[Federal Register Volume 73, Number 74 (Wednesday, April 16, 2008)]
[Notices]
[Pages 20744-20747]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-8101]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2008-0073]


Mosler Automotive; Grant of Application for a Temporary Exemption 
From Advanced Air Bag Requirements of FMVSS No. 208

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

ACTION: Notice of grant of petition for temporary exemption from 
certain provisions of Federal Motor Vehicle Safety Standard (FMVSS) No. 
208, Occupant Crash Protection.

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SUMMARY: This notice grants the petition of Mosler Automotive (Mosler) 
for a temporary exemption from certain air bag requirements of Federal 
Motor Vehicle Safety Standard (FMVSS) No. 208, Occupant Crash 
Protection, for the Mosler MT900 for the requested period of thirty 
months. In accordance with 49 CFR Part 555, the basis for the grant is 
that compliance would cause substantial economic hardship to a 
manufacturer that has tried in good faith to comply with the standard, 
and the exemption would have a negligible impact on motor vehicle 
safety.
    This action follows our publication in the Federal Register of a 
document announcing receipt of Mosler's application and soliciting 
public comments.

DATES: The exemption is effective immediately and remains in effect 
until May 16, 2008.

FOR FURTHER INFORMATION CONTACT: Mr. Ed Glancy or Mr. Ari Scott, Office 
of the Chief Counsel, NCC-112, National Highway Traffic Safety 
Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590. 
Telephone: (202) 366-2992; Fax: (202) 366-3820.

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'' (see 65 FR 30680). 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.
    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 before that. However, because the new requirements were 
challenging, major air bag suppliers have 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 addressing a petition for a temporary exemption from the 
advanced air bag requirements submitted by a manufacturer of a high-
performance sports car.

II. 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 a 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. 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, as the first manufacturer, they had a substantial role 
in the development and manufacturing process of that vehicle.
    Finally, while 49 U.S.C. 30113(b) states that exemptions from a 
Safety Act standard are to be granted on a ``temporary basis,'' \1\ the 
statute also expressly provides for renewal of an exemption on 
reapplication. Manufacturers are nevertheless cautioned that the 
agency's decision to grant an initial petition in no way predetermines 
that the agency will repeatedly grant renewal petitions, thereby 
imparting semi-permanent exemption from a safety standard. Exempted 
manufacturers seeking renewal must bear in mind that the agency is 
directed to consider financial hardship as but one factor, along with 
the manufacturer's on-going good faith efforts to comply with the 
regulation, the public interest, consistency with the Safety Act, 
generally, as well as other such matters provided in the statute.
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    \1\ 49 U.S.C. 30113(b)(1).
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III. Petition of Mosler and Notice of Receipt

    In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR 
Part 555, Mosler has petitioned the agency for a temporary exemption 
from certain advanced air bag requirements of

[[Page 20745]]

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 notice of receipt of this 
petition was published in the Federal Register on June 12, 2007 (72 FR 
32392).
    Mosler is a U.S. company, organized as a Florida corporation in 
1987 and owned by a single American shareholder. Mosler began 
production in 1998 of high performance sports cars based on an aluminum 
honeycomb monocoque chassis. This application concerns the MT900 (Model 
Year 2004, currently the company's only model), which is expected to 
retail for $189,900. To date, the MT900 has been in and out of 
production, with the following numbers of vehicles being produced over 
the past three years: 12 vehicles in 2004; 8 vehicles in 2005; and 13 
vehicles in 2006. Worldwide sales, as of the time of the petition, were 
10 race cars, 3 U.S. street cars, and 8 European specification cars. 
Mosler is requesting an exemption for the MT900 from all of the 
advanced air bag requirements in S14 of FMVSS No. 208 (we are treating 
this as a request for an exemption from S14.5.2, Rigid barrier unbelted 
test), 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).
    Mosler stated its intention to have its advanced air bag system 
ready approximately two and a half years from the date of the petition. 
Accordingly, the company seeks an exemption from the above-specified 
requirements of FMVSS No. 208 for a period of two and one half years 
(thirty months).

