[Federal Register Volume 71, Number 203 (Friday, October 20, 2006)]
[Notices]
[Pages 62038-62041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-17605]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2006-26109]


Panoz Auto-Development Company; 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, Panoz 
Auto-Development Company 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

[[Page 62039]]

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 November 6, 2006.

FOR FURTHER INFORMATION CONTACT: Ms. Dorothy Nakama, 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. 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 were 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 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, Panoz Auto-Development Company (Panoz) has petitioned the 
agency for a temporary exemption from certain advanced air bag 
requirements of FMVSS No. 208 Occupant Crash Protection for the Panoz 
Esperante only. 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\ In an e-mail message of August 17, 2006 to Otto Matheke, 
Esq. of NHTSA's Chief Counsel's office, the company waived 
confidential treatment under 49 CFR part 512 for certain business 
and financial information submitted as part of its petition for 
temporary exemption.
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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,

[[Page 62040]]

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 Panoz Auto-Development Company

    Panoz states that it seeks a temporary exemption from the advanced 
air bag requirements of FMVSS No. 208 only for the Panoz Esperante, a 
two seat convertible sports car. Panoz states that ``[t]he Esperante is 
the only passenger car currently being produced by Panoz, a small 
volume manufacturer.'' Panoz states that it is an independent company 
with no affiliation with other automobile manufacturers.
    Panoz began to sell the Esperante in 2001. The Esperante is 
equipped with a driver and passenger side air bag. The driver side air 
bag is supplied by Breed and the passenger side air bag is supplied by 
Ford. Panoz states that it spent a ``significant'' amount of money in 
order to comply with the ``inflatable restraint requirements'' of FMVSS 
No. 208. Panoz was able to achieve compliance with ``extensive 
technical support'' from Visteon, who performed all the calibration 
work on the air bag restraint module necessary for compliance.
    Panoz stated that as a small volume manufacturer with limited 
financial and technical resources, Panoz must use components produced 
by large volume manufacturers in order to meet safety and emissions 
requirements. Panoz stated that it uses components developed by Ford 
for the Ford Mustang ``in order to meet the stringent regulations.'' 
Panoz's center tub and chassis design is based on the previous 
generation Ford Mustang which Panoz referred to as the ``SN95 
platform.'' The front chassis structure is engineered to closely 
simulate the Ford Mustang crash pulse, so that the same air bag 
restraint module could be used in the Esperante, with some calibration 
changes, as was used in the Mustang. The interior space in the 
Esperante was designed to be similar to the Mustang so that the 
Mustang's relationship of the air bags to the occupants was simulated 
in the Esperante.
    Panoz cited the following issues as contributing to its inability 
to meet the advanced air bag requirements of FMVSS No. 208 by September 
1, 2006:
    1. Actual sales of the Esperante have been below projected sales;
    2. In Model Year 2005, a complete change was made to the Mustang 
platform, resulting in a new S197 Ford platform;
    3. A delay in Panoz's receiving the necessary information from Ford 
regarding the new chassis delayed Panoz's design and development of an 
Esperante that can meet the advanced air bag requirements;
    4. Visteon declared bankruptcy and eliminated their air bag system 
division; and
    5. Advanced air bag systems components and technology are not 
readily available to small volume manufacturers. Most vendors continue 
to concentrate on large volume manufacturers.
    How these issues have affected Panoz's inability to manufacture the 
Esperante to meet the advanced air bag requirements are discussed in 
the following sections on Panoz's statements of economic hardship and 
good faith efforts to comply.
    Panoz states that while its petition is under consideration, it 
will continue the design and development of the advanced air bag 
system. Panoz has assigned engineering personnel and test vehicles to 
this project and Panoz will continue to pursue full compliance with the 
requirements of FMVSS No. 208.
    Panoz estimates that full compliance with FMVSS No. 208 
requirements will be achieved before July 2009.

