01-15606. Saleen, Inc.; Grant of Application for Temporary Exemption From Federal Motor Vehicle Safety Standard No. 208

This notice grants the application by Saleen, Inc., of Irvine, California, for a temporary exemption of its S7 passenger car from the automatic restraint requirements of Federal Motor Vehicle Safety Standard No. 208 Occupant Crash Protection. The basis of the request was that compliance would cause substantial economic hardship to a manufacturer that has tried to comply with the standard in good faith. 49 U.S.C. 30113(b)(3)(B)(i).

We published notice of receipt of the application on April 23, 2001, and afforded an opportunity for comment (66 FR 20520).

Saleen referred to itself as a “small volume US manufacturer which currently produces the Saleen S281 and the XP8 Explorer.” Saleen receives completed and certified Mustangs and Explorers from Ford Motor Company drop shipped at the direction of the dealers who own them. Saleen adds a supercharger, makes “other minor engine modifications, front and rear bumper outer skin designs, the seat trim, [upgrades] the tires' wheels/suspension/brakes, and [adds] appliques to the exterior and interior of the vehicle. Saleen does not make any structural changes to the Mustang or the Explorer.” Under NHTSA regulations, Saleen is considered an alterer, rather than a manufacturer, since it modifies previously certified vehicles. (See 49 CFR 567.7). Although it may have altered several hundred Ford vehicles in the year preceding the filing of its application, we have not previously regarded Saleen as a “manufacturer.”

Saleen now intends to manufacture a motor vehicle of its own design. As the vehicle has not entered production, Saleen has manufactured no motor vehicles in the year preceding the filing of its application. The vehicle is called the S7 and is a “two seat, coupe, sportscar.” The S7 has been shown in prototype form at automobile shows around the country. The prototype does not fully comply with the lighting requirements of Motor Vehicle Safety Standard No. 108, Lamps, Reflective Devices and Associated Equipment, but Saleen has assured us that the next prototype and the production models to follow will meet Standard No. 108 and all other standards as well, with the exception of the automatic restraint requirements of Standard No. 208, paragraph S4.1.5.3.

Saleen asked for a three-year exemption for the S7 and anticipates that it will sell a total of 112 of them by the end of 2003. According to the petition, preliminary compliance-related development of the S7 was started in July 2000. By the time it filed its petition in December 2000, the company had “spent an estimated total of 180 man-hours and $18,000 relating to the installation of a driver and passenger side airbag system on the S7.” The monies spent thus far “have been in the areas of exterior and interior design necessary for the installation of airbags.” It has been advised that the airbag development process would cost approximately $1,000,000 not including the cost of test prototype vehicles and airbags, and tooling. This process cannot be completed by the time the company expects to launch the S7, in the summer of 2001. Indeed, the company estimated that it will take up to 20 months to fully develop a system and that the total costs will approach $3,000,000.

Saleen had cumulative net losses before taxes for the past three fiscal years of $9,716,334. It states that it “simply cannot afford to develop the airbags in either the first (2001) or second (2002) year” because of these losses. The company “has exhausted all of its borrowing capacity and must sell and ship S7 vehicles (as well as its other products) to generate cash flow sufficient to defray airbag development costs as well as other S7 development costs.” Although “funding for the S7 was secured through a private investor,” Saleen states that “all further funding for airbags must come from our ordinary income.” Even with an exemption, Saleen projected net losses continuing through the end of the period though earnings before interest, taxes, depreciation and amortization would be positive. It plans to spread out air bag development costs over the next three years to achieve compliance by the end of the exemption period. If the petition is denied, the company believes that it would lose credibility with dealers and negatively impact the demand for altered Saleen vehicles.

The company argued that a temporary exemption is in the public interest because the S7 “is a unique super car designed and produced in the U.S. utilizing many U.S. sourced components.” An exemption would also allow it to maintain its payroll of 122 full time employees and to continue its purchase of U.S. sourced components for the Mustangs and Explorers that it modifies. Its business with U.S. suppliers “indirectly provides employment for several hundred other Americans.” An exemption is consistent with vehicle safety objectives because the S7 otherwise will conform to all applicable Federal motor vehicle safety standards.

We received no comments from the public on Saleen's application.

Saleen is typical of small volume manufacturers who have received temporary exemptions in the past on hardship grounds. It is commencing to manufacture high-priced automobiles for a specialty market with limited resources to do so, and its income statements show net losses for previous fiscal years. It is manifest that to require compliance with Standard No. 208 now would cause Saleen substantial economic hardship through preventing it from the opportunity to enter a new market, although a denial of its application would not appear to NHTSA to have a material effect on its current operations as an alterer.

Saleen is typical, too, in extending its compliance development efforts over a period of time in recognition of its limited finances. NHTSA notes that the company estimates that it will take up to 20 months to fully develop an automatic restraint system. This would appear to justify a 24-month exemption rather than one of 36 months.

The agency has traditionally found that the public interest is served in affording continued employment to a small volume manufacturer's work force and to those of its U.S.-sourced component suppliers, as well as affording the public a wider variety of motor vehicles. An exemption in this case would appear to afford an opportunity for new jobs and part suppliers connected with manufacturing the S7. In the usual case, the vehicle that is the subject of the application complies with all other applicable Federal motor vehicle safety standards and will be made in quantities that will have a negligible impact on the overall level of safety on the roads of this country.

All these factors are present in this case. In consideration of the foregoing, it is hereby found that compliance with the automatic restraint requirements of Standard No. 208 would cause substantial economic hardship to a manufacturer that has tried in good faith to comply with the standard. It is further found that the granting of an exemption would be in the public interest and consistent with the objectives of traffic safety.

Accordingly, Saleen, Inc., is hereby granted NHTSA Temporary Exemption No. 2001-6 from S4.1.5.3 of 49 CFR 571.208, Standard No. 208, Occupant Crash Protection, for the Saleen S7, expiring July 1, 2003.

(49 U.S.C. 30113; delegation of authority at 49 CFR 1.50)

Issued on June 18, 2001.

L. Robert Shelton,

Executive Director.