IV. Agency Analysis of Mosler's Petition

    Because no comments were received in response to the notice of 
receipt of Mosler's petition, the agency has based its decision on the 
arguments and facts put forth in the petition, and on its own 
expertise.

a. Eligibility

    In order to be eligible for an exemption based on economic 
hardship, a company must submit information on the requirements put 
forth in 49 CFR 555.6(a). Among other things, the manufacturer must 
state how failure to acquire an exemption would cause economic hardship 
and the itemized estimated cost to comply with the standard. 
Additionally, it must provide a description of efforts to comply with 
the requirement and the estimated date by which compliance will be met 
(or production of the noncomforming vehicle will cease). Finally, the 
manufacturer must state the total number of vehicles produced by or on 
behalf of the manufacturer during the 12-month period prior to the 
petition, which is not to exceed 10,000. As stated in the notice of 
receipt of petition, Mosler has presented adequate information in order 
to be eligible to be considered for an exemption.
    As discussed in the petition, Mosler is independently owned by a 
single American shareholder. The entire organization currently employs 
25 people in the U.S. No other vehicle manufacturer has an ownership 
interest in Mosler. Mosler is an independent automobile manufacturer 
which does not have any common control nor is otherwise affiliated with 
any other vehicle manufacturer.
    The company is a small volume manufacturer whose total production 
has ranged from 8 to 13 vehicles per year over the period from 2004 to 
2006. According to its current forecasts, Mosler anticipates that 
approximately 75 vehicles would be sold in the U.S. during the period 
of its requested exemption, if its request were granted.

b. Economic Hardship

    Publicly available information and also the financial documents 
submitted to NHTSA by the petitioner indicate that the company will 
suffer substantial financial losses unless Mosler obtains a temporary 
exemption from the advanced air bag requirements. According to the 
petition, the company has determined that it cannot finance the work 
necessary to develop and install advanced air bags in its vehicles 
unless U.S. sales continue. It argued that NHTSA has previously 
``confirmed the appropriateness of an exemption when the sales of 
exempted vehicles generate income to fund air bag development 
expenditures in order to comply with Standard 208 at the end of the 
exemption period. 64 FR 6736.'' Mosler stated that it ``therefore needs 
USA exempted-vehicle sales to `bridge the gap,''' until fully compliant 
vehicles can be funded, developed, tooled, and introduced for the U.S. 
market. The petitioner further stated that it ``will suffer a 
significant market loss--the US--in the event it does not receive the 
exemption.''
    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. Mosler has an extremely long product 
cycle (for the MT900, the company estimates a lifespan of 11 years), 
which has thus far prevented it from recouping its $600,000 investment 
in its current standard air bag occupant restraint system. Over the 
period 2004-2006, Mosler has had net operational losses totaling over 
$3 million, and the retained deficit of the company exceeds over $23 
million. The petitioner stated that significant engineering and funding 
will be necessary to upgrade to an advanced air bag system, and that 
the projected overall cost of approximately $2.0 to $2.5 million is 
beyond the company's current capabilities given its current financial 
condition. The company has stated that it cannot hope to attain 
profitability if it incurs additional research and development expenses 
at this time.
    Mosler stated that the estimated $2.0 to $2.5 million in costs 
associated with advanced air bag engineering and development included 
research and development, testing, tooling, and test vehicles, as well 
as internal costs. In its petition, Mosler 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.
    If the exemption is denied, Mosler projects a net loss of over $3 
million during the period from 2007-2009. However, if the petition is 
granted, the company anticipates a profit of nearly $6.4 million during 
that same period. The petitioner argued that a denial of this petition 
could preclude financing of the project for U.S.-compliant vehicles, a 
development which would have a highly adverse impact on the company.
    Upon review of the financial information submitted by Mosler, the 
agency has concluded that the company is undergoing significant 
economic hardship. Our review of documentation provided by Mosler 
indicates that Mosler has been and continues to operate at a 
substantial loss, and requires significant ongoing infusions of 
investor capital in order to stay solvent. NHTSA agrees with Mosler's 
statement that without the income generated by U.S. sales, it will not 
have the resources required to develop an air bag that is compliant 
with the advanced air bag requirements.

c. Good Faith Efforts To Comply

    Mosler began production of the latest version of the MT900 in 2004, 
at which time it was certified for U.S. road use.

