Passenger Automobile Average Fuel Economy Standards; Proposed Decision To Grant Exemption

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 531

[Docket No. 95-51; Notice 1]

Passenger Automobile Average Fuel Economy Standards; Proposed

Decision To Grant Exemption

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

ACTION: Proposed decision.

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SUMMARY: This proposed decision responds to a petition filed by Rolls-

Royce Motors, Ltd. (Rolls-Royce) requesting that it be exempted from

the generally applicable average fuel economy standard of 27.5 miles

per gallon (mpg) for model year 1997, and that a lower alternative

standard be established. In this document, NHTSA proposes that the

requested exemption be granted and that an alternative standard of 15.1

mpg be established for MY 1997 for Rolls-Royce.

DATES: Comments on this proposed decision must be received on or before

September 7, 1995.

ADDRESSES: Comments on this proposal must refer to the docket number

and notice number in the heading of this notice and be submitted,

preferably in ten copies, to: Docket Section, Room 5109, National

Highway Traffic Safety Administration, 400 Seventh Street, S.W.,

Washington, DC 20590. Docket hours are 9:30 a.m. to 4 p.m., Monday

through Friday.

FOR FURTHER INFORMATION CONTACT: Mr. Orron Kee, Office of Market

Incentives, NHTSA, 400 Seventh Street, SW, Washington, DC 20590. Mr.

Kee's telephone number is: (202) 366-0846.

SUPPLEMENTARY INFORMATION:

Statutory Background

Pursuant to 49 U.S.C. section 32902(d), NHTSA may exempt a low

volume manufacturer of passenger automobiles from the generally

applicable average fuel economy standards if NHTSA concludes that those

standards are more stringent than the maximum feasible average fuel

economy for that manufacturer and if NHTSA establishes an alternative

standard for that manufacturer at its maximum feasible level. Under the

statute, a low volume manufacturer is one that manufactured (worldwide)

fewer than 10,000 passenger automobiles in the second model year before

the model year for which the exemption is sought (the affected model

year) and that will manufacture fewer than 10,000 passenger automobiles

in the affected model year. In determining the maximum feasible average

fuel economy, the agency is required under 49 U.S.C. 32902(f) to

consider:

(1) Technological feasibility

(2) Economic practicability

(3) The effect of other Federal motor vehicle standards on fuel

economy, and

(4) The need of the Nation to conserve energy.

The statute at 49 U.S.C. 32902(d)(2) permits NHTSA to establish

alternative average fuel economy standards applicable to exempted low

volume manufacturers in one of three ways: (1) A separate standard for

each exempted manufacturer; (2) a separate average fuel economy

standard applicable to each class of exempted automobiles (classes

would be based on design, size, price, or other factors); or (3) a

single standard for all exempted manufacturers.

[[Page 37862]]

Background Information on Rolls-Royce

Rolls-Royce is a small company concentrating wholly on the

production of high quality, prestigious cars. Rolls-Royce markets cars

under the Bentley and Rolls-Royce nameplates and currently seeks an

exemption for both Bentley and Rolls-Royce cars. The annual production

rate for these cars is approximately 1,600 automobiles, of which one-

third are sold in the United States. The corporate philosophy

concentrates on this limited production as the only way to maintain

their reputation for producing what is widely perceived as the best car

in the world. It believes that its customers will continue to demand

substantial cars, craftsman-built, using traditional materials and

equipped to the highest standards. Rolls-Royce operates as an

independent unit within the Vickers group of companies and is required

to generate its own financial resources. The limited financial

resources of this small company and its market position preclude Rolls-

Royce from improving fuel economy by any means involving significant

changes to the basic concept of a Rolls-Royce car.

Fuel economy improvements are particularly difficult in the short

run. Rolls-Royce manufactures its own engine and bodies and is a very

low volume manufacturer. Because of this integration of component

manufacturing and low volume, model changes are much less frequent than

with larger manufacturers. Rolls-Royce may manufacture a body shell for

fifteen years before making a major change. The opportunities for

improving fuel economy through changing the model mix are also quite

limited as Rolls-Royce manufactures only one basic model in different

configurations and all have similarly low fuel economy.

