ID: 2396y

Robert A. Rogers, Director
Automotive Safety Engineering
Environmental Activities Staff
General Motors Corporation
General Motors Technical Center
30400 Mound Road
Warren, MI 48090-9015

Dear Mr. Rogers:

This is in reply to your letter asking for confirmation that an interpretation of a notice of proposed rulemaking remains in effect with respect to the final rule based upon that proposal. I regret the delay in responding.

Specifically, you reference an interpretation dated September 12, l988, that this Office provided Koito Corporation, informing it that each of the two Vehicle Headlamp Aiming Device (VHAD) designs depicted "complies with the intent of S7.7.5.2" of Standard No. l08. The second design consisted of a detachable spirit level that would be inserted in the bulb socket for the purpose of aiming the headlamp. We informed Koito that "under subsection (b)(7) photometric testing is provided for "the VHAD and headlamp assembly (if the headlamp is separable or intended to be used with the VHAD)", and that this meant that the VHAD may be integral with the headlamp assembly or separate from it. However, we also cautioned that our comments were based upon the proposal, and could change with the issuance of the final rule.

You have commented that the final rule was the same with respect to the pertinent VHAD wording. This is not entirely true. The final rule (paragraph S7.7.5.2(b)(vii)) omitted the parenthetical phrase "(if the headlamp is separable or intended to be used with the VHAD)". You also noted that paragraph S7.7.5.2(c)(l) of the final rule defines a headlamp assembly as "(the headlamp(s) and the integral or separate VHAD mechanism)". The intent of this language is to specify a VHAD that is a permanent part of the headlamp, and hence integral, or to have a separate VHAD that is part of the mounting mechanism. It was not meant as permitting a VHAD that could be physically separated from headlamp or the mounting mechanism. Thus, in our view and upon our further consideration of the matter, a detachable VHAD does not meet the "intent" of the final rule. This means that the spirit level design described in your letter, which is not integral to the headlamp or mounting mechanism, is not permissible. We shall provide Koito with a copy of this letter.

Sincerely,

Stephen P. Wood Acting Chief Counsel

ref:l08 d:4/9/90

ID: 2397y

Mr. Gary R. Balanza
P.O. Box 88112
Honolulu, HI 96830

Dear Mr. Balanza:

This is in reply to your letter asking for an interpretation whether your invention "will interfere with the standard equipment" required by Motor Vehicle Safety Standard No. l08. I regret the delay in responding.

Your invention, "Pinlights", is described as an auxiliary lighting system designed to fit an automobile's side contours. Its purpose is to light up the entire length of a vehicle, so that it will be more conspicuous at night. We note your uncertainty as to "number of stripes allowed on a car", "colors allowed on a car", and "maximum brightness allowable."

There are two ways to approach your invention under the National Traffic and Motor Vehicle Safety Act, our authority for the issuance of the motor vehicle lighting standard, Standard No. l08. The first is as an item of original equipment, in place on the vehicle at the time it is bought by its first owner. You have asked the correct question: does the invention impair the effectiveness of the lighting equipment required by Standard No. l08? The equipment most likely to be impaired are the side marker lamps and reflectors. These items are located near the front and rear of the vehicle, to enhance vehicle conspicuity by affording an approximation of vehicle length, and an indication of the vehicle's front and rear. The lamps are amber to the front, and red to the rear. Your invention would be located along the side of the vehicle, from front to rear. This suggests that the color of your device should similarly be amber to the front and red to the rear, so as not to impair the effectiveness of the directional function of the side marker lamps.

The second way to approach your invention is as an item available in the aftermarket. Standard No. l08 does not apply to a vehicle in use. However, as it applies to your question, the Vehicle Safety Act prohibits modifications by manufacturers, distributors, dealers, or motor vehicle repair businesses if they render inoperative, in whole or in part, any of the required lighting equipment. In most cases, we consider an impairment of new vehicle equipment to be equivalent to a partial inoperability. Further, if installation of aftermarket equipment directly affects the performance of original equipment (such as a reduction of light output through an interference with the wiring), that would certainly be considered a partial inoperability.

Lighting equipment that is not covered by Standard No. l08 remains subject to the requirements of each State in which a vehicle on which it is installed is registered and/or operated. We are unable to advise you on State laws, and suggest that, for an opinion, you write the American Association of Motor Vehicle Administrators, 4600 Wilson Boulevard, Arlington, Va. 22203.

