U.S. Government Considers Job Loses and Exempts Nissan from Fuel Economy Rule

WASHINGTON April 20, 2004; Dee-Ann Durbin writing for the AP reported that U.S. regulators decided to exempt Nissan Motor Co. from government fuel economy standards, a highly unusual move prompted by concern enforcement could lead to U.S. job losses.

Nissan asked the U.S. government in February for an exemption to the "two-fleet rule," which requires automakers to calculate the average fuel economy of their domestic- and foreign-made vehicles. Each fleet must meet the government's standard of 27.5 miles per gallon.

The National Highway Traffic Safety Administration, which sets fuel economy rules, decided Tuesday to let Nissan combine its domestic and foreign vehicles and then calculate the fuel economy. The exemption, staunchly opposed by U.S. automakers, applies to vehicles from the 2006 to 2010 model years.

Nissan has 15,000 U.S. employees and operates two plants in Tennessee and one in Mississippi. Suppliers to those plants employ many thousands more.

Nissan had said without the exception it might move production of one of its U.S.-produced vehicles overseas. NHTSA determined such a move would cost hundreds of U.S. jobs because American suppliers would lose business.

"Projected job losses from denying the petition outweigh potential job losses from granting it," NHTSA Deputy Administrator Otis Cox said.

General Motors Corp., Ford Motor Co., DaimlerChrysler AG all opposed Nissan's petition, saying it's unfair to give Nissan more flexibility to meet the standards.

The companies also said it's more expensive to maintain separate statistics for foreign and domestic vehicles. A GM spokeswoman said the company wasn't prepared to comment Tuesday evening. Calls to Ford and DaimlerChrysler weren't immediately returned.

Fuel economy exemptions can only be granted to foreign manufacturers that produced vehicles in the United States between 1975 and 1985. That includes Volkswagen AG, Toyota Motor Co. and Honda Motor Co.

Congress included the provision because lawmakers were concerned foreign manufacturers already in the United States might not expand because of the "two-fleet" rule. Volkswagen is the only other company to be granted an exemption. It was approved in 1981 but is no longer in effect.

Nissan said the North American Free Trade Agreement was the reason it wanted the exemption. Under NAFTA, vehicles from 2005 and later will be classified as "domestic" if at least 75 percent of their parts or labor originate in the United States, Mexico or Canada.

Because much of Nissan's Sentra is made in Mexico, it will be considered a domestic vehicle. Nissan objected because the Sentra has high fuel economy and the company's foreign-made vehicles couldn't have met the fuel economy average without it.

"We are pleased that NHTSA has granted our petition," Nissan said in a statement released Tuesday. "Nissan can now continue its current expansion in the U.S."

Nissan had some powerful Republican lawmakers on its side. Senate Majority Leader Bill Frist of Tennessee and Mississippi Gov. Haley Barbour, the former Republican National Committee chairman, were among those who asked NHTSA to grant Nissan's petition.

The United Auto Workers, which has tried unsuccessfully to unionize Nissan workers, said the decision was misguided. Nissan had more than 10 years to plan for the NAFTA changes and could have shifted production of some of its foreign vehicles to the United States, the UAW said.

"This will hurt overall jobs in the U.S.," UAW legislative director Alan Reuther said.

NHTSA looked at the impact of its decision on other companies and determined only 70 jobs would be lost because of it.

NHTSA: http://www.nhtsa.dot.gov

Nissan: http://www.nissanusa.com