Nissan North America, Inc.; Petition for Exemption From Two-Fleet Rule Affecting Compliance With Passenger Automobile Fuel Economy Standards

Nissan North America, Inc. (Nissan) filed a petition requesting exemption from the two-fleet rule for the 2006-2010 model years. The two-fleet rule, which is contained in the corporate average fuel economy (CAFE) statute, requires that a manufacturer divide its passenger automobiles into two fleets, a domestically-manufactured fleet and a non-domestically manufactured fleet, and ensure that each fleet separately meets the CAFE standards for passenger automobiles. Nissan filed the petition because a change under the statute in the treatment of value added to a vehicle in Mexico will cause one of that company's passenger automobiles, which is manufactured in Mexico, to be reclassified from non-domestic to domestic. The loss of these automobiles, which are relatively fuel-efficient, will cause its non- domestic fleet to fail to comply with the CAFE standards for passenger automobiles. The CAFE statute requires the agency to grant such a petition unless it finds that doing so would result in reduced employment in the U.S. related to motor vehicle manufacturing. To determine if such a reduction would result, NHTSA compared vehicle prices and sales under two scenarios: a baseline scenario in which Nissan would not have an exemption and would need either to pay penalties for noncompliance or adopt any one of a number of optional courses of action to achieve compliance; and a scenario in which Nissan would have an exemption and would not bear any of the costs of the baseline scenario. The agency then attempted to estimate the effect of the sales changes on employment for each of the options. The analysis indicated virtually no employment effect for the option most likely (on the basis of cost) to be chosen by Nissan and only slight negative employment effects for the other options. Nissan also pointed out employment effects that are not accounted for in our economic analysis. If we deny the petition, Nissan would likely purchase fewer parts from U.S. suppliers and more parts from foreign suppliers in order to recontent one of its vehicles. The result would be fewer American workers producing components to be used in Nissan cars. We are unable to quantify with precision the number of jobs potentially lost from denying the petition. It is likely, however, that more jobs would be lost if we deny the petition than would be lost if we grant it. In sum, the evidence does not support a finding that granting the petition would reduce motor vehicle manufacturing employment in the U.S. The evidence suggests instead that granting the petition would likely help retain American jobs that might otherwise be sent overseas. Accordingly, the agency will permit Nissan to combine its domestic and non-domestic passenger automobile fleet for model years 2006-2010.