V. Panoz's Statement of Economic Hardship

    Panoz has estimated that the addition of an advanced air bag system 
adds approximately $6,129 to the cost of each vehicle. The impact of 
the cost increase could reduce vehicle sales by approximately 8 
percent. Panoz stated that as a result of development efforts necessary 
to comply with the ``airbag mandate'' \4\ and with Environmental 
Protection Agency and California Air Resources Board requirements, the 
manufacturer's suggested retail price (MSRP) of the Esperante was 
increased to $121,326. As a result of the price increase and 
``prevailing market conditions,'' Panoz stated that:
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    \4\ Panoz did not specify whether it meant the advanced air bag 
requirements or other FMVSS No. 208 air bag requirements.

actual sales were 35 units below projections in 2001, 30 units below 
projections in 2002, 72 units below projections in 2003, 77 units 
below projections in 2004, 73 units below projections in 2005, and 
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43 units below projections in 2006.\5\

    \5\ Panoz did not provide actual sales figures or production 
figures for the Esperante for any of these years.

    Panoz also stated: ``The total production of Panoz Esperante 
vehicles during the past 12 months was 12 units. The 2006 calendar-year 
production to date is 10 vehicles.''
    Panoz stated that the reduced sales revenue forced it to slow the 
advanced air bag system and other programs and decrease staff by 
approximately 30 percent.
    Panoz cited the following development work and modifications 
related to the installation of an advanced air bag system in the 
Esperante. Panoz estimated the total cost to adapt an advanced driver 
and passenger-side air bag system within one or two years to be 
$1,928,000:
    1. Develop a new chassis that would generate the same crash pulse 
as the S197 Mustang ($380,000);
    2. Chassis tooling ($300,000);
    3. Design a new firewall and surrounding structure in order to 
install the passenger side air bag from the Mustang ($187,000);
    4. Interior tooling ($150,000);
    5. Installation of the Mustang steering column and driver side air 
bag ($85,000);
    6. Installation of a new passenger side seat with built-in sensors 
($49,000);
    7. Modifications to the vehicle wiring harness ($65,000);
    8. Low (8 mph), medium (14 mph) and high (30 and 35 mph) speed 
barrier crash testing, including the cost of test vehicles and 
engineering support (estimated at $235,000);
    9. Undercarriage snag, pole snag, rough-road testing, and 
engineering support, including the cost of test vehicles (estimated at 
$98,000);
    10. Barrier crash tests with 3 and 6 year old dummies, including 
the cost of test vehicles ($228,000);
    11. Testing for out-of-position occupant sensing ($46,000);
    12. ``Compliance-level'' frontal barrier crash tests at 30 mph, 
including the cost of vehicles (estimated at $68,000); and
    13. Continued evaluation of production vehicles under varying 
ambient and road conditions (estimated at $37,000).
    Panoz stated that this $1,928,000 expenditure represents a 
``significant sum.'' Panoz stated it must continue the sale of the 
existing Esperante in order to generate the revenue necessary to fund 
this project. The three year extension will provide Panoz the time 
necessary to properly develop the advanced air bag system.
    If the exemption is not granted by NHTSA, Panoz stated that it will 
lose:

approximately $4,226,120.00 in sales revenues in 2006 based on the 
projected annual sales of 53 units, $6,339,180.00 in 2007 based on 
the projected sales of 60 units, $10,565,300.00 in 2008 based on the

[[Page 62041]]

projected sale of 100 units, and $15,847,950.00 in 2009 based on the 
projected sale of 150 units.

    Panoz further stated that denial of the petition would cause 
substantial economic hardship and would keep it from meeting the 
advanced air bag requirements of FMVSS No. 208, removing the Esperante 
from the U.S. market and jeopardizing the existence of the company. 
Panoz stated that a three-year exemption would spread the necessary 
expenditures to approximately $1,928,000 divided by thirty-six months 
or $53,556 per month, which would be sustained through the sales of 
Esperante vehicles.

