Pub. 4 Issue 4

13 Issue 4 2018 Instead the Association set up a committee to prepare a Second- Hand Auto Price Book that would compile periodical data on the average values of used makes and model and be used by all members. The book relied on data on used car trade allowances granted to customer purchasing new cars. The book was ready for distribution five months later. That same year, 17-year-old Les Kelley arrived in Los Angeles fromArkansas. He carved out a living by buying, reconditioning, and selling used cars while working his way through college. In 1918 he formed the Kelley Kar Company as a used car operation. To acquire inventory, Kelley circulated lists of desired cars along with prices he was willing to pay. Kelley Kars grew quickly and after several relocations, he settled at the corner of Figueroa and Pico with satellite locations for mechanical and body shop repairs and became the largest used car dealer in the world. Kelley’s list- ing of prices became the standard for valuation by local dealer- ship and banks. In 1926 Kelley published his first Blue Book of Motor Car Values. Despite these efforts, the second-hand car problemdefied easy solutions. A wide variety of used cars entered the market, from high quality cars reconditioned by factory-trained and sold by li- censed dealers to beat upmodels with a “for sale” sign sold for cash on the curb by unlicensed sellers. New car dealers complained that the factories deliberately set prices on new cars higher than they were worth knowing that buyers would be able to lower the price by demanding an allowance on their trade that would be more than what the dealer could sell the trade for. These problems were muted somewhat as the sale of cars continued unabated through the 1910s, but it would return in 1920 when the industry faced its first major economic recession. The Auto Franchise System The franchise system provided the auto manufacturers with a flexible method for distributing and marketing cars to an emerg- ing mass market that was geographically and economically di- verse. Distribution was relatively simple in the first two decades since the main challenge was to produce enough cars to meet the increasing demand. However, this began to change as the auto market expanded to a broader demographic, the quality of cars improved, and customers demanded greater reliability, new styl- ing, and more comfort. Most of the early manufacturers focused solely on making cars and were not involved in showroom facili- ties, storage of inventory, repair services, financing sales, local advertising, or second-hand cars. Local dealers assumed these tasks and a symbiotic relationship evolved between carmakers and dealers. Manufacturers built the cars, but local dealers were better positioned to sell and service the cars. Carmakers needed the dealers and vice versa. The franchise system did not mean that the relationship betweenmanufacturers and dealers was one of equality. Once the manufacturers had overcome the barriers to mass production, in the mid-1920s, they shifted their emphasis to demand higher sales andmore control over dealership operations. While the franchise system remained intact for the remainder of the Twentieth Century and up to the present, dealers often felt compelled to turn to the federal government and state legislatures to remedy inequities between dealers and manufacturers within the franchise system.  Darryl Holter is Dealer Principal of Felix Chevrolet and Adjunct Professor of History at USC