[Federal Register Volume 73, Number 228 (Tuesday, November 25, 2008)]
[Notices]
[Pages 71725-71728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-27963]



[[Page 71725]]

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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2008-0181, Notice 1 Modena Design SpA]


Receipt 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 receipt 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: In accordance with the procedures in 49 CFR Part 555, Modena 
Design SpA has petitioned the agency for a temporary exemption from 
certain advanced air bag requirements of FMVSS No. 208. The basis for 
the application is that compliance would cause substantial economic 
hardship to a manufacturer that has tried in good faith to comply with 
the standard.\1\
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    \1\ To view the application, go to http://www.regulations.gov 
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 statutory provisions. NHTSA has not made 
any judgment on the merits of the application.

DATES: You should submit your comments not later than December 26, 
2008.

FOR FURTHER INFORMATION CONTACT: Ari Scott, Office of the Chief 
Counsel, NCC-112, National Highway Traffic Safety Administration, 1200 
New Jersey Avenue, SE., West Building 4th Floor, Room W41-326, 
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://www.regulations.gov. Follow the 
instructions for submitting comments on the electronic docket site by 
clicking on ``Help and Information'' or ``Help/Info.''
     Fax: 1-202-493-2251.
     Mail: U.S. Department of Transportation, Docket 
Operations, M-30, Room W12-140, 1200 New Jersey Avenue, SE., 
Washington, DC 20590.
     Hand Delivery: 1200 New Jersey Avenue, SE., West Building 
Ground Floor, Room W12-140, Washington, DC, between 9 am and 5 pm, 
Monday through Friday, except Federal Holidays.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Instructions: All submissions must include the agency name and 
docket number. Note that all comments received will be posted without 
change to http://www.regulations.gov, including any personal 
information provided. Please see the Privacy Act discussion below. We 
will consider all comments received before the close of business on the 
comment closing date indicated above. To the extent possible, we will 
also consider comments filed after the closing date.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov at any time or to 
1200 New Jersey Avenue, SE., West Building Ground Floor, Room W12-140, 
Washington, DC 20590, between 9 am and 5 pm, Monday through Friday, 
except Federal Holidays. Telephone: (202) 366-9826.
    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://www.dot.gov/privacy.html.
    Confidential Business Information: If you wish to submit any 
information under a claim of confidentiality, you should submit three 
copies of your complete submission, including the information you claim 
to be confidential business information, to the Chief Counsel, NHTSA, 
at the address given under FOR FURTHER INFORMATION CONTACT. In 
addition, you should submit two copies, from which you have deleted the 
claimed confidential business information, to Docket Management at the 
address given above. When you send a comment containing information 
claimed to be confidential business information, you should include a 
cover letter setting forth the information specified in our 
confidential business information regulation (49 CFR Part 512).

SUPPLEMENTARY INFORMATION:

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 before that. However, because the new requirements were 
challenging, major air bag suppliers concentrated their efforts on 
working with large volume manufacturers, and thus, some small volume 
manufacturers have 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 Modena Design SpA

[[Page 71726]]

(``Modena Design''), a company operated by Horacio Pagani, regarding a 
high-performance sports car, the C9 ZONDA (the ``C9'').

II. Overview of Petition for Economic Hardship Exemption

    In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR 
Part 555, Modena Design has petitioned the agency for a temporary 
exemption from certain advanced air bag requirements of FMVSS No. 208. 
The basis for the application is that compliance would cause 
substantial economic hardship to a manufacturer that has tried in good 
faith to comply with the standard. A copy of the petition\3\ is 
available for review and has been placed in the docket for this notice. 
Specifically, Modena Design has requested an exemption for a period of 
three years from the date of granting, which the petitioner has 
estimated to be around December 31, 2011. Modena Design has requested 
an exemption from the advanced air bag requirements of FMVSS 208, set 
forth in S14. While Modena Design stated that the C9 will be equipped 
with standard air bags, and that the company will use its best efforts 
to comply with the S14 requirements for belted 50th percentile and 5th 
percentile dummies, it was uncertain as to whether that would be 
possible, and therefore requested an exemption from the entirety of 
S14. We note that a number of petitions for exemptions from advanced 
air bags include not only requests for exemption from S14.5.2, but 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). We 
also note that several small vehicle manufacturers have provided 
standard air bags that comply with the provisions of S14 in force 
before the advanced air bag rules came into effect.
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    \3\ The company requested confidential treatment under 49 CFR 
Part 512 for certain business and financial information submitted as 
part of its petition for temporary exemption. Accordingly, the 
information placed in the docket does not contain information 
subject to a claim of confidentiality.
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III. Requirements for Economic Hardship Petitions

