[Federal Register Volume 72, Number 22 (Friday, February 2, 2007)]
[Notices]
[Pages 5099-5103]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-1735]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2006-25592]


Morgan Motor Company Limited; Denial of Application for a 
Temporary Exemption From Air Bag Provisions of Federal Motor Vehicle 
Safety Standard No. 208

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

ACTION: Denial of application for a temporary exemption from air bag 
provisions of Federal Motor Vehicle Safety Standard No. 208, Occupant 
Crash Protection.

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SUMMARY: This notice denies the petition of Morgan Motor Company, 
Limited (Morgan) for a temporary exemption from the air bag 
requirements of Federal Motor Vehicle Safety Standard (FMVSS) No. 208,

[[Page 5100]]

Occupant Crash Protection, for the Morgan ``traditional roadster'' from 
September 2006 through September 2009. The basis of the application is 
that compliance would cause substantial economic hardship to a 
manufacturer that states it has tried in good faith to comply with the 
standard. NHTSA notes that Morgan has known since 1997 that it could 
not procure more air bags, but provided no evidence of attempts to 
secure an alternate source of air bags.
    In accordance with the requirements of 49 U.S.C. 30113(b)(2), we 
published a Federal Register document on August 15, 2006 announcing 
receipt of Morgan's application.

FOR FURTHER INFORMATION CONTACT: Ms. Dorothy Nakama in the Office of 
Chief Counsel, NCC-112, (Phone: 202-366-2992; Fax 202-366-3820).

SUPPLEMENTARY INFORMATION:

I. Background

    Founded in 1909, Morgan is a small, privately-owned vehicle 
manufacturer producing approximately 600 specialty sports cars per 
year.\1\ Morgan manufactures several models, but at present, only sells 
the Aero 8 in the U.S. Morgan intended to produce a vehicle line 
specific to the U.S. market, with Ford supplying the engine and 
transmission. However, for technical reasons, the project did not come 
to fruition, and Morgan temporarily stopped selling vehicles in the 
U.S. in 2004. In May 2005, Morgan obtained a temporary exemption from 
this agency's bumper standard and began selling the Aero 8 in the U.S.
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    \1\ A manufacturer is eligible to apply for a 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 (15 U.S.C. 1410(d)(1)).
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    On July 12, 2006 (71 FR 39386), NHTSA published a notice of receipt 
of five applications for temporary exemptions from the advanced air bag 
requirements \2\ of Federal Motor Vehicle Safety Standard (FMVSS) No. 
208, Occupant Crash Protection. Among these petitions was an October 4, 
2005 one from Morgan, for the Aero 8, which is discussed at pages 
39390-39391. Morgan's petition is included in the docket for that 
notice, i.e., Docket NHTSA-2006-25324.
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    \2\ In 2000, NHTSA upgraded the requirements for air bags in 
passenger cars and light trucks, requiring what are commonly known 
as ``advanced air bags.'' 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. See 65 FR 30680 (May 12, 2000) 
(Docket No. NHTSA-2000-7013).
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    That notice of receipt did not address a second request by Morgan. 
In correspondence dated February 6, 2006, Morgan petitioned for an 
exemption for a different vehicle, its ``traditional roadster,'' from 
all air bag requirements in FMVSS No. 208 (i.e., the standard's 
requirement that vehicles be equipped with air bags as well as the 
advanced air bag requirements) from September 2006 through September 
2009. That company titled this correspondence ``Supplement to Pending 
Morgan Part 555 Temporary Exemption.'' Morgan explained that it did not 
file a petition for the traditional roadster at the same time as it 
petitioned for the Aero 8 because in October 2005 (when the Aero 8 
petition was filed), Morgan planned to sell only the Aero 8 in the U.S. 
from September 2006-September 2009. The company did not plan to sell 
the traditional roadster during that period because the Rover engine 
used in the U.S. version of the traditional roadster for 35 years was 
no longer able to meet more stringent U.S. emissions standards.
    In late 2005, Morgan found a U.S.-certified Ford V6 engine for the 
U.S. traditional roadster and built a limited production run of 80 
vehicles. The traditional roadster ``immediately sold out.'' In order 
to maintain U.S. sales and to produce revenue, Morgan then decided to 
continue to sell the U.S. traditional roadster. However, while the 
traditional roadster had had a mechanical Breed standard air bag system 
(i.e., non-advanced air bag system) since 1996, those air bags are now 
out of production and are no longer available. Morgan indicated that 
the final limited production run of 80 vehicles using the Ford V6 
engine used the last of these air bag systems. In addition, Morgan 
stated that the Aero 8 standard air bag system cannot be fitted to the 
traditional roadster because the interiors and chassis are completely 
different.
    We note that in its February 2006 correspondence, Morgan asked that 
its exemption requests for the traditional roadster and Aero 8 be 
considered independently. On September 7, 2006 (71 FR 52851), NHTSA 
issued its determinations of five manufacturers petitioning for 
temporary exemptions from the advanced air bag requirements of Standard 
No. 208. Morgan's Aero 8 petition was addressed at pages 52862-52865.
    As noted above, NHTSA upgraded the requirements for air bags in 
2000 to require advanced air bags in passenger cars and light trucks. 
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 (i.e., original vehicle manufacturers 
producing or assembling fewer than 5,000 vehicles annually for sale in 
the United States) 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 complex 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 indicated above, for its traditional roadster, Morgan is 
requesting an exemption not only from the advanced air bag 
requirements, but also from the standard's requirements for air bags 
altogether. As always, we are concerned about the potential safety 
implications of any temporary exemptions granted by this agency.