Roll's Royce's ability to make long term fuel economy improvements

is also very limited. Any change in the basic concept of its cars to

reduce size or downgrade the specifications would not, according to the

petitioner, be acceptable to its customers.

Nevertheless, Rolls-Royce states that it is making every effort to

achieve the lowest possible fuel consumption consistent with meeting

emission, safety, and other standards while maintaining customer

expectations of its product. In the 17-year period from 1978, when

Federal fuel economy standards were introduced, Rolls-Royce has

achieved a fuel economy improvement of approximately 30 percent by

substituting lighter weight components and tuning its powertrain while

leaving basic features of the vehicles unchanged.

Rolls-Royce states that technical innovation and switching to

lighter weight materials should result in worthwhile improvements in

its vehicles. The company believes that it has been conscious of the

need for weight saving for many years, and since the introduction of

the Silver Shadow, has made many parts of aluminum. These include the

engine block and cylinder heads, transmission and axle casings, doors,

hood and deck lid.

In addition to discussing opportunities for weight reduction,

Rolls-Royce also included in its petition discussions of improving its

fuel economy through mix shifts, engine improvements, and drive train

and transmission improvements.

Rolls-Royce's Petition

On November 30, 1994, Rolls-Royce petitioned NHTSA for an exemption

from the average fuel economy standards for vehicles to be manufactured

by Rolls-Royce in model year (MY) 1997. A number of petitions have been

filed by Rolls-Royce covering all model years from 1978. The last was

submitted October 1992, which resulted in Rolls-Royce being granted an

exemption from the generally applicable fuel economy standard for MYs

1995 through 1996.

Methodology Used to Project Maximum Feasible Average Fuel

Economy Level for Rolls-Royce

Baseline Fuel Economy

To project the level of fuel economy which could be achieved by

Rolls-Royce in MY 1997, the agency considered whether there were

technical or other improvements that would be feasible for these Rolls-

Royce vehicles, whether or not the company currently plans to

incorporate such improvements in those vehicles. The agency reviewed

the technological feasibility of any changes and their economic

practicability.

NHTSA interprets ``technological feasibility `` as meaning that

technology which would be available to Rolls-Royce for use on its MY

1997 automobiles, and which would improve the fuel economy of those

automobiles. The areas examined for technologically feasible

improvements were weight reduction, engine improvements, and drive line

improvements.

The agency interprets ``economic practicability'' as meaning the

financial capability of the manufacturer to improve its average fuel

economy by incorporating technologically feasible changes to its MY

1997 automobiles. In assessing that capability, the agency has always

considered market demand since it is an implicit part of the concept of

economic practicability. Consumers need not purchase what they do not

want.

In accordance with the concerns of economic practicability, NHTSA

has considered only those improvements which would be compatible with

the basic design concepts of Rolls-Royce automobiles. NHTSA assumes

that Rolls-Royce will continue to produce a five-passenger luxury car.

Hence, design changes that would make the cars unsuitable for five

adult passengers with luggage or would remove items traditionally

offered on luxury cars, such as air conditioning, automatic

transmission, power steering, and power windows, were not examined.

Such changes to the basic design could be economically impracticable

since they might well significantly reduce the demand for these

automobiles, thereby reducing sales and causing significant economic

injury to the low volume manufacturer.

Mix Shift

Rolls-Royce has little opportunity for improving fuel economy by

changing the model mix since it makes only one basic model in various

configurations, all with similarly low fuel economy. The differences in

fuel economy values among the different models available in MY 1997

will likewise be small. For the 1997 model year, Rolls-Royce and

Bentley cars will fall into five fuel economy configurations, three

from the naturally aspirated engine family and two from the

turbocharged engine family with the range of curb weights from 5,360

lbs to 6,100 lbs. The differences in fuel economy values between the

different models are small, and the models with the lower projected

fuel economies have significantly lower projected volumes. The Rolls-

Royce model mix is essentially fixed by the market demand, and

variations in sales percentages between the models would produce

negligible improvement in CAFE.

