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Notice

Morgan Motor Company Limited Grant of Application for a Temporary Exemption From Part 581 Bumper Standard

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AGENCY:

National Highway Traffic Safety Administration (NHTSA), DOT.

ACTION:

Grant of application for a temporary exemption from Part 581 Bumper Standard.

SUMMARY:

This notice grants the Morgan Motor Company Limited (“Morgan”) application for a temporary exemption from Part 581 Bumper Standard. In accordance with 49 CFR part 555, the basis for the grant is that compliance would cause substantial economic hardship to a manufacturer that has tried in good faith to comply with the standard.[1]

The National Highway Traffic Safety Administration (NHTSA) published a notice of receipt of the application on January 13, 2005, and afforded an opportunity for comment.[2]

DATES:

The exemption is effective from May 1, 2005, until May 1, 2008.

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FOR FURTHER INFORMATION CONTACT:

George Feygin in the Office of Chief Counsel, NCC-112, (Phone: 202-366-2992; Fax 202-366-3820; e-mail: George.Feygin@nhtsa.dot.gov).

I. Background

Founded in 1910, Morgan is a small privately owned vehicle manufacturer producing approximately 400 to 500 vehicles per year. The vehicles manufactured by Morgan are uniquely styled open top roadsters. In recent years, the only model exported into the United States was the Morgan Plus 8.[3]

Petitioner states that in preparing to replace the Morgan Plus 8 with a new model in the U.S., Morgan sought to use a V6 engine and a manual transmission supplied by Ford Motor Company (Ford). However, it later became apparent that Ford would be unable to supply a suitable engine and manual transmission due to the change in the production plans. The planned Morgan replacement vehicle for the U.S. market could not accommodate an automatic transmission. Because no other alternatives were available, Morgan was unable to proceed with designing a replacement vehicle for the U.S. market. Thus, petitioner stopped selling vehicles in the United States in January of 2004.

After an unsuccessful attempt to manufacture a new vehicle that would replace the Morgan Plus 8, Morgan turned its attention to an existing vehicle designed specifically for the European market, the Morgan Aero 8 (Aero 8).[4] The petition stated, that after prolonged efforts to develop an air bag system and to make other changes to the vehicle, Morgan was able to bring the Aero 8 into compliance with all the Federal motor vehicle safety standards. However, because Aero 8 was not originally intended for the U.S. market and because the petitioner was working on a different vehicle intended for the U.S. market, this latest effort required significant financial expenditures in a short period of time. Petitioner stated that as a consequence, it had not been able to develop bumpers that comply with the requirements of Part 581, Bumper standard.

II. Why Morgan Needs a Temporary Exemption

Petitioner indicated that it has experienced substantial economic hardship, especially in light of decreasing sales and substantial costs incurred in bringing Aero 8 into compliance with FMVSSs. Specifically, Morgan indicated that it spent a total of Start Printed Page 25880£8,000,000 (≉ 15,232,811) [5] on developing Aero 8 for the U.S. market. Petitioner's financial submission showed a net loss of £1,947,456 (≉ $3,739,109) for the fiscal year 2003; a net loss of £582,446 (≉ $1,118,203) for the fiscal year 2002; and a net gain of £148,425 (≉ $284,952) for the fiscal year 2001. This represented a cumulative net loss for a period of 3 years of £2,381,477 (≉ $4,572,664).[6]

According to the petitioner, the cost of making the Aero 8 compliant with the bumper standard was beyond the company's current capabilities because developing and building a compliant bumper requires redesigning the entire body structure of the Aero 8. Morgan estimated the cost of developing a Part 581-compliant bumper to be approximately £3,000,000 (≉ $5,710,407).

Morgan requested a three-year exemption in order to develop compliant bumpers. Petitioner anticipates the funding necessary for these compliance efforts will come from immediate sales of Aero 8 in the United States.

III. Why Compliance Would Cause Substantial Economic Hardship, and How Morgan Has Tried in Good Faith To Comply With the Bumper Standard

Petitioner contends that it cannot return to profitability unless it receives a temporary exemption from the bumper standard for the Aero 8. Specifically, if the exemption is granted, Morgan anticipates a net profit of £596,923 (≉ $1,136,444) for the first year of Aero 8 being sold in the U.S. Morgan also projects that an exemption would have a similar impact in the next year. If the exemption is denied, Morgan will not be able to sell Aero 8 in the U.S. Resulting loss in sales revenue will result in a projected net loss of £2,242,527 (≉ $4,269,536.37). Morgan indicates that a temporary exemption would provide U.S. Morgan dealers with a source of revenue. Without Aero 8 being available in the U.S., some dealers will find it difficult to remain in business and support existing customers. The petitioner will also be forced to cut back on existing customer support in the U.S.

According to its petition, Morgan examined a number of bumper solutions in order to bring the Aero 8 into compliance with Part 581. First, Morgan considered mounting bumpers from another Morgan vehicle onto Aero 8. However, because of Aero 8's unique shape, there were no structures that would accommodate suitable bumper mountings without interference with headlamps. Second, Morgan considered installing rubber bumpers. However, they too caused interference with lighting equipment. Finally, Morgan considered foam-based bumpers. This proved to be the only solution that did not result in interference with lighting equipment. However, it required a change to front and rear aluminum body panels and chassis at a cost of approximately £3,000,000.