Sincerely,

Stephen P. Wood Acting Chief Counsel

/ ref:VSA#l08 d:4/9/90

ID: 2398y

Mr. Michael S. Kmiecik
5601 Western Avenue
Omaha, Nebraska 68132

Dear Mr. Kmiecik:

This is in reply to your letter with respect to vehicle modification kits you wish to purchase, to be used in conversion of Datsun 240-280Z cars from closed to open vehicles. You have asked for the safety standards that apply to l974-78 convertibles, and whether the conversion kit meets these standards. I regret the delay in responding.

We appreciate your efforts to meet the requirements of the National Traffic and Motor Vehicle Safety Act. As you appear to realize, the Act requires, in essence, that vehicle alterations by a motor vehicle manufacturer, distributor, dealer or repair business must not render wholly or partially inoperative any device or element of design installed on that vehicle in accordance with a Federal motor vehicle safety standard. This means that a vehicle at the end of its conversion process must continue to meet the standards that applied at the time that it was first manufactured. This does not preclude conversions that render compliance with a standard physically impossible; obviously an open car cannot meet, for example, the standard for roof crush resistance (Standard No. 216), and convertibles, are, in fact, exempt from it. Such a conversion would allow substitution of a two-point (lap belt) restraint system in a convertible for a three-point (lap-shoulder belt) restraint system that may have been installed when it was a closed car (Standard No. 208).

After the vehicle alterations are complete, the vehicle must conform to the barrier tests specified in several standards. We note that the items that comprise the kit are intended to add rigidity to the body and frame after removal of the top, but are unable to advise you of the effect these modifications would have upon the safety performance of the vehicle as converted.

There are no Federal safety standards that apply to the individual items in your kit. The standards that apply to motor vehicles, including convertibles, manufactured from October 1, l973, through September 30, l978, will be found at Title 49 Code of Federal Regulations Part 571. Specifically, the standards appear in volumes titled 49 CFR Parts 200 to 999, revised as of October 1, l973, l974, l975, l976, and l977. Originally, these volumes were available through the U.S. Government Printing Office (which may have an Omaha outlet). If they are no longer available through the GPO, we recommend that you consult a local law library.

Thank you for your interest in motor vehicle safety.

Sincerely,

Stephen P. Wood Acting Chief Counsel

ref:VSA d:4/8/90

ID: 2399y

Mr. Herbert E. Stoel
3772 Prairie Street
Grandville, MI 49418

Dear Mr. Stoel:

This is in reply to your letter to John Womack of this Office, suggesting that the color of taillamps on motor vehicles be green.

The agency is concerned about methods to effectively improve rear lighting and signaling. The issues involved include lamp size, location, operation, combinations and separation, and color. We are learning that changes in lamp function, operation, and color should be approached in a conservative fashion, so as not to confuse the operators of other vehicles.

With specific respect to use of the color green on rear lighting equipment, we are aware that some research suggests a green/red color scheme may enhance driver performance. In such systems, a green lamp indicates that the accelerator pedal is applied, amber that the foot has been lifted from the accelerator pedal, and red, that the brake is being applied. Some years ago, an experiment was conducted with such a system using transit buses in the D.C. area. The results were inconclusive. Although some research suggests a possible improvement in driver performance with green/red lamps, there are no data addressing the possible driver confusion that might arise from multiple color lighting arrays.

Thank you for your suggestion to enhance motor vehicle safety.

Sincerely,

Stephen P. Wood Acting Chief Counsel ref:l08 d:4/8/90

ID: 2400y

Mr. Bill Waltz
Wagner Division
Cooper Industries, Inc.
155 Algonquin Parkway
Whippany, NJ 07981

Dear Mr. Waltz:

This is in reply to your letter requesting permission for deviations from marking requirements for round sealed beam headlamps.

Wagner has been asked to assemble some headlamps designed to appear as closely as possible to those produced by Guide Lamp in the l950's. The lamps would be marked "l" and "2" in accordance with the nomenclature of the day, rather than "2Dl", "1C1", and "2C1", as required by Standard No. l08. The DOT symbol would not be provided, "since this obviously was not on the original lamps." You have informed us that the lamps "will be made to today's photometric standards" and "subjected to all the tests currently required of the round headlights." Finally, "they will be distributed on a limited basis through antique parts dealers."

