Early Times: 1917-1942

By Roberta Maynard

NADA was born in 1917 when a group of dealers set out to change the way Congress viewed automobiles. Thirty dealers from state and local associations went to Washington and set up base at the Willard Hotel. By convincing Congress that cars weren't luxuries as they had been classified, but were vital to the economy, the group prevented total factory conversion to wartime work and succeeded in reducing a proposed 5 percent luxury tax to 3 percent.

These businessmen realized that the nation's 15,000 dealers needed continuing representation in Washington. Two months later, in July, 130 dealers met in Chicago to elect officers. Milwaukee dealer George Browne was the first NADA president. To launch the association cost exactly $102.71, which covered mostly telegrams, telephone calls, and postage.

The annual convention was an NADA fixture from the beginning. The association wanted its meetings to coincide with auto shows because of the large numbers of dealers attending. So, before it was six months old, NADA held its first annual meeting, with 138 delegates, during the Chicago Auto Show. St. Louis was chosen as NADA headquarters.

Among the early concerns was how to increase membership. More than 100 automakers were asked by letter to help, but only 33 replied. So NADA officers rewrote the bylaws, dropping a membership requirement that dealers had to belong first to a local or state dealer association. Territory was allotted to the directors, who conducted membership campaigns locally.

The first important national legislation sponsored by NADA was the National Motor Vehicle Theft Law in 1919, which made it a federal offense to steal a vehicle and take it across state lines. NADA also promoted uniform accounting methods among dealers and was active in seeking auto financing reforms.

By 1920, NADA office staff had grown to six people, with seven field secretaries. The annual budget was $54,850. Member services were expanded to include insurance protection and bank credit. The 1924 convention in Chicago had 2,000 attendees. Car and truck dealers in the United States numbered about 20,000.

In 1922, NADA began to study used-car values as a service to members. A decade later those studies became the Official Used Car Guide, carrying the U.S. government's endorsement as the nation's authority on used-car values. About 40,000 copies were printed and mailed to subscribers in December 1933. The first issue was 388 pages, published for 21 regions. The $31 subscription cost reflected strict requirements under the government's war recovery program. The following year, without them, the price dropped to $12. Membership in NADA cost an additional $5.

Interest in used-car values was high for two reasons. One, after debating for years how to handle tradeins, dealers finally began applying their value toward new-car down payments. Two, used cars outsold new cars. At the end of World War I, sales of used cars were about half as numerous as new-car sales. But from 1919 through the 1950s, used-car sales consistently exceeded new-car sales.

In 1928, the NADA membership dues structure was changed from a single fee to one based on the member's gross sales the previous year. Dealers with less than $250,000 per year gross sales paid $35 annual dues. The cap was set at $2 million, which required dues of $250. Group memberships also became available.

The Depression and the 1930s

NADA almost didn't survive the Depression. The first four months of 1932 left the association—after expenses of $20,879—with a net income of $837. In May, NADA's general manager told the board that, based on the renewal record and members' difficulty in paying dues, it would be "impossible to carry the association beyond the first six months of the year without drastic changes."

The secretary was to find new quarters for the association at a cost not to exceed $50 per month. The board reduced activity to a minimum and for the rest of 1932 employed only a secretarymanager and a stenographer, who also handled bookkeeping. The general counsel, field staff, and mailroom clerk were let go. The president personally paid his office costs and stenographer's salary, and NADA's newsletter was reduced from three issues per month to one. Efforts were confined to alerting members to a proposed federal tax and special gas taxes, and promoting membership.

But a year later, things were different. In February 1933, NADA had 2,200 members, most of whom were behind in their dues. But by early 1934, NADA had an active, paidup membership of more than 20,000. By the end of the year, there were 30,000. A motor magazine editor speaking at the 1934 convention said, "It is incredible that so infinite an improvement could have been recorded in so short a space. For the average dealer who had lived so close to the gates of hell that he could smell the sulphur, the swiftly changing scene has brought a glimpse of a business paradise to which he may aspire . . . Our grandchildren, reading their histories, will have a clearer conception than we of the swift sequence of portentous events which have crowded the past 11 months."

The turnaround was the result of the New Deal's National Recovery Administration and the new Code of Fair Competition for the Motor Vehicle Retailing Trade. When the mandate of industryspecific codes was announced, the nearly dissolved association went into a flurry of activity, developing a proposed code and visiting dealers around the country for suggestions and support. It was the first retail code to be signed by President Roosevelt, and although later rescinded, it was enough to jumpstart the industry and NADA.

Factory relations and profit margins were pressing topics throughout the 1930s. At NADA's annual meeting in early 1935, the president "committed the Association to a program calling for a more equitable factorydealer relationship," according to the NADA Bulletin (later to become Automotive Executive); the executive committee authorized the president to employ assistance to bring this about. And until Prohibition ended in 1933, NADA lobbied on behalf of dealers who suffered losses when cars on which they held unpaid liens were confiscated by the Revenue Department because the owners violated liquor laws.