IV. Why an Exemption Would Be in the Public Interest

Petitioner put forth several arguments in favor of a finding that the requested exemption is consistent with the public interest. Specifically:

1. Petitioner noted that Aero 8 complies with all Federal motor vehicle safety standards and therefore, the exemption would not increase the safety risks on U.S. highways.

2. Although the Aero 8 bumpers do not comply with Part 581, the cost of bumper repairs is comparable to similarly priced vehicles.

3. Petitioner argues that denial of the petition would limit consumer choices by permanently eliminating Morgan from the marketplace.[7]

4. Morgan remarks that due to the nature of the Aero 8, it will, in all likelihood, be utilized infrequently and each car would not travel in excess of 3,000-4,000 miles annually.

5. Morgan does not anticipate selling more than 100 vehicles annually, and therefore, the impact of the exemption is expected to be minimal.

V. Comments Regarding the Morgan Application

The agency received ten comments in response to the notice of the application. The commenters were: The Coalition of Small Volume Auto Manufacturers (COSVAM); Stephen Stierman; Peter S. Roberts; Andrew Bradley; W. James Franks; Dave Houser; Mark Jehan; Jeff Smith; Thomas Ellsworth; Carlton Shriver.[8] All commenters were in favor of granting the exemption. COSVAM indicated that current U.S. owners of Morgan vehicles are entirely dependent on Morgan for their continued support in the routine maintenance and restoration. COSVAM also stated that the denial of the petition would restrict consumer choice in the U.S. COSVAM noted that specialized vehicles like Aero 8 are used only occasionally and do not average more than 4,000 to 5,000 thousand miles annually. The individual commenters urged the agency to grant the exemption because of Aero 8's unique characteristics would make the car a collector's item, and because they believed that Morgan's low production output would have a negligible effect on motor vehicle safety in the United States. Others indicated that they were in favor of the exemption because the purchasers would be aware that their vehicles do not comply with the Federal bumper standards, and would not drive these rare and expensive cars frequently.

VI. The Agency's Findings

The agency concludes that the Morgan application for a temporary exemption demonstrates that the company has made a good faith effort to bring the Aero 8 into compliance with the Bumper Standard. Morgan has also demonstrated the requisite financial hardship.

Traditionally, the agency has found that the public interest is served in affording continued employment to a small volume manufacturer's work force. The agency has also found that the public interest is served by affording the consumers a wider variety of motor vehicles. In this instance, denial of the petition is likely to put Morgan out of business in the U.S. and cause the company to suffer losses in excess of $4,000,000. Further, an exemption would assure an adequate supply of spare parts to existing U.S. Morgan owners.

The term of this exemption will be limited to three years and the agency anticipates that the Aero 8 will be sold in very limited quantities. We anticipate that with the help of revenues derived from U.S. sales, Morgan will be able to introduce a fully compliant vehicle by the time this exemption expires.

Because Morgan Aero 8 will be manufactured in limited quantities and because each vehicle is likely to be operated only on a limited basis, the agency finds that this exemption will likely have a negligible impact on the overall safety of U.S. highways. The agency notes that the vehicle subject to this petition complies with all applicable Federal motor vehicle safety standards.

In consideration of the foregoing, it is hereby found that compliance with the requirements of 49 CFR part 581 Bumper Standard would cause substantial economic hardship to a manufacturer that has tried in good faith to comply with the standard. It is Start Printed Page 25881further found that the granting of an exemption would be in the public interest and consistent with the objectives of traffic safety.

In accordance with 49 U.S.C. § 30113(b)(3)(B)(i), Morgan Aero 8 is granted NHTSA Temporary Exemption No. EX 05-1, from 49 CFR part 581 Bumper Standard. The exemption shall remain in effect until May 1, 2008.

(49 U.S.C. 30113; delegations of authority at 49 CFR 1.50. and 501.8)

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Issued on: May 9, 2005.

Jeffrey W. Runge,

Administrator.

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Footnotes

1.  To view the petition, please got to: http://dms.dot.gov/​search/​searchFormSimple.cfm (Docket No. NHTSA-2005-20053).

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4.  A description of the Aero 8 vehicle is attached to the petition and can be viewed online at http://dms.dot.gov/​search/​searchFormSimple.cfm (Docket No. NHTSA-2005-20053).

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5.  All dollar values are based on an exchange rate of £1 = $1.90 as of 4/18/2005.

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6.  See April 16, 2005 supplement to the Morgan application (Docket No. NHTSA-2005-20053-13).

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7.  As previously discussed, Morgan manufactures unique automobiles for which there is no direct competition or a substitute.

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8.  See Docket No. NHTSA-2005-20053.

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[FR Doc. 05-9707 Filed 5-13-05; 8:45 am]

BILLING CODE 4910-59-P