II. Morgan's Statement of Economic Hardship

    In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR 
Part 555, Morgan petitioned NHTSA for a temporary exemption from 
standard and advanced air bag requirements of FMVSS No. 208. The basis 
for its application is that compliance would cause substantial economic 
hardship to a manufacturer that has tried in good faith to comply with 
the standard. The agency closely examines and considers the information 
provided by

[[Page 5101]]

manufacturers in support of these factors and in addition, pursuant to 
49 U.S.C. 30113(b)(3)(A), determines whether an exemption is in the 
public interest and consistent with 49 U.S.C. Chapter 301.
    Morgan stated that without the sales of the U.S. traditional 
roadster from September 2006-September 2009, it would lose an 
additional $315,000 on top of the losses estimated in the October 2005 
petition for the Aero.\3\ It further stated that if it were able to 
sell the traditional roadster in the U.S. during that period, ``the 
resulting revenues would also be critical to funding the development of 
the new advanced air bag for use in all Morgan vehicles destined for 
the U.S. after September 2009.'' Morgan's previous financial submission 
indicates that the company's losses over the last 5 years have totaled 
more than $3,600,000. In 2004, Morgan made a small profit for the first 
time in three years. Morgan predicted a net loss for fiscal year 2005.
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    \3\ Estimated to be between $3,196,179 and $5,066,938. When 
costs for interior redesign, crash cars, and tooling are included, 
the estimate rises to between $5,648,679 and $7,519,438. (See 71 FR 
at 39391.)
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    Morgan stated that even adding the projected sales of the 
traditional roadster, the total U.S. ``exempted-car sales'' forecast 
for September 2006-September 2009 remain about the same: for 2006, 50 
vehicles; for 2007, 250 vehicles; for 2008, 250 vehicles; and for 2009, 
250 vehicles. Morgan also provided information on the sales of the 80 
model year 2005 traditional roadsters (with the Ford V6 engine).
    We note that in commenting on the agency's July 2006 notice 
concerning its request for a temporary exemption for the Aero 8, Morgan 
indicated that the temporary exemptions it was seeking would involve 
400 Aero 8s over three years, and 400 traditional roadsters over three 
years.

