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Group Lotus Plc.; Receipt of Application for a Temporary Exemption From Federal Motor Vehicle Safety Standard No. 108 and Part 581 Bumper Standard

1,901 words
24 October 2003
Federal Register
61035
Vol. 68, No. 206
English
(c) 2003 Federal Information & News Dispatch, Inc. All rights reserved

In accordance with the procedures of 49 CFR part 555, Group Lotus Plc. ("Lotus" has applied for a Temporary Exemption from S7. Headlighting requirements, of Federal Motor Vehicle Safety Standard ("FMVSS" No. 108, Lamps, reflective devices, and associated equipment; and Part 581 Bumper Standard. The basis of the application is that compliance would cause substantial economic hardship to a manufacturer that has tried in good faith to comply with the standard.

We are publishing this notice of receipt of the application in accordance with the requirements of 49 U.S.C. 30113(b)(2), and have made no judgment on the merits of the application.

I. Background

Lotus, which was founded in 1955, produces small quantities of performance cars. In the past five years, Lotus has sold a total of 550 automobiles in the United States. The only current Lotus vehicle sold in the United States is Lotus Esprit ("Esprit". In the same time period, Lotus has manufactured a total of 18,888 vehicles worldwide, including Lotus Elise ("Elise".

The Elise was introduced in 1996, but it was not originally designed or intended for the U.S. market. However, after deciding to terminate production of the Esprit by 1999, *1 petitioner sought to introduce the Elise in the United States. Significant management, ownership and financial hardship issues contributed to the delay in introducing the Elise model. Recently, Peruashan Otomobile Nasional Berhad ("Proton" has taken a 100% ownership of Lotus. Petitioner is now ready to introduce the Elise vehicle into the U.S. Market. A description of the Elise vehicle is set forth in the Exhibit 1 of the petition (Docket No. NHTSA-03-16341). For additional information on the vehicle, please go to http://www.LotusCars.com.

*1 Espirit produciton was eventually extended by three years while petitioner sought to bring Elise into compliance with FMVSS. Espirit will cease production on 12/31/2003.

II. Why Lotus Needs a Temporary Exemption

Lotus has continued to experience substantial economic hardship, previously discussed by the agency in a March 3, 2003 Renewal of a Temporary Exemption from FMVSS No. 201 (68 FR 10066). *2 Lotus' latest financial submissions show the company's operating loss of [pound]43,228,000 ([ap] $69,000,000) for the fiscal year 2000; a loss [pound]18,055,000 ([ap] $29,000,000) for the fiscal year 2001; and a loss of [pound]2,377,000 ([ap] $4,000,000) for its fiscal year 2002. This represents a cumulative loss for a period of 3 years of [pound]63,660,000 ([ap] $102,000,000). *3

*2 We note that the Elise vehicle is FMVSS No. 201 compliant.

*3 All dollar values are based on an exchange rate of [pound]1= $1.60.

According to the petitioner, the cost of making the Elise compliant with the headlighting requirements of FMVSS 108 and the bumper standard is beyond the company's current capabilities. Petitioner contends that developing and building FMVSS-compliant headlamps and Part 581-compliant bumpers cannot be done without redesigning the entire body structure of the Elise. Specifically, developing Part 581-compliant bumpers would cost $6 million dollars over a period of 2 years. Producing an actual FMVSS-compliant headlamp would cost approximately $1.1 million. In addition, there are unspecified costs of body modifications in order to accommodate the new headlamp, because there is insufficient space in the current body structure to permit an FMVSS-compliant headlamp.

Lotus requests a three-year exemption in order to concurrently develop compliant bumpers and headlamps and make necessary adjustments to the current body structure. Petitioner anticipates the funding necessary for these compliance efforts will come from immediate sales of Elise vehicles in the United States.

III. Why Compliance Would Cause Substantial Economic Hardship and How Lotus Has Tried in Good Faith To Comply With Standard No. 108 and the Bumper Standard

Petitioner contends that Lotus cannot return to profitability unless it receives the temporary exemption. In support of their contention, Lotus prepared alternative forecasts for the next 3 fiscal years. The first forecast assumes that the petitioner receives exemptions from S7 of FMVSS No. 108 and the bumper standard. The second forecast assumes the exemptions are denied. *4 In the event of denial, Lotus anticipates extensive losses through the fiscal year 2006, because it cannot bring the Elise into full compliance any earlier.