Weight Reduction

Rolls-Royce is conscious of the need to improve automotive fuel

economy of its passenger vehicles. Work had begun to design a lighter

and more fuel efficient model which included new features such as a

lighter bodyshell, engine, transmission, suspension, and other

components. However, the company's financial resources are limited

compared to other manufacturers, therefore its plans had to be re-

evaluated.

[[Page 37863]]

In addition, Rolls-Royce had to modify its passenger cars to

accommodate a number of safety standards and environmental regulations

which resulted in an increase in vehicle weight. A front passenger air

bag was introduced to comply with the requirements of FMVSS No. 208 for

passive restraints. The air conditioning system was substantially

revised to enable the use of HC 134a refrigerant in place of the

previously used CFC 12.

Rolls-Royce, being a small manufacturer of prestigious automobiles,

cannot afford to change the design of its cars by downsizing since its

customers desire traditional size cars.

Engine Improvements

The current petition from Rolls-Royce restates past efforts to

improve fuel economy in addressing engine improvements. Past

developmental activities include test and evaluation of various

technologies applied to the Rolls-Royce engine. These included the

Texaco Controlled Combustion system, the Honda Compound Vortex

Controlled Combustion system, diesel engines, cylinder disablement,

increased engine displacement (to reduce NO emissions and permit timing

for improved fuel economy), the May ``Fireball'' combustion chamber,

and overall downsizing of the engine and car incorporating all new

features including bodyshell, engine, transmission, and suspension.

Each of these approaches was discarded in turn as failing to provide a

feasible option for simultaneously meeting fuel economy and emission

requirements, and exacting customer expectations.

For MY 1994, Rolls-Royce introduced a package of engine and

emission system improvements. The principal feature was a revised

induction system incorporating a multi-point sequentially pulsed fuel

injection system, and an advanced ignition system with an individual

coil for each cylinder. Both systems are controlled by a central engine

management microprocessor. The fuel injection system improves control

and precision of fuel metering for improved emission control and fuel

economy during warm-up. The ignition system improvements anticipate

regulatory requirements for emission control diagnostics.

Transmission and Drive Train Improvements

Rolls-Royce uses the General Motors 4L80-E four-speed automatic

transmission with torque converter lockup clutch on all models

beginning in MY 1992. Use of the fourth gear as an overdrive ratio has

shown the capability of improving fuel economy by approximately 14

percent under highway driving conditions. The rear axle ratio was

reduced on the Bentley Turbo R and Bentley Continental R, thereby

improving the top gear engine-to-vehicle speed ratio from 28.5 rpm/mph

to 24.9 rpm/mph. This improved the highway fuel economy of this model

by about 5 percent.

Effect of Other Motor Vehicle Standards

The Rolls-Royce petition cites exhaust emission standards as having

the greatest effect on fuel economy, and for this reason the company

considers the fuel economy program to be an integral part of its

emission control program. It states that, historically, emission

standards have placed a severe strain on its limited technical

resources; and only with the introduction of new emission control

techniques such as oxidation and three way catalysts has the trend to

higher fuel consumption been reversed.

As a small volume manufacturer, Rolls-Royce was not subject to the

recently agreed upon stringent California emission standards until the

1995 model year. The more stringent Federal Clean Air Act Amendment

standards will not apply until the 1996 model year.

Of the Federal regulations having an adverse effect on fuel

economy, Rolls-Royce considers the most significant ones to be 49 CFR

Part 581 (energy absorbing bumpers), FMVSS 214 (side intrusion beam in

doors), and FMVSS 208 (passive restraints). The passive restraint

systems (air bags) forced some models to move into the 6,000 lbs and

6,500 lbs inertia weight classes. The effect of these regulations

increased vehicle weight despite efforts to reduce weight. Rolls-Royce

is a small company and engineering resources are limited and priority

must be given to meeting mandatory standards in order to remain in the

marketplace. Conflict often exists between the priority of meeting

standards and the need to remain competitive.