I am sorry, but we have no authority to exempt manufacturers of motor vehicle equipment from any requirements of the Federal motor vehicle safety standards. Our temporary exemption authority under l5 U.S.C. 1410 extends only to motor vehicles. Further, we have no authority to exempt manufacturers of either vehicles or equipment from their statutory obligation to certify through use of the DOT symbol that their products meet all applicable Federal motor vehicle safety standards.

Under Federal Motor Vehicle Safety Standard No. l08 Lamps, Reflective Devices, and Associated Equipment, the motor vehicle lamps which you have identified, and for which you ask an exemption are designated Type C and Type D sealed beam headlamps. As such, they must be designed to conform to the photometric requirements of SAE Standard J579c, December l978, which are incorporated by reference in Standard No. l08. They are considered replacement equipment, and must conform to all requirements of Standard No. 108, including marking and certification.

Standard No. l08 covers both original and replacement vehicle equipment. Depending on the vehicle category, it became effective for original equipment on January 1, l968, and January 1, l969. On January 1, l972, it became effective for equipment intended to replace original equipment on all motor vehicles manufactured on and after January 1, l972. Therefore, it might appear that the standard would not apply in any event to replacement equipment for l950's vehicles. However, the headlamps you describe are designed to conform to all contemporary requirements, except marking and certification. Even though intended for use on l950's vehicles, these circular headlamps are interchangeable with circular headlamps installed on any vehicle manufactured after the effective dates of Standard No. l08. Therefore, they must be designed to conform with Standard No. l08, and marked and certified accordingly.

The intended markings "l" and "2" would signify mistakenly that the headlamps were designed to conform to SAE Standard J579a, October l965 (which also did not require the DOT symbol on the lens). Until June l989, SAE J579a was incorporated in Standard No. l08 as a permissible option to SAE J579c, but the agency deleted it as the lamps appeared to be out of production. However, even had J579a been retained, we could not have allowed the lenses of headlamps manufactured to J579c to be marked according to J579a.

Sincerely,

Stephen P. Wood Acting Chief Counsel

/ ref:l08 d:4/8/90

ID: 2401y

Mr. George B. Maday
President
Network USA Inc.
136 Walker St., SW
Atlanta, GA . 30313-1326

Dear Mr. Maday:

This is in reply to your letter with respect to the automatic light switching device whose potential for the U.S. market you are assessing. The device automatically activates the headlamps at a pre-determined (but adjustable) level of darkness. There is a manual override for the operator. I regret the delay in responding.

You have asked two questions:

"l. What legislation is in force or pending regarding the mandatory utilization of such daytime running lights for vehicles?"

None. The agency once proposed that motor vehicles be equipped with daytime running lamps as an option, but it terminated rulemaking on this subject without taking action.

"2. What regulations, standards, forms, etc. have to be submitted to you or the appropriate agency to ensure that the product meets any U.S. specifications or standards prior to importation.

None. There are no Federal motor vehicle safety standards that apply to this item of motor vehicle equipment. However, if you intend it to be installed as an item of original equipment, it must not create a noncompliance with Motor Vehicle Safety Standard No. l08 Lamps, Reflective Devices, and Associated Equipment, or result in an impairment of the effectiveness of the lighting equipment that the standard requires. For example, the standard requires the taillamps to be activated when the headlamps are activated. Therefore, when your device activates the headlamps, the taillamps must also be activated. Though expressed in somewhat different terms, the acceptability of your device in the aftermarket is governed by a similar consideration: it may not be installed by a motor vehicle manufacturer, distributor, dealer or repair business if the installation would render inoperative any element of design or device installed in accordance with Standard No. l08. The device would remain subject to the laws of any State in which it is sold or operated. We are unable to advise you as to its acceptability under State laws, and recommend that you consult the American Association of Motor Vehicle Administrators (AAMVA), 4600 Wilson Boulevard, Arlington, Va. 22203.

Sincerely,

Stephen P. Wood Acting Chief Counsel

ref:l08 d:4/8/90

ID: 24023

Dick Keller, Product Development Manager
Bruno Independent Living Aids
1780 Executive Drive
PO Box 84
Oconomowoc, WI 53066





Dear Mr. Keller:

This responds to your recent correspondence where you ask whether defeating a seat cushion occupant classification system on a vehicle manufactured before September 1, 2006, would constitute making the system inoperative when the vehicle modification is performed to accommodate the needs of a person with a disability. I am pleased to be able to provide a response.