[[Page 20746]]

The company has invested over $23 million on research and development 
and tooling for the MT900 program. This included $600,000 to re-
engineer the MT900 to include a standard air bag system, which it 
intended to develop into an advanced air bag system. In that time, the 
company was able to bring the vehicle into compliance with all 
applicable NHTSA regulations, except for the advanced air bag 
provisions of FMVSS No. 208.
    According to its petition, even though advanced air bags are beyond 
its current capabilities, Mosler is nonetheless planning for the 
introduction of these devices. The company stated that Siemens 
Restraint Systems GmbH will spearhead this effort, and current plans 
estimate a cost of between $2.0 and $2.5 million (excluding internal 
costs) and a minimum lead time of 24 months for the advanced air bag 
project. Mosler stated that the following engineering efforts are 
needed to upgrade the MT900's standard air bag system to an advanced 
air bag system: (1) Tooling for prototypes and production vehicles; (2) 
contractor engineering; (3) air bag system materials; (4) cost of test 
vehicles; (5) integration of air bag electronics; (6) radio frequency 
interference/electromagnetic compatibility testing; (7) significant 
design and development of interior components including seats and 
dashboard; (8) crash testing; and (9) system validation. In past 
reviews of petitions for exemption of advanced air bag systems, NHTSA 
has noted that OEM supplier quotes provided by Siemens to other small 
vehicle manufacturers, plus those manufacturers' internal development 
costs, have been in the range of $2 to $4 million. The program costs 
cited by Mosler, therefore, are consistent with previous submissions.
    In addition, Mosler emphasized 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. 
Mosler further stated that, as a small volume manufacturer, the company 
simply does not have the internal resources to do full U.S. 
homologation projects without reliance on outside suppliers of advanced 
engineering technologies. We note that NHTSA has cited this argument 
previously when granting petitions for exemption from the advanced air 
bag requirements to other small vehicle manufacturers. See Koenigsegg, 
72 FR 17608.
    In short, Mosler 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. 
Mosler stated in its petition that it expects its advanced air bag 
system to be ready by the end of the requested exemption period, and 
that an exemption would allow it to maintain continued operations until 
then.

 d. Public Interest Considerations

    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, 
Mosler 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 MT900 will comply with all other applicable FMVSSs.
    NHTSA agrees that granting the exemption will benefit U.S. 
employment, companies, and citizens, because Mosler is a U.S. company 
and employs 25 people at its Florida facility. Mosler also argued that 
denial of the exemption request would have an adverse impact on 
consumer choice. The agency also agrees 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, extreme design and high cost. 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, Mosler stated that the MT900 has an 
extremely strong chassis, which is composed of aluminum tubes and 
composite structural parts. According to Mosler, the vehicle design is 
such that occupants are effectively placed in a ``protective `cell' '' 
with the chassis structure built around them. The petitioner asserts 
that this rigid ``monocoque'' structure stays firm during impact, 
providing a hard frame and resisting intrusion into the passenger 
compartment.

