[Federal Register: December 28, 2004 (Volume 69, Number 248)]
[Rules and Regulations]
[Page 77663-77672]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de04-16]
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DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 534
[Docket No. NHTSA 2004-19940]
RIN 2127-AG97
Fuel Economy Standards--Credits and Fines--Rights and
Responsibilities of Manufacturers in the Context of Changes in
Corporate Relationships
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation.
ACTION: Final rule.
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SUMMARY: This document establishes a new regulation governing the use
of rights (credits) and liabilities (fines) under the Corporate Average
Fuel Economy program in the face of changes in corporate relationships.
This final rule fulfills a statutory responsibility to issue a
regulation addressing these issues.
DATES: The rule is effective January 27, 2005.
Petitions for Reconsideration must be received by February 11,
2005. Petitions for reconsideration should refer to the docket and
notice number of this document and be submitted to the Administrator of
NHTSA 400 Seventh Street, SW., Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT: Mr. Otto Matheke, Office of the Chief
Counsel, Suite 5219, National Highway Traffic Safety Administration,
400 Seventh Street, SW., Washington, DC 20590. (202-366-5263)
Table of Contents
I. Introduction and History
II. Applicable Statutory Provisions
III. The Notice of Proposed Rulemaking
IV. Public Comments
V. Post-NPRM CAFE Considerations
VI. The Final Regulation
A. Definitions
B. CAFE Credits
1. Legal Considerations
2. Policy Considerations
C. Acquisitions During a Model Year
VII. Rulemaking Analyses and Notices
I. Introduction and History
This final rule establishes a regulation governing the treatment of
corporate assets and liabilities arising from the agency's Corporate
Average Fuel Economy (CAFE) program in the face of changes in corporate
relationships. It fulfills a statutory responsibility to define by
regulation the use of CAFE credits and liabilities in light of changes
in corporate structure.
In December 1975, Congress enacted the Energy Policy and
Conservation Act (EPCA). The EPCA established the Corporate Average
Fuel Economy (CAFE) program by adding a new Title V to the Motor
Vehicle Information and Cost Saving Act. Congress has made various
amendments to the fuel economy provisions since 1975, and the fuel
economy provisions are now codified in Chapter 329 of Title 49 of the
United States Code.
The CAFE statute requires that a manufacturer meet average fuel
economy standards, as established by regulation, separately for fleets
of light trucks, domestic passenger cars and imported passenger cars. A
manufacturer's average fuel economy for a particular model year is
calculated in accordance with 49 U.S.C. 32904. The establishment of
CAFE standards and the calculation of average fuel economy is
statutorily tied to ``automobiles manufactured by a manufacturer'' for
any given model year. (49 U.S.C. 32902, 32904)
The statute specifically provides that, with regard to each
individual fleet, a manufacturer may earn credits by exceeding the
applicable standard and may use those credits, for three years forward
and three years back, to offset any shortfalls in CAFE compliance
applicable in a particular model year. Again the statute makes clear
that the number of credits earned is tied to the volume of automobiles
manufactured by the manufacturer. (49 U.S.C. 32903)
Manufacturers failing to meet the established fleet standard for a
particular model year must, if they do not have credits available to
offset their shortfall, pay fines to the United States Treasury. Over
the history of the CAFE program, manufacturers have paid over 140 fines
totaling more than $600 million. The highest fine ever paid by a single
manufacturer was almost $28 million, with the average approximating $4
million.
The provisions of EPCA recognize that changes in corporate
structures are common and that a ``manufacturer,'' as defined by the
CAFE statute, may change in light of new corporate relationships. In
1980, Congress amended the definition of a manufacturer to explicitly
contemplate corporate successors and predecessors. Congress recognized
at that time that CAFE credits and responsibilities would become assets
and liabilities in the course of such changes, and directed the
Secretary of Transportation to promulgate regulations defining how such
credits and responsibilities should be treated when corporate changes
occur. (49 U.S.C. 32901(13))
The agency did not immediately move to establish the regulation
Congress prescribed. Nonetheless, in 1991, the Administrator authorized
the agency's Complaint Counsel to initiate an administrative complaint
against the Chrysler Corporation (Chrysler). As Congress anticipated,
structural corporate change gave rise to issues relating to the
application of CAFE rights and responsibilities. Chrysler had purchased
the assets of American Motors Company (AMC) and Chrysler had fallen
short of an applicable CAFE. AMC had available credits that Chrysler
wished to apply to its existing shortfall. Chrysler took the position
that AMC's CAFE credits were available to the new corporate entity.
Complaint Counsel disagreed and sought to impose CAFE fines for
Chrysler's failure to meet the applicable CAFE standard.\1\
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\1\ Complaint Counsel's position in the administrative
proceeding was consistent with the position taken by the agency's
Acting Chief Counsel in a 1990 letter to the Chrysler Corporation
setting forth the agency's interpretation of the law as applied to
Chrysler's acquisition of AMC. Pursuant to 49 CFR part 501.8(d)(5),
the NHTSA Administrator has delegated to the Chief Counsel the
authority ``to issue authoritative interpretations of the statutes
administered by NHTSA and the regulations issued by the agency.''
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On January 8, 1992, an Administrative Law Judge issued an Initial
Decision and Order. While expressing in dictum support for Complaint
Counsel's position, the ALJ ruled that the agency could not enforce
that position because it had not, as the statute anticipates,
promulgated regulations in accordance with the Administrative
Procedures Act. NHTSA's Administrator terminated the prosecution and
directed the agency to initiate rulemaking. In an order dated March 31,
1992, NHTSA's Administrator found:
Upon further consideration of the matters at issue in this
proceeding, I have decided that NHTSA should prescribe regulations
[[Page 77664]]
pursuant to section 501(g) of the Act to define the extent to which
predecessors and successors of manufacturers of automobiles should
be included within the term `manufacturer' for the purposes of the
Act. I have therefore directed the Associate Administrator for
Rulemaking to promptly commence such a proceeding.
While such a proceeding would provide helpful clarification and
be consistent with the statute, in my view there is a great deal of
doubt as to the correctness of the Administrative Law Judge's view
that, in the absence of such regulations, an enforcement proceeding
against Chrysler cannot proceed. Therefore, I am unwilling to allow
the I.D. (Initial Decision) to become the Final Decision of this
agency. On the other hand, I believe that continuation of this
proceeding under these circumstances could result in an unnecessary
expenditure of the resources of the agency and of Chrysler.
Therefore, I have decided to take steps to terminate the proceeding
at this time, without prejudice to the possible filing of a new
administrative complaint against Chrysler following the issuance of
the regulatory definitions referred to above.
