Vector Aeromotive Corporation Grant of Application for Temporary Exemption From Federal Motor Vehicle Safety Standard No. 208

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. 95-40; Notice 2]

Vector Aeromotive Corporation Grant of Application for Temporary

Exemption From Federal Motor Vehicle Safety Standard No. 208

Vector Aeromotive Corporation of Jacksonville, Florida, applied to

be exempted from paragraph S4.1.4 of Federal Motor Vehicle Safety

Standard No. 208 Occupant Crash Protection. The basis of the

application was that compliance will cause substantial economic

hardship to a manufacturer that has tried to comply with the standard

in good faith.

Notice of receipt of the application was published on June 26,

1995, and an opportunity afforded for comment (60 FR 33029). This

notice grants the application.

According to its application, Vector intends to begin production of

a two-seat high performance sport car in September 1995 called the

Vector Avtech SC (``Avtech''). Design concept specifications were

developed several years ago for the Avtech, and a prototype shown at

the Geneva Automobile Show in March 1992. During this time, Vector

produced a sports car called the Vector W8. This car went out of

production in early 1993 after a run of 22 vehicles, and Vector has

produced no motor vehicles since.

Vector's single largest shareholder is V'Power Corp., a Bahamian

Corporation, which is also the controlling shareholder of Automobili

Lamborghini S.p.A. Lamborghini, which manufactured 1,475 cars between

1989 and 1994, was recently granted a temporary exemption from Motor

Vehicle Safety Standard No. 214 Side Impact Protection (59 FR 59458).

V'Power will provide Vector with $5.5 million in funds to finance

Vector's proposed development schedule over the next 12 months.

Vector's cumulative net losses in the three years preceding the filing

of its application were approximately $12,400,000.

Vector evaluated ``the original Avtech prototype'' in order to

determine ``what changes had to be made to install a driver and

passenger side airbag system. The specific areas which are projected to

require design changes or additional development are related to the

main chassis design forward of the A pillar, instrument panel, steering

column, steering wheel, and seats.'' The applicant has begun to

integrate these design changes into the Avtech SC. Vector has received

airbag development program cost estimates of approximately $1,500,000

from airbag suppliers. At the time of its application, it stated that

it had already spent $56,000 in pursuit of the project and an estimated

1000 man hours. Vector estimates that a year will be required in order

to complete development, and that vehicles conforming to Standard No.

208 will be available in the time period June-September 1996. However,

to allow for development problems, Vector asked for an exemption until

May 1, 1997. In the meantime, it promises that the Avtech will be

equipped ``with an active, three point, seat belt system that meets, or

exceeds, all FMVSS performance requirements.''

The applicant also argued that an exemption would be in the public

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interest as its development and production ``will result in additional

employment at the factory, vendor, dealer, and service levels.'' Its

success ``should establish the US as a major source for ultrahigh

performance vehicles and technology''. The Avtech will be equipped with

``the only twelve cylinder engine offered by a US manufacturer.'' In

its view, an exemption would be consistent with traffic safety

objectives because the vehicle will otherwise comply with all

applicable Federal motor vehicle safety standards. In addition, the

company's production would be limited. It estimated sales of 60 cars

through the second quarter of 1996.

No comments were received on the petition.

Pursuant to 49 U.S.C. 30113(b)(3)(B)(i), small manufacturers such

as Vector may be temporarily exempted from a Federal motor vehicle

safety standard such as Standard No. 208 if ``compliance with the

standard would cause substantial economic hardship to a manufacturer

that has tried to comply with the standard in good faith.'' The

application must contain ``a complete description of the manufacturer's

good faith effort to comply'' with the standard (49 U.S.C.

30113(c)(1)).

As a general rule, the agency is sympathetic to the economic

problems of small manufacturers and tends to equate a cumulative net

loss position to a per se showing of ``substantial economic hardship.''

NHTSA recognizes that the engineering and testing of prototypes are

costly and may be more easily borne by small manufacturers if conducted

over a more extended period of time than is the custom with the major

manufacturers. With the cumulative net losses of over $12,000,000 as

mentioned above, Vector has made a sufficient demonstration to convince

the agency that, to require immediate compliance with the automatic

restraint requirements of Standard No. 208 would cause it substantial

economic hardship.

However, in order for the agency to make the requisite finding of

good faith, a manufacturer who applies for an exemption under section

30113(b)(3)(B)(i) must demonstrate that it has made at least a

colorable attempt to meet the requirements of the standard from which

it requests exemption.