V. Summary

    In conclusion, we are granting the Mosler petition to be exempted 
from portions of the advanced air bag regulation required by FMVSS No. 
208. Specifically, Mosler is exempted from S14.5.2, S15, S17, S19, S21, 
S23, and S25 of 49 CFR 571.208. The exemption does not extend to the 
provision requiring a 50th percentile male barrier impact test 
(S14.5.1(a)). In addition to certifying compliance with S14.5.1(a), 
Mosler must continue to certify to the unbelted 50th percentile barrier 
impact test in force prior to September 1, 2006 (S5.1.2(a)(1)). We note 
that the unbelted sled test in S13 is an acceptable option for that 
requirement. The agency's rationale for this decision is as follows.
    The advanced air bag requirements present a substantial challenge 
due to the high cost of development for advanced air bags and the 
extremely low production numbers of the Mosler automobiles. Because 
Mosler produces only a handful of vehicles for sale, the estimated $2.0 
to $2.5 million in development costs represents a significant sum on a 
cost-per-vehicle basis. Mosler's financial disclosures support its 
assertion that without the revenue generated by U.S. sales, Mosler will 
not be able to finance the development of a compliant advanced air bag 
system.
    Based upon the information provided by the petitioner, we 
understand that Mosler made good faith efforts to bring the MT900 into 
compliance with the applicable requirements until such time as it 
became apparent that there was no practicable way to do so. As a small 
specialty manufacturer, the company had a difficult time in gaining 
access to advanced air bag systems and components (which reflects 
restraint system suppliers' initial focus on meeting the needs of large 
volume manufacturers). Additionally, small manufacturers must amortize 
the development costs of advanced air bags into a much smaller number 
of produced vehicles, resulting in significantly higher per-vehicle 
costs. Because Mosler is an independent automobile manufacturer, there 
was no possibility of technology transfer from a larger parent company 
that also manufactures motor vehicles. Consequently, given Mosler's 
dependence on investor capital in order to sustain operations, the 
financial hardship is particularly acute.
    Furthermore, we note that Mosler made several arguments as to the 
public interest considerations in granting the exemption. First, we 
note that there will be a limited effect on safety due to this 
exemption. This is because the MT900 will continue to be equipped with 
a standard air bag system, fewer than 100 vehicles are expected to be 
produced during the period of the exemption, and

[[Page 20747]]

the MT900 is utilized as a ``second vehicle,'' due to its extreme 
design and high cost, and therefore driven a limited amount and 
generally without child occupants. Second, we believe that allowing 
production of the MT900 will help further consumer choice, as well as 
help to preserve the jobs of Mosler's 25 U.S. based employees.

VI. Issuance of Notice of Final Action

    In sum, the agency concludes that Mosler has demonstrated good 
faith effort to bring the MT900 into compliance with the advanced air 
bag requirements of FMVSS No. 208 and has also demonstrated the 
requisite financial hardship. Further, we find these exemptions to be 
in the public interest.
    In consideration of the foregoing, we conclude that compliance with 
the advanced air bag requirements of FMVSS No. 208, Occupant Crash 
Protection, would cause substantial economic hardship to a manufacturer 
that has tried in good faith to comply with the standard. We further 
conclude that granting of an exemption from these provisions would be 
in the public interest and consistent with the objectives of traffic 
safety.
    We note that, as explained below, prospective purchasers will be 
notified that the vehicle is exempted from the specified advanced 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 Standard 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.
    We note that the text of Sec.  555.9 does not expressly indicate 
how the required statement on the two labels should read in situations 
where an exemption covers part but not all of a Federal motor vehicle 
safety standard. Specifically in the case of FMVSS No. 208, we believe 
that a statement that the vehicle has been exempted from Standard No. 
208 generally, without an indication that the exemption is limited to 
the specified advanced air bag provisions, could be misleading. A 
consumer might incorrectly believe that the vehicle has been exempted 
from all of Standard No. 208's requirements. Moreover, we believe that 
the addition of a reference to such provisions by number without an 
indication of its subject matter would be of little use to consumers, 
since they would not know the subject of those specific provisions. For 
these reasons, we believe the two labels should read in relevant part, 
``except for S14.5.2, S15, S17, S19, S21, S23, and S25 (Advanced Air 
Bag Requirements) of Standard No. 208, Occupant Crash Protection, 
exempted pursuant to * * *.'' We note that the phrase ``Advanced Air 
Bag Requirements'' is an abbreviated form of the title of S14 of 
Standard No. 208.
    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), the Mosler MT900 is 
granted NHTSA Temporary Exemption No. EX 08-02, from S14.5.2, S15, S17, 
S19, S21, S23, and S25 of 49 CFR 571.208. The exemption is effective 
immediately and continues in effect for thirty months.

    Issued on: April 9, 2008.
James F. Ports, Jr.,
Deputy Administrator.
 [FR Doc. E8-8101 Filed 4-15-08; 8:45 am]
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