Interpretation ID: Copy of Robert Babcock
Robert Babcock, Senior Manager
Regulation and Certification Division
Hyundai-Kia America Technical Center, Inc.
6800 Geddes Road
Superior Township, MI 48198
Dear Mr. Babcock:
This responds to your November 26, 2008 letter, as well as an earlier letter from Hyundai-Kia America Technical Center, Inc., concerning a petition you submitted requesting an exemption from the parts marking requirements of Part 541, Federal Motor Vehicle Theft Prevention Standard, for the Kia Amanti beginning with the 2009 model year.
Under 49 CFR Part 543.5(a), a manufacturer may, for each model year, petition the National Highway Traffic Safety Administration (NHTSA) for an exemption of one vehicle line from the requirements of the Vehicle Theft Prevention Standard. Because our agency had already granted a petition submitted by Hyundai-Kia American Technical Center, Inc. (HATCI) for the 2009 Hyundai Genesis, NHTSA staff informally advised HATCI that it appeared to be ineligible for a second exemption for the same model year. You asked us to reconsider this position. This letter provides our response. As discussed below, based on available information, we believe that Hyundai and Kia are eligible as separate manufacturers for parts marking exemptions.
We have previously addressed the issue of how related companies are treated for purposes of parts marking exemptions in an interpretation to Patrick M. Raher, Esq., dated July 12, 2007. We explained:
The definition of manufacturer for the theft prevention standard program is set forth at 49 U.S.C. 32101(5), and reads as follows:
manufacturer means a person
(A) manufacturing or assembling passenger motor vehicles or passenger motor vehicle equipment; or
(B) importing motor vehicles or motor vehicle equipment for resale.
In considering whether related companies are separately eligible for parts marking exemptions, we believe it is appropriate to consider two issues. First, we consider whether the companies are structured such that they can be considered separate persons under the statutory definition. Second, assuming the answer is yes, we look beyond the corporate structure and consider whether the companies are operationally independent from each other. It is necessary to consider this since a manufacturer could be highly integrated in operation but, for variety reasons, use multiple corporations. Also, we separately consider, with respect to the vehicles for which an exemption is sought, whether the vehicles can be considered to have more than one manufacturer and, if so, whether that would affect eligibility for the requested exemption. We note that the statutory provision does not indicate that a person is a manufacturer of a vehicle solely by virtue of ownership or control of another person that is a manufacturer.
In your letter arguing that Kia Motors Corporation (KMC) and Hyundai Motor Company (HMC) should be considered separately eligible for parts marking exemptions, you provided the following explanation of the relationship between KMC, HMC, and HATCI:
KMC is an independent original equipment manufacturer (OEM) of passenger automobiles and light trucks. HMC is also an independent OEM of passenger automobiles and light trucks. HATCI is a Michigan based corporation headquartered and incorporated in the State of Michigan, USA with additional offices and facilities in the State of California.
HATCI is an authorized representative of both HMC and KMC (the Companies), doing business pursuant to independent contracts with both Companies. An analogy of HATCIs relationship with HMC and KMC would be that of a law firm representing two separate clients that produce similar products.
HATCI performs engineering and design services for both Companies. Such activities are performed on behalf of, and independently for, the Companies. HATCIs financial structure provides for independent budgeting, billing, and operational financing of the activities performed for each of the Companies.
The Companies are separately capitalized and operate independently and autonomously; having separate management, administrative and operational structures, financing, marketing, product planning and human resources organizations. The Companies produce, market, and sell separate vehicles, parts, and services. While some products (individual models) are based on core components including engines, transmissions, body structures, and components, these core products are sourced independently and each product is independently designed, engineered, tested, calibrated, and manufactured.
Two exceptions exist regarding these matters. The Hyundai Entourage is produced for HMC under contract by KMC, and is a functional duplicate of the Kia Sedona with the exception of basic calibration and tuning. However, the Entourage is produced for HMC under contract by KMC, and is marketed, sold, and serviced independently by HMC. There are contractual agreements between HMC and KMC making HMC responsible for all aftermarket issues regarding the Entourage including any warranty and recall responsibilities.
The other exception to this arrangement relates to the Research and Development (R&D) function of the Companies. While each company maintains separate management, financial, and operational departments, many of the R&D functions are performed by a unified R&D Group with its own President and Administrative offices. As a practical matter, this group operates as an independent contractor performing functions related to research, development, and testing utilizing highly-capitalized equipment and facilities to ensure appropriate economy. While performed by a unified group, these operations and functions are separately financed and invoiced for each company.
Based on this information, you stated that it is HATCIs contention that both HMC and KMC should be considered and treated as separate companies for the purposes of the consideration of the exemption qualifications of 49 CFR Part 541, and that it be understood that HATCI is merely operating as the authorized representative of KMC regarding this matter.
As indicated above, in considering whether related companies are separately eligible for parts marking exemptions, we believe it is appropriate to consider two issues. First, we consider whether the companies are structured such that they can be considered separate persons under the statutory definition.
In considering this question, we consider the structuring of the companies both in the United States and abroad. In a December 19, 2007 letter on this subject, signed by Jeffrey R. Smith, HATCI provided the following information concerning the corporate structure of Hyundai and Kia in Korea:
Hyundai Motor America is a wholly owned subsidiary of Hyundai Motor Company of the Republic of Korea. Kia Motors America is a wholly owned subsidiary of Kia Motors Corporation of the Republic of Korea. Hyundai Motor Company owns less than forty percent of Kia Motors Corporation stock in the Republic of Korea.
Based on the information provided by you and by Jeffrey R. Smith, we believe the companies are structured such that they can be considered separate persons under the statutory definition.
As indicated above, in situations where companies can be considered separate persons under the statutory definition, we look beyond the corporate structure and consider whether the companies are operationally independent from each other. We believe it is necessary to consider this since a manufacturer could be highly integrated in operation but, for variety reasons, use multiple corporations. We note that the maintenance of separate brand identities and distribution systems does not by itself indicate operational independence.
We believe the issue of whether Hyundai and Kia are operationally independent under this test is a close case. The information provided in your letter indicates that the corporate structure of HMC and KMC have been formed to provide for operational independence in the vast majority of areas. On the other hand, Hyundai and Kia are part of the same automotive group in Korea: the Hyundai-Kia Automotive Group. Moreover, HATCI is also part of the Hyundai-Kia Automotive Group and provides services for both Hyundai and Kia in North America.
After considering the available information in the specific context of eligibility for parts marking exemptions, we have concluded that there is sufficient separation between Hyundia and Kia in operations to treat them as two separate manufacturers.
Finally, as indicated above, we separately consider, with respect to the vehicles for which an exemption is sought, whether the vehicles can be considered to have more than one manufacturer and, if so, whether that would affect eligibility for the requested exemption. However, based on the information you provided, this does not appear to be a relevant consideration for this requested exemption.
For the reasons discussed above, we conclude that Kia is separately eligible for a theft exemption for the Amanti, without regard to Hyundais petition for an exemption for the Genesis. The agency will therefore process your petition for the Kia Amanti.
We note that the analysis presented in this letter is limited to eligibility for theft exemptions. Before deciding whether the analysis would apply in other contexts, we would want to carefully evaluate the relevant statutory and regulatory requirements and purposes.
If you have questions about this or related issues, please feel free to contact Edward Glancy of my staff at (202) 366-2992.
Sincerely yours,
Stephen P. Wood
Acting Chief Counsel
ref:543
d.7/24/09