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. 96-067; 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 joint petition filed by

Lamborghini and Vector requesting that each company be exempted from

the generally applicable average fuel economy standard of 27.5 miles

per gallon (mpg) for model years 1995 through 1997, and that lower

alternative standards be established. In this document, NHTSA proposes

that the requested exemption be granted and that alternative standards

of 12.8 mpg be established for MY 1995, 12.6 mpg for MY 1996, and 12.5

mpg for MY 1997, for Lamborghini and Vector.

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

September 27, 1996.

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, SW.,

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

through Friday.

FOR FURTHER INFORMATION CONTACT: Ms. Henrietta Spinner, Office of

Market Incentives, NHTSA, 400 Seventh Street, SW., Washington, DC

20590. Ms. Spinner's telephone number is: (202) 366-4802.

SUPPLEMENTARY INFORMATION:

Statutory Background

Pursuant to 49 U.S.C. 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.

Background Information on Lamborghini and Vector

Vector Aeromotive Corporation (Vector) and Automobili Lamborghini

S.p.A. (Lamborghini) are small automobile manufacturers that each

produce a single model of high priced, uniquely designed exotic sport

vehicles. Lamborghini is an Italian manufacturer of passenger cars,

which concentrates exclusively on the production of high quality, high

performance, prestige sports cars. Lamborghini currently produces one

model, the Diablo. Vector, a domestic low volume manufacturer, also

marketing exotic high performance

[[Page 39430]]

sports cars, was originally founded as the ``Vector Car'' Company. The

assets of Vector Car in were purchased by the Vector Aeromotive

Corporation in 1987, and Vector completed redesign and engineering of

its first production car, the Vector W8. During MYs 1991-1993, Vector

manufactured a total of 22 Vector W8 passenger automobiles for

worldwide sales. It did not produce any vehicles in MY 1995.

Need for a Joint Petition for Lamborghini and Vector

Although they manufacture different automobile lines, Lamborghini

and Vector are both controlled by V-Power Corporation. V-Power is the

largest shareholder of Vector, owning 57 percent of the stock; the

remaining 43 percent of Vector is publicly traded on NASDAQ. V-Power

also owns 50 percent of Lamborghini, with the remaining 50 percent held

by Micom/Stedco Ltd. For each of MYs 1995 through 1997, Lamborghini's

and Vector's combined worldwide production will be less than 10,000

automobiles. As both companies are controlled by V-Power, any

alternative CAFE standard would apply to Lamborghini and Vector

together, and a single petition should be submitted for a single

alternative standard, applicable to the combined fleet of these

companies.

NHTSA's regulations on low volume exemptions from CAFE standards

state that petitions for exemption are to be submitted ``not later than

24 months before the beginning of the affected model year, unless good

cause for later submission is shown.'' (49 CFR 525.6(b).)

NHTSA received a petition from Vector Aeromotive Corporation on May

24, 1995 seeking an exemption for the 1995-1998 model years. On May 31,

1995, Vector withdrew this petition. On August 9, 1995, Vector

submitted a joint petition on behalf of itself and Lamborghini seeking

exemption from the passenger automobile fuel economy standards for MYs

1995-1997. On March 14, 1996, the petitioner provided amended data for

Lamborghini/Vector vehicles for MYs 1996 and 1997, indicating improved

fuel economy values.

The Lamborghini/Vector joint petition was filed less than 24 months

before the beginning of MY 1997 and was therefore untimely under 49

C.F.R. 526.6(b). This section requires that petitions ``be submitted

not later than 24 months before the beginning of the affected model

year, unless good cause for late submission is shown.''

Lamborghini/Vector has provided NHTSA with information regarding

the lateness of the joint petition. Lamborghini, which had been

acquired by Chrysler in 1988, was sold to MegaTech Ltd. in February

1994. In September 1994, six months after acquisition of Lamborghini,

MegaTech Ltd., which owned 100 percent of Lamborghini, distributed 50

percent of Lamborghini's stock to V-Power (owner of Vector) and 50

percent to Micom/Stedco Ltd. (an Indonesian shipping and manufacturing

firm).

Chrysler's sale of Lamborghini, which Lamborghini contends occurred

without prior notice, placed significant demands on this small company.

As Lamborghini was no longer a part of Chrysler, it could not rely on

compliance by Chrysler models to permit delayed compliance, as part of

a phase-in, with the Environmental Protection Agency/California Air

Resources Board (EPA/CARB) Tier I emission certifications.