VI. Panoz's Statement of Good Faith Efforts To Comply

    Panoz states that the delay in the implementation of the advanced 
air bag system has mostly been due to ``circumstances beyond the 
control of Panoz.'' Panoz states its intent to ``provide the safest 
vehicles possible to the public.'' The three year exemption from air 
bag requirements is necessary to develop and test the ``most up-to-date 
airbag technology available.'' Panoz states that the Esperante will 
``remain fully compliant with all FMVSS standards during the extended 
exemption periods with the sole exception of the advanced air bag 
requirements of standard 208.'' Panoz cited the following changes that 
must be made to the Esperante in order to meet the advanced air bag 
requirements:
    1. Modify the chassis in order to simulate the S197 Mustang crash 
pulse;
    2. Modify the interior in order to simulate the interior space of 
the S197 Mustang and the relationship between the occupants and air bag 
system;
    3. ``Package'' \6\ the new Mustang seats which are equipped with 
sensors;
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    \6\ Panoz did not explain what it means by the term ``package.''
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    4. ``Package'' the air bag system sensors, restraint control module 
and wiring harness;
    5. Modify the dashboard and support structure to install the new 
passenger side air bag;
    6. Install new driver side air bag;
    7. Perform crash tests to determine compliance with the Federal 
motor vehicle safety standards; and
    8. Validate the advanced air bag system.
    Panoz cited the following as a factor in ``significantly'' delaying 
its ability to develop an Esperante model that meets advanced air bag 
requirements. Ford introduced the new Mustang in Model Year 2005. Panoz 
was scheduled to receive a preproduction Mustang for development 
purposes in 2004. However, Panoz did not receive an S197 Mustang until 
March 2005, a delay of approximately a year.
    Panoz states that between October 2003 and July 2006, it spent 
6,292 man-hours and $630,000 to develop an advanced air bag system for 
the Esperante. A large portion of these resources went into designing a 
new ``compliant'' chassis, with assistance from Multimatic Corporation. 
The new chassis project began before Panoz received a new Mustang from 
Ford. Development of this chassis is ongoing.
    Panoz states that in addition to expenditures relating to the 
installation of an advanced air bag system, ``during this period'' 
Panoz spent approximately $1,910,000 towards compliance with other 
Federal motor vehicle safety standards and with Environmental 
Protection Agency and California Air Resources Board emissions 
standards.
    Panoz noted that Visteon developed and calibrated the restraint 
control module installed in the Esperante. Panoz intended to enter into 
a contract with Visteon to develop the advanced air bag system and 
recalibrate the air bag restraint module for use with the advanced air 
bag system. Panoz was unable to use this option when Visteon eliminated 
its air bag development group.
    Panoz stated that it began the process of complying with advanced 
air bag requirements in October 2003 by entering into a contract with 
Multimatic Corporation to develop a chassis that simulates the crash 
pulse and duplicates the interior packaging of the ``S197 Mustang.'' 
Panoz stated that a large portion of the work has been accomplished, 
but because of financial constraints and inability to obtain the 
necessary S197 crash pulse information, the work has not been 
completed. Panoz stated that the new chassis design dictates that it 
must develop a proprietary fuel tank that is able to work properly with 
the Ford On-Board-Diagnostic system, since the new Mustang fuel tank 
will not fit in the Esperante. The new chassis also required redesign 
of the suspension system.

VII. Panoz's Statement of 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, 
Panoz states that the Esperante is a ``unique'' car produced in the 
U.S. using ``100 percent U.S. components.'' The powertrain, climate 
control system, wiper/washer system, and other major components are 
purchased from Ford Motor Company. Other parts are purchased from 
approximately 469 different companies. Panoz currently provides direct 
employment to ``35 full time employees and one part time employee.'' 
The Panoz Esperante is currently being sold through 20 dealers in the 
U.S. Panoz states that in addition to providing direct employment to 36 
employees, ``at least 500 employees from over 469 different companies 
remain involved in the Panoz project.''
    Panoz states that the Esperante remains as the only vehicle 
developed and sold in the U.S. which uses extensive aluminum 
technology. Panoz states that the Esperante is the only vehicle to 
currently use molded aluminum body panels for the entire car. 
Application of aluminum technology continues to gain strength in the 
U.S. automotive industry. Several new manufacturers have introduced new 
models equipped with a large number of aluminum components. Panoz 
asserts that ``[w]ith the probable mandate for greater fuel efficiency, 
the use of aluminum technology should continue to escalate.'' Panoz 
states that the Esperante is a ``showcase'' for aluminum technology. 
Several companies have used some of the Esperante technology in their 
products. Panoz states that it is an innovator in vehicle technology. 
Panoz further states that it continues to provide the public with ``a 
classic alternative'' to current production vehicles.

VIII. Request for Comments

    We are providing a 15-day comment period, since the advanced air 
bag requirements became effective for small volume manufacturers on 
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: October 17, 2006.
Stephen R. Kratzke,
Associate Administrator for Rulemaking.
 [FR Doc. E6-17605 Filed 10-19-06; 8:45 am]
BILLING CODE 4910-59-P