III. Morgan's Statement of Good Faith Efforts to Comply

    In its October 2005 submission, Morgan stated that it has been 
working with the air bag supplier Siemens to develop an advanced air 
bag system for the Aero 8. However, a lack of funds and technical 
problems precluded the implementation of an advanced air bag system for 
the Aero 8. It said that the minimum time needed to develop an advanced 
air bag system (provided that there is a source of revenue) is 2 years. 
Specific technical challenges include the following matters. Morgan 
does not have access to the necessary sensor technology to pursue the 
``full suppression'' passenger air bag option. Due to the design of the 
Aero 8 platform dashboard, an entirely new interior solution and design 
must be developed. Chassis modifications are anticipated due to the 
originally stiff chassis design.
    In its February 2006 petition, Morgan stated that it cannot install 
air bags in the U.S. traditional roadsters expected to be built between 
September 2006 and September 2009, even though the Aero 8 vehicles 
built during that period will have standard air bags. Morgan provided 
two reasons why the traditional roadster ``cannot have air bags'' even 
though the Aero 8 can. First, since 1996, the traditional roadsters 
have had a mechanical Breed standard air bag system. In 1997, Breed 
stopped production of the air bags fitted to the traditional roadsters. 
Thus, these bags are no longer available. Morgan states that it cannot 
obtain any more components. The final run of the 80 traditional 
roadsters with the Ford V6 engine used the last of the air bag systems.
    Second, the Aero 8 standard air bag system cannot be fitted into 
the traditional roadster because the interiors and chassis are 
completely different. Morgan asserts that it would not be possible to 
integrate the Aero 8 air bag components into the traditional roadster's 
design because of both physical and operational differences. The Aero 8 
air bag steering wheel will not fit in the traditional roadster's 
design, and the Aero 8 passenger air bag will not fit into the 
traditional roadster's instrument panel. In terms of air bag operation, 
to use the Aero 8 system in the traditional roadster, there would have 
to be a new deployment control/trigger system developed due to the 
significantly different crash pulses between the Aero 8 aluminum tub 
and the traditional roadster steel chassis.
    Morgan stated that the traditional roadster will have an advanced 
air bag system at the same time that the Aero 8 will. At present, the 
traditional roadster uses the same design as it has had since 1936, a 
steel chassis with a wooden frame for the body panels. As part of the 
development of the advanced air bag system, Morgan plans to switch the 
traditional roadster onto the aluminum tub chassis used by the Aero 8. 
In this way, the advanced air bag program (through Siemens) that Morgan 
outlined in its Part 555 exemption petition for the Aero 8 will also be 
applicable to the traditional roadster. Morgan believes that when its 
advanced air bag system is ready in 2009, the air bag system will 
simultaneously be installed in both the Aero and traditional roadster 
models. Morgan asserts that it ``obviously cannot expend the resources 
to develop an air bag system--advanced or standard'' for the 
traditional roadster that is separate from the air bag system being 
developed for the Aero 8. Morgan cites this inability as the reason why 
there cannot be an interim standard air bag system for the traditional 
roadster during the period September 2006-September 2009.

IV. Morgan's Statement of Public Interest

    In its original petition, which concerned the Aero 8, Morgan made 
several arguments supporting its view that the requested exemption is 
consistent with the public interest. According to Morgan, if the 
exemption were denied and Morgan stopped U.S. sales, Morgan's U.S. 
dealers would unavoidably have numerous lay-offs, resulting in some 
loss of jobs in the U.S. Denial of an exemption would reduce consumer 
choice in the specialty sports car market sector in which Morgan cars 
compete. That company argued further that the Morgan vehicles would not 
be used extensively by owners, and would be unlikely to carry small 
children. Finally, according to Morgan, granting an exemption would 
assure the continued availability of proper parts and service support 
for existing Morgan owners. Without an exemption, Morgan would be 
forced out of the U.S. market, making it difficult for Morgan dealers 
to support existing customers.
    We note that in its February 2006 correspondence requesting an 
exemption for the traditional roadster, Morgan generally did not 
discuss whether or how these arguments would apply to its request 
concerning the traditional roadster. We invited Morgan to address this 
issue. As indicated above, Morgan did argue that revenues from selling 
the traditional roadster would be critical to funding the development 
of the new advanced air bag for use in all Morgan vehicles destined for 
the U.S. after September 2009.