*4 See Petition Exhibit 2 (Docket No. NHTSA-03-16341).m

[Page Number 61036]



Fiscal Year Forecast if Forecast if exemptions
exemptions granted denied (in ]
(in ]

2003 [ap] $975,000 [ap]- $1,700,000
2004 [ap] $12,520,000 [ap]- $15,402,000
2005 [ap] $11,749,000 [ap]- $22,718,000


According to the petition, Lotus expended substantial resources (approximately $27,000,000) in the past 12 months in order to bring Elise into compliance with the Federal Motor Vehicle Safety Standards and other U.S. regulations. Specifically, Lotus invested approximately $5,000,000 in order to obtain a suitable engine supplier capable of complying with U.S. emissions standards. Next, Lotus developed an FMVSS 208 compliant air bag system. Significant resources are currently being expended in order to bring Elise in compliance with all other Federal Motor Vehicle Safety Standards, including FMVSSs 208, 210, 212, 214, 219 and 301.

As previously discussed, the Elise was not designed for the U.S. market and does not have a conventional bumper system or the underlying bumper structure. Instead, it was designed with "clam shell" body parts. According to the petitioner, installing a compliant bumper system would require re-designing the entire body of the automobile.

Petitioner considered equipping the Elise with an "interim headlamp" that would comply with FMVSS No. 108. This headlamp would not feature a polycarbonate cover currently on the vehicle, and would have been assembled from "off-the-shelf" parts. However, the development of this "interim headlamp" would cost $500,000. Because Lotus anticipates introducing an all- new, fully compliant Elise in 2006, the projected number of vehicles sold until the introduction of the new 2006 model could not justify this investment.

Petitioner contends that installation of "an interim headlamp" without a polycarbonate cover would also significantly decrease forecasted sales because aesthetic appearance of the automobile would be compromised. Lotus marketing research forecasted a sales decline of as much as 30%. Further, the absence of the polycarbonate cover would have a negative effect on vehicle aerodynamics, and would decrease fuel economy. Finally, Lotus indicated that installation of "interim headlamps" could result in U.S. customers purchasing aftermarket or "European-spec" headlamps and installing these headlamps on their vehicles.

As previously stated, Lotus plans to introduce the second generation Elise in late 2006. This vehicle will feature compliant headlamps, bumpers and advanced air bags.

IV. Why an Exemption Would Be in the Public Interest and Consistent With the Objectives of Motor Vehicle Safety

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

1. Petitioner notes that the current Elise headlamp does not pose a safety risk because the headlamp's photometrics are very close to the requirements of FMVSS 108. The headlamp has also been subjected to environmental testing, and has a good warranty record.

2. Petitioner argues that the clamshell body system utilized by the Elise vehicle acts to reduce low-speed damage even in the absence of conventional bumpers. In a situation involving greater damage, the cost of an entire fiberglass clamshell is comparable to bumper-related repair costs of other "high-end" vehicles.

3. Petitioner suggests that denial of the petition would prevent Lotus from introducing the Elise for a period of three years and would in fact cause Lotus to seize U.S. operations. This would in turn result in loss of jobs by Lotus employees in the U.S. *5

*5 In the event the petition is granted, Lotus anticipates hiring more employees and expanding its dealer network.

4. With respect to consumers, petitioner argues that denial of the petition would limit consumer choices by eliminating Lotus from the marketplace. Lotus contends that its continued presence in the U.S. is needed in order to provide parts and service for the existing Lotus Esprit customers.

5. Lotus remarks that due to the nature of the Elise vehicle, it will, in all likelihood, be utilized infrequently as a "second" or a recreational vehicle.

6. Finally, Lotus notes that the Elise does comply with all other Federal Motor Vehicle Safety Standards, and features above-average fuel economy.

V. How You May Comment on Lotus's Application

We invite you to submit comments on the application described above. You may submit comments [identified by DOT Docket Number NHTSA-03-16341] 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 am and 5 pm, 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 below. To the extent possible, we shall

[Page Number 61037]

also consider comments filed after the closing date. We shall publish a notice of final action on the application in the Federal Register pursuant to the authority indicated below.

Comment closing date: November 24, 2003.

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

FOR FURTHER INFORMATION CONTACT: George Feygin in the Office of Chief Counsel, NCC-112, (Phone: 202-366-2992; Fax 202-366-3820; E-Mail: [email protected]).

