01-1691. Panoz Auto Development Company; Grant of Application for Temporary Exemption From Federal Motor Vehicle Safety Standard No. 208

This notice grants the application by Panoz Auto Development Company of Hoschton, Georgia, for a temporary exemption from paragraph S4.1.4 of Federal Motor Vehicle Safety Standard No. 208 Occupant Crash Protection. The basis of the application is that compliance will cause substantial economic hardship to a manufacturer that has tried to comply with the standard in good faith.

Notice of receipt of the application was published on October 25, 2000, and an opportunity afforded for comment (65 FR 63913).

Panoz received NHTSA Exemption No. 93-5 from S4.1.4 of Standard No. 208, an exemption for two years which was initially scheduled to expire August 1, 1995 (58 FR 43007). It applied for, and received, two two-year renewals of this exemption (61 FR 2866; 63 FR 16856), the last of which expired March 1, 2000. Panoz now seeks a new exemption from S4.1.4 on hardship grounds, that would expire March 31, 2003. This exemption would apply to the Panoz Roadster but not to the company's other product, the Panoz Esperante, which, during the term of the last exemption, has been designed to comply with S4.1.4.

Panoz's original exemption was granted pursuant to the representation that its Roadster would be equipped with a Ford-supplied driver and passenger airbag system, and would comply with Standard No. 208 by April 5, 1995, after estimated expenditures of $472,000. As of the time of its application, April 1993, the company had expended 750 man hours and $15,000 on the project.

According to its 1995 application for renewal,

Panoz has continued the process of researching and developing the installation of a driver and passenger side airbag system on the Roadster since the original exemption petition was submitted to NHTSA on April 5, 1993. To date, an estimated 1680 man-hours and approximately $50,400 have been spent on this project.

At that time, Panoz used a 5.0L Ford Mustang GT engine and five speed manual transmission in its car. Because “the 1995 model year and associated emission components were revised by Ford,” this caused

a delay in the implementation of the airbag system on the Roadster due to further research and development time requirements and expenditure of additional monies to evaluate the effects of these changes on the airbag adaptation program.

Shortly before filing its application for first renewal in 1995, Panoz learned that Ford was replacing the 5.0L engine and emission control system on the 1996 Mustang and other passenger cars with a modular 4.6L engine and associated emission components. The 1995 system did not meet 1996 On-Board Diagnostic emission control requirements, and Panoz was faced with using the 1996 engine and emission control system as a substitute. The majority of the money and man hours at that time had been spent on adapting an airbag system to the 5.0L engine car, and the applicant had to concentrate on adapting it to a 4.6L engine car. Panoz listed eight types of modifications and testing necessary for compliance that would cost it $337,000 if compliance were required at the end of a one-year period. It asked for and received a two-year renewal of its exemption.

However, between 1995 and 1997, Panoz found integration of the 4.6L engine into its existing chassis more difficult than anticipated, primarily because the 4.6L was 10 inches wider than the engine it replaced. This required a total redesign of the chassis, requiring expenditure of “a significant amount of resources.” Simultaneously, Panoz designed the vehicle to allow for the integration of the Ford Mustang driver-side and passenger-side airbag systems. Panoz described these steps in some detail and estimates that between May 1995 and August 1997 it spent 2200 man-hours and $66,000 on these efforts. In the same time period, it spent $47,000 in static and dynamic crash testing of a 4.6L car related to airbag system development. Panoz concluded by describing the additional modifications and testing required to adapt the Ford system to its car. These costs totaled $358,000. In 1997, the company argued that a two-year renewal of its exemption would provide time to generate sufficient income (approximately $15,000 a month through sales of vehicles and private funding) to fund the modifications and testing. After August 1997, Panoz spent an additional 1779 man hours and $87,375 in airbag development for the Roadster, a large portion of which was to adapt the 1997-98 Ford Mustang mechanical system. In September 1998, NHTSA issued its Notice of Proposed Rulemaking (NPRM) on advanced airbags which would have required Panoz to begin the phase-in of the new system as of September 1, 2002. Panoz decided that the mechanical airbag system it was developing could not comply with the proposed advanced system. It also lacked the resources to develop two systems simultaneously, so it turned its development efforts towards the advanced system, which will be in its new model, Esperante. In November 1999, NHTSA issued a Supplemental NPRM under which implementation of the advanced airbag rule would be delayed for small manufacturers until September 1, 2005 (subsequently adopted in the final rule of May 2000). This resulted in Panoz's resumption of efforts to adapt the Ford Mustang airbag system to its Roadster. However, with its 1999 models, Ford had replaced the mechanical airbag system with an electronic one, “which dictated that Panoz would have to conduct further crash testing in order to properly calibrate the [Restraint Control Module] for application on the AIV Roadster.” Panoz intends to have the electronic system adapted by the end of the exemption it has requested. The foregoing is a summary of Panoz's compliance efforts which are set forth in detail in its application.

