updated 4/20/2004 6:19:20 PM ET 2004-04-20T22:19:20

The government decided Tuesday to exempt Nissan Motor Co. from a fuel economy rule, a highly unusual move due to concern that enforcement could lead to U.S. job losses.

Nissan asked the government in February for an exemption to the "two-fleet rule," which requires automakers to separately calculate the average fuel economy of their domestic and foreign-made vehicles. The averages for the two fleets must meet the government's standard of 27.5 mpg.

Nissan now will be allowed to combine its domestic and foreign vehicles and then calculate the fuel economy. The exemption applies to vehicles from the 2006 to 2010 model years.

The automaker had said without the exemption, it might move production of one of its U.S.-produced vehicles overseas.

The potential for job losses prompted the National Highway Traffic Safety Administration to decide that an exemption was warranted. Volkswagen AG is the only other company that has ever received an exemption. It was granted in 1981.

Exemptions can only be granted to foreign manufacturers that produced vehicles in the United States between 1975 and 1985.

The decision angered domestic manufacturers and the United Auto Workers, who said it gives Nissan an unfair advantage.

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

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 can't meet the fuel economy average without it.

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