Lamborghini's separation from Chrysler also required that it comply

with the phase-in requirements of Federal motor vehicle safety standard

No. 214, ``Side Impact Protection,'' before it had anticipated having

to do so. These developments, combined with the advent of Lamborghini's

relationship with Vector and the subsequent redesign of the Vector W8

to use a Lamborghini engine, placed considerable demands on the limited

resources of Lamborghini/Vector. NHTSA notes that prior to the

submission of the petition of May 24, 1995, Vector had never before

submitted such a petition to the agency. Similarly, Lamborghini had not

been eligible to submit an exemption petition since it was acquired by

Chrysler in 1988. Preparing a joint petition required considerable

interaction between these two previously unrelated companies. Given

these circumstances, in conjunction with the significant drain on

resources required for compliance with other regulations as noted

above, the agency believes that sufficient good cause has been shown by

Lamborghini/Vector to allow late filing of the joint petition for

exemption for MY's 1995-97.

Methodology Used to Project Maximum Feasible Average Fuel Economy Level

for Lamborghini/Vector

Baseline Fuel Economy

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

Lamborghini/Vector in MYs 1995-1997, the agency considered whether

there were technical or other improvements that would be feasible for

these vehicles, and whether or not the company currently plans to

incorporate such improvements in the 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 Lamborghini/Vector for use on

its MY 1995 through 1997 automobiles, and which would improve the fuel

economy of those automobiles. The areas examined for technologically

feasible improvements were weight reduction, aerodynamic improvements,

engine improvements, drive line improvements, and reduced rolling

resistance.

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 MYs

1995 through 1997 automobiles. In assuming that capability, the agency

has always considered market demand as 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 Lamborghini and Vector automobiles. Since

NHTSA assumes that Lamborghini and Vector will continue to build exotic

high performance cars, design changes that would remove items

traditionally offered on these cars, such as reducing the displacement

of their engines, were not considered. Such changes to the basic design

would 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.

Technology for Fuel Economy Improvement

The nature of Lamborghini and Vector vehicles generally do not

result in high fuel economy values. Also, Lamborghini and Vector lag in

having the latest developments in fuel efficiency technology because

suppliers generally provide components and technology to small

manufacturers only after supplying large manufacturers.

Lamborghini/Vector state that the requested alternative fuel

economy values represent the best possible CAFE that Lamborghini/Vector

can achieve for MYs 1995 through 1997. However, the joint alternative

fuel economy values decrease from 12.8 mpg in MY 1995 to

[[Page 39431]]

12.6 mpg in MY 1996 (a decrease of 0.2 mpg) and from 12.6 mpg in MY

1996 to 12.5 mpg in MY 1997 (a decrease of 0.1 mpg). The fuel economy

will decrease over the three years because Lamborghini/Vector projects

that Vector sales will increase over MYs 1996 and 1997 while

Lamborghini sales will remain constant. Therefore, fuel economies will

decrease because of the projected increased sales of Vectors, which

have lower fuel economy values than Lamborghini's.

Despite these qualifications, the following describes how

Lamborghini and Vector plan to maximize their respective vehicles' fuel

economy by using state of the art materials and technologies for their

vehicles.

Lamborghini and Vector vehicles share a common engine designed and

produced by Lamborghini. This engine is a 5.7 liter V-12 with a 10:1

compression ratio that produces 492 horsepower at 6,800 revolutions per

minute and 428 foot-pounds of torque at 5,200 rpm. Fuel is delivered to

the engine through a computer-controlled multipoint fuel injection

system. Aluminum alloy is used for all major castings like the engine

crankcase, cylinder heads, induction manifold, gearbox, and axle. The

Lamborghini V-12 is a highly efficient engine which produces extremely

high output for its displacement.

In keeping with the high performance character, Lamborghini and

Vector vehicles are designed to provide a structure that is both strong

and lightweight. Vector uses a semi-monocoque structure and a steel

roll cage with body panels fabricated from carbon-reinforced composite

fiber glass. Front suspension consists of independent, unequal length

A-arms with concentric coil shock absorbers and anti-dive

characteristics. Rear suspension is parallel link, concentric coil

springs with anti-squat characteristics. The hydraulic brake system

includes vacuum assist, quad cylinder calipers and ventilated discs.

The Lamborghini Diablo chassis uses space frame construction with

the unstressed panels, such as the doors and trunk, made of aluminum

alloy and plastic composite. Composite and steel beams were recently

adopted for the energy absorbing bumpers.

All Lamborghini/Vector vehicles have a rear engine driving rear

wheels through five speed manual transmissions. Additionally, Vector W8

vehicles are equipped with ZF transaxle and constant velocity

driveshaft joints. Both the Lamborghini Diablo and the Vector W8 rely

on wide low aspect ratio tires to provide maximum traction and

performance.

