Passenger Automobile Average Fuel Economy Standards

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

49 CFR Part 531

[Docket No. NHTSA-97-3205, Notice 02]

Passenger Automobile Average Fuel Economy Standards

AGENCY: National Highway Traffic Safety Administration (NHTSA),

Department of Transportation.

ACTION: Final decision.

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SUMMARY: This final decision responds to a joint petition filed by

Vector Aeromotive Corporation (Vector) and Lamborghini S.p.A.

(Lamborghini) requesting that each company be exempted from the

generally applicable average fuel economy standard of 27.5 miles per

gallon (mpg) for model years (MYs) 1998 and 1999 and that lower

alternative standards be established. In this document, NHTSA denies

Lamborghini's request for MYs 1998 and 1999 and grants Vector's request

only for MY 1998. The agency establishes an alternative standard of

12.1 mpg for MY 1998 for Vector.

DATES: Effective Date: This final decision is effective April 12, 1999.

This denial applies only to Lamborghini for MYs 1998 and 1999.

Petitions for reconsideration: Petitions for reconsideration must

be received no later than April 12, 1999.

ADDRESSES: Petitions for reconsideration of this rule should refer to

the docket and notice number set forth above and be submitted to:

Administrator, National Highway Traffic Safety Administration, 400

Seventh Street, SW, Washington, D.C. 20590.

FOR FURTHER INFORMATION CONTACT: The following persons at the National

Highway Traffic Safety Administration, 400 Seventh Street, SW,

Washington, D.C. 20590.

For non-legal issues: Ms. Henrietta L. Spinner, Office of Planning

and Consumer Programs, Safety Performance Standards, NPS-32, NHTSA, 400

Seventh Street, SW., Washington, D.C. 20590. Telephone: (202) 366-4802,

facsimile (202) 366-2739.

For legal issues: Otto Matheke, Office of the Chief Counsel, NCC-

20, telephone (202) 366-5253, facsimile (202) 366-3820.

SUPPLEMENTARY INFORMATION:

Statutory Background

Pursuant to section 32902(d) of Chapter 329 ``Automobile Fuel

Economy'' (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 at

that 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 United States to conserve energy.

The statute permits NHTSA to establish alternative average fuel

economy standards applicable to exempt 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.

Proposed Decision and Public Comment

This final decision was preceded by a proposal announcing the

agency's tentative conclusion that Vector and Lamborghini should be

exempted from the generally applicable MYs 1998 and 1999 passenger

automobile average fuel economy standard of 27.5 mpg, and that

alternative standards of 12.4 mpg for MYs 1998 and 1999 be established

for Vector and Lamborghini (63 FR 5774; February 4, 1998). The agency

did not receive any comments in response to the proposal.

NHTSA Final Determination

On August 27, 1997, Lamborghini and Vector filed a joint petition

seeking an exemption from the generally applicable fuel economy

standards for passenger cars for MYs 1998 and 1999 and requested that

an alternative fuel economy standard for the two companies be

established. At the time this petition was filed, V-Power Corporation

controlled Lamborghini and Vector. V-Power was, and remains, the

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

remaining 43 percent of Vector being publicly held. V-Power also had a

controlling interest in Lamborghini owning 50 percent of Lamborghini's

stock. As V-Power controlled both companies, any alternative Corporate

Average Fuel Economy (CAFE) standard would apply to Lamborghini and

Vector together (see 49 U.S.C. 32901(a) (4)), and a single

[[Page 12091]]

petition was submitted for a single alternative standard, applicable to

the combined fleet of the two manufacturers.

On July 24, 1998, Audi AG (Audi), a wholly owned subsidiary of

Volkswagen AG, acquired full ownership of Lamborghini. Together, Audi

and Volkswagen have an annual worldwide production of more than 10,000

vehicles. Section 32902(d) of Chapter 329 provides that an alternative

standard may only be established for a manufacturer that manufactured

(whether in the United States or not) fewer than 10,000 passenger

automobiles in the model year two years before the model year for which

the application is made. The section further provides that an exemption

for a model year applies only if the manufacturer manufactures (whether

in the United States or not) fewer than 10,000 passenger automobiles in

the model year.

On September 21, 1990, the agency published a notice (55 FR 38822)

containing NHTSA's interpretation of the terms manufacture and

manufacturer for the purposes of determining eligibility for a low

volume exemption under section 32902(d). In considering whether an

entity is eligible for a low volume exemption, the agency indicated

that it must count all of the cars manufactured by that entity

worldwide, and not merely those imported in the United States.

Importers who are controlled by larger ``parent'' manufacturers have,

by virtue of the relationship with the ``parent,'' access to

technological and material resources that provide them with the ability

to manufacture more fuel efficient vehicles. The fact that the

``parent'' may choose not to import and market cars in the United

States does not have any bearing on the availability of these

resources.