The agency did not act immediately. In the early 1990s, the agency
faced a variety of legal challenges raising numerous issues and
focusing agency resources on the developing contours of the program. In
April 1994, the agency began to consider a multi-year rulemaking to
establish light truck CAFE standards for some or all of model years
1998-2006. (59 FR 16324). Congress responded by effectively
``freezing'' light truck standards. On November 15, 1995, the
Department of Transportation and Related Agencies Appropriations Act
for FY 1996 was enacted. Pub. L. 104-50. Section 330 of that Act
provided:
None of the funds in this Act shall be available to prepare,
propose, or promulgate any regulations * * * prescribing corporate
average fuel economy standards for automobiles * * * in any model
year that differs from standards promulgated for such automobiles
prior to enactment of this section.
Similar language in subsequent Appropriations Acts continued the
freeze through model year 2003. Ongoing debate about the efficacy of
the CAFE program also led Congress to require a review of the program.
The conference committee report for the Department of Transportation
and Related Agencies Appropriations Act for FY 2001 directed NHTSA to
fund a study by the National Academy of Sciences to evaluate the
effectiveness and impacts of CAFE standards (H.R. Conf. Rep. No. 106-
940, at 117-118).
On January 22, 2001, six months prior to submission of the NAS
report to the Department of Transportation, the agency published a
notice of proposed rulemaking (NPRM) advancing regulatory text intended
to formalize Complaint Counsel's positions in the 1991-1992
administrative proceeding. (66 FR 6523)
II. Applicable Statutory Provisions
The CAFE statute provides that a ``manufacturer of automobiles
commits a violation if the manufacturer fails to comply with an
applicable average fuel economy standard under section 32902 of this
title. Compliance is determined after considering credits available to
the manufacturer under section 32903 of this title.'' (49 U.S.C.
32911(b))
Section 32903 provides that ``when the average fuel economy of
passenger automobiles manufactured by a manufacturer in a particular
model year exceeds an applicable average fuel economy standard * * *
the manufacturer earns credits.'' Those credits may be applied to any
of the 3 consecutive model years immediately proceeding or following
the model year during which the credits were earned.
The statute defines a ``manufacturer'' as ``(A) a person engaged in
the business of manufacturing automobiles, including a predecessor or
successor of the person to the extent provided under regulations
prescribed by the Secretary; and (B) if more than one person is the
manufacturer of an automobile, the person specified under regulations
prescribed by the Secretary.'' (49 U.S.C. 32901(a)(13)) The statute
defines ``an automobile manufactured by a manufacturer'' as including
``every automobile manufactured by a person that controls, is
controlled by, or is under common control with the manufacturer, but
does not include an automobile manufactured by the person that is
exported not later than 30 days after the end of the model year in
which the automobile is manufactured.'' \2\
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\2\ The statutory language relating to predecessors and
successor was added to the statute as part of the 1980 amendments.
That same set of amendments extended the credit period from one year
carry forward and carry back to three years forward and back.
Although the phrase ``automobile manufactured by a manufacturer''
was in the statute previously, Congress added the definition of that
phrase in 1990. We take all of those definitions and provisions into
account in reaching our conclusions in this rulemaking.
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During the 1990s, the agency provided its interpretation of the
term ``automobile manufactured by a manufacturer.'' This term is
crucial to this rulemaking because a manufacturer earns CAFE credits
when the average fuel economy of the ``automobiles manufactured by a
manufacturer'' exceeds the applicable CAFE standard for that model
year. In response to a 1996 letter from Ford Motor Company seeking
clarification with regard to whether vehicles produced by certain
corporate affiliates could appropriately be included in its CAFE fleet,
the agency reviewed the meaning of the phrase ``automobiles
manufactured by a manufacturer,'' which by statute ``includes every
automobile manufactured by a person that controls, is controlled by, or
is under common control with the manufacturer'' (except those exported
within 30 days of the model year). The agency stated:
The term ``control'' a used in 32902(a)(4) is not defined
elsewhere in Chapter 329 or the legislative history of the Chapter
and its predecessor, the Motor Vehicle Information and Cost Savings
Act. In past interpretations the agency has indicated that the term
as used in the CAFE context may have the same definition as it has
when used in a corporate law context. In the corporate law context,
the issue of control is important for determining whether the
controlling persons have violated any fiduciary duties to the
corporation and other shareholders. Control in that sense refers to
ownership of a large enough bloc of a company's stock to constitute
effective voting control of the firm.
For the purposes of Chapter 329, control is important for
determining a company's corporate average fuel economy and total
production. For CAFE purposes, ``control'' is the ability to
exercise a major influence over a company's average fuel economy and
production. In addition to the ownership of a controlling bloc of
stock, control for our purposes could be shown by control over the
design and availability of certain models and other factors
affecting production, sales mix and technological improvements.
(Letter from John Womack, Acting Chief Counsel, to Timothy Green of
Ford Motor Company, dated September 19, 1996).
In sum, the statute provides that a manufacturer may earn credits
when its fleet (consisting of every vehicle built by a manufacturer
that controls it, is controlled by it or is under common control with
it) exceeds the applicable CAFE standard for that model year. The
statute anticipates that predecessors and successors will be included
and that the Department would define such entities through regulation.
III. The Notice of Proposed Rulemaking
In January 2001, the agency published its NPRM relating to the
rights and responsibilities of manufacturers in light of changes in
corporate relationships. The NPRM sought to formalize the agency's
position during the Chrysler enforcement action of the early 1990s and
addressed a number of corollary issues.
The regulatory text proposed in the NPRM would have made successors
responsible for any civil penalties arising out of fuel economy
shortfalls
[[Page 77665]]
incurred by predecessors, as well as any shortfall if the companies had
combined within the last model year. Credits in existence at the time
the predecessor/successor relationship was established could only be
used to satisfy the existing shortfalls of each company prior to the
formation of the new corporate structure. Thus, the successor's
existing credits could only be used first to satisfy its existing
shortfalls and the predecessor's credits could only be used first to
satisfy its existing shortfalls. Remaining credits could be used to
offset future shortfalls of the new corporate entity.
The proposed regulatory text also addressed companies within
control relationships. It suggested that each company coming within a
corporate control relationship within a model year should be jointly
and severally liable for any CAFE liabilities incurred by any of the
other companies coming within the control relationship within that
model year. The NPRM then set forth a number of additional
``specifications'' attempting to define, in general terms, the use of
credits and incurring of liabilities within control relationships. Each
``specification'' was subject to the agreement of the other
manufacturers, the availability of the credits, and other general
restrictions.
The proposal presented in the NPRM was built upon the following
notion: ``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'' \3\
(emphasis added).
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\3\ This language mirrors that in EPCA prior to its codification
in 1994. The codification was not intended to have any substantive
effect.
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NHTSA historically allowed successor manufacturers to use a
predecessor's existing credits to satisfy the newly merged
corporation's CAFE liabilities acquired after the merger has been
finalized. By the same token, successors are generally responsible for
predecessors' liabilities, and NHTSA has maintained this is the case
under the CAFE program. Thus, the only issue regarding credits in the
NPRM was whether a successor is entitled to use the existing CAFE
credits of either itself or its predecessors to satisfy the other's
existing CAFE liabilities. In the NPRM, the agency tentatively was of
the view that the successor could not.