By way of background, the National Highway Traffic Safety Administration (NHTSA) administers a statute requiring that motor vehicles manufactured for sale in the United States or imported into the United States be manufactured so as to reduce the likelihood of motor vehicle crashes and of deaths and injuries when crashes do occur. That statute is the National Traffic and Motor Vehicle Safety Act of 1966 ("Vehicle Safety Act") (recodified at 49 U.S.C. 30101, et seq.).

One of the agency's functions under that Act is to issue and enforce the Federal motor vehicle safety standards (FMVSSs). These standards specify safety performance requirements for motor vehicles and/or items of motor vehicle equipment. Manufacturers of motor vehicles must certify compliance with all applicable safety standards and permanently apply a label to each vehicle stating that the vehicle complies with all applicable FMVSSs and providing the vehicle gross vehicle weight rating (GVWR). Alterers of motor vehicles are companies that modify a completed vehicle prior to first retail sale. Alterers must determine whether those modifications could affect the vehicle manufacturer's certification of compliance and, if so, must certify that the vehicle continues to comply with those safety standards that were affected by the modification.

The Vehicle Safety Act also prohibits manufacturers, distributors, dealers, or motor vehicle repair businesses from knowingly making inoperative any part of a device or element of design installed on or in a motor vehicle or motor vehicle equipment that is in compliance with any applicable FMVSS (49 U.S.C. 30122). If NHTSA determines that a business has violated the make inoperative provision, it may assess a civil penalty in the amount of $5,000 per violation (not to exceed $15,000,000 in the aggregate). NHTSA may, through regulation, exempt a person or business from the prohibition if it decides that an exemption is consistent with motor vehicle safety and the Vehicle Safety Act.

On February 27, 2001, NHTSA published a final rule setting forth a limited exemption from the make inoperative prohibition for businesses or individuals who modify vehicles for persons with disabilities (66 Federal Register 12638; Docket No. NHTSA-01-8667). This exemption is codified in 49 CFR Part 595. Only portions of some FMVSSs are covered by the exemption. Additionally, the exemption only applies to modifications made after the first retail sale of the vehicle.

On May 8, 2000, NHTSA published a final rule amending FMVSS No. 208, Occupant crash protection, to add several new requirements to minimize the risk of air bags to children and small adults, while maintaining the benefits of the air bags for all other front seat occupants. These requirements are collectively referred to as the "advanced air bag" requirements of FMVSS No. 208. They apply to all vehicles manufactured for sale or use in the United States with a GVWR of 8,500 pounds or less and an unloaded vehicle weight of 5,500 pounds or less (other than walk-in van-type trucks or vehicles manufactured exclusively for the U.S. Postal service).

The advanced air bag requirements are subject to a phase-in, whereby, generally speaking, ⁽¹⁾ at least 35% of a given vehicle manufacturer's fleet must comply with the requirements between September 1, 2003, and August 31, 2004, 65% of its fleet must comply between September 1, 2004, and August 31, 2005, and 100% of its fleet must comply between September 1, 2005, and August 31, 2006. Vehicles manufactured in two or more stages or by companies manufacturing less than 5,000 vehicles for the U.S. market per year must meet the advanced air bag requirements in all vehicles produced on or after September 1, 2006.

In amending FMVSS No. 208, NHTSA contemplated three different types of technologies that could be used, individually or in combination, to minimize air bag risks to children seated in the front seat of a vehicle. First, the rule allows vehicle manufacturers to certify compliance with the new requirements by using a system that suppresses the air bag when a small child is sitting in the front seat (automatic suppression system requirements). Second, manufacturers may deploy the air bag for a small child using a system that is unlikely to injure the child when the air bag deploys (low-risk deployment system requirements). Finally, manufacturers may use a system that suppresses the air bag whenever any occupant moves far enough into the air bag's deployment zone that an air bag related injury could result (dynamic automatic suppression system requirements).

Some of the technologies contemplated by manufacturers to meet these requirements are located in the passenger seat. When such systems are used, removal of the seat would make the suppression system inoperative.

Subpart C of Part 595 does not include the advanced air bag requirements of FMVSS No. 208 among the provisions for which an exemption may be granted. We are reviewing a petition for rulemaking that requests us to amend Part 595 to allow modifiers to make these systems inoperative. We anticipate that if we decide to so amend Part 595, the amendment will become effective before September 1, 2003, the beginning of the phase-in.

