The year was 1917. Thirty dealers gathered in Washington to fight a luxury tax on automobiles. The 5 percent tax Congress proposed could have raised prices and hurt sales. Something had to be done to block the tax and to stem growing regulation of the auto industry.
Dealers felt the solution was to form an association that offered permanent representation in Washington. About a hundred more dealers joined the 30 who lobbied against the luxury tax for an organizational meeting in Chicago July 1917, according to an account in the 75th anniversary edition of Automotive Executive, NADA's monthly magazine.
The National Automobile Dealers Association was incorporated Aug. 22, 1917, in Illinois.
'They knew that as individual dealers they had no chance,' says Frank McCarthy, executive vice president of today's NADA.
Back then, it took just $102.71 to launch the association, including the cost of telegrams, telephone calls and postage, according to Automotive Executive. But the outlay was enough to make the new organization successful.
The dealers who started NADA from a room at the Willard Hotel in Washington convinced Congress that a car is not a luxury item. Their lobbying efforts reduced the proposed luxury tax to 3 percent from 5 percent.
It was the first excise tax that Congress loaded on the back of a growing - and later, mature - industry, a burden that was to continue for more than half a century. Congress boosted the excise levy to 5 percent in 1919, repealed it in 1928 and reinstated it in 1932. It was 10 percent from 1951-65, and it was 7 percent when Congress finally dumped it in summer 1971.
An aversion to higher taxes was perhaps one of the few things many dealers had in common in 1917. There were 157 automakers and 15,000 dealers selling more than 350 American makes. There was one car for every 21 people in the United States. And the average retail price of a vehicle was $727.
Three dealers signed NADA's incorporation papers Aug. 22, 1917, in Illinois: Thomas Hay, J.F. Davis and C.R. Dashiell. They established a board of nine directors to manage NADA during its first year. Board members were W.G. Tennant of Chicago, John Graham of Minneapolis, O.A. Forester of Cleveland, John Johnson of Boston, A.E. Maltby of Philadelphia, George McCutcheon of Atlanta, P.E. Chamberlain of Denver, P.H. Greer of Los Angeles and Dean Schooler of Des Moines, Iowa.
The incorporation papers state the association's objective: to promote and safeguard the interests of wholesale and retail dealers in motor vehicles throughout the United States.
'I think NADA started as 30 dealers who got together to survive the war years,' says Herb Galles, chairman of Galles Motors in Albuquerque, N.M., which handles Saturn, Oldsmobile, Chevrolet, Isuzu, Subaru and Lexus. Galles was president of NADA in 1959.
The instinct for economic survival drew 138 dealers to NADA's first annual meeting in Chicago during the 1918 Chicago auto show, according to Automotive Executive. The group wanted to piggyback its meetings with auto shows to maximize attendance, one of NADA's early concerns.
NADA elected officers, making a Milwaukee dealer, George Browne, its first president. The association was based first in Chicago, then in St. Louis after the 1918 annual meeting. It moved to Detroit in 1935, then to Washington in 1941 to focus on federal lobbying efforts. In 1975, after NADA outgrew its headquarters, it moved to McLean, Va., a Washington suburb.
Auto theft was one of the most pressing issues when NADA was formed. The first national legislation NADA backed was the National Motor Vehicle Theft Law of 1919, which made it a federal offense to steal a vehicle and transport it across state lines. NADA also advanced uniform accounting methods for dealers and sought auto financing reforms.
The minutes of the Jan. 19, 1919, annual meeting of NADA in Chicago help describe the conditions that furthered the existence of the association and the auto industry in general. The group called for:
Creation of a national highway commission to study transportation needs and construct roads.
Construction of a national highway system.
The funds to build the nation's highways.
'Here is where the NADA gets right into the middle of this picture,' the minutes read. 'We need throughout the United States the building up of a sentiment which will show the farmer, the laborer, the president of your university, the undertaker, the insurance man, I don't care who he is, or what he is, that somewhere in his life, in all that he has, in all that he wears, in all that he eats, the road has its part, and if the road is inefficient, so in some measure that man must be inefficient.'
NADA continued to expand until the Depression. Its membership plummeted from about 3,500 to 2,200 dealers - most of them behind in their dues. In early 1932, the association netted just $837 after expenses of $20,879, reports Automotive Executive.
The New Deal's National Recovery Administration and the new Code of Fair Competition for the Motor Vehicle Retailing Trade caused a startling turnaround in 1934, bringing membership to 30,000 by the end of that year. Drives during the 1940s boosted membership to 35,000 in 1949.
But as the industry has matured, competition has chipped away at the dealer population. NADA now represents 19,500 dealers holding 40,000 franchises. Automakers and dealers alike think many markets are overdealered.
The early dealers would not have dreamed the country could become so crowded with auto franchises that factories would reduce their numbers. In 1917, there were so many makes - and such small volume - that factory-dealer relations were a non-issue. Those 15,000 dealers sold 1.9 million cars and light trucks in 1917. Last year, 22,288 dealers sold 14.8 million.
Says Warren McEleney, president of McEleney Motors, which handles all the General Motors lines plus Toyota in Clinton, Iowa: 'Dealers (as a group) were not as cohesive as they are today. There were so many automakers. My father and my uncle started in the business in 1914 with a line of cars called the Jeffrey, the forerunner to the Nash.' Warren McEleney was president of NADA in 1971.
But now that the industry has matured and competition has grown fierce, the dealer group has turned to fighting for survival of the franchise system.
As he left office, Leon Edwards of Edwards Chevrolet in Birmingham, Ala., the 1995 NADA president, identified the factories' plans for shuffling brands and eliminating dealerships as a prime concern.
Even established dealers such as McEleney are looking over their shoulders. His Iowa City, Iowa, dealership is a target of GM's Project 2000 plan to redistribute franchises.
Says McEleney: 'It is not aligned the right way. I doubt my dad would have envisioned this.' *
Donna Lawrence is an Automotive News staff reporter.