In sum, Panoz has been exempted from compliance with the airbag requirements for all passenger cars that it manufactured between August 1, 1993, and March 1, 2000, approximately 61/2 years. These, however, total only 178 units.

At the time of its original petition, Panoz's cumulative net losses since incorporation in 1989 were $1,265,176. It lost an additional $249,478 in 1993, $169,713 in 1994, $721,282 in 1995, and $1,349,241 in 1996. Its losses continued in 1997, 1998, and 1999, respectively $3,253,111, $4,264,689, and $2,996,903. Thus, Panoz's losses for the years that the exemption was in effect, 1993-99, total $13,004,417.

The applicant reiterated its original arguments that an exemption would be in the public interest and consistent with the objectives of traffic safety. Specifically, The Roadster is built in the United States and uses 100 percent U.S. components, bought from Ford and approximately 95 other companies (“at least 250 employees” of which “remain involved in the Panoz project”). Panoz provides employment for 47 full time and three part time employees. The company now has 33 U.S. dealers. The Roadster is said to provide the public with a classic alternative to current production vehicles. It is the only vehicle that incorporates “molded aluminum body panels for the entire car,” a process which continues to be evaluated by other manufacturers and which “results in the reduction of overall vehicle weight, improved fuel efficiency, shortened tooling lead times, and increased body strength.” With the exception of S4.1.4 of Standard No. 208, the Roadster meets all other Federal motor vehicle safety standards.

No comments were received on the application.

In spite of its previous exemptions, Panoz has accumulated more than $13,000,000 in net losses during the exemption periods, over half of that occurring in 1998 and 1999 when its latest extension was in effect. After NHTSA had granted the previous extension on April 6, 1998 (63 FR 16856), the agency issued its advanced airbag NPRM, in September 1998, and Panoz turned its limited resources towards an attempt to develop an advanced airbag system in compliance with the proposal, and anticipated that it would have to comply as of September 1, 2002. Fourteen months later, in November 1999, NHTSA issued a supplemental NPRM under which compliance would be deferred until September 1, 2005 for small manufacturers such as Panoz. At this point, Panoz resumed its efforts to modify the Ford mechanical airbag system only to find that Ford had changed to an electronic system with its 1999 models. Panoz could not adopt the system without additional crash testing, and it now anticipates that it will be in compliance at the end of the two-year extension it has requested. Although this is the fourth time that Panoz has applied to NHTSA for an exemption from the automatic restraint requirements of Standard No. 208, the statute imposes no limit on the number of times that a manufacturer may apply, and a further exemption may be granted upon appropriate findings of hardship and good faith efforts to comply.

We have concurred before with Panoz's arguments that an exemption would be in the public interest and consistent with the objectives of motor vehicle safety. The Roadster is built in the United States and 100% of its components are bought from Ford and from other domestic suppliers. With the exception of Standard No. 208, the Roadster is said to meet all other applicable Federal motor vehicle safety standards.

In consideration of the foregoing, we hereby find that Panoz has met its burden of persuasion that, to require compliance with S4.1.4. of Federal Motor Vehicle Safety Standard No. 208 would cause substantial economic hardship to a manufacturer that has tried in good faith to comply with the standard. We further find that a temporary exemption is in the public interest and consistent with the objectives of motor vehicle safety. Accordingly, Panoz Auto Development Company is hereby granted NHTSA Temporary Exemption No. EX2001-1 from S4.1.4 of 49 CFR 571.208 Motor Vehicle Safety Standard No. 208 Occupant Crash Protection. This exemption applies only to the Panoz Roadster and will expire on January 1, 2003.

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

Issued on January 11, 2001.

Rosalyn G. Millman,

Deputy Administrator.