Issued on: October 20, 2003.
 

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Intresting read. With a three year exemption, wonder if they would rework the car. Or with the S2 already around a few years a new generation would be out. In ether case would think it would be a bit heavier as a '08.

Just notice the dates on this are this week, with a response by Nov. Would think/hope it's only a formality at this point. :eek:
 

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sounds like the 2006 model will be a complete redesign. Should be interesting.

As long as the DOT doesnt' make Lotus go with a interim headlamp, I think i'll be happy. I'd be upset if they changed the looks over what we already knew.
 

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The real issue to me is-

Is this just a formality, the paperwork so to speak? I thought the exemptions were a done deal. If so... then this is just the paperwork right?

If not, I am a little suprised. I would not want to be in the positiion of Lotus finding out a couple months before taking hard orders, that the headlights have to be changed and they are bolting on large rubber bumpers.
 

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The timeframe seems somewhat unclear. At one point, they talk about the "2006 model" for full compliance. Since we're getting the 2005 model, that would be the second model year. But then it says "As previously stated, Lotus plans to introduce the second generation Elise in late 2006." That's more than two years from the first car being sold, so it would have to be the 2007 model.

In any case, one reason why I wanted to be on the list for the first year is that I'm concerned that they will have to uglify (is that a word? ;) ) and make it heavier for US regulations in future model years.
 

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Well, doing a bit of reading between the lines. Lotus expects a new version of the Elise in '06. There has been talk of a new modual chassis, so while they can stick with what we're getting for up to 3 yrs, if it's only 1.5yrs, in a sense it's a stop-gap car... which may be a good thing for the light-weight crowd.
 

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<b>'We ...have made no judgment on the merits of the application.'</b>

That does sound a bit scary. I also thought this was in the bag already. :confused:

If Lotus does not secure this excemption then I'm headed back to the Porsche camp. Well I'm going to stay positive and believe this is just a formality...
 

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Randy Chase said:
rubber bumpers.
They do say it's a go-kart for the street:p

If they switch to a full DOT compliant structure after the first year of production making the car bigger and heavier just think what the value of our cars will be:D
 

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ConeFusion said:
In any case, one reason why I wanted to be on the list for the first year is that I'm concerned that they will have to uglify (is that a word? ;) ) and make it heavier for US regulations in future model years.
I totally agree. It makes me feel better about my decision to get in early on the Elise even though, historically speaking, buying one of the first in a production run is never a good idea.

FYI, if anyone is interested in the FMVSS codes and explanations, they are all listed here: http://www.nhtsa.dot.gov/cars/rules/import/FMVSS/

... and if you're *really* interested, here's the full text on standard 108 (the one Lotus is trying to waiver): http://fmvss108.tripod.com/fmvss108text.htm

... and even more info about standard 108 in general: http://fmvss108.tripod.com

:)
 

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Devil's advocate says...

It's entirely possible that they could build a DOT compliant car that is even lighter weight than what exists now while increasing performance. Then just think what the value of our cars will be. ;)

But I agree... the car will probably get slightly heavier as time goes on.
 

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strawtarget said:
Devil's advocate says...

It's entirely possible that they could build a DOT compliant car that is even lighter weight than what exists now while increasing performance. Then just think what the value of our cars will be. ;)

But I agree... the car will probably get slightly heavier as time goes on.
I was thinking more along the lines that the car will get uglier - if they have to raise the height of the lights, remove or reshape the lense covers, add bumpers, etc... we'll start getting Lamborghini Countach add-ons for the US market (remeber those huge bumpers they were slapping on the Countach in the late 80's). blech.
 

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Randy Chase said:
The real issue to me is-

Is this just a formality, the paperwork so to speak? I thought the exemptions were a done deal. If so... then this is just the paperwork right?

If not, I am a little suprised. I would not want to be in the positiion of Lotus finding out a couple months before taking hard orders, that the headlights have to be changed and they are bolting on large rubber bumpers.
The Regulation that covers the processing of these applications states that:

Unless a later effective date is specified in the notice of the grant, a temporary exemption is effective upon publication of the notice in the FEDERAL REGISTER and exempts vehicles manufactured on and after the effective date. 47 C.F.R. s 555.7(f).

So, at the very least, Lotus cannot manufacture any US-bound cars until the petition is granted. Unfortunately, the Regs don't set any timeframe for deciding a petition. I would hope that Lotus had sufficient communication with the NHTSA to be satisfied that their petition will be granted prior to filing it. (The fact that it was published at least shows that petition was not formally insufficient.)