The Need of the Nation To Conserve Energy

The agency recognizes there is a need to conserve energy, to

promote energy security, and to improve balance of payments. However,

as stated above, NHTSA has tentatively determined that it is not

technologically feasible or economically practicable for Rolls-Royce to

achieve an average fuel economy in MY 1997 above 15.1 mpg. Granting an

exemption to Rolls-Royce and setting an alternative standard at that

level would result in only a negligible increase in fuel consumption

and would not affect the need of the Nation to conserve energy. In

fact, there would not be any increase since Rolls-Royce cannot attain

those generally applicable standards. Nevertheless, for illustrative

purposes the agency estimates that the additional fuel consumed by

operating the MY 1997 fleet of Rolls-Royce vehicles at the company's

projected CAFE of 15.1 mpg (compared to an hypothetical 27.5 mpg fleet)

over 106,952 miles is 36,378 bbls. of fuel. This averages about 8.30

bbls. of fuel per day over the 12-year period that these cars will be

an active part of the fleet. Obviously, this is insignificant compared

to the daily fuel used by the entire motor vehicle fleet which amounts

to some 4.90 million bbls. per day for passenger cars in the U.S. in

1993.

Maximum Feasible Average Fuel Economy for Rolls-Royce

This agency has tentatively concluded that it would not be

technologically feasible and economically practicable for Rolls-Royce

to improve the fuel economy of its MY 1997 automobiles above an average

of 15.1 mpg, that compliance with other Federal automobile standards

would not adversely affect achievable fuel economy beyond the amount

already factored into Rolls-Royce's projections, and that the national

effort to conserve energy would not be affected by granting the

requested exemption and establishing an alternative standard.

Consequently, the agency tentatively concludes that the maximum

feasible average fuel economy for Rolls-Royce in MY 1997 is 15.1 mpg.

Proposed Level and Type of Alternative Standard

The agency proposes to exempt Rolls-Royce from the generally

applicable standard of 27.5 mpg and to establish an alternative

standard for Rolls-Royce for MY 1997 at its maximum feasible average

fuel economy of 15.1 mpg. NHTSA tentatively concludes that it would be

appropriate to establish a separate standard for Rolls-Royce for the

following reasons. The agency has already received a petition and

published a proposal (60 FR 31937, June 19, 1995) for an alternate

standard for MedNet, Inc. for MY's 1996, 1997, and 1998 seeking an

alternate standard for that company of 17.0 mpg. Therefore, the agency

cannot use the second (class standards) or third (single standard for

all exempted manufacturers) approaches for MY 1997.

[[Page 37864]]

Regulatory Impact Analyses

NHTSA has analyzed this proposal and determined that neither

Executive Order 12866 nor the Department of Transportation's regulatory

policies and procedures apply. Under Executive Order 12866, the

proposal would not establish a ``rule,'' which is defined in the

Executive Order as ``an agency statement of general applicability and

future effect.'' The proposed exemption is not generally applicable,

since it would apply only to Rolls-Royce, Inc., as discussed in this

notice. Under DOT regulatory policies and procedures, the proposed

exemption would not be a ``significant regulation.'' If the Executive

Order and the Departmental policies and procedures were applicable, the

agency would have determined that this proposed action is neither major

nor significant. The principal impact of this proposal is that the

exempted company would not be required to pay civil penalties if its

maximum feasible average fuel economy were achieved, and purchasers of

those vehicles would not have to bear the burden of those civil

penalties in the form of higher prices. Since this proposal sets an

alternative standard at the level determined to be Rolls-Royce's

maximum feasible level for MY 1997, no fuel would be saved by

establishing a higher alternative standard. NHTSA finds that because of

the minuscule size of the Rolls-Royce fleet, that incremental usage of

gasoline by Rolls-Royce's and customers would not affect the nation's

need to conserve gasoline. There would not be any impacts for the

public at large.

