NHTSA Grants Nissan Petition to Combine Car Fleets under CAFE

Topics:  Nissan, Nissan Sentra

National Highway Traffic Safety Administration
April 20, 2004

NHTSA 18-04
Tuesday, April 20, 2004
Contact: Rae Tyson
Telephone: (202) 366-9550

A 1980 amendment to the law that regulates the fuel efficiency of new cars and light trucks has led the U.S. Department of Transportation's National Highway Traffic Safety Administration (NHTSA) to grant a petition from Nissan North America changing the way Nissan's cars made in Mexico are affected by those standards and in turn help to keep domestic parts orders and the jobs they support from going overseas.

Starting with the 2005 model year, the corporate average fuel economy (CAFE) standard will change because the North American Free Trade Agreement will begin to classify any vehicle as "domestic" if at least 75 percent of its parts or labor originated in the United States , Mexico or Canada . Because the Nissan Sentra is made in the U.S. and Mexico , it would be moved out of the company's import fleet and into its domestic fleet, making it impossible for the rest of Nissan's imports to meet the fuel economy standard for cars.

The pending change prompted the company to ask NHTSA's permission to combine its domestic and import passenger car fleets in order to ensure their compliance with fuel efficiency standards. And under language in the CAFE law, NHTSA would be required to grant its approval unless doing so would reduce U.S. automobile manufacturing jobs.

"Projected job losses from denying the petition outweigh the potential job losses from granting it. Because we cannot conclude that there would be U.S. automobile manufacturing-related job losses, we are compelled to grant the petition," said NHTSA Deputy Administrator Otis Cox.

In its analysis, NHTSA found that granting the petition would likely help to keep some parts-manufacturing jobs from going overseas, which could have happened if Nissan were forced to reduce the domestic content of the Sentra in order to have it reclassified as an import to gain CAFE compliance for its import fleet.

Nissan claimed it faced the prospect of purchasing vehicle parts from suppliers overseas in order to avoid falling below the passenger car CAFE standard. Granting the petition allows Nissan to continue purchasing those parts from North American suppliers and retains jobs that might otherwise be lost.

Under a "two-fleet" rule, the CAFE statute requires that auto manufacturers, in calculating fuel economy, divide their vehicles into domestic and non-domestic fleets. With the petition granted, Nissan can combine its fuel-efficient Mexican-made model with its less fuel-efficient models to create a single fleet that is more likely to meet the CAFE standard.

Nissan is one of a very few manufacturers that qualify for this exemption. Only foreign manufacturers that produced or assembled vehicles in the United States between 1975 and 1985 qualify for the exemption.

The exemption from the two-fleet rule applies to 2006-2010 model year cars. The decision was posted today at the Federal Register. It also is available at http://www.nhtsa.dot.gov/cars/rules/cafe/rulemaking.htm title="www.nhtsa.dot.gov/cars/rules/cafe/rulemaking.htm"

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