In 1991, Congress decided that 95% of passenger cars manufactured

between September 1, 1996, and September 1, 1997, must be equipped with

a driver and front seat passenger airbag, plus a manual lap/shoulder

belt, and that 100% of all cars manufactured on and after September 1,

1997, be so equipped. This requirement originated in Section 2508 of

the NHTSA Authorization Act of 1991 (part of the Intermodal Surface

Transportation Efficiency Act of 1991, known as ``ISTEA''), enacted in

December 1991. To implement this requirement, NHTSA published a notice

of proposed rulemaking (NPRM) on December 14, 1992 and a final rule on

September 2, 1993.

Thus, by the time Vector displayed its prototype at Geneva in March

1992, the industry had been aware for at least three months that it

would eventually have to provide air bags for the driver and front seat

passenger. By the time of the Geneva show, Vector was on notice that,

four and one-half years later, 95% of its production would have to be

so equipped. When the production of the Vector W8 terminated in early

1993, NHTSA had already issued the NPRM reiterating the compliance

schedule mandated by Congress. The final rule was issued 20 months

before Vector's application. These regulatory actions were widely

publicized at the time.

Vector identified the Avtech SC shown at Geneva as a ``prototype'',

rather than a ``concept'', indicating to NHTSA that the vehicle was

intended for eventual production. NHTSA believes that a good faith

effort to conform the Avtech SC to the automatic restraint requirements

of Standard No. 208 (whether automatic belts or airbags) should have

begun as part of the further development of the prototype for

production, and that the modification of the chassis, instrument panel,

seats, etc. mentioned in the application should have commenced years

earlier than it apparently has. Although the applicant states that it

has spent $56,000 on its efforts to conform, this figure represents

less than two percent of the amount that it has spent on research and

development, a total of $3,178,501 for its fiscal years 1992, 1993, and

1994.

Very simply, NHTSA expects an American manufacturer to develop and

engineer new products to conform to all applicable Federal motor

vehicle safety standards, especially when a leadtime of this length has

been provided.

However, NHTSA recognizes that the applicant was experiencing well-

publicized problems when the W8 went out of production which eventually

resulted in a complete change of corporate management. It may have been

that, until these problems were resolved, the applicant had not decided

as to the course of its future production and whether such would

include the Avtech. Thus, NHTSA is willing to give Vector the benefit

of the doubt in finding that it has made a good faith effort to comply

with Standard No. 208. However, in the belief that it might have done

more, NHTSA is providing an exemption that will expire on September 1,

1996, eight months less than Vector requested.

In granting an exemption of only one year instead of twenty months,

NHTSA has taken into account the company's financial position. Its

single largest shareholder intends to provide it with $5.5 million in

funds to finance its proposed development schedule over the next 12

months, and a short exemption period will encourage Vector to achieve

conformance by September 1, 1996.

The applicant believes that an exemption would be in the public

interest as its development and production ``will result in additional

employment at the factory, vendor, dealer, and service levels.'' In the

past, NHTSA has found such an argument sufficient to uphold the public

interest in granting an exemption, no matter how minimal the positive

impact might be on the economy.

In its view, an exemption would be consistent with traffic safety

objectives because the vehicle will otherwise comply with all

applicable Federal motor vehicle safety standards. NHTSA notes also

that the market for so-called ``supercars'' like the Vector has

softened considerably and that the company's projected estimate of

sales of 60 cars through the second quarter of 1996 may be unduly

optimistic. Vector's limited exemption is likely to have only the most

minimal impact upon motor vehicle safety. Finally, one of the

objectives of Chapter 301 is to provide temporary relief to small

manufacturers attempting to comply with the Federal motor vehicle

safety standards.

In consideration of the foregoing, it is hereby found that to

require immediate compliance with Standard No. 208 would cause

substantial economic hardship to a manufacturer that has tried in good

faith to comply with the standard, and that an exemption is consistent

with the public interest and 49 U.S.C. Chapter 301--Motor Vehicle

Safety. Accordingly, Vector Aeromotive Inc. is hereby granted NHTSA

Exemption No. 95-3 from paragraph S4.1.4 of 49 CFR 571.208 Motor

Vehicle Safety Standard No. 208 Occupant Crash Protection, expiring

September 1, 1996.

(49 U.S.C. 30113; delegation of authority at 49 CFR 1.50).

[[Page 48747]]

Issued on September 13, 1995.

Ricardo Martinez,

Administrator.

[FR Doc. 95-23262 Filed 9-19-95; 8:45 am]

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