, beginning September 1, 2006. As indicated above, we 
are also granting that company an extension of the exemption from the 
``basic'' air bag requirements for the first of the three years. 
Saleen's ability to utilize the final two years of the exemption from 
the advanced air bag requirements will be dependent on whether it 
implements an air bag system that enables the S7 to at least meet FMVSS 
No. 208's ``basic'' air bag requirements.
    Given the discussion presented above, we conclude that Saleen has 
made sufficient good faith efforts to comply with FMVSS No. 208 to 
support these exemptions for the prescribed time periods, that 
requiring immediate compliance would cause substantial economic 
hardship, and that the exemptions are in the public interest and 
consistent with the Safety Act. We note that while this document 
includes some discussion of those good faith efforts and economic 
hardship, NHTSA has also considered additional information submitted by 
Saleen which has been determined to be confidential.
    We should caution that manufacturers that receive temporary 
exemptions should not assume that the agency will necessarily grant 
extensions. On this basic issue, we note that Saleen cited in its 
petition a particular sales rate that it needs to sustain in order to 
continue to fund the development of advanced air bags for 
implementation by September 1, 2009. See p. 2 of Saleen's petition. The 
petitioner should not assume that if it is unable to maintain a 
particular sales rate or for other reasons does not continue to fund 
the development of advanced air bags, that the agency will then grant 
an extension of the exemption for advanced air bags provided in this 
document.
    As to the specific paragraphs of FMVSS No. 208 that will be covered 
by the exemptions, we note that the original exemption for Saleen cited 
S4.1.5.3 of 49 CFR 571.208. On review, we believe that it would be 
clearer to cite both S4.1.5.1(a)(1) and S4.1.5.3. The former paragraph 
requires passenger cars, at each front outboard seating position, to 
meet specified frontal crash protection requirements ``by means that 
require no action by vehicle occupants.'' S4.1.5.3 then requires that 
passenger cars meet that requirement by means of inflatable restraint 
systems. Since the intent of the exemption is to exempt the S7 from 
automatic crash protection requirements, we believe that S4.1.5.1(a)(1) 
should be cited. We note that the S7 is still subject, among other 
things, to S4.1.5.1(a)(3), which requires it to meet specified 
performance requirements in a belted crash test. The relevant paragraph 
for the advanced air bag requirements is S14.2.
    We also note that prospective purchasers will be notified that the 
vehicle is exempted from the air bag requirements of Standard No. 208. 
Under Sec.  555.9(b), a manufacturer of an exempted passenger car must 
affix securely to the windshield or side window of each exempted 
vehicle a label containing a statement that the vehicle conforms to all 
applicable Federal motor vehicle safety standards in effect on the date 
of manufacture ``except for Standards Nos. [listing the standards by 
number and title for which an exemption has been granted] exempted 
pursuant to NHTSA Exemption No. ------.'' This label notifies 
prospective purchasers about the exemption and its subject. Under Sec.  
555.9(c), this information must also be included on the vehicle's 
certification label.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), Saleen S7 is 
granted NHTSA Temporary Exemption No. EX 06-7, from S4.1.5.1(a)(1) and 
S4.1.5.3. This exemption is effective September 1, 2006 to August 31, 
2007. Saleen S7 is granted NHTSA Temporary Exemption No. EX 06-8, from 
S14.2 of Sec.  571.208. This exemption is effective September 1, 2006 
to August 31, 2009.

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

    Issued on: August 31, 2006.
Nicole R. Nason,
Administrator.
 [FR Doc. E6-14829 Filed 9-6-06; 8:45 am]
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