YES! Sportscars; Receipt of Application for a Temporary Exemption From the Advanced Air Bag Requirements of FMVSS No. 208

DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2006-25545, Notice 1]

YES! Sportscars; Receipt of Application for a Temporary Exemption

From the Advanced Air Bag Requirements of FMVSS No. 208

AGENCY: National Highway Traffic Safety Administration (NHTSA),

Department of Transportation (DOT).

ACTION: Notice of receipt of petition for temporary exemption from

provisions of Federal Motor Vehicle Safety Standard (FMVSS) No. 208,

Occupant Crash Protection.

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SUMMARY: In accordance with the procedures in 49 CFR part 555, YES!

Sportscars has petitioned the agency for a temporary exemption from

certain advanced air bag requirements of FMVSS No. 208. The basis for

the application is that compliance would cause substantial economic

hardship to a manufacturer that has tried in good faith to comply with

the standard.\1\

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\1\ To view the application, go to: http://dms.dot.gov/search/

searchFormSimple.cfm and enter the docket number set fourth in the

heading of this document.

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This notice of receipt of an application for temporary exemption is

published in accordance with the statutory provisions of 49 U.S.C.

30113(b)(2). NHTSA has made no judgment on the merits of the

application.

DATES: You should submit your comments not later than September 12,

2006.

FOR FURTHER INFORMATION CONTACT: Mr. Ed Glancy or Mr. Eric Stas, Office

of the Chief Counsel, NCC-112, National Highway Traffic Safety

Administration, 400 Seventh Street, SW., Room 5219, Washington, DC

20590. Ttlephone: (202) 366-2992; fax: (202) 366-3820.

Comments: We invite you to submit comments on the application

described above. You may submit comments identified by docket number at

the heading of this notice by any of the following methods:

Web site: http://dms.dot.gov. Follow the instructions for

submitting comments on the DOT electronic docket site by clicking on

``Help and Information'' or ``Help/Info.''

Fax: 1-(202)-493-2251.

Mail: Docket Management Facility, U.S. Department of

Transportation, 400 Seventh Street, SW., Nassif Building, Room PL-401,

Washington, DC 20590.

Hand Delivery: Room PL-401 on the plaza level of the

Nassif Building, 400 Seventh Street, SW., Washington, DC, between 9 am

and 5 pm, Monday through Friday, except Federal Holidays.

Federal eRulemaking Portal: Go to http://

www.regulations.gov. Follow the online instructions for submitting

comments.

Instructions: All submissions must include the agency name and

docket number or Regulatory Identification Number (RIN) for this

rulemaking. Note that all comments received will be posted without

change to http://dms.dot.gov, including any personal information

provided.

Docket: For access to the docket in order to read background

documents or comments received, go to http://dms.dot.gov at any time or

to Room PL-401 on the plaza level of the Nassif Building, 400 Seventh

Street, SW., Washington, DC, between 9 a.m. and 5 p.m., Monday through

Friday, except Federal Holidays.

Privacy Act: Anyone is able to search the electronic form of all

comments received into any of our dockets by the name of the individual

submitting the comment (or signing the comment, if submitted on behalf

of an association, business, labor union, etc.). You may review DOT's

complete Privacy Act Statement in the Federal Register published on

April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit

http://dms.dot.gov.

We shall consider all comments received before the close of

business on the comment closing date indicated above. To the extent

possible, we shall also consider comments filed after the closing date.

I. Advanced Air Bag Requirements and Small Volume Manufacturers

In 2000, NHTSA upgraded the requirements for air bags in passenger

cars and light trucks, requiring what are commonly known as ``advanced

air bags.'' \2\ The upgrade was designed to meet the goals of improving

protection for occupants of all sizes, belted and unbelted, in

moderate-to-high-speed crashes, and of minimizing the risks posed by

air bags to infants, children, and other occupants, especially in low-

speed crashes.

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\2\ See 65 FR 30680 (May 12, 2000).

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The advanced air bag requirements were a culmination of a

comprehensive plan that the agency announced in 1996 to address the

adverse effects of air bags. This plan also included an extensive

consumer education program to encourage the placement of children in

rear seats. The new requirements were phased in beginning with the 2004

model year.