Until we amend Part 595 to include the advanced air bag requirements, a vehicle modifier must retain the vehicle features relied upon by the manufacturer for compliance with those requirements. A vehicle manufacturer is permitted to certify compliance with the advanced air bag requirements of FMVSS No. 208 before the beginning of the phase-in. If a vehicle manufacturer relies on a seat-based occupant detection system to certify a vehicle's compliance, regardless of whether it manufactures the vehicle before the beginning of the phase-in, removing a seat containing the system would make the vehicle's compliance "inoperative" within the meaning of 49 U.S.C. 30122.

In such a case, a modifier may not remove the system unless NHTSA has issued a letter stating that it will not enforce the make inoperative prohibition for the work performed on the vehicle. Accordingly, a vehicle modifier should assure itself that the vehicle manufacturer is not relying on a seat-based occupant detection system to comply with the advanced air bag requirements before removing the passenger seat. If the seat-based system is relied upon for compliance, the modifier may request written agency approval of to the required modification. Any requests for such a letter should be submitted to this office.

I hope this addresses your concerns on this issue. Should you require any additional information or assistance, please contact Rebecca MacPherson, of my staff, at (202) 366-2992 or at the address given above.

Sincerely,

Jacqueline Glassman
Chief Counsel

ref:595
d.5/2/02

---

¹ Manufacturers who produce two or fewer car lines for the U.S. market may opt out of the phase-in schedule if 100% of their vehicles meet the advanced air bag requirements beginning September 1, 2004. Final-stage manufacturers and very small vehicle manufacturers (no more than 5,000 vehicles per year) are not required to comply with these new requirements during the phase-in period.

ID: 2402y

Mr. Mehdi Rowghani
Dallas European Parts Distributors
1505 Wallace Drive
Carrollton, TX 75006

Dear Mr. Rowghani:

This is in reply to your letter of January 9, 1990, to Taylor Vinson of this Office. You have asked whether "importation and sale of European doors (without reinforcement bars) is in accordance with the rules and regulations of the Department of Transportation."

Your question appears premised upon the fact that many European passenger cars achieve compliance with Federal Motor Vehicle Safety Standard No. 214 Side Door Strength by being equipped with doors incorporating reinforcement bars. However, this standard applies only to new vehicles, and does not extend to replacement parts for such vehicles. Thus, if damage to a vehicle is such that its original door must be replaced, and that door incorporated a reinforcing bar, there is no requirement that the replacement door restore the vehicle to a condition in which it continues to meet Standard No. 214. In short, the importation and sale of a replacement door that does not incorporate a reinforcing bar does not violate any of the statutes, standards, or other regulations administered by this agency.

If the replacement door is intended for use on a passenger car line that is subject to the Federal Motor Vehicle Theft Prevention Standard that this agency administers, however, you should be aware that it must nevertheless be marked with the registered trademark of the manufacturer of the door, or unique identifier if there is no registered trademark, and the letter "R". I enclose a copy of the standard for your information, as this requirement is a relatively new one, and may not be clearly understood. This marking must be on the door before the door is imported into the United States.

Sincerely,

Stephen P. Wood Acting Chief Counsel

Enclosure (Part 541) ref:2l4#54l d:4/9/90

ID: 2403y

Mr. Patrick S. Baran
I.D.E.A.
2340 W. Belmont
Chicago, IL 60618

Dear Mr. Baran:

This is in reply to your letter to Taylor Vinson of this Office, with respect to "D.O.T. guidelines for tail light brightness" with respect to a "brake light for the back of a motor cycle helmet." I regret the delay in responding.

The Department has no authority to "approve" or "disapprove" items of equipment, but we can provide guidance on the relationship of equipment to the Federal motor vehicle safety standards. I enclose a copy of a l982 interpretation with respect to a similar device, a headlamp intended for installation on a motorcycle helmet. It also represents our views with respect to your device. I enclose also a copy of SAE Standard J586c Stop Lamps, which our Rulemaking office promised you.

We note that you use the term "tail light" and "brake light" interchangeably. In seeking State guidance you should be clear as to whether your device indicates the presence of the cyclist (taillamp), or the application of the brakes of the motorcycle (stop lamp), or both.

Sincerely,

Stephen P. Wood Acting Chief Counsel

Enclosure ref:VSA#l08#2l8 d:4/9/90

ID: 2404y

Lewis H. Goldfarb, Esq.
Assistant General Counsel
Chrysler Motors Corporation
l2000 Chrysler Drive
Highland Park, MI 48288-l9l9

Dear Mr. Goldfarb:

This responds to your letter concerning the fuel economy implications of Chrysler's acquisition of American Motors Corporation (AMC). You stated that you were writing to obtain confirmation of Chrysler's "understanding" that fuel economy credits earned by AMC, for exceeding light truck standards in model years l984-86, are now available to Chrysler. You enclosed a memorandum of law explaining your position.