This position was based on two premises, one legal and one policy-
driven. First, NHTSA maintained that EPCA established a priority of
credit carryover that requires all credits first be used by the
manufacturer earning the credits to satisfy its existing CAFE
liabilities and before remaining credits are carried forward for use by
that same manufacturer. NHTSA then stated that permitting a successor
to use its predecessor's remaining credits to satisfy other existing
liabilities would permit the remaining credits to be carried forward
and then carried back to a manufacturer that did not possess those
credits when it incurred the liabilities the credits would satisfy.
Although the agency did not conduct a rulemaking as Congress
contemplated before taking a view, NHTSA's tentative position since the
Chrysler enforcement action has been that the statute does not support
such a result.
Second, while recognizing Congress' intent to add flexibility to
the CAFE program when amending the statute in 1980, the agency
expressed concern that a successor should not be permitted to ``merge''
the CAFE credits of its predecessor companies because it believed that
``permitting such use of credits would discourage energy conservation.
For example, to the extent that a successor had been planning to exceed
standards in the future to earn credits that could be carried back to
cover pre-acquisition shortfalls, permitting the successor to use the
predecessor's previously earned credits to cover those shortfalls would
remove the incentive to exceed those standards.'' 66 FR 6528.
As noted above, the agency proposed a number of ``specifications''
covering a variety of situations in which questions relating to the use
of credits and liabilities might arise. The NPRM proposed the following
definitions:
Control relationship means the relationship that exists
between manufacturers that control, are controlled by, or are under
common control with, one or more other manufacturers.
Identity means the relationship between a predecessor and
a successor during the time in which the successor owns 50 percent or
more of the assets, based on valuation, that had belonged to the
predecessor.
Predecessor means a manufacturer whose rights have been
vested in and whose burdens have been assumed by another manufacturer.
Successor means a manufacturer who has become vested with
the rights and assumed the burdens of another manufacturer.
As set forth in the NPRM, the definitions of ``successor'' or
``predecessor'' are intended to reflect the ordinary corporate law
meaning of those terms.\4\
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\4\ The Revised Model Business Corporation Act (at Sec. 11.02),
incorporates these general principles by stating that a ``survivor
corporation becomes vested with all the assets of the
corporation(s)/entity that merged into the survivor and becomes
subject to their liabilities.'' The states in which the major motor
vehicle makers are incorporated each apply the same concept in their
respective statutes. See, e.g., 8 Del.C. Sec. 259 (Delaware), Cal.
Corp. Code Sec. 1107(a) (California) and N.J.S.A. 14A:10-6 (New
Jersey).
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IV. Public Comments
The NPRM generated little public comment. Ford Motor Company raised
fundamental objections to the definitional approach the agency had
taken, pointing out that as applied to certain situations the approach
created potentially unfair results inconsistent with the application of
general principles of corporate law.
Ford claimed that a successor should not be responsible for all
vehicles manufactured by the predecessor for the entire model year
(defined as October 1-September 30). The company argued the NPRM would
have forced companies to combine fleets before any control relationship
had been established. Ford also noted that the NPRM stated its intent
to be both simple and faithful to the overall statutory scheme and then
argued that the agency had failed to do so. According to Ford,
``NHTSA's proposed rule short-circuits the statute and general
principles of corporate successorship in its eagerness to achieve
simplicity.''
Ford and DaimlerChrysler also contested the agency's proposed
limitations on the use of predecessor's pre-existing CAFE credits. Ford
argued: ``[I]n the final analysis, we see no reason why allowing a
successor corporation to use pre-existing credits as it sees fit would
be contrary to the intent of Congress. Credits are not being double-
counted or being used for some improper purpose; no vehicles are being
omitted from the CAFE calculations. The only real effect of this
proposal would be to increase the likelihood that shortfalls will be
subject to fines rather than covered with credits.''
V. Post-NPRM CAFE Considerations
Since the promulgation of the NPRM, the CAFE program has received
considerable analytic attention. Particularly in response to
Congressional concerns, studies of the CAFE program have emerged that
help us better understand how policy decisions are likely to affect the
goal of achieving energy independence.
Congress directed the National Academy of Sciences, in consultation
[[Page 77666]]
with the Department of Transportation, to evaluate the CAFE program and
make recommendations to improve it. The NAS conducted a detailed review
of the policies underlying the CAFE program and made recommendations
for better achieving those policies. A draft of the NAS Report was
available to the Department in June 2001 and the final report was
published in January 2002.
The NAS recommended ``the CAFE system, or any alternative
regulatory system, should include broad trading of fuel economy
credits. The committee believes a trading system would be less costly
than the current CAFE system; provide more flexibility and options to
the automotive companies; give better information on the cost of fuel
economy changes to the private sector, public interests groups, and
regulators; and provide incentives to all manufacturers to improve fuel
economy. Importantly, trading of fuel economy credits would allow for
more ambitious fuel economy goals than exist under the current CAFE
system, while simultaneously reducing the economic cost of the
program.''
More recently, the Congressional Budget Office released an issue
brief focusing on the economic costs of CAFE standards and comparing
them with the costs of a gasoline tax that would reduce gasoline
consumption by the same amount. The CBO noted the NAS's finding that
enhancing the transfer of credits would encourage the creation of
credits because firms able to produce them would be able either to use
them as needed or to sell them to other firms. The CBO estimated that
fuel economy credit trading could cut the cost of a 3.8 mpg increase in
the CAFE standards by 16 percent, down from $3.6 billion per year to $3
billion per year.\5\
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\5\ The CBO estimated that CAFE standards would need to increase
by 3.8 mpg (to 31.3 mpg for passenger cars and 24.5 mpg for light
trucks) in order to reduce the amount of gasoline consumed by new
vehicles by 10 percent.
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VI. The Final Regulation
We have considered the issues raised in the NPRM in light of the
comments filed by Ford Motor Company and DaimlerChrysler, applicable
concepts of corporate law and the policy analyses provided by the
National Academy of Sciences and the Congressional Budget Office. We
have also reviewed the legislative history and considered the issues
with an eye towards the Congressional intent of providing flexibility
while enhancing overall fuel efficiency. While this regulation does not
directly implicate credit trading, the policy considerations are
similar and, as the NPRM suggests, relevant to deciding how best to
achieve the overall intent of the CAFE program.
Based on our review and consideration of all this information, we
have decided to expand our initial stance on carry back credits so as
to allow a successor to use a predecessor's existing credits to satisfy
the successor's existing liabilities and vice versa. As proposed in the
NPRM, the successor will be liable for all of the predecessor's
liabilities and credits not used to satisfy existing liabilities may be
used to satisfy subsequent liabilities, consistent with statutory
requirements. We have also decided to assess a successor's CAFE assets
and liabilities for the full model year during which the corporate
merger occurred. In those instances in which the change in corporate
relationships did not result in the establishment of a successor/
predecessor relationship, but rather in a lesser form of corporate
control, the corporations are free to determine which corporation will
be responsible for the model year allocation of penalties, as long as
they file a contract detailing respective responsibilities with NHTSA
prior to the end of the model year.