Small volume manufacturers are not subject to the advanced air bag

requirements until September 1, 2006, but their efforts to bring their

respective vehicles into compliance with these requirements began

several years ago. However, because the new requirements were

challenging, major air bag suppliers concentrated their efforts on

working with large volume manufacturers, and thus, until recently,

small volume manufacturers had limited access to advanced air bag

technology. Because of the nature of the requirements for protecting

out-of-position occupants, ``off-the-shelf'' systems could not be

readily adopted. Further complicating matters, because small volume

manufacturers build so few vehicles, the costs of developing custom

advanced air bag systems compared to potential profits discouraged some

air bag suppliers from working with small volume manufacturers.

The agency has carefully tracked occupant fatalities resulting from

air bag deployment. Our data indicate that the agency's efforts in the

area of consumer education and manufacturers' providing depowered air

bags were successful in reducing air bag fatalities even before

[[Page 50981]]

advanced air bag requirements were implemented.

As always, we are concerned about the potential safety implication

of any temporary exemptions granted by this agency. In the present

case, we are seeking comments on a petition for a temporary exemption

from the advanced air bag requirements submitted by a manufacturer of

very expensive, low volume, exotic sports cars.

II. Overview of Petition for Economic Hardship Exemption

In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR

part 555, YES! Sportscars has petitioned the agency for a temporary

exemption from certain advanced air bag requirements of FMVSS No. 208.

The basis for the application is that compliance would cause

substantial economic hardship to a manufacturer that has tried in good

faith to comply with the standard. A copy of the petition \3\ is

available for review and has been placed in the docket for this notice.

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\3\ The company requested confidential treatment under 49 CFR

part 512 for certain business and financial information submitted as

part of its petition for temporary exemption. Accordingly, the

information placed in the docket does not contain such information

that the agency has determined to be confidential.

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III. Statutory Background for Economic Hardship Exemptions

A manufacturer is eligible to apply for a hardship exemption if its

total motor vehicle production in its most recent year of production

did not exceed 10,000 vehicles, as determined by the NHTSA

Administrator (49 U.S.C. 30113).

In determining whether a manufacturer of a vehicle meets that

criterion, NHTSA considers whether a second vehicle manufacturer also

might be deemed the manufacturer of that vehicle. The statutory

provisions governing motor vehicle safety (49 U.S.C. Chapter 301) do

not include any provision indicating that a manufacturer might have

substantial responsibility as manufacturer of a vehicle simply because

it owns or controls a second manufacturer that assembled that vehicle.

However, the agency considers the statutory definition of

``manufacturer'' (49 U.S.C. 30102) to be sufficiently broad to include

sponsors, depending on the circumstances. Thus, NHTSA has stated that a

manufacturer may be deemed to be a sponsor and thus a manufacturer of a

vehicle assembled by a second manufacturer if the first manufacturer

had a substantial role in the development and manufacturing process of

that vehicle.

IV. Petition of YES! Sportscars

Background. YES! Sportscars is a division of Funke & Will

Aktiengesellschaft (AG), a German corporation formed in 2000. Funke &

Will AG is a specialized engineering firm which offers engineering

services to the automobile industry on small volume projects. Although

the parent company's two founders together own 85 percent of the

corporation's shares, the German state of Saxony does have a 15-percent

ownership stake.\4\

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\4\ According to the petitioner, the German state government

took an ownership interest in the firm in exchange for subsidies for

capital investment in facilities and equipment. According to YES!

Sportscars, these subsidies cannot be used for operational

expenditures and research and development funding.

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YES! Sportscars, a separate vehicle manufacturing part of the

company, began production in 2001 of high-performance sports cars based

on an aluminum spaceframe. This application concerns the YES! Roadster

(currently the company's only model) which is expected to retail for

$59,000. To date, the primary markets for the YES! Roadster have been

Europe and the Middle East, with the following numbers of vehicles

being produced over the past five years: 12 vehicles in 2001; 37

vehicles in 2002; 42 vehicles in 2003; 48 vehicles in 2004, and 54

vehicles in 2005. None of those vehicles has been sold in the U.S.

market.

According to the petition, the company had originally planned to

produce vehicles for the European market, but it has been determined to

be a matter of financial necessity for YES! Sportscars to enter the

U.S. market, particularly given the limited but global market for these

high-end sports cars. The company anticipates that approximately 65

percent of its total sales will be to the U.S. market.