Also noteworthy is that although - by statute - the orginal exemption may not exceed 3 years, the NHTSA will consider applications for renewal, if the "substantial economic hardship" prong is still satisfied.
 

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Sound like the next generation Elise (probably a 2007 model) will be more like the M250. Larger, more refined, and car like?




CLICK HERE
 

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So, at the very least, Lotus cannot manufacture any US-bound cars until the petition is granted.
Of course. But considering the schedule and $$$'s involved, it would seem almost certain that Lotus must have had some indication that this is okay. What I am saying is that there must have already been communication.

You first have a couple meetings and discuss the issue with the people involved that can approve it. You find out what you have to do. You get verbal approval. And then you follow up with the application.

I hope.
 

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I have no real knowledge about what's going on here, but as a government bureaucrat, I can say that usually by the time you publish a notice such as this, any major issues already have been resolved. By law, the federal government has to publish the proposed rule and solicit comments before finalizing a decision. But unless something drastic and unexpected comes up during the comment period, this should just be routine govt red tape and approval should follow. Lotus and other manufacturers have received exemptions before, so it probably is not that big a deal.

Presumably Lotus has factored all of this into their timeline and we still are on schedule for April 2004.

Since Lotus stated that they anticipate introducing a fully compliant vehicle in late 2006, I would guess that they would be held to that. But with the government, who knows; if Lotus can show a good reason why that's not possible, they could get an extension down the line.

If you are worried about depreciation, keep in mind that most new cars lose almost half their value within the first 3 years. If you want to be practical, wait until 2007 and pick up a used Elise at a bargain price.
 

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jml, agreed with everything except the depreciation statement. I do not expect this car to be half the price in 3 years.

What causes depreciation?

1. Newer models with better stuff. If you own a 2001 Lexus and the 2004 is the same, expect 20 more hp and includes DVD and side airbags... people will want the 2004 model. Makes sense. But if the company is putting out the same car with no substantial changes, this reason goes away.

Unless or until the time that Lotus comes out with a model with better specs, this will not be an issue. As noted, it can work the other way if the newer cars are less desirable for some reason, like more weight.


2. Quantity of cars on the road. More used and new cars available so the market becomes a buyer's market.

With a small number of cars and a lot of demand (as evidenced by the waiting lists..and we have not seen the real demand yet), I think this is a non-issue. Unless Lotus really ramps up production at Hethel. A good example of this, but even less so, is the Toyota Spyder. Numbers around 5000 imported each year. In the 2nd year of the car's life, the cost of a used car was near the same as a new car, in some cases more so. Even now, 4 years into the car's life, with better features on the new cars such as LSD, the car has retained a lot of it's value. I expect the Elise to do even better.

P.S. as a guy who subcontracts to the military, I understand the process. Now I need to go do some work, so I can bill them, and then they can request a quote, so I can eventually get a purchase order. :)
 

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Randy Chase said:
So do I.

But at least it gives me something new to think about: what car would I get instead of the Elise if it gets "federalized" (i.e., screwed up)? Ugh, I don't even think I can tackle that question right now. :(
 

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Good points, Randy, about depreciation. The Elise is not most cars, so it may hold its value pretty well. Look at Vipers - new ones are around $85,000, but even those more than 5 years old seem to be going for $50,000+. That may be a better comparison with what's in store for the Elise, since Viper production is also fairly low.

I'm not worried about depreciation, because I plan to drive my Elise forever. But if you plan to get something new every few years, buying new cars every time could be an expensive proposition.
 

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If the exemption is until the 2006 model year, that raises a question.

Most car companies push the model year early. Buyers enjoy owning a car 6 months prior to the model year. In some cases, car manufacturers have been pushing this earlier and earlier, releasing the next year's model in the spring of the previous year.

Lotus is supposed to be doing that with the Elise, releasing it in April as a 2005 model.

The other reason for doing that is that it simplifies things. If Lotus released the car as a 2004, then when would they switch to a 2005? And would it be exactly the same car? Probably.

In any case, my question is when would they come out with a 2006? Does Lotus have a history here about how they treat model years? I would think the 2006 cars will come out around September of 2005. If so, that is only 15 months or so for the 2005 models.

That is not a long time before we are supposed to see a new model that meets the federal requirements without waivers.
 
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