We no longer find tenable the proposed position we had taken
limiting a successor corporation's right to use CAFE credits earned by
a predecessor corporation. As indicated above, the proposed position
was based on two premises, one policy and one legal. The policy premise
was a statement that permitting a successor corporation to use the CAFE
credits of its predecessor corporation would not encourage CAFE credit
building. Upon further consideration, we do not believe our tentative
policy premise regarding incentives to earn additional credits is a
valid reason for limiting successor corporations' ability to use CAFE
credits earned by a predecessor.
Further, our preliminary legal analysis did not fully consider all
the applicable statutory language nor did it apply the general
corporate law principles it sought to instill in the definitions. The
legal premise was explained in our proposal as an outgrowth of the
statutory provision 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.'' We proposed to conclude
that a successor corporation could not be considered to be that
manufacturer with respect to the predecessor corporation, and so the
statute would prohibit the successor corporation from using CAFE
credits earned by a predecessor corporation to address CAFE shortfalls
the successor corporation had before it acquired the predecessor.
We also proposed to define successors and predecessors in
accordance with general principles of corporate law. Yet, even while
doing so, we proposed a tentative conclusion different than the one
that would result from applying those definitions and the same general
principles. Under ordinary principles of corporate law, the reference
to that manufacturer would not be read as prohibiting a successor from
putting itself in the position of a predecessor corporation. Nor did we
consider the import of the statutory phrase ``automobiles manufactured
by a manufacturer'' when developing our preliminary analysis.
The agency proposed a reading of the CAFE statute contrary to
ordinary principles of corporate law based on our preliminary policy
conclusion that permitting the normal application of successor/
predecessor principles of corporate law would frustrate the policies
underlying the CAFE statute. In such circumstances, the proposed
interpretation of the statute was intended to ensure that the
underlying policies of the law were effectuated. However, we have now
concluded that our policy view as to the impact of our reading of the
statute does not in fact further the goals of the CAFE statute.
Accordingly, we have no reason to read the CAFE statute in a way that
is contrary to general principles of corporate law and we are not doing
so in this final regulation.
A. Definitions
The NPRM proposed four definitions: Control relationship,
Successor, Predecessor and Identity. The comments did not take issue
with these definitions, but did object to the agency's proposal
regarding the use of credits upon corporate restructurings. As
explained in the NPRM, the term ``identity'' was proposed solely to
provide structure to the agency's proposal that credits earned by a
company that subsequently becomes part of another should expire and no
longer be available to the acquiring manufacturer.
We are adopting in this Final Rule definitions of the terms
``successor'', ``predecessor'' and ``control relationship'' as proposed
in the NPRM. As amended in 1980, the EPCA specifically directed the
agency to develop regulations to include successors and predecessors
within the structure of manufacturer's carry-back and carry-forward
CAFE credit plans. The proposed definitions incorporate into that
regulatory structure the
[[Page 77667]]
common definition of successors and predecessors used in corporate law,
providing successors with the rights and burdening them with the
liabilities of their predecessors.
We believe it is necessary to define a control relationship because
in many instances manufacturers are engaged in the corporate operations
of another manufacturer to such an extent that they may have control
over vehicle design or production but do not have so much control as to
establish the successor/predecessor relationship contemplated under
corporate law. We have decided against defining the term ``identity''
because under today's rule, the successor is not limited in using
credits generated by the predecessor or in satisfying the predecessor's
CAFE liabilities. To the extent a non-successor/predecessor control
relationship is established, the allocation of rights and liabilities
will be governed by contract.
The Final Rule also includes the following provision to help
implement these definitions:
``Reporting Corporate Transactions.'' Manufacturers who
have entered into written contracts transferring rights and
responsibilities such that a different manufacturer owns the
controlling stock or exerts control over the design, production or sale
of automobiles to which a Corporate Average Fuel Economy standard
applies shall report the contract to the agency as follows:
(a) The manufacturers must file a certified report with the agency
affirmatively stating that the contract transfers rights and
responsibilities between them such that one manufacturer has assumed a
controlling stock ownership or control over the design, production or
sale of vehicles. The report must also specify the first full model
year to which the transaction will apply.
(b) The manufacturers may seek confidential treatment for
information provided in the certified report in accordance with 49 CFR
Part 512.
B. CAFE Credits
1. Legal Considerations
NHTSA has been provided with wide latitude to confer rights and
develop constraints within the context of the successor/predecessor
relationship. In light of this broad statutory authority, we have
determined that our previous interpretation of Sec. 32903 as
prohibiting successor corporations from using a predecessor's existing
credits to satisfy the successor's existing liability is too narrow.
The fuel economy credit provisions are set forth in 49 U.S.C.
32903, Credits for exceeding average fuel economy standards. Paragraph
(a) of this section reads as follows:
(a) Earning and period for applying credits. When the average
fuel economy of passenger automobiles manufactured by a manufacturer
in a particular model year exceeds an applicable average fuel
economy standard under section 32902(b)-(d) of this title
(determined by the Secretary of Transportation without regard to
credits under this section), the manufacturer earns credits. The
credits may be applied to--
(1) Any of the 3 consecutive model years immediately before the
model year for which the credits are earned; and
(2) To the extent not used under clause (1) of this subsection,
any of the 3 consecutive model years immediately after the model
year for which the credits are earned.
The language of the statute suggests that a manufacturer may use
credits in any manner it chooses as long as existing liabilities are
first satisfied and, potentially, those credits are not sold or
otherwise traded to another manufacturer.\6\ However, the language of
Sec. 32903 changed when the predecessor Motor Vehicle Information and
Cost Savings Act, which was codified into Sec. 32903 by Pub. L. 103-
272 (July 5, 1994). Section 1(a) of that law stated that the laws being
codified were being done so ``without substantive change.'' Therefore,
it is appropriate to look to the language of the earlier statute when
determining whether Congress intended to compel the agency to further
restrict manufacturer use of credits.
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\6\ The question as to whether the statute permits credit
trading, either between manufacturers or between classes of light
trucks, was raised in the agency's Advanced Notice of Proposed
Rulemaking exploring CAFE reform options. See 68 FR 74908 (December
29, 2003).
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Section 502(l)(1)(B) of the Motor Vehicle Information and Cost
Savings Act stated:
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.
NHTSA has historically maintained that this language of the Motor
Vehicle Information and Cost Savings Act means that a credit earned by
a particular manufacturer (or group of related manufacturers) is only
available to be taken into account with respect to the average fuel
economy of that manufacturer (or group of related manufacturers). In
the NPRM (as well as in previous agency articulations of the issue),
NHTSA maintained that this language allows only a manufacturer
exercising control at the time the credit is earned to use the credit
to satisfy a contemporaneous or preexisting liability.