V. Notice of Receipt of Petition and Public Comments

    On August 15, 2006 (71 FR 46974) (Docket No. NHTSA-2006-25592), 
NHTSA published a Notice of Receipt of Application for a Temporary 
Exemption from Air Bag Provisions of Federal Motor Vehicle Safety 
Standard No. 208, and asked for public comment. In response, NHTSA 
received two sets of comments, both from Morgan and both undated.
    In the first set of comments, Morgan compared its petition with the 
grant of a Part 555 advanced air bag exemption to Ferrari (see 71 FR 
29389, May 22,

[[Page 5102]]

2006). Morgan stated that, like Ferrari, its product cycles must last 
longer than those typical in the industry. Morgan also stated that, as 
did Ferrari, it made a good faith effort, but could not find a 
practicable way to meet the air bag requirements. Morgan stated that 
its air bag supplier went out of business, which resulted in a lack of 
components. Morgan concluded that it needed the exemption in order to 
implement a new advanced air bag system on a new chassis. Morgan also 
commented on the safety implications of granting the petition and 
provided additional points on why granting Morgan's petitions would be 
``in the public interest.''
    Finally, Morgan updated its 2004 and 2005 financial statements as 
follows. Morgan's original submission indicated that in 2004, Morgan 
made a ``profit of 372,504 pounds.'' It was subsequently determined 
that Morgan showed a loss of 11,207 pounds (approximately $21,000). 
Morgan explained that the difference resulted from ``certain vehicle 
sales that in fact did not materialize.'' Morgan further stated that 
although it earlier stated that ``the results predicted * * * for 2005 
were a small loss of [pound]3,248'' (approximately $6,000), the final 
accounts showed a larger loss of [pound]386,140 (approximately 
$723,000). Morgan explained that the difference arises out of the 
amortization of additional R & D costs.
    In the second set of comments, Morgan compared its petition to that 
of Saleen, which recently received a one-year extension of a complete 
air bag exemption, which was a partial grant of Saleen's petition for 
extension for three more years. Morgan stated that its petition 
differed from that of Saleen, which already had five years under a 
complete air bag exemption when it asked for an initial exemption. 
Morgan stressed that it was petitioning for an initial exemption, not 
an extension, and for a period of time that is ``half the total number 
of exemption years that Saleen has now received.'' Morgan also once 
again emphasized that it made good faith efforts to meet the air bag 
requirements, citing again that it used an air bag system that was in 
production for eight years, which can no longer be used because the 
supplier went out of business. Morgan also stated that the fact that it 
can no longer source components for its already existing air bag system 
further distinguishes Morgan from Saleen.

