(FORTUNE Magazine) – AS SLEEK 1986 CARS rolled out of the factories in November, the air bag lobby -- consumer groups, insurance companies like State Farm, and air bag suppliers -- had plenty to cheer about. ''I'm thinking about declaring victory and retiring from the field,'' says Clarence Ditlow, director of Ralph Nader's Center for Auto Safety. ''Air bags are on their way.'' Mercedes, which expects to sell 90,000 1986 cars in the U.S., recently became the first manufacturer to put the safety device on all models as standard equipment. Ford is offering an air bag as an $815 option on its new Tempo and Topaz compact cars; it hopes 12,000 or so buyers will order them. Rumors have been flying around Washington that BMW and Volvo are ready to jump on the air bag bandwagon. What once looked like a loophole in a federal regulation requiring so-called passive restraints -- air bags or automatic seat belts -- now looks like a noose to Detroit's Big Three. In 1984 Transportation Secretary Elizabeth Dole ordered the restraints installed on all cars sold in the U.S. by 1989, beginning with 10% of the 1987 fleets. Dole offered to rescind this requirement if states with populations equal to two-thirds of the U.S. total enacted mandatory seat belt laws that met her guidelines. Hoping to take advantage of the loophole, Ford, General Motors, and Chrysler pushed hard for state seat belt laws, coordinating their efforts through an industry lobbying group known as Traffic Safety Now. Thus far 16 states with more than half the country's population -- they include New York and Illinois -- have passed the laws. More states are expected to act next year. But, says a Detroit lobbyist, ''not one of the 16 states has passed a law that really meets Dole's criteria.'' For example, Nevada made its mandatory seat belt law conditional upon the federal government's raising the 55-mph speed limit in uncongested areas. That's how to get hung with a loophole.