However, support for this position cannot be found in the 1980
amendments to the statute that codified this provision, or indeed to
its predecessor language in EPCA. Additionally, this position largely
ignores the fact that the 1980 amendments, which adopted not only this
language but amended the definition of a manufacturer to include
successor/predecessor relationships which were to be defined by NHTSA,
were made to increase the degree of manufacturer flexibility while
retaining the overall intent of the original statute to promote fuel
efficiency. Thus, in defining the terms ``successor'' and
``predecessor'' consistent with Congress' intent at the time, we must
look not only to the overarching goal of improving fuel efficiency, but
more specifically to the goal of increasing manufacturing flexibility.
CAFE standards were established in 1975 as part of a far-reaching
piece of legislation designed to address growing dependency on foreign
oil and dwindling domestic petroleum reserves. Congress determined that
the best way to encourage the automotive sector to increase the fuel
efficiency of its vehicles was to create a system under which
manufacturers would be required to meet federally established fuel
standards. These standards were to be sufficiently rigorous to promote
the development of more fuel efficient vehicles, but not so rigorous as
to result in the loss of employment in the automotive sector, then
responsible for 1 out of every 9 jobs in the U.S. economy.
As part of that legislation, Congress established a limited credit
program in which a manufacturer could earn credits for enhanced fuel
efficiency. As part of its enforcement program, the Department of
Transportation would determine a manufacturer's liability and
[[Page 77668]]
then would determine whether the manufacturer had earned any credits
the previous year. If so, those credits were to be applied to the
liability and penalties would be reduced by existing credits on a one-
to-one basis. Any credits not used to satisfy a previous year's
liabilities could be retained to meet liabilities incurred in the
following year, either as a direct reduction if penalties had not yet
been paid, or as a refund.
A manufacturer was defined as ``any person engaged in the business
of manufacturing'' and the Secretary of Transportation was ordered to
``prescribe rules for determining, in cases in which more than one
person is the manufacturer of an automobile, which person is to be
treated as the manufacturer'' 15 U.S.C. 2002 (1976 Ed.).
Five years later, domestic U.S. automobile manufacturers were in
the midst of financial difficulties and one major manufacturer,
Chrysler, was on the verge of bankruptcy. Congress decided the CAFE
program needed to be amended so as to provide vehicle manufacturers
with greater flexibility, thus decreasing the likelihood of layoffs in
the automotive sector, while generally retaining the program's
commitment to increased fuel efficiency.
As part of the 1980 amendments, Congress took several steps to
increase manufacturer flexibility. First, it allowed low-volume
manufacturers to request alternative CAFE standards for two or more
years and exempted them from reporting requirements. Second, it
provided additional flexibility in the CAFE standards for foreign
manufacturers so as to encourage them to expand manufacturing
operations into the U.S. Finally, and most importantly for this
discussion, it provided manufacturers with greater flexibility in
achieving CAFE standards in any particular year by allowing
manufacturers to earn credits that could be used to offset liabilities
incurred up to three years before and three years after the credits
were earned.
Manufacturers without credits that discovered they were likely to
end the model year with a shortfall were permitted to file a plan with
NHTSA demonstrating how they would make up any shortfall within three
years. Unless the plan was deemed unreasonable, NHTSA was to approve
the plan, and penalties were deferred until the plan failed to produce
the anticipated credits. As part of this legislation, the term
``manufacturer'' was amended to ``include[s] any predecessor or
successor of such a manufacturer to the extent provided under rules
which the Secretary shall prescribe.''
Under the scheme proposed in the NPRM, a successor's use of the
CAFE credits of its predecessor corporations would be limited, placing
a significant constraint on manufacturer flexibility. Yet, the
successor would be held responsible for any CAFE liabilities of its
predecessor companies. A successor corporation could well find itself
responsible for previously incurred CAFE obligations, but without
previously earned CAFE credits. Despite the statutory language, a
``manufacturer'' would no longer include the concept of successor and
predecessor corporations as generally defined in corporate law.
Instead, it would be subject to a different set of rules applicable
only in the context of the CAFE program.
Further, the preliminary analysis set forth in the NPRM focused
only on the statutory term ``manufacturer,'' but did not give due
consideration to the import of the statutory term ``automobiles
manufactured by a manufacturer.'' This latter term is the fulcrum of
determining the CAFE performance of a particular vehicle fleet and, by
statute, incorporates any vehicle manufactured by a manufacturer in a
control relationship with another manufacturer. By definition, then,
the statute anticipates including in a manufacturer's fleet vehicles
sold by manufacturers other than the particular corporate entity that
produced or sold the vehicle when there is a control relationship.
We believe it is unlikely that Congress expected the agency to
develop a scheme under which there is no incentive to earn credits
other than to make up for existing shortfalls. Nor is it a policy
encouraging the development and sale of vehicle fleets exceeding
applicable CAFE standards.
Indeed, as discussed above, Congress adopted amendments to the CAFE
statute to provide for three-year carry-forward and carry-back
compliance plans using credits to offset liabilities expressly to give
manufacturers additional flexibility. Rather, it is more likely that
Congress was well aware when it enacted provisions to extend CAFE
credit planning that compliance with CAFE standards was premised on the
fleet of ``automobiles manufactured by a manufacturer,'' and further
that any individual fleet would include vehicles manufactured by
companies in various control relationships. Congress chose to provide
additional flexibility to manufacturers to meet CAFE standards while
maintaining the ability of a manufacturer in a control relationship to
calculate its corporate average fuel economy with regard to the
automobiles sold by companies within that control relationship.
2. Policy Considerations
The NPRM was premised on the agency's preliminary belief that tight
constraints on existing credits are necessary to encourage vehicle
fleets to exceed applicable CAFE standards. The agency reasoned that
allowing the transfer of CAFE credits as part of a corporate merger
would not encourage good CAFE performance. Indeed, the agency believed
that permitting the transfer of CAFE credits would discourage the
development and sale of more fuel-efficient vehicles.
The NPRM offered the following example: ``To the extent that a
successor had been planning to exceed standards in the future to earn
credits that could be carried back to cover pre-acquisition shortfalls,
permitting the successor to use the predecessor's previously earned
credits to cover those shortfalls would remove the incentive to exceed
those standards.'' 66 FR 6528. It did not, however, consider the
incentive to companies to exceed standards in order to gain assets
valuable to potential investors and acquirers.
The agency issued the NPRM without the benefit of the policy input
and economic analysis developed during the NAS's review of the CAFE
program. The NAS study is instructive in that it raises the prospect
that treating credits as an asset that is potentially of value to
others provides an increased incentive to create the asset. The
preliminary conclusions stated in the NPRM did not consider that a
successor company's ability to use CAFE credits might create valuable
assets enhancing the value of a corporation to another.