The agency has also considered the environmental implications of

this proposed exemption in accordance with the National Environmental

Policy Act and determined that this proposed exemption if adopted,

would not significantly affect the human environment. Regardless of the

fuel economy of the exempted vehicles, they must pass the emissions

standards which measure the amount of emissions per mile traveled.

Thus, the quality of the air is not affected by the proposed exemption

and alternative standard. Further, since the exempted passenger

automobiles cannot achieve better fuel economy than is proposed herein,

granting this proposed exemption would not affect the amount of fuel

used.

Interested persons are invited to submit comments on the proposed

decision. It is requested but not required that 10 copies be submitted.

All comments must not exceed 15 pages in length (49 CFR 553.21).

Necessary attachments may be appended to these submissions without

regard to the 15 page limit. This limitation is intended to encourage

commenters to detail their primary arguments in a concise fashion.

If a commenter wishes to submit certain information under a claim

of confidentiality, three copies of the complete submission, including

purportedly confidential business information, should be submitted to

the Chief Counsel, NHTSA, at the street address given above, and seven

copies from which the purportedly confidential business information has

been deleted, should be submitted to the Docket Section. A request for

confidentiality should be accompanied by a cover letter setting forth

the information specified in the agency's confidential business

information regulation. 49 CFR part 512.

All comments received before the close of business on the comment

closing indicated above for the proposal will be considered, and will

be available for examination in the docket at the above address both

before and after that date. To the extent possible, comments filed

under the closing date will also be considered. Comments received too

late for consideration in regard to the final rule will be considered

as suggestions for further rulemaking action. Comments on the proposal

will be available for inspection in the docket. NHTSA will continue to

file relevant information as it becomes available in the docket after

the closing date, and it is recommended that interested persons

continue to examine the docket for new material.

Those persons desiring to be notified upon receipt of their

comments in the rules docket should enclose a self-addressed, stamped

postcard in the envelope with their comments. Upon receiving the

comments, the docket supervisor will return the postcard by mail.

List of Subjects in 49 CFR Part 531

Energy conservation, Gasoline, Imports, Motor vehicles.

In consideration of the foregoing, 49 CFR part 531 would be amended

as follows:

PART 531--[AMENDED]

1. The authority citation for part 531 would be revised to read as

follows:

Authority: 49 U.S.C. 32902; delegation of authority at 49 CFR

1.50.

Sec. 531.5 [Amended]

2. In section 531.5, the introductory text of paragraph (b) is

republished for the convenience of the reader and paragraph (b)(2)

would be revised to read as follows:

Sec. 531.5 Fuel economy standards.

* * * * *

(b) The following manufacturers shall comply with the standards

indicated below for the specified model years:

* * * * *

(2) Rolls-Royce Motors, Inc.

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Average fuel

economy

Model year standard

(miles per

gallon)

------------------------------------------------------------------------

1978.................................................... 10.7

1979.................................................... 10.8

1980.................................................... 11.1

1981.................................................... 10.7

1982.................................................... 10.6

1983.................................................... 9.9

1984.................................................... 10.0

1985.................................................... 10.0

1986.................................................... 11.0

1987.................................................... 11.2

1988.................................................... 11.2

1989.................................................... 11.2

1990.................................................... 12.7

1991.................................................... 12.7

1992.................................................... 13.8

1993.................................................... 13.8

1994.................................................... 13.8

1995.................................................... 14.6

1996.................................................... 14.6

1997.................................................... 15.1

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* * * * *

Issued on: July 18, 1995.

Barry Felrice,

Associate Administrator for Safety Performance Standards.

[FR Doc. 95-18044 Filed 7-21-95; 8:45 am]

BILLING CODE 4910-59-P