a. General Requirements for Petitions for Exemptions

    In order to file a petition for exemption based on substantial 
economic hardship, a manufacturer must satisfy relevant requirements 
specified in 49 CFR Part 555, Temporary Exemption from Motor Vehicle 
Safety and Bumper Standards. All petitions for exemption must conform 
to the requirements in 49 CFR 555.5, ``Application for exemption.'' A 
petition must, among other requirements, state the number and title, 
and the text or substance of the standard for which the temporary 
exemption is sought, and the length of time of the requested exemption. 
The petitioner must set forth the basis of the petition (the 
requirements listed under Part 555.6(a) for petitions based on economic 
hardship). The petition must specify any information withheld from 
public disclosure under Part 512. Finally, the petitioner must set 
forth the reasons why the granting of the exemption would be in the 
public interest, and, as applicable, consistent with the objectives of 
49 U.S.C. 301 or 325.

b. Requirements Specific for Exemptions Based on Substantial Economic 
Hardship

i. Statement on Eligibility
    The substantial economic hardship exemption is limited to those 
manufacturers whose motor vehicle production in its most recent year of 
production did not exceed 10,000 vehicles, as determined by the NHTSA 
Administrator (See 49 CFR 555.6(a)(2)(v)). 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, depending on the circumstances. Thus, NHTSA 
has stated that a manufacturer may be deemed to be a sponsor, and thus 
a secondary manufacturer of a vehicle assembled by a primary 
manufacturer, if the secondary manufacturer had a substantial role in 
the development and manufacturing process of that vehicle. In the event 
of such a finding, if either manufacturer has produced over 10,000 
vehicles in the previous 12 months, neither manufacturer would be 
eligible to receive an economic hardship exemption for the vehicle in 
question.
ii. Basis for Application
    A petition for exemption based on economic hardship must meet the 
requirements set forth in Part 555.6, ``Basis for Application,'' 
specifically those in 49 CFR 555.6(a). One of these requirements, 
specified at 49 CFR 555.6(a)(1), is for the manufacturer to provide 
engineering and financial information demonstrating how compliance 
would cause substantial hardship. More specifically, it is required 
that a manufacturer: (1) State a list or description of each item that 
would need to be modified to achieve compliance; (2) state the itemized 
estimated cost of the modifications if compliance were to be achieved 
under three different time scenarios; and (3) state the estimated cost 
increase of compliance on a per-vehicle basis. Additionally, the 
manufacturer must provide corporate balance sheets and income 
statements for the fiscal year immediately preceding the application, 
as well as projected statements for the year following a hypothetical 
denial of the application for exemption. Finally, a manufacturer must 
provide a discussion of any other hardships that may result from the 
denial of an application.
    The petition must also contain the information specified in 49 CFR 
555.6(a)(2), which relate to a manufacturer's efforts to achieve 
compliance. This section requires that a petition must contain a 
description of the manufacturer's efforts to comply with the standard. 
The required information includes: (1) A chronological analysis of such 
efforts showing its relationship to the rulemaking history of Standard 
No. 208; (2) a discussion of alternate means of compliance considered, 
and rationales for the rejection of those means; (3) a discussion of 
any other factors that the petitioner desires NHTSA to consider in 
deciding that it tried in good faith to comply with the standard; and 
(4) a description of its planned efforts to achieve compliance during 
the exemption period, and the estimated date by which compliance will 
be achieved or, alternatively, production ceased. Finally, the 
petitioner must provide the agency with the total number of vehicles 
produced by or on behalf of the petitioner during 12-month period prior 
to filing the petition, in

[[Page 71727]]

order to establish that the manufacturer is eligible to receive the 
exemption, as stated above.