As discussed below, it is our opinion that even if Chrysler is considered the "successor" to AMC under the Motor Vehicle Information and Cost Savings Act, that fact would not result in the conclusion that credits earned, prior to the acquisition, by AMC for exceeding a fuel economy standard could be applied to shortfalls incurred by Chrysler's pre-acquisition fleet, under the three-year carryforward and carryback provisions of the Act and regulations. However, credits earned by AMC could be applied to the pre-acquisition AMC fleet and to the post-acquisition Chrysler/AMC fleet. Also, credits earned by post-acquisition Chrysler/AMC could be applied to the pre-acquisition Chrysler fleet and/or AMC fleet, provided that double counting does not take place. Other issues raised by your letter and legal memorandum are also addressed below.

Section 50l(8) of the Cost Savings Act defines "manufacturer" as follows:

The term "manufacturer" means any person engaged in the business of manufacturing automobiles. The Secretary shall prescribe rules for determining, in cases where more than one person is the manufacturer of an automobile, which person is to be treated as the manufacturer of such automobile for purposes of this part. Such term also includes any predecessor or successor of such a manufacturer to the extent provided under rules which the Secretary shall prescribe.

One issue raised by Chrysler's memorandum is whether Chrysler is the successor of AMC. The term "successor," as used in the definition of "manufacturer" quoted above, is not defined in the statute or in agency regulations. Under general principles of corporate law, the term "successor" ordinarily refers to a corporation which, through amalgamation, consolidation, or other legal succession, becomes invested with the rights and assumes the burdens of another corporation.

Based on our general understanding of Chrysler's acquisition of AMC, we have no reason to doubt your conclusion that Chrysler is the successor of AMC. However, your letter does not provide specific facts concerning the structure of Chrysler's acquisition of AMC or whether Chrysler is invested with the rights and has assumed the burdens of AMC. In the absence of such facts, we are unable to provide an opinion that Chrysler is the successor of AMC. However, for purposes of this letter, it will be assumed that a factual showing can be made that Chrysler is the successor to AMC.

It should be noted that the mere fact that one corporation acquires another corporation does not necessarily mean that the acquiring corporation is a "successor." In the context of the Cost Savings Act, manufacturer A may be wholly owned by manufacturer B, yet still be a manufacturer itself. Under sections 503(a) and (c), however, the automobiles of such related manufacturers would be combined for purposes of calculating average fuel economy.

Another issue raised by Chrysler's memorandum is whether Chrysler and AMC became the same manufacturer for fuel economy purposes for model year l987. According to the memorandum, Chrysler agreed to acquire AMC in the spring of l987, and the transaction closed on August 6, l987. The memorandum concludes that Chrysler and AMC became the same manufacturer for fuel economy purposes in model year l987.

Based on the above facts, it is our opinion that all of Chrysler's and AMC's vehicles should be treated as manufactured by the same manufacturer for model year l987. Fuel economy standards apply to passenger automobiles manufactured by a manufacturer, for a particular model year. See section 502(a)(l). Moreover, average fuel economy is calculated based on the total number of passenger automobiles manufactured in a given model year by a manufacturer. See section 503(a)(l). Under section 503(c), the term "passenger automobiles manufactured by a manufacturer" includes all automobiles manufactured by persons who control, are controlled by, or are under common control with, such manufacturer." Since Chrysler controlled AMC prior to the end of the l987 model year, and since fuel economy standards apply to particular model years as a whole and not to separate parts of a model year, it is our opinion that all of the vehicles produced by both Chrysler and AMC for model year l987 shall be treated as if manufactured by the same manufacturer, i.e., placed into one fleet. Otherwise, one or both of the manufacturers would have two separate CAFE values, pre-acquisition (or pre-control) and post-acquisition (or post-control), for the same model year.

We will now address generally the issue of how credits may be used where one manufacturer is the successor of another. In discussing the issue, we will refer to the following hypothetical example: A and B are both car manufacturers. After consolidation, A is the only surviving corporation and is invested with the rights and assumes the burdens of B. Thus, A is the "successor" of B.