In the NPRM, the agency only considered the prospect encountered in
the earlier Chrysler enforcement action, i.e., the successor possesses
a shortfall that the predecessor's credits can alleviate. It did not
consider the reverse situation in which a credit-rich manufacturer is
acquiring a predecessor with sizeable CAFE liability. Ford raised this
scenario in its comments. Ford offered the following example:
If A, whose fleet is CAFE-positive, acquires B, whose fleet is
CAFE-negative, it may not be possible for A to generate sufficient
credits in the next three years to cover B's pre-existing
shortfalls. A's product plans for the next three model years are
basically set, and there is little A can do in the short term to
improve its CAFE performance. Nor can A do anything to change B's
CAFE-negative past. As a result, A may have no choice but to address
B's shortfall by paying a fine--even
[[Page 77669]]
though A may have enough past credits to offset B's past shortfall.
This outcome may add to the coffers of the U.S. Treasury, but it
unfairly penalizes A and does nothing to serve CAFE's overall
purpose of promoting energy conservation.
While Ford expressed its concerns in terms of equity, we believe
the ability of a successor corporation to use its existing credits
actually has the potential to encourage greater fuel efficiency. That
is to say, a manufacturer has an incentive to earn credits above and
beyond its actual need because a credit-rich manufacturer can use
excess credits to reduce the cost of merging with an otherwise
attractive manufacturer that is laden with CAFE liabilities.
The concern expressed in the NPRM was also premised on the notion
that allowing a successor corporation to use credits by one of its
predecessors to offset the liabilities of any other predecessor
amounted to trading credits between manufacturers. This concern was
premised on a preliminary belief that allowing a successor to use
within the control relationship the credits earned by one of its
constituent parts would ``retroactively'' apply credits to a
``manufacturer'' that did not earn them.
After reviewing the comments and applicable corporate law, we find
that acknowledging the purchase and sale of corporate assets, including
CAFE credits, or corporate liabilities, including CAFE obligations,
does not amount to trading credits between manufacturers. Nor does it
imply any retroactive application of credits. At any particular point
of time, CAFE responsibility is gauged in accordance with the corporate
structure in existence at that time.
If a company purchases the assets and liabilities of another
manufacturer, in accordance with the contract between them, the
successor manufacturer may be entitled to use the assets of its
constituent parts as one company. If the successor has purchased the
assets and liabilities of its constituent parts, it is entitled
(consistent with its contract) to use those assets and liabilities to
address the responsibilities of the company as they exist as of that
time. For example, if Company A has CAFE liability in Year 1 and
purchases the assets and liabilities of Company B midway through Year
2, combined Company C's assets and liabilities for CAFE purposes are
determined with regard to its position, in terms of its CAFE
responsibilities, as of Year 3. If the contract provides, combined
Company C incurs all the liabilities and is entitled to all of the
assets of its predecessor corporations. If within the three-year carry-
forward carry-back time frame, the company is responsible for the
liabilities and may use the credits applicable to the corporation as a
whole.
Consistent with the express statutory terms construing a
manufacturer's corporate average fuel economy in terms of the
``automobiles manufactured by a manufacturer,'' and consistent with
general principles of corporate law, a successor corporation is
entitled to use the assets and is responsible for the liabilities of
its predecessor corporations as defined by their contractual relations.
This includes the rights and responsibilities of companies in a
position of control over, or who are controlled by, another
corporation.
Our purpose, as set forth in the NPRM, is to encourage CAFE
compliance in the vehicle fleet as a whole to reduce consumption of
gasoline and to enhance the nation's energy independence. We now
believe that the ability of successor corporations to use more freely
the CAFE credits earned by each of their predecessor corporations
enhances the value of those companies to others. And, perhaps more
compelling, the ability of a successor corporation to use its own
credits to satisfy the liabilities of a predecessor provides the
successor with a valuable mechanism to reduce the overall cost of the
acquisition. Thus, the effect of today's rule is to encourage companies
on the one hand to maximize the number of credits it earns and on the
other to join in corporate structures that help advance overall fleet
fuel economy.
The NPRM also addressed other types of changes in corporate
relationships, including the potential for corporate relations to
dissolve. We believe our regulation properly addresses such
dissolutions by focusing on the contractual agreements and by applying
(as suggested in the NPRM) general principles of corporate law. Thus,
we have included in the Final Rule a provision simply stating that
dissolutions--like combinations--are subject to contractual agreements
and should be available for use consistent with general principles of
corporate law. We have, therefore, simplified the final regulation
without altering the basic policy underlying the need to enhance energy
independence.
C. Acquisitions During a Model Year
In the NPRM, we proposed to specify that ``(i)f one manufacturer
becomes the successor of another manufacturer during a model year, all
of the vehicles produced by those manufacturers during the model year
are treated as though they were manufactured by the same
manufacturer.'' The proposed specification also provided that ``(a)
manufacturer is considered to have become the successor of another
manufacturer during a model year if it is the successor on September 30
of the corresponding calendar year and was not the successor for the
preceding model year.''
Ford argued that the proposed specification ``is clearly
inconsistent with the CAFE statute.'' It noted that, as currently
codified, 49 U.S.C. 32901(4) defines the term ``automobile manufactured
by a manufacturer'' as including every automobile manufactured by a
person that controls, is controlled by, or is under common control with
a manufacturer * * *''
Ford argued that a problem with NHTSA's proposed rule is that it
forces manufacturers to combine fleets before any control relationship
has even been established. It cited the example of A's acquiring or
taking control of B on August 1, 2002. Under the proposed rule, the
fleets of A and B would be combined for all of model year 2002.
However, Ford argued that it is improper to force A to include in its
model year 2002 fleet a vehicle produced by B on October 2001.
Ford noted the agency's statement that fuel economy standards must
apply to ``particular model years as a whole'' and not to ``separate
parts of a model year.'' It stated that the agency is worried that,
absent such a provision, ``one or both manufacturers would have two
separate CAFE values * * * for the same model year.'' Ford claimed this
is an implausible assumption. According to Ford, simply put, both
manufacturers would file CAFE reports; manufacturer A would include
those models produced after ``control'' was established and
manufacturer B would include those vehicles produced before ``control''
was established. This would be the case even if B ceased to exist after
the ``control'' date.
That company argued that a scheme which pretends that Manufacturer
A ``controls'' Manufacturer B for an entire model year, even though the
actual control relationship existed only for the last two months (or
even the very last day) of that model year, is contrary to the
statutory scheme. Ford argued that in setting up the ``control''
criterion, Congress intended to count in a manufacturer's CAFE fleet
only those vehicles for which the manufacturer could fairly be held
responsible. Ford argued that the fairest and most transparent way to
address the issue is to have A take responsibility for only those
vehicles produced by B after the control relationship is established.
[[Page 77670]]
We disagree. First, CAFE compliance and any remaining obligations
are based on the total volume of vehicles sold during the course of the
model year and are not determined until the end of the model year. (49
U.S.C. 32903(b)(1)) No administrative mechanism currently exists to
separate CAFE compliance to account for mid-year changes in corporate
relationships and we see no need to craft one. Under today's rule, an
acquiring corporation inherits all CAFE liabilities and credits of the
predecessor corporation for a period dating back three years. These
assets and liabilities would be considered by both parties when
negotiating the transfer of corporate interests, as would any assets
and liabilities.