During those years, NADA also launched a publicity campaign urging customers to buy new cars. The average citizen could not spare a dime, and those who could afford to buy were reluctant to flaunt extravagance.

In 1935, NADA announced a Speakers' Bureau Service to help state and local dealer associations obtain lists of speakers who could address dealer groups for free. NADA also began regular, confidential studies—sales of new cars and equipment, used cars, reconditioning, parts and equipment, service, income tax, advertising—to define and quantify dealers' problems. A survey of 359 dealers at the time showed an average gross profit per new car sale of $171.87 (20 percent); direct expense of $89.09 per sale; indirect expense, $34.45; and an operating profit of $48.33 on a unit sales average of $853.17. These surveys continue in various forms today.

When NADA moved to Detroit in December 1936, it formed a new legislative department, prepared a Standard Used Car Appraisal Form, and began a dealer education program to demonstrate how to sell the used-car allowance to prospects and how to use the Guide. NADA's newsletter urged members to take care of used cars in inventory and to demo drive used cars, and offered tips for sales managers. NADA established a Used Car Creed, with 12 rules, including "never keep a used car longer than 60 days; don't spend too much for reconditioning; put used cars in salable condition and keep them that way." In 1938, the association's total assets were $161,529.35, with a cash surplus of $67,648. Dealer count, which had dropped to a low of 35,265 in 1933, was up to 41,992 in 1938. A 1939 article headline decried, "Too Many Dealers; What Can Be Done About It?"

Newmodel introductions became a bone of contention during the second half of the 1930s. At President Roosevelt's request in 1935, the industry changed the intro date for new models from January to the previous November to help stabilize auto industry employment. Dealers argued they would have to bear the cost of carrying the inventory during the extra winter months. For the next few years, NADA and several state associations adopted resolutions and lobbied to return new-car intros to January. But a 1939 NADA Bulletin article concluded that a return to the January date wasn't likely and that intros might even be put back to October. The newsletter stated that the October date would benefit dealers by allowing the new 1940 products to be displayed at the New York and San Francisco World Fairs.

For the 22nd convention in April 1939 (planned around the World's Fair and Golden Gate Exposition), a special train was arranged, offering "firstclass" meals, to take dealers from Chicago to San Francisco. It left on Thursday and arrived on Sunday. The St. Francis was the headquarters hotel that year, and banquet tickets cost $5.

The 1940 convention in Pittsburgh offered an oyster and beer party and a "cocktail and bridge party for ladies." Notices for the convention invited Eastern dealers to travel to Pittsburgh via "The Dream Highway," the new Pennsylvania Turnpike. In 1941, NADA moved from Detroit to Washington, D.C., to work more closely with government agencies and keep tabs on legislative events.

The period 1936 to 1942 was marked by many changes in factory policy favorable to dealers, among them less coercion, better understanding of dealer problems by factory executives, and willingness by automakers to seek dealer opinion and cooperation.

1940s: NADA and the Big War

In the early war years, NADA bulletins urged members to be more profitconscious, to work on improving gross profit, and to adopt "saner selling methods" to prepare for higher taxes and higher costs of doing business. And through prepared newspaper articles, NADA tried to show the public the importance of cars to the economy.

The 1942 convention marked NADA's 25th anniversary, and 2,300 dealers attended. The talk was of survival, the threat of gas rationing, and the government freeze on vehicle delivery. One speaker assured attendees that the tires and other resources then available would be sufficient to keep cars rolling for the next two years.

A March 1942 Census Bureau report of 23 common types of businesses showed that dealers were by far the hardest hit by the war program. NADA tried to boost dealer morale and lobbied to minimize the effects of rationing and other warrelated restrictions, while NADA's newsletter offered articles about how to increase service business and get customers to think about extending the life of their car.

It was a tough year for dealers. The public wasn't buying used cars for fear that the government would appropriate them; dealers were reluctant to acquire used cars because of rumors that their inventories would be frozen. Uncle Sam had already prohibited the sale and delivery of new cars and trucks; only customers who had placed orders before Jan. 1, 1942, could take delivery of new cars. Business was further eroded with nationwide gas rationing.

In mid1942, President Roosevelt brought relief to struggling dealers, signing into law a measure allowing them to sell to the government new cars and trucks that had been subject to rationing. There were 44,000 dealers at the time.

Interestingly, NADA's January 1942 newsletter warned that "the war with Japan may eliminate the American automobile forever from that country." The article noted that business had been on the "downgrade" for several years and that the last foreign manufacturer was considering moving his plant out when the war broke out. And, it said prophetically, Japan already produces beyond its own "small" requirements.

Originally published in NADA's Automotive Executive magazine, May 1992.