While this example and subsequent discussion is for passenger automobiles, the relevant requirements concerning the earning and availability of credits are essentially identical for passenger automobile standards and light truck standards. Compare section 502(l)(1)(B) and 49 CFR Part 535, and see 45 FR 83233-36, December l8, l980. Thus, our analysis for passenger automobile standards is also relevant to light truck standards.

Section 502(l)(1)(B) states:

Whenever the average fuel economy of the passenger automobiles manufactured by a manufacturer in a particular model year exceeds an applicable average fuel economy standard . . ., such manufacturer shall be entitled to a credit calculated under subparagraph (C), which--

(i) shall be available to be taken into account with respect to the average fuel economy of that manufacturer for any of the three consecutive model years immediately prior to the model year in which such manufacturer exceeds such applicable average fuel economy standard, and

(ii) to the extent that such credit is not so taken into account pursuant to clause (i), shall be available to be taken into account with respect to the average fuel economy of that manufacturer for any of the three consecutive model years immediately following the model year in which such manufacturer exceeds such applicable average fuel economy standard.

We note first that credits earned by a particular manufacturer are only "available to be taken into account with respect to the average fuel economy of that manufacturer," for any of the three model years before, or after, the model year in which the credits are earned. (Emphasis added.) In the example set forth above, B is no longer a manufacturer under the Cost Savings Act. (Indeed, it is no longer a "person" under section 50l(8).) Thus, in the absence of some provision concerning "successors," any unused credits that B had earned prior to the consolidation would expire unused, since the only manufacturer to which they are available no longer exists. However, for some purposes B continues to exist as part of A, its "successor."

Section 50l(8)'s definition of "manufacturer" does not provide that the term "manufacturer" necessarily includes any precedessor or successor but instead provides that the term does so "to the extent provided under rules which the Secretary shall prescribe." This provision was added by the Automobile Fuel Efficiency Act of l980 as a conforming amendment to the section concerning modification of local content requirements to encourage domestic production of fuel efficient automobiles and not to the section concerning credits. The legislative history does not provide any indication as to why the provision was added, and, to date, NHTSA's administration of the statutory provisions concerning modification of the local content requirements has not turned up a situation for which such rules would be relevant. Should rules be issued under section 50l(8), NHTSA would do so by notice-and-comment rulemaking, taking account of the purposes of that section and the statutory scheme as a whole.

Notwithstanding the absence of rules, we do not believe that Congress intended to require the forfeit of a manufacturer's unused credits in a situation where that manufacturer's substance continues to exist as part of a "successor." Thus, taking account of section 50l(8) and the statutory scheme as a whole, we conclude that, in the example set forth above, B can be deemed as continuing to exist as part of A, from the time of succession.

This conclusion does not, however, permit the general integration of A's and B's credits and shortfalls. Under section 502(l)(1)(B), credits earned by a particular manufacturer are only "available to be taken into account with respect to the average fuel economy of that manufacturer." Since B's existence as part of A only dates from the time of succession, B is not the same manufacturer as A prior to the time of succession. Thus, any credits earned by B would only be available to offset A's shortfalls for the model years during which B exists as part of A, since it is only at that time that the credits earned by B and applied to A can be considered to be taken into account with respect to the average fuel economy of "that manufacturer." Similarly, the only credits earned by A which would be available to B would be those credits earned during the time when B exists as part of A.

The general integration of A's and B's credits would be inconsistent with the basic structure of section 502(l)(l). Assume, for example, that A and B are separate manufacturers for model years 1 through 6, and A is the successor of B for model year 7. If general integration of credits were permitted, credits earned by B in model year 4 could be applied to A's CAFE for model years l-6, as well as model year 7. However, the structure of section 502(l)(l) does not permit this result. Under paragraph (B)(i), any credits earned by B in model year 4 are available to be carried back with respect to B's CAFE for any of model years l, 2 and 3. To the extent that such credits are not so used, paragraph (B)(ii) makes those credits available to be carried forward with respect to B's CAFE for any of model years 5, 6 and 7. In order for credits earned by B in model year 4 to be applied to A's CAFE for model years l-6, B's credits would first have to be carried forward to model year 7 (the model year where A is B's successor) and then be carried back to model years l-6 (for application to A's CAFE), a process which has no statutory basis.