Lamborghini/Vector vehicles achieve a very high level of

performance by incorporating an efficient powerplant with a lightweight

structure. Much of the technology used to improve fuel economy in other

vehicles is already employed by Lamborghini/Vector to enhance

performance. Any further improvements in fuel economy in these vehicles

through the use of a smaller powerplant or tires with less rolling

resistance would be contrary to the essential characteristics of the

vehicles and their position in the marketplace.

Model Mix

The Vector W8 and Lamborghini Diablo are similarly sized vehicles

sharing a common V-12 engine. Therefore, any opportunity to improve

fuel economy by changing model mix would be dependent on introduction

of new models or engines. In any event, changing the model mix would

have a negligible effect on fuel economy due to the inherently low fuel

economy of these ultra high performance coupes.

The Effect of Other Vehicle Standards

The new, California emissions standards apply to Lamborghini and

Vector in MY 1995 and the similarly stringent Federal Clean Air Act

Amendments apply in MY 1996. Lamborghini/Vector achieved lower fuel

economy due to compliance with these standards.

Federal Motor Vehicle Safety Standards and other NHTSA standards

also have an adverse effect on fuel economies of Lamborghini and Vector

vehicles. These standards include 49 CFR part 581, Bumper Standard,

Standard No. 214, Side impact protection, and Standard No. 208,

Occupant crash protection. These standards tend to reduce achievable

CAFE levels, since they result in increased vehicle weight. Engineering

resources are necessarily devoted to meeting the standards, since, in

order to remain in the market, Lamborghini/Vector must meet these

mandatory standards.

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 Lamborghini/

Vector to achieve an average fuel economy in MYs 1995 through 1997

above the levels set forth in this proposed decision. Granting an

exemption to Lamborghini/Vector 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 Lamborghini/

Vector cannot attain those generally applicable standards.

Nevertheless, the agency estimates that the additional fuel consumed by

operating the MYs 1995 through 1997 fleets of Lamborghini/Vector

vehicles at the combined projected CAFE of 12.8 mpg for MY 1995, 12.6

mpg for MY 1996, and 12.5 mpg for MY 1997 is insignificant compared to

the fuel used each day by the entire U.S. motor vehicle fleet for

passenger cars in 1994.

Maximum Feasible Average Fuel Economy for Lamborghini/Vector

The agency has tentatively concluded that it would not be

technologically feasible and economically practicable for Lamborghini/

Vector to improve the fuel economy of their MY 1995 through 1997 fleets

above an average of 12.8 mpg for MY 1995, 12.6 mpg for MY 1996, and

12.5 mpg for MY 1997. Federal automobile standards would not adversely

affect achievable fuel economy beyond the amount already factored into

Lamborghini/Vector's projections, and that the national effort to

conserve energy would not be affected by granting the requested

exemption and establishing an alternative standard.

Proposed Level and Type of Alternative Standard

NHTSA tentatively concludes that the maximum feasible average fuel

economy for Lamborghini/Vector is 12.8 mpg in MY 1995, 12.6 mpg in MY

1996, and 12.5 mpg in MY 1997. The agency also tentatively concludes

that it would be appropriate to establish a separate standard for

Lamborghini/Vector for the following reasons. The agency has already

granted petitions submitted by Rolls Royce for alternative standards of

14.6 mpg for MY's 1995-96 and 15.1 mpg for MY 1997. NHTSA has also

granted a petition from Mednet, Inc. (successor company to Dutcher

Motors) for an alternative standard of 17.0 mpg for MYs 1996-98.

Therefore, the agency cannot use the second (class standards) or third

(single standard for all exempted manufacturers) approaches for MYs

1995, 1996, and 1997.

Regulatory Impact Analyses

NHTSA has analyzed this proposal and determined that neither

Executive Order 12866 nor the Department of

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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 Lamborghini

Automobili and Vector Aeromotive 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 the maximum feasible levels for

Lamborghini/Vector for MYs 1995 through 1997, no fuel would be saved by

establishing a higher alternative standard. NHTSA finds in the Section

on ``The Need of the Nation to Conserve Energy'' that because of the

small size of the Lamborghini/Vector fleet, the incremental usage of

gasoline by Lamborghini/Vector's 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 exemptions

and alternative standards. Further, since the exempted passenger

automobiles cannot achieve better fuel economy than is proposed herein,

granting these proposed exemptions 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

after 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

to read 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.

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

republished for the convenience of the reader and paragraph (b)(13)

would be added 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:

* * * * *

(13) Automobili Lamborghini S.p.A./Vector Aeromotive Corporation.

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Average

fuel

economy

Model year standard

(miles

per

gallon)

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

1995.......................................................... 12.8

1996.......................................................... 12.6

1997.......................................................... 12.5

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Issued on: July 22, 1996.

Barry Felrice,

Associate Administrator for Safety Performance Standards.

[FR Doc. 96-19070 Filed 7-26-96; 8:45 am]

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