VI. Agency Decision

    NHTSA denies Morgan's petition for the ``traditional roadster.'' 
Morgan has informed NHTSA that the traditional roadster will have the 
same advanced air bag system as the Aero 8 in 2009, when the 
traditional roadster's chassis will be modified to accommodate the 
advanced air bag system. In the following discussion, NHTSA focuses on 
Morgan's attempts to secure a standard air bag for its traditional 
roadsters for September 2006-September 2009. In the background 
information regarding Morgan's attempts to secure both the standard and 
advanced air bags, Morgan states that its last source of standard air 
bags was in 1997 from Breed. Since Breed no longer manufactures the 
standard air bags, they are no longer available. In late 2005, after it 
found a U.S.-certified Ford V6 engine for the U.S. traditional 
roadster, Morgan built a limited production run of 80 traditional 
roadsters, installing in them the last of the Breed standard air bags. 
Morgan informs us that the standard air bag system on its Aero 8 cannot 
be fitted to the traditional roadster because the interiors and chassis 
are completely different.
    In its petition, Morgan simply states that it ``obviously cannot 
expend the resources to develop an air bag system--advanced or 
standard'' for the traditional roadster that is separate from the air 
bag system being developed for the Aero 8. It appears that Morgan had 
no plans to sell the traditional roadster in the U.S. after 1997. It 
appears that it was only in late 2005, when Morgan equipped U.S.-
certified engine vehicles with the last of the standard air bags and 
had better than expected sales that it decided to attempt to 
reintroduce the traditional roadster into the U.S. market. However, the 
agency has no information indicating that Morgan attempted to find a 
new source for the standard air bag. Although Morgan may not have been 
able to develop its own standard air bag system for the traditional 
roadster, it did not describe any contacts it made with potential 
suppliers of standard air bags, or provide quotations (even on a 
confidential basis) from possible sources that would be qualified to 
develop standard air bags for the traditional roadster. Without this 
information, NHTSA is unable to determine the extent of the economic 
hardship it would cause Morgan to procure standard air bags in the Aero 
8.
    In its comments, Morgan compared its petition with those of Ferrari 
and Saleen (which received a one year temporary exemption out of the 
three years for which it petitioned). The major difference between 
Morgan's petition and those of Ferrari and Saleen is that Morgan's 
petition lacks the detail provided by Ferrari and Saleen describing how 
each company attempted to secure alternate sources of air bags, and how 
much it would cost each company, if a source were available.
    In its petition, Ferrari provided the following:

    1. Chronological analysis of Ferrari's efforts to comply, 
showing the relationship to the rulemaking history of the advanced 
air bag requirements.
    2. Itemized costs of each component that would have to be 
modified in order to achieve compliance.
    3. Discussion of alternative means of compliance and reasons for 
rejecting these alternatives.
    4. List of air bag suppliers that were approached in hopes of 
procuring necessary components.
    * * *
    6. Corporate balance sheets for the past 3 years, and projected 
balance sheets if the petition is denied.\4\

    \4\ See Ferrari S.p.A. and Ferrari North America, Inc. Grant of 
Application for a Temporary Exemption from S14.2. of Federal Motor 
Vehicle Safety Standard No. 208 (71 FR 29389, May 22, 2006) (Docket 
No. NHTSA-2005-23093), at page 29390.
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    In its petition dated January 24, 2006, Saleen cited by name the 
air bag developers and suppliers it approached about assisting Saleen 
in developing an advanced air bag system (see page 3 of the petition). 
Saleen also provided pursuant to 49 CFR Part 555.6(a)(1), ``Engineering 
and financial information demonstrating in detail how compliance or 
failure to obtain an exemption would cause substantial economic 
hardship,'' and included information such as the vehicle components 
that would have to be modified to accommodate an air bag system (pages 
3-4), and the itemized costs to modify each component (page 4).
    Because Morgan did not provide a similar level of detail about the 
efforts it undertook to find alternative sources of a standard air bag 
and costs that would be entailed in modifying the traditional roadster 
to accommodate a standard air bag, NHTSA was unable to conclude that 
meeting the air bag requirements for Morgan would ``cause substantial 
economic hardship to a manufacturer that has tried to comply with the 
standard in good faith.''
    Finally, NHTSA notes that in the August 15, 2006 notice of receipt 
of Morgan's application for a temporary exemption for the traditional 
roadster, we invited Morgan to address the issue of how granting 
Morgan's petition for exemption for the traditional roadster would be 
in the public interest. We noted that all the public interest arguments 
raised in the August 2006 notice were taken from Morgan's petition for 
the Aero 8. Morgan did not respond to NHTSA's request on this

[[Page 5103]]

issue, and did not provide an independent basis for the agency's 
determining how granting Morgan's petition for the traditional roadster 
would be in the public interest.

    Authority: 49 U.S.C. 30113; delegations of authority at 49 CFR 
1.50. and 501.8.

    Issued on: January 30, 2007.
Nicole R. Nason,
Administrator.
[FR Doc. E7-1735 Filed 2-1-07; 8:45 am]
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