US regulators have exempted Nissan Motor from government fuel economy standards in a highly unusual move prompted by concern enforcement could lead to US job losses.

Associated Press (AP) said Nissan asked the US 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.

AP said the the National Highway Traffic Safety Administration (NHTSA), which sets fuel economy rules, decided on Tuesday to let Nissan combine its domestic and foreign vehicles and then calculate the fuel economy and the exemption, strongly opposed by US carmakers, applies to vehicles from the 2006 to 2010 model years.

Nissan has 15,000 US employees and operates plants in Tennessee and Mississippi while suppliers to those two plants employ many thousands more, AP noted.

According to the report, Nissan had said that, without the exception, it might move production of one of its US-produced vehicles overseas and NHTSA determined such a move would cost hundreds of US 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, according to Associated Press.

But General Motors, Ford and DaimlerChrysler all opposed Nissan’s petition, saying it was unfair to give Nissan more flexibility to meet the standards, AP added.

The companies also reportedly said it’s more expensive to maintain separate statistics for foreign and domestic vehicles.

According to Associated Press, fuel economy exemptions can only be granted to foreign manufacturers that produced vehicles in the United States between 1975 and 1985 – that includes Volkswagen, Toyota and Honda.

Congress reportedly 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 Volkswagen is the only other company to be granted an exemption which was approved in 1981 but is no longer in effect, AP said.

Nissan reportedly 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% of their parts or labour originate in the United States, Mexico or Canada.

AP said that, because much of Nissan’s Sentra is made in Mexico, it will be considered a domestic vehicle and the carmaker 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 reportedly said in a statement released Tuesday. “Nissan can now continue its current expansion in the US.”

Associated Press noted that Nissan had some powerful Republican lawmakers on its side.

But the United Auto Workers, which has tried unsuccessfully to unionise Nissan workers, told AP the decision was misguided, saying that Nissan had more than 10 years to plan for the NAFTA changes and could have shifted production of some of its foreign-made vehicles to the United States.

“This will hurt overall jobs in the US,” UAW legislative director Alan Reuther told Associated Press which added that NHTSA looked at the impact of its decision on other companies and determined only 70 jobs would be lost because of it.