We will now apply the general analysis discussed above to the particular facts cited in Chrysler's letter. Prior to MY l987, Chrysler and AMC were two separate manufacturers. Chrysler acquired AMC during MY l987, and became the "successor" to AMC at that time. Under section 502(l)(1)(B), credits earned by a particular manufacturer are only "available to be taken into account with respect to the average fuel economy of that manufacturer." Since AMC's existence as part of Chrysler only dates from MY l987, AMC was not the same manufacturer as Chrysler prior to MY l987. Thus, any credits earned by AMC would only be available to Chrysler to offset CAFE shortfalls incurred in the model years during which AMC exists as part of Chrysler, i.e., MY l987 and thereafter, since it is only at that time that the credits earned by AMC and applied to Chrysler can be considered to be taken into account with respect to the average fuel economy of "that manufacturer." Similarly, the only credits earned by Chrysler which would be available to AMC would be those credits earned during the time when AMC exists as part of Chrysler, i.e., credits earned in MY l987 and thereafter.

Chrysler's memorandum argues that section 502(l) must mean more than that the predecessor's credits can be carried forward and used for the successor firm for l987 and subsequent years. The memorandum states:

"Manufacturer" is a defined term, and it must be read in light of its definition. The only satisfactory reading of this provision is that the reference to "that manufacturer" includes its predecessors and successors--that is, the successor firm may use the credits available to it for calculating its own fuel economy for l987 and subsequent model years or that of its predecessors, including pre-acquisition Chrysler, for the years before l987. On any other reading, the definition of "manufacturer" would be meaningless, and the term would mean different things in different places in the Act.

Chrysler also asserts that its approach would represent a "literal" reading of the Act, and that the agency should not seek to import into the carryover scheme a qualification on the use of credits that Congress did not impose.

We believe that Chrysler's analysis is incorrect since it does not take into account fundamental differences in the timing of the earning of the credits and of Chrysler's becoming a successor. Chrysler was not the successor to AMC during the model years prior to Chrysler's acquisition of AMC in which AMC earned credits. In MY l984, for example, Chrysler and AMC were two separate manufacturers.

In particular, Chrysler is incorrect in concluding that AMC's l984-l986 credits can be applied to Chrysler for model years before l987. Chrysler cannot succeed to rights greater than AMC possessed at the time of the acquisition. As of its acquisition in MY l987, AMC's "rights" as to its MY 1984 credits were to apply them to its own fleet in MY l981-l983 and l985-l986 (since it had no successor in that time period) and to apply them to itself/successor in MY l987.

In construing the Act, we believe that it is appropriate and necessary to read its provisions in the correct temporal context. Thus, we do not believe that the term "manufacturer" means different things in different places in the Act, but instead recognize that corporate relationships, and thus manufacturer identities, may differ for different model years.

Moreover, we believe that Chrysler's memorandum itself construes the term "manufacturer" differently in different parts of the Act. As indicated above, section 502(l)(l)(B) states that "whenever the average fuel economy of the passenger automobiles manufactured by a manufacturer in a particular model year exceeds an applicable average fuel economy standard . . ., such manufacturer shall be entitled to a credit . . . ." Emphasis added. In concluding that Chrysler is entitled to AMC's l984 credits, Chrysler's memorandum apparently reads "manufacturer" to mean "AMC only" the first time it is used in this section, and "AMC and its future successors" the second time it is used.

We also note that Chrysler's current position would lead to absurd results. For example, if the term "manufacturer" were consistently read to include future successors, Chrysler's acquisition of AMC would presumably require calculation of new CAFE values, for the combined Chrysler/AMC fleet, for each model year all the way back to the beginning of the CAFE program. See section 503(a)(l). Moreover, if a company which paid penalties in a particular model year were later acquired by another company which had earned credits in that same model year, but never used the credits, under Chrysler's retroactive successorship interpretation NHTSA could be required to refund those penalties, even if the acquisition took place ten or twenty years later. The Cost Savings Act was designed to encourage manufacturers to improve their CAFE performance; not to allow them to avoid penalties for non-compliance by acquiring companies that had, independently, earned credits in prior years.

Finally, we reject the argument that we are importing into the carryover scheme a qualification on the use of credits that Congress did not impose. Congress expressly chose to limit the ability to use credits to the manufacturer that exceeded an applicable average fuel economy standard and thereby earned the credits. Credits earned by AMC are only available to Chrysler for the model years during which AMC exists as part of Chrysler, since it is only at that time that the credits earned by AMC can be considered as being "taken into account with respect to the average fuel economy" of the manufacturer that earned them.

Sincerely,

Stephen P. Wood Acting Chief Counsel ref:CSA d:4/4/90