Accordingly, we do not believe that the successor corporation is in
any way injured by the existing administrative structure. A successor
corporation may, upon acquisition, take steps to mitigate any projected
CAFE shortfall for its total fleet for that model year, including
filing a plan to make up any shortfalls within the next three model
years. Given today's determination that a predecessor's CAFE
liabilities need not be satisfied solely through the payment of
penalties, there is no imposition of an unreasonable burden.
Further, to ensure that the agency properly allocates CAFE credits
and liabilities to the appropriate manufacturer in accordance with
their corporate transaction, we have decided to include in the
regulation a provision similar to that used in many of our Federal
Motor Vehicle Safety Standards (FMVSS). New or upgraded FMVSS often
include a ``phase-in'' schedule during which the standard becomes
applicable to an increasing percentage of each manufacturer's new
vehicle fleet. The agency has accounted for corporate transactions in
this context by providing that a vehicle will be attributable as
between manufacturers in accordance with express written contracts
submitted to NHTSA. (See, e.g., FMVSS 225 Sec. 14.2.2 and 49 CFR part
596.6(b)(3)).
We have included a similar provision in this Final Rule to help the
agency identify when a corporate transaction has resulted in the
transfer of rights and responsibilities between manufacturers. To
effect the corporate transaction, manufacturers are to submit a
certified report to the agency stating that the transaction has or will
transfer controlling stock interest or otherwise vest a new corporate
entity with control over the design, production or sales of automobiles
manufactured by another manufacturer.
Likewise, to the extent that a group of manufacturers within a
control relationship allocates the group's CAFE credits and liabilities
among the manufacturers within the group, the group of manufacturers
shall file a copy of the agreement controlling the allocation at the
end of each model year. In this way, NHTSA will be better able to
administer its CAFE compliance program. All manufacturers in a control
relationship shall be jointly and severally liable for any CAFE
liabilities that are not collected from the manufacturer allocated
responsibility for those liabilities.
VII. Rulemaking Analyses and Notices
A. Executive Order 12866 and DOT Regulatory Policies and Procedures
NHTSA has considered the impact of this rulemaking action under
Executive Order 12866 and the Department of Transportation's regulatory
policies and procedures. This rulemaking document is not economically
significant. It was reviewed by the Office of Management and Budget
under E.O. 12866, ``Regulatory Planning and Review.'' The rulemaking
action has been determined to be significant under the Department's
regulatory policies and procedures, given the public interest in the
automotive fuel economy program.
The new regulation does not create any new obligations, other than
the obligation to file with NHTSA evidence of a contractual
relationship allocating CAFE credits and liabilities among various
parties exercising control over the manufacture of a fleet of vehicles.
It expands upon the same positions concerning predecessors and
successors as we have previously taken in interpretation letters by
permitting existing credits to be used to satisfy the existing
liabilities of either party to a transaction establishing a successor/
predecessor relationship.
As discussed earlier in this notice, if we did not adopt
regulations governing the use of CAFE credits by predecessors and
successors, a predecessor's unused credits would simply expire, since
the only manufacturer that could use them would no longer exist.
Similarly, there would be no way of offsetting a predecessor's
remaining CAFE shortfalls in the absence of some provision concerning
successors. The successor would thus be required to pay the
predecessor's penalties, a responsibility which it assumed with the
rest of the predecessor's obligations, but would have no ability to
earn future credits to offset the predecessor's shortfalls.
To address this inequity, the regulation gives the successor all
the rights the predecessor had with respect to the use of preexisting
credits and the ability to earn future credits.
The provisions concerning the rights and responsibilities of
manufacturers in other situations in which there have been changes in
corporate relationships, e.g., changes in control, are essentially a
statement of our interpretation of the statute and reflect the same
principles as the provisions relating to predecessors and successors.
B. Regulatory Flexibility Act
We have considered the effects of this rulemaking action under the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.) I hereby certify that
proposed rule does not have a significant economic impact on a
substantial number of small entities. Therefore, a regulatory
flexibility analysis is not required for this action. As discussed
above, the regulation does not create any new obligations but simply
adopts the same positions concerning predecessors and successors as we
have previously taken in interpretation letters. Similarly, the
provisions concerning the rights and responsibilities of manufacturers
in other situations in which there have been changes in corporate
relationships, e.g., changes in control, are essentially a statement of
our interpretation of the statute and reflect the same principles as
the provisions relating to predecessors and successors. Moreover, as a
practical matter, the acquiring corporations most likely to be affected
by this regulation are not small businesses.
C. National Environmental Policy Act
NHTSA has analyzed this rule for the purposes of the National
Environmental Policy Act and determined that it does not have any
significant impact on the quality of the human environment.
D. Executive Order 13132 (Federalism)
The agency has analyzed this rulemaking action in accordance with
the principles and criteria set forth in Executive Order 13132 and has
determined that it does not have sufficient federalism implications to
warrant consultation with State and local officials or the preparation
of a federalism summary impact statement. The rule has no substantial
effects on the States, or on the current Federalism-State relationship,
or on the current distribution of power and responsibilities among the
various local officials.
E. Unfunded Mandates Act
The Unfunded Mandates Reform Act of 1995 requires agencies to
prepare a
[[Page 77671]]
written assessment of the costs, benefits and other effects of proposed
or final rules that include a Federal mandate likely to result in the
expenditure by State, local or tribal governments, in the aggregate, or
by the private sector, of more than $100 million annually (adjusted for
inflation with base year of 1995). The rule does not result in the
expenditure by State, local or tribal governments, in the aggregate, or
by the private sector, of more than $100 million annually.
F. Executive Order 12778 (Civil Justice Reform)
This rule does not have any retroactive effect. However, as we
noted in the NPRM, we would, as a practical matter, consider the
regulation in any enforcement action regarding predecessors and
successors that involved conduct that occurred before the regulation
became effective.
As discussed earlier, the regulation does not create any new
obligations but expands the same positions concerning predecessors and
successors as we have previously taken in interpretation letters and
have previously applied in our administration of the statute. If we did
not adopt special provisions governing the use of CAFE credits by
predecessors and successors, a predecessor's unused credits would
simply expire, since the only manufacturer that could use them would no
longer exist. Similarly, there would be no way of offsetting a
predecessor's remaining CAFE shortfalls in the absence of some
provision concerning successors.
The rule addresses this inequity and gives the successor all the
rights the predecessor had with respect to credits.
We would similarly consider the regulation in any enforcement
action regarding other situations in which there have been changes in
corporate relationships, e.g., changes in control, that involved
conduct that occurred before the regulation became effective. However,
the provisions are essentially a statement of our interpretation of the
statute.
States are preempted from promulgating laws and regulations
contrary to the provisions of this rule. The rule does not require
submission of a petition for reconsideration or other administrative
proceedings before parties may file suit in court.