IV. Petition of Modena Design

    The following section briefly summarizes the pertinent portions of 
the petition related to completeness and eligibility. We note that the 
full petition can be viewed by accessing the docket via http://www.regulations.gov, or by any of the other means listed above in the 
COMMENTS section.

a. Requested Exemption

    Modena Design has requested an exemption from paragraph S14 of 
FMVSS No. 208, ``Occupant Crash Protection.'' It has requested that the 
exemption extend for three years upon the date of publication in the 
Federal Register.

b. Petitioner's Statements Relating to Eligibility

    Modena Design asserts that current production volume ranges from 15 
to 17 vehicles per year, well under the 10,000 vehicle limit. To date, 
Modena Design has only produced 85 vehicles since 1999, all of them the 
C8 ZONDA model. Modena Design has provided the following figures with 
regard to past production:
--2004: 9 vehicles
--2005: 8 vehicles
--2006: 16 vehicles
--2007 (as of November 8): 17 vehicles

Modena Design states that it is an independent vehicle manufacturer 
specialized in the design, development, and construction of high 
performance vehicles. Specifically, Modena Design states that it 
performs the following tasks:
--Design, Style Interior/Exterior.
--Design of the bodywork.
--Design of the chassis/suspensions/brakes.
--Study of the vehicle dynamics.
--Study of the elasto-kinematics.
--Design of the wiring system.
--Design of the models and moulds for the composite materials.
    Modena Design states that due to the small size of the company (it 
states that it has a work force of 30 employees), it contracts out the 
other aspects of vehicle development. However, it also states that the 
company does do all of the assembly of its vehicles, and that no third 
party company is involved with that process, although Mercedes acts as 
an arms-length engine supplier. Additionally, Modena Design's sister 
company, Pagani Automobili SpA, performs the marketing work on Modena 
Design's vehicles. Both companies are owned and run by the Pagani 
family.

c. Petitioner's Statements Concerning Substantial Economic Hardship

    While Modena Design has posted a profit in recent years, it claims 
that it is still suffering from economic hardship, and needs the 
requested exemption in order to expand into the U.S. market. According 
to the documentation that Modena Design provided, the company has 
posted a profit ranging from $19,990-81,463 ([euro]13,327-54,309) 
during the past four years. Comparatively, it estimates that the cost 
of developing a standard air bag system will be approximately 
$3,570,000, and the cost of developing an advanced air bag system an 
additional $4 million above that.
    Modena Design asserts that because of the overwhelming cost of 
design for standard and advanced air bags, it requires U.S. exempted-
vehicle sales to ``bridge the gap,'' that is, to provide the necessary 
financing to fund its air bag development efforts. It states that if 
the company is not able to sell vehicles in the U.S., it will not have 
the funds to develop FMVSS-compliant successor vehicles.
    Financially, Modena Design states that the financial impact of the 
exemption will be approximately $12,000,000 ([euro]8,000,000) over the 
period from 2007-2011. Modena Design states that the full cost of 
developing the C9 will be approximately $19,500,000 ([euro]13,000,000). 
To offset this, Modena Design provides two projections for net income 
during the exemption period, from 2009 to 2011. The first, assuming the 
exemption is denied, would mean that there are no U.S. sales during the 
period, and the net income for the company (excluding development 
costs) would be $13,783,500 ([euro]9,189,000). This means that the 
company would incur a total of $5,700,000 ([euro]3,800,000) shortfall 
as a result of its investment in the C9. The second projection assumes 
that an exemption is granted, and that the company would be able to 
sell vehicles in the U.S. during the aforementioned period, with the 
resulting net income being $25,869,000 ([euro]17,246,000). This figure 
implies a profit of $6,375,000 ([euro]4,250,000) with regard to the C9 
over the period from 2007-2011.
    Additionally, Modena Design asserts that it requires a substantial 
amount of time to design systems that comply with the FMVSSs. In its 
petition, the company claims that its system of building test 
prototypes means that it will take a significant investment of time and 
resources to design new systems for the C9. It states that it takes six 
months for Modena Design to build a test car, and ``if the company were 
to devote all resources to prototype building, then it would have to 
cease building what few C8 production cars [are currently] being 
built.''
    Finally, Modena Design states that there is no possibility of 
technology transfer that could aid it with its homologation projects. 
As an independent manufacturer, Modena Design asserts that there is 
``no possibility of technology transfer from a larger parent company 
that also manufactures motor vehicles.''

