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. NHTSA-97-3205; 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 1998 and 1999, and that lower

alternative standards be established. In this document, NHTSA proposes

that the requested exemption be granted and that alternative standards

of 12.4 mpg be established for MYs 1998 and 1999, for Lamborghini and

Vector.

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

April 6, 1998.

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

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

preferably in two copies, to: US Department of Transportation Docket

Management, PL-401, 400 Seventh Street, S.W., Washington, DC 20590.

Docket hours are 10:00 a.m. to 5:00 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. 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 motor vehicle standards of the Government on

fuel economy, and

(4) The need of the United States 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 sports cars, was originally founded

as the ``Vector Car'' Company. The assets of Vector Car were purchased

by the Vector Aeromotive Corporation in 1987, and Vector completed

redesign and engineering of its first production car, the Vector W8.

The W8 has been partially redesigned and is now sold as the Avtech/M12.

Vector produced a total of 43 automobiles in the 1996 and 1997 model

years while Lamborghini imported 54 cars into the U.S. in the same time

period.

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 has a

[[Page 5775]]

controlling interest in Lamborghini, owning 50 percent of Lamborghini's

stock. For MYs 1998 and 1999, 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

can 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

August 14, 1996 seeking an exemption for Lamborghini and Vector for the

1998 model year. A second petition, seeking an exemption for the 1999

model year, was submitted by Lamborghini and Vector August 27, 1997.

These petitions were timely filed under 49 CFR 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.'' Agency action regarding the MY 1998

petition was delayed at the request of Lamborghini and Vector. Due to

this delay, NHTSA is now acting on both the 1998 and 1999 model year

petitions.

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 1998 and 1999, 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 1998 and 1999 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

automobiles. In evaluating 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 value represents the best possible CAFE that Lamborghini/Vector

can achieve for MYs 1998 and 1999. However, the joint alternative fuel

economy values sought, 12.4 mpg, represents a decrease from 12.5 mpg in

MY 1997. The fuel economy decrease from MY 1997 is attributed to

Lamborghini/Vector's projection that Vector sales will increase in MY

1998 from the MY 1997 level and remain steady for MY 1999 while

Lamborghini sales will remain constant. Therefore, fuel economy will

decrease from the 1997 level because of the projected increased sales

of Vectors, which have lower fuel economy values than Lamborghinis.

Despite these qualifications, the following describes how

Lamborghini and Vector 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 that produces

550 horsepower. 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. While

the fuel efficiency of the Lamborghini and Vector vehicles could be

improved through the use of a smaller engine, redesign or replacement

of the current engine would require Lamborghini and Vector to invest

resources in an endeavor which would most likely reduce the demand for

their vehicles.

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 in which fifth gear

serves as an overdrive gear. Additionally, Vector vehicles are equipped

with ZF transaxle and constant velocity driveshaft joints. Both

Lamborghinis and the Vectors 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, tires with less rolling

resistance, or lower axle ratios would be

[[Page 5776]]

contrary to the essential characteristics of the vehicles and their

position in the marketplace.

Model Mix

The Vector Avtech/M12 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

Federal Motor Vehicle Safety Standards and other regulations 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, Standard No. 208, Occupant crash

protection and Standard No. 201, Occupant protection in interior

impact. 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 United States 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 1998 and 1999 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 United States to conserve energy. In

fact, there would not be any increase since Lamborghini/Vector cannot

attain the generally applicable standards. Nevertheless, the agency

estimates that the additional fuel consumed by operating the MYs 1998

and 1999 fleets of Lamborghini/Vector vehicles at the projected CAFE of

12.4 mpg for MYs 1998 and 1999 is insignificant compared to the fuel

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

in 1996.

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 1998 and 1999 fleets

above an average of 12.4 mpg, 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 12.4 mpg in MY 1998 and 12.4 mpg in

MY 1999. The agency also tentatively concludes that it would be

appropriate to establish a separate standard for Lamborghini/Vector

rather than to set standards for a vehicle class or a single standard

for exempt manufacturers. Neither of these two options are available

for the model years in question because of actions previously taken by

the agency.

NHTSA has already established an alternative standard for Rolls

Royce of 16.3 mpg for MYs 1998 and 1999. The agency 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 set a standard for a class or a single standard for all exempted

manufacturers for MYs 1998 and 1999.

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 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 1998 and

1999, no fuel would be saved by establishing a higher alternative

standard. NHTSA finds in the Section on ``The Need of the United States

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 two 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 two

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

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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, Fuel economy, Gasoline, Imports, Motor

vehicles.

In consideration of the foregoing, 49 CFR Part 531 is proposed to

be amended as follows:

PART 531--[AMENDED]

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

follows:

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

1.50.

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

republished for the convenience of the reader and paragraph (b)(10)

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:

* * * * *

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

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

Average

fuel

economy

Model year standard

(miles

per

gallon)

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

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

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

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

1998......................................................... 12.4

1999......................................................... 12.4

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

* * * * *

Issued on: January 29, 1998.

L. Robert Shelton,

Associate Administrator for Safety Performance Standards.

[FR Doc. 98-2695 Filed 2-3-98; 8:45 am]

BILLING CODE 4910-59-P