1950s: Dealer-automaker relations

1950s: Dealer-automaker relations


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1950-1959 Timeline of Events (click to enlarge)

After the war, the auto industry discovered television. NADA predicted that, based on initial experiments with dealer and factory TV ads, the medium would become “a permanent sales tool of the automotive industry.” Radio also became increasingly important during this decade. NADA provided dealers with free five-minute public interest scripts for local radio broadcasts.

 

As the nation remobilized for the Korean War, dealers braced for another halt in car production. Price controls were again slapped on the auto industry. To help pay for rearmament, Congress imposed a 7 percent excise tax on new cars, which NADA criticized for pushing the average price of a car to $2,200. Although the association fought for its repeal after the war, the tax was not lifted and was later raised to 10 percent. As it had done in 1917, NADA countered with a public relations campaign stressing the “essentiality” of the car to the American way of life and the inconsistency of taxing cars but not luxury items such as yachts.

 

Washington also restricted automakers’ steel supply, causing them to close plants and lay off workers. When the government set 1952 production levels for individual automakers, there were still 11 players in the field—GM, Chrysler, Ford, Studebaker, Nash, Hudson, Packard, Kaiser-Frazer, Willys, Crosley and Checker.

 

Code of Ethics

Meanwhile, NADA started a campaign urging dealers to adopt a code of ethics. An NADA survey showed the public didn’t trust dealers, thought their profits were too high and took their cars elsewhere for service. NADA countered with studies showing that dealers made less profit than plumbers and bakers.

 

Dealer-manufacturer relations suffered during the deep recession of the early 1950s. Manufacturers tried to buoy auto sales with drastic measures, which drove many dealers out of business. With NADA’s full support, dealers finally appealed to Congress to mandate fair play, and Congress recognized the manufacturers’ abuse of the disparate bargaining ability of dealers. The Dealer’s Day in Court Law of 1956 allowed dealers to bring suit against an automobile manufacturer and recover damages for the manufacturer’s failure to “act in good faith in performing or complying with any of the terms or provisions of the franchise.”

 

After the Korean War, employment in the United States was at an all-time high. Detroit set production records, and for the first time, dealers worried about too much of a good thing. One NADA official called the specter of overcapacity “an automotive hydrogen bomb that hangs poised over all dealerships.” In a prophetic statement, 1952 NADA President J. Saxton Lloyd said it was unfair to dealers “to be forced to absorb or dispose of so many more cars than the public will buy that we all have to give them away at practically no profit or perhaps at a loss.”

 

Restoring consumer faith

NADA helped draft the Price Labeling Law in 1958, which mandated window stickers listing manufacturer suggested retail prices for cars and all options, accessories, handling, freight and federal taxes. The Monroney sticker, named for Sen. Mike Monroney (D-­Okla.), father of the law, helped restore consumer faith in the auto industry and transformed the car-buying process.

 

NADA sought improvements in dealer-automaker relations, and lobbied Congress for repeal of the 10 percent excise tax on new cars, and reinstatement of depreciation and capital gains tax treatment of company vehicles, which had been disallowed by the IRS in 1948. NADA formalized ties with local and state dealer associations, built an eight-story building in the nation’s capital, and started a nationwide workshop program, a truck advisory committee, and a retirement plan for dealers and their families. NADA was also active in various public service programs, including a national, nonpartisan get-out-the-vote campaign, highway safety programs and the loaning of cars to high schools’ newly created driver education classes.