G. Paperwork Reduction Act
The agency has prepared the necessary paperwork under the Paperwork
Reduction Act and submitted it to the Office of Management and Budget.
PRA clearance is necessary because the final regulation includes a
provision requiring the submission of agreements between companies in
certain circumstances.
H. Regulation Identifier Number (RIN)
The Department of Transportation assigns a regulation identifier
number (RIN) to each regulatory action listed in the Unified Agenda of
Federal Regulations. The Regulatory Information Service Center
publishes the Unified Agenda in April and October of each year. You may
use the RIN contained in the heading at the beginning of this document
to find this action in the Unified Agenda.
I. Executive Order 13045
Executive Order 13045 (62 FR 19885, April 23, 1997) applies to any
rule that: (1) Is determined to be ``economically significant'' as
defined under E.O. 12866, and (2) concerns an environmental, health or
safety risk that NHTSA has reason to believe may have a
disproportionate effect on children. This regulatory action does not
meet either of those criteria.
J. National Technology Transfer and Advancement Act
Section 12(d) of the National Technology Transfer and Advancement
Act (NTTAA) requires NHTSA to evaluate and use existing voluntary
consensus standards \7\ in its regulatory activities unless doing so
would be inconsistent with applicable law (e.g., the statutory
provisions regarding NHTSA's vehicle safety authority) or otherwise
impractical. This requirement is not relevant to this rulemaking
action.
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\7\ Voluntary consensus standards are technical standards
developed or adopted by voluntary consensus standards bodies.
Technical standards are defined by the NTTAA as ``performance-based
or design-specific technical specifications and related management
systems practices.'' They pertain to ``products and processes, such
as size, strength, or technical performance of a product, process or
material.''
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List of Subjects in 49 CFR Part 534
Fuel economy, Motor vehicles.
0
In consideration of the foregoing, chapter V of title 49 of the Code of
Federal Regulations is amended by adding a new Part 534 to read as
follows:
PART 534--RIGHTS AND RESPONSIBILITIES OF MANUFACTURERS IN THE
CONTEXT OF CHANGES IN CORPORATE RELATIONSHIPS
534.1 Scope.
534.2 Applicability.
534.3 Definitions.
534.4 Successors and predecessors.
534.5 Manufacturers within control relationships.
534.6 Reporting corporate transactions.
535.7 Situations not directly addressed by this part.
Authority: 49 U.S.C. 32901; delegation of authority at 49 CFR
1.50.
Sec. 534.1 Scope.
This part defines the rights and responsibilities of manufacturers
in the context of changes in corporate relationships for purposes of
the automotive fuel economy program established by 49 U.S.C. Chapter
329.
Sec. 534.2 Applicability.
This part applies to manufacturers of passenger automobiles and
non-passenger automobiles.
Sec. 534.3 Definitions.
(a) Statutory definitions and terms. All terms used in 49 U.S.C.
Chapter 329 are used according to their statutory meaning.
(b) As used in this part--
``Control relationship'' means the relationship that exists between
manufacturers that control, are controlled by, or are under common
control with, one or more other manufacturers.
``Predecessor'' means a manufacturer whose rights have been vested
in and whose burdens have been assumed by another manufacturer.
``Successor'' means a manufacturer that has become vested with the
rights and assumed the burdens of another manufacturer.
Sec. 534.4 Successors and predecessors.
For purposes of the automotive fuel economy program,
``manufacturer'' includes ``predecessors'' and ``successors'' to the
extent specified in paragraphs (a) through (d) of this section.
(a) Successors are responsible for any civil penalties that arise
out of fuel economy shortfalls incurred and not satisfied by
predecessors.
(b) If one manufacturer has become the successor of another
manufacturer during a model year, all of the vehicles produced by those
manufacturers during the model year are treated as though they were
manufactured by the same manufacturer. A manufacturer is considered to
have become the successor of another manufacturer during a model year
if it is the successor on September 30 of the corresponding calendar
year and was not the successor for the preceding model year.
(c) Credits earned by a predecessor may be used by a successor,
subject to availability of the credits and the general three-year
restriction on carrying credits forward and the general
[[Page 77672]]
three-year restriction on carrying credits backward.
(d) Credits earned by a successor may be used to offset a
predecessor's shortfall, subject to availability of the credits and the
general three-year restriction on carrying credits backward.
Sec. 534.5 Manufacturers within control relationships.
(a) If a civil penalty arises out of a fuel economy shortfall
incurred by a group of manufacturers within a control relationship,
each manufacturer within that group is jointly and severally liable for
the civil penalty.
(b) A manufacturer is considered to be within a control
relationship for an entire model year if and only if it is within that
relationship on September 30 of the calendar year in which the model
year ends.
(c) Credits of a manufacturer within a control relationship may be
used by the group of manufacturers within the control relationship to
offset shortfalls, subject to the agreement of the other manufacturers,
the availability of the credits, and the general three-year restriction
on carrying credits forward or backward.
(d) If a manufacturer within a group of manufacturers is sold or
otherwise spun off so that it is no longer within that control
relationship, the manufacturer may use credits that were earned by the
group of manufacturers within the control relationship while the
manufacturer was within that relationship, subject to the agreement of
the other manufacturers, the availability of the credits and the
general restriction on carrying credits forward or backward.
(e) Agreements among manufacturers in a control relationship
related to the allocation of credits or liabilities addressed by this
section shall be filed with the agency within 60 days of the end of
each model year in the same form as specified in section 534.6. The
manufacturers may seek confidential treatment for information provided
in the certified report in accordance with 49 CFR Part 512.
Sec. 534.6 Reporting corporate transactions.
Manufacturers who have entered into written contracts transferring
rights and responsibilities such that a different manufacturer owns the
controlling stock or exerts control over the design, production or sale
of automobiles to which a Corporate Average Fuel Economy standard
applies shall report the contract to the agency as follows:
(a) The manufacturers must file a certified report with the agency
affirmatively stating that the contract transfers rights and
responsibilities between them such that one manufacturer has assumed a
controlling stock ownership or control over the design, production or
sale of vehicles. The report must also specify the first full model
year to which the transaction will apply.
(b) Each report shall--
(i) Identify each manufacturer;
(ii) State the full name, title, and address of the official
responsible for preparing the report;
(iii) Identify the production year being reported on;
(iv) Be written in the English language; and
(v) Be submitted to: Administrator, National Highway Traffic Safety
Administration, 400 Seventh Street, SW., Washington, DC 20590.
(c) The manufacturers may seek confidential treatment for
information provided in the certified report in accordance with 49 CFR
part 512.
Sec. 534.7 Situations not directly addressed by this part.
To the extent that this part does not directly address an issue
concerning the rights and responsibilities of manufacturers in the
context of a change in corporate relationships, the agency will make
determinations based on interpretation of the statute and the
principles reflected in the part.
Issued on: December 20, 2004.
Jeffrey W. Runge,
Administrator.
[FR Doc. 04-28237 Filed 12-27-04; 8:45 am]
BILLING CODE 4910-59-P