d. Petitioner's Statements Regarding Efforts To Comply With the 
Standard

    In explaining why it has not been currently able to meet the air 
bag requirements, Modena Design points to the difficulty that many 
small vehicle manufacturers have had in obtaining items of specialized 
vehicle equipment. Nonetheless, according to the petition, Modena has 
made efforts to achieve compliance with the FMVSS. These efforts 
involve work with several suppliers to develop compliant air bags for 
the U.S. market.
    To begin, Modena Design asserts in its petition that an air bag 
project is already underway. This project aims first to create 
standard, and then advanced air bags, at a total cost of around 
$7,500,000. To this end, Modena Design states that it has partnered 
with Applus+ IDIATA, a Spanish engineering services company that has 
previously provided advanced air bag development solutions and testing 
for small volume manufacturers. According to figures presented in the 
petition, a total of $3,828,000 ([euro]2,552,000) has been invested in 
the development of standard air bags, and an additional $4,288,500 
([euro]2,859,000) has been invested in the development of advanced 
systems. Modena Design provided fairly detailed specifications of the 
engineering efforts and the design specifications of its air bag 
systems in its petition.

e. Petitioner's Statements Concerning Intent To Comply or Cease 
Production Upon Expiration of Requested Temporary Exemption

    Modena Design states that it ``expects its smart air bag system to 
be ready in December 2011.'' We note that Modena Design asserted that 
due to the long product cycle, it expects the C9 to be in production 
until 2015.

[[Page 71728]]

f. Petitioner's Statements Concerning Why Granting Exemption Would Be 
in the Public Interest and Consistent With the Objectives of 49 U.S.C. 
Chapter 301 or 325

    Modena Design argues that the vehicle comes equipped with numerous 
features that enhance safety, and that the granting of this exemption 
would be consistent with the public interest and the objectives of the 
Safety Act (see 49 U.S.C. 301). The petitioner asserts that the Pagani 
vehicles incorporate design features that have significant safety 
benefits. These include the use of carbon-fiber technology, which 
provides great strength at a low weight. The fuel tank is incorporated 
into the carbon chassis for maximum protection, and the chassis also 
incorporates the monocoque protective ``cell'' design. Enhanced by a 
metal roll cage and alloy front and rear chassis subframes, the vehicle 
provides a significant safety benefit in the event of a crash or 
rollover. The monocoque can stay rigid during repeated impacts, 
providing an additional source of protection in the event of a 
potentially penetrating impact. Modena Design implies that these 
features serve, in part, to mitigate the diminished crashworthiness 
caused by the lack of FMVSS-compliant air bags.
    Modena Design lists six additional rationales as to why an 
exemption would be in the public interest. They are repeated below:
     All exempted cars will have standard air bags which comply 
with the pre-S14 provisions of FMVSS No. 208.
     Exempted vehicles will comply with all Federal safety 
standards other than the provisions that are subject to the exemption.
     Due to the extremely small number of exempted vehicles 
(even with an increase in production capability, Modena Design states 
that it will only produce around 50 vehicles per year), the effect on 
motor vehicle safety will be de minimus.
     If an exemption is not granted, U.S. consumer choice would 
be adversely affected.
     Modena Design vehicles will not be used extensively, due 
to their ``second vehicle'' nature.
     Because of the nature of the C9 as a high-performance 
sports car, it is not expected to typically transport children, thereby 
reducing the importance of advanced air bags, which are, in part, aimed 
at protecting children.

V. NHTSA's Initial Review of Petition as to Completeness/Eligibility

    Upon receiving a petition, NHTSA conducts an initial review of the 
petition with respect to whether the petition is complete and whether 
the petitioner appears to be eligible to apply for the requested 
petition. The agency has tentatively concluded that the petition is 
complete and the petitioner eligible to apply for the requested 
petition. The agency has not made any judgment on the merits of the 
application.

VI. Issuance of Notice of Final Action

    We are providing a 30-day comment period. 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: November 19, 2008.
Stephen R. Kratzke,
Associate Administraton for Rulemaking.
[FR Doc. E8-27963 Filed 11-24-08; 8:45 am]
BILLING CODE 4910-59-P