The petitioner argued that it tried in good faith, but could not

bring the vehicle into compliance with the advanced air bag

requirements, and would incur substantial economic hardship if it

cannot sell vehicles in the U.S. after September 1, 2006.

Eligibility. As discussed in the petition, YES! Sportscars is a

division of Funke & Will AG, a German corporation formed in 2000. The

entire organization currently employs 49 people. No other vehicle

manufacturer has an ownership interest in either YES! Sportscars or

Funke & Will AG, and the reverse is likewise true. Stated another way,

YES! Sportscars is an independent automobile manufacturer which does

not have any common control or is otherwise affiliated with any other

vehicle manufacturer.

The company is a small volume manufacturer whose total production

has ranged from 12 to 54 vehicles per year over the period from 2001 to

2005. According to its current forecasts, YES! Sportscars anticipates

that approximately 250 vehicles would be imported into the U.S. during

the three-year period for its requested exemption, if such request were

granted.

Requested exemption. YES! Sportscars stated that it intends to

certify the YES! Roadster as complying with the rigid barrier belted

test requirement using the 50th-percentile adult male test dummy set

forth in S14.5.1 of FMVSS No. 208. The petitioner stated that it

previously determined the YES! Roadster's compliance with rigid barrier

unbelted test requirements using the 50th-percentile adult male test

dummy through the S13 sled test using a generic pulse rather than a

full vehicle test. YES! Sportscars stated that it, therefore, cannot at

present say with certainty that the YES! Roadster will comply with the

unbelted test requirement under S14.5.2, which is a 25 mph rigid

barrier test.

As for the YES! Roadster's compliance with the other advanced air

bag requirements, YES! Sportscars stated that it does not know whether

the YES! Roadster will be compliant because to date it has not had the

financial ability to conduct the necessary testing.

As such, YES! Sportscars is requesting an exemption for the YES!

Roadster from the rigid barrier unbelted test requirement with the

50th-percentile adult male test dummy (S14.5.2), the rigid barrier test

requirement using the 5th-percentile adult female test dummy (belted

and unbelted, S15), the offset deformable barrier test requirement

using the 5th-percentile adult female test dummy (S17), the

requirements to provide protection for infants and children (S19, S21,

and S23) and the requirement using an out-of-position 5th-percentile

adult female test dummy at the driver position (S25).

YES! Sportscars stated its intention to certify compliance of a

second generation of the YES! Roadster, to be produced by September 1,

2009, which would be certified as complying with all applicable U.S.

standards, including advanced air bags. Accordingly, the company seeks

an exemption from the above-specified requirements of FMVSS No. 208

from September 1, 2006 to August 31, 2009.

Economic hardship. Publicly available information and also the

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financial documents submitted to NHTSA by the petitioner indicate that

the YES! Roadster project will result in financial losses unless YES!

Sportscars obtains a temporary exemption.

Over the period 2001-2005, the YES! Sportscars division of Funke &

Will AG has had net operational losses totaling 484,000 euros ($618,000

at an exchange rate of 1 euro = $1.277).\5\ As of the time of the

application, YES! Sportscars has invested over $3.0 million on the

design, development, and homologation of the YES! Roadster project in

order to have the vehicle meet U.S. standards--not including the

advanced air bag requirements which are the subject of the present

petition for temporary exemption. The company has stated that it cannot

hope to attain profitability if it incurs additional research and

development expenses at this time.

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\5\ According to the YES! petition, the engineering portion of

Funke & Will AG has made a modest profit in the past few years, but

in total, such profits would only amount to 45 percent of the

funding needed to finance the requisite advanced air bag work.

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YES! Sportscars stated that costs associated with advanced air bag

engineering and development (including research and development,

testing, tooling, and test vehicles) have been estimated to be $1.7

million (including internal costs). In its petition, YES! Sportscars

reasoned that sales in the U.S. market must commence in order to

finance this work and that non-U.S. sales alone cannot generate

sufficient income for this purpose. In essence, YES! Sportscars argued

that the exemption is necessary to allow the company to ``bridge the

gap'' until fully compliant vehicles can be funded, developed, tooled,

and introduced for the U.S. market.

If the exemption is denied, YES! Sportscars projects a net loss of

$1.1 million over the period from 2006-2008 (assuming a delayed start

of U.S. sales until 2008). However, if the petition is granted, the

company anticipates a profit of nearly $1.4 million during that same

period. The petitioner argued that a denial of this petition could

preclude financing of the project for USA-compliant vehicles, a

development which would have a highly adverse impact on the company.

