Among business executives of the 1950s, General Motors President Harlow Curtice was a superstar.
Curtice rose through the ranks from bookkeeper at a GM parts subsidiary to chief of the world's largest and most powerful corporation. He was a numbers cruncher who favored big, stylish cars. Time magazine named Curtice its Man of the Year for 1955.
But Curtice made a political blunder in July 1955. He blew off an invitation to testify before a U.S. Senate committee that was investigating the power of big business.
He may have believed that the business-friendly Eisenhower administration would keep insulating GM from government interference. But lawmakers - especially Democrats - resolved to get even for what they considered Curtice's snub, accounts from the period say.
Senators held high-profile hearings in late 1955 and early 1956 that sympathetically examined auto dealers' grievances about their treatment by then all-powerful automakers. Among their complaints: Factories forced them to take vehicles they didn't want and canceled their franchises if they didn't go along.
Curtice appeared at some of the hearings, but the course was set. In 1956, Congress passed a groundbreaking law that prohibited coercion of dealers by automakers. The law, which gives dealers the right to sue car companies in federal courts, is known as the Automobile Dealer's Day in Court Act.
Later court rulings would limit the law's effectiveness in addressing dealers' complaints. But its passage is recognized as a turning point in the history of the franchise system.
Today's automakers and dealers try, at least publicly, to emphasize how well they work together. So it is striking in retrospect that factory-dealer conflict took the center of the national stage a half-century ago.
On dealers' side
Despite a seeming lack of consensus, Democrats hoped to campaign against the power of big business in the 1956 national election. They were determined to enact measures to help small businesses, notably dealerships.
"The auto dealers had some real grievances," says University of Wisconsin law professor Stewart Macaulay. His 1966 book, Law and the Balance of Power: The Automobile Manufacturers and Their Dealers, offers a carefully researched and detailed look at the passage of the dealer day in court law.
Many abuses against dealers were perpetuated not by GM brass but by Ford Motor Co. "road men," Macaulay wrote. They were low-level managers who pressed dealers to take more cars because "Ford had this notion that it would overtake Chevrolet," Macaulay told Automotive News.
The congressional hearings were front-page news across the country. In addition to the federal measures the hearings generated, states would pick up the pace of enacting the franchise laws that underpin dealer-factory relations.
Yet Washington's key actors in the drama that unfolded in 1955-56 are mostly historical footnotes today.
Democrats Mike Monroney of Oklahoma and Joseph O'Mahoney of Wyoming chaired the Senate subcommittees that held the hearings.
Monroney insisted that the attention Congress paid to automaker-dealer relations was entirely warranted. "We are dealing with the No. 1 industry of America and the world," Congressional Quarterly quoted him. "If that is not an important enough industry in which to legislate, I do not know what industry would be."
O'Mahoney was the prime sponsor of the bill that would become the dealer day in court law.
One of the key witnesses at the Senate hearings was George Romney, then president of the upstart American Motors. Romney testified that many dealers were being abused and faced a crisis. The practices of his company's larger competitors were at least partly responsible, Romney said.
In the wake of the hearings, AMC launched a voluntary program to improve dealer relations and created a board to hear appeals of franchise cancellations, Macaulay wrote. Romney would go on to serve as a Republican governor of Michigan and to run for president in 1968.
As the debate in Congress over proposed dealer legislation heated up, Ford warned its dealers that automakers might find other ways of selling and servicing vehicles if laws were enacted. The company got some dealers to protest pending bills.
The National Automobile Dealers Association struggled to get dealers united behind congressional action. It was effective in countering the dealers who voiced the Ford line, Macaulay wrote.
O'Mahoney concluded that some Ford dealers opposed legislation because they feared reprisals from the automaker. That was proof, he said, of the car companies' power to coerce dealers.
After extensive compromises, Congress passed the day in court law. President Dwight Eisenhower, the first Republican in the White House since Herbert Hoover, wasn't eager to have government interfere with business, as Curtice understood.
Still, Eisenhower signed the law on Aug. 8, 1956. But he predicted accurately that it might face trouble in the courts.
GM's landmark agreement
The publicity generated by the Senate hearings that O'Mahoney and Monroney chaired may have done as much to help dealers as the law that eventually was enacted.
GM, stung by bad press and trying to head off tough legislation, decided in late 1955 to give its 17,000 dealers five-year selling agreements that could not be terminated without cause, Macaulay wrote. The agreement took effect in 1956.
GM also added provisions to its franchise agreement that enabled dealers to nominate their successors, increased payments for warranty work, and boosted year-end clearance help. The GM agreement became the model for other automakers' franchise contracts with their dealers.
Yet dealer complaints got scant attention in Time's long, glowing Man of the Year cover story about Curtice at the start of 1956. It portrayed the GM of the 1950s as an irrepressible corporate powerhouse.
Monroney's name lives on, linked to the federally mandated price label that goes in the window of every new car and truck. The requirement was part of a bill enacted in the congressional session of 1957-58. It probably was a more valuable consumer reform than giving dealers the right to sue automakers in federal court.
Requiring an established, visible price for each vehicle curbed some chronic abuses. The main irritant was so-called price packing. Dealers who were forced by the factory to take more vehicles than they wanted lured customers by inflating trade-in values and creating the illusion that shoppers got a fantastic price for their old clunkers.
Dealers made up the difference by "packing" the prices of new vehicles in inventory. Monroney stickers hampered that practice.