When Lamborghini and Vector filed their joint petition seeking an

exemption in 1997, the annual worldwide production of both companies

combined was fewer than 10,000 vehicles. However, Lamborghini was

acquired by Audi, which is in turn owned and controlled by Volkswagen,

during Lamborghini's 1998 model year. The combined worldwide production

of Volkswagen, Audi, and Lamborghini during Lamborghini's 1998 model

year was much greater than 10,000 vehicles. As section 32902(d)(1)

prohibits establishing alternative fuel economy standards for

manufacturers producing more than 10,000 vehicles during the model year

for which the exemption is sought, Lamborghini, by virtue of its coming

under the ownership of Audi and Volkswagen, is ineligible for an

exemption for the 1998 model year. Similarly, as Lamborghini and its

parents, Audi and Volkswagen, will manufacture more than 10,000

vehicles annually in the 1999 model year, the agency is denying

Lamborghini's request for an exemption for MY 1999 as well.

The agency notes that Vector, which submitted a joint petition for

exemption with Lamborghini, remains under the ownership of V-Power.

Vector and its parent company produce fewer than 10,000 vehicles

worldwide each year. The company is, therefore, still eligible for an

exemption from the generally applicable fuel economy standards. Vector

has requested that the agency consider the joint petition filed on

behalf of itself and Lamborghini to be a single petition seeking an

alternative standard for Vector alone. To assist the agency in

considering its decision to set such an alternative standard, Vector

provided NHTSA with information regarding its maximum feasible fuel

economy for the 1998 model year. NHTSA has determined Vector's maximum

feasible fuel economy for that year and establishes an alternative

standard of 12.1 mpg for MY 1998, based on Vector's request. When

Vector furnishes the agency with additional MY 1999 data and

information to support its request for an alternative standard for that

year, NHTSA will address its petition in a separate decision. In prior

model years, Vector exclusively relied on the Lamborghini engine in its

passenger cars. Volkswagen's acquisition of Lamborghini leaves Vector

technically uncertain regarding the supplier of engines for its 1999

models. Therefore, at this time, the agency cannot determine Vector's

maximum feasible fuel economy for MY 1999.

Regulatory Impact Analyses

NHTSA has analyzed this decision and determined that neither

Executive Order 12866 nor the Department of Transportation's regulatory

policies and procedures apply. Under Executive Order 12866, the

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

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

future effect.'' The decision is not generally applicable, since it

applies to Automobili Lamborghini S.p.A. and its parent companies and

Vector Aeromotive Corporation, as discussed in this notice. Under DOT

regulatory policies and procedures, the decision is not a ``significant

regulation.'' If the Executive Order and the Departmental policies and

procedures were applicable, the agency would have determined that this

decision is neither major nor significant. The principal impact of this

decision is that the companies seeking an exemption could be required

to pay civil penalties if the average fuel economy of the Volkswagen/

Audi/Lamborghini's and Vector's fleets are less than the generally

applicable standard. In that event, purchasers of those vehicles may

have to bear the burden of those civil penalties in the form of higher

prices. Since this rule sets an alternative standard at the level

determined to be the maximum feasible level for Vector for MY 1998, 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 Vector's fleet, the

incremental usage of gasoline by Vector's customers would not affect

the nation's need to conserve gasoline. There would not be any impacts

to the public at large.

The agency has also considered the environmental implications of

this decision in accordance with the Environmental Policy Act and

determined that it does not significantly affect the human environment.

Regardless of the fuel economy of the affected 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 denial of

Lamborghini's request and the exemption of Vector's request for

alternative standards. Further, since the passenger automobiles at

issue will be required to meet applicable passenger car fuel economy

standards, the decision does not affect the amount of fuel used.

Since the Regulatory Flexibility Act may apply to both decisions

denying an exemption to a manufacturer and exempting a manufacturer

from a generally applicable standard, I certify that this decision will

not have a significant economic impact on a substantial number of small

entities. While the denial of the exemption imposes a burden on

Lamborghini, the company and its parent companies are not small

businesses. The prices of 1998 and 1999 Lamborghini automobiles are not

likely to be affected by this decision as the Lamborghini vehicles are

sold in very small numbers and will be included in the fleet of its

parent company. The relatively low fuel economy of the small number of

Lamborghini vehicles will be outweighed by the comparatively high fuel

economy of the large numbers of Volkswagen and Audi vehicles.

[[Page 12092]]

Purchasers will therefore not be affected. This decision does not

impose any burdens on Vector. It does relieve the company from being

subject to an infeasible standard for MY 1998 and from having to pay

civil penalties for noncompliance with that standard. Since the price

of 1998 Vector automobiles were not affected by this decision, the

purchasers are not affected.

List of Subjects in 49 CFR Part 531

Energy conservation, Fuel economy, Imports, Motor vehicles.

In consideration of the foregoing, 49 CFR Part 531 is amended as

set forth below:

PART 531--[AMENDED]

1. The authority citation for Part 531 continues to read as

follows:

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

1.50.

2. Section 531.5(b) is amended by republishing paragraph (b)

introductory text and adding paragraph (b)(13) 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) Vector Aeromotive Corporation.

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

Average fuel

economy

Model year standard

(miles per

gallon)

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1998.................................................... 12.1

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* * * * *

Issued on: March 5, 1999.

L. Robert Shelton,

Associate Administrator for Safety Performance Standards.

[FR Doc. 99-6052 Filed 3-10-99; 8:45 am]

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