Good faith efforts to comply. As stated above, YES! Sportscars

initially planned to produce vehicles for the European, Mid-East, and

Far-East markets, but once it was determined in 2005 that entry into

the U.S. market was a necessary part of its business plan, the company

invested over $3.0 million on research and development and tooling for

its U.S. YES! Roadster program. In that time, the company was able to

bring the vehicle into compliance with all applicable NHTSA

regulations, except for than the advanced air bag provisions of FMVSS

No. 208.

In light of limited resources, the petitioner stated that it was

necessary to first develop the vehicle with a standard U.S. air bag

system. The company has spent over $630,000 to reengineer the YES!

Roadster to include a standard air bag system, which it stated will

then be ``expanded'' into an advanced air bag system.

According to its petition, even though advanced air bags are beyond

its current capabilities, YES! Sportscars is nonetheless planning for

the introduction of these devices. The company stated that Siemens

Restraint Systems will spearhead this effort, and current plans

estimate a cost of $1.1 million (excluding internal costs) and a

minimum lead time of 24 months for the advanced air bag project. YES!

Sportscars stated that the following engineering efforts are needed to

upgrade the YES! Roadster's standard air bag system to an advanced air

bag system: (1) Interior redesign work to the dashboard, steering

column, and electronic systems; (2) sourcing and organization of

supplier and engineering personnel and resources for development work

(including sensor calibration); (3) construction of prototypes, and (4)

testing.

In addition, YES! Sportscars stated that finding suppliers willing

to work with a manufacturer with very low production volumes has proven

extremely difficult, and as a result, the company must wait for

technology to ``trickle down'' from larger manufacturers and suppliers.

YES! Sportscars further stated that small volume manufacturers simply

do not have the internal resources to do full U.S. homologation

projects without reliance on outside suppliers of advanced engineering

technologies.

In short, YES! Sportscars argued that, despite good faith efforts,

limited resources prevent it from bringing the vehicle into compliance

with all applicable requirements, and it is beyond the company's

current capabilities to bring the vehicle into full compliance until

such time as additional resources become available as a result of U.S.

sales. With funding from sale of the current generation of YES!

Roadsters, the company expects that additional development efforts

could start in 2007, thereby allowing production of a fully compliant

vehicle in September 2009.

YES! Sportscars argues that an exemption would be in the public

interest. The petitioner put forth several arguments in favor of a

finding that the requested exemption is consistent with the public

interest and would not have a significant adverse impact on safety.

Specifically, YES! Sportscars argued that the vehicle would be equipped

with a fully-compliant standard U.S. air bag system (i.e., one meeting

all requirements of FMVSS No. 208 prior to implementation of S14).

Furthermore, the company emphasized that the YES! Roadster will comply

with all other applicable FMVSSs.

The company asserted that granting the exemption will benefit U.S.

employment, companies, and citizens, because YES! Roadsters will be

sold and serviced through a network of U.S. dealers. YES! Sportscars

also argued that denial of the exemption request would have an adverse

impact on consumer choice, suggesting that there is domestic demand for

a performance vehicle in the YES! Roadster's price range. The company

also argued that an exemption is unlikely to have a significant safety

impact because these vehicles are not expected to be used extensively

by their owners, due to their ``second vehicle'' nature and

``minimalist design.'' The company also reasoned that given the nature

of the vehicle, it is less likely to be used to transport young

children than most other vehicles.

As an additional basis for showing that its requested exemption

would be in the public interest, YES! Sportscars stated that the YES!

Roadster has an extremely strong and protective chassis, which is

composed of aluminum tubes and composite structure parts. According to

YES! Sportscars, the vehicle design is such that occupants are

effectively placed in a ``protective `cell' '' with the chassis

structure built around them.

V. Issuance of Notice of Final Action

We are providing a 15-day comment period, in light of the short

period of time between now and the time the advanced air bag

requirements become effective for small volume manufacturers (i.e.,

September 1, 2006). After considering public comments and other

available information, we will publish a notice of final action on the

application in the Federal Register.

Issued on: August 18, 2006.

Ronald L. Medford,

Senior Associate Administrator for Vehicle Safety.

FR Doc. E6-14252 Filed 8-25-06; 8:45 am]

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