Dan Myers, dressed in loafers and a Hawaiian-style floral shirt, looks better prepared to host a cocktail party than to lead a guerrilla effort. But his voice-mail greeting presents his firm's battle cry: "Myers," it says, "is out protecting car dealers from the evil empire."

The dark side, in Myers's view, is on the Internet. Eager to cash in on the online boom, car makers and companies such as CarsDirect.com want to use the Web to sell directly to consumers - and bypass the traditional dealers that control access to customers in the $350 billion new-vehicle business.

To gain the influence over their retail networks that such an overhaul requires, the world's two biggest auto makers, General Motors Corp and Ford Motor Co, have in the past two years flirted with buying and operating dealerships, selling cars and offering services such as financing via the Net.

Car dealers, the quintessential middlemen, see the manufacturers' experiments as a mortal threat. So they are fighting back. And despite predictions that they would be no match for the mighty forces of the New Economy and the global auto giants, the dealers are largely winning.

Using their control over distribution systems, dealers have managed to cow GM and Ford into abandoning, at least publicly, their ambitious plans to sell vehicles directly to consumers. Now, having slowed the manufacturers' incursions onto their turf, the dealers are rushing to construct their own online-based car-retailing world with themselves at the center. They are setting up Web sites, buying into online services, and even posting invoice prices on the Net.

The result: Americans in the future may buy more cars through the Internet, but the same people who for decades have been peddling cars off the lot will still be taking their cut. Indeed, the dealers' challenge offers a warning to Web-heads in every industry who dream of cutting out the middleman and selling directly to customers online.

For most consumers, the clash between dealers and big car companies over who will control auto retailing in the Internet Age may seem distant and arcane. Except for this: The current system for retailing cars and trucks is notoriously inefficient, accounting by some estimates for as much as 25 per cent of the cost of a car. Using the Internet to streamline the process by cutting out dealers could save $1,000 or more a vehicle.

For now, the pendulum is swinging in the opposite direction: In state legislatures, car dealers, whose sheer numbers ensure that they are among the most influential lobbies in most states, are pushing to bolster the bulwark of so-called franchise laws to prevent car makers from using the Web - or any other means - to sell directly to consumers. In September 1999, 32 states had laws restricting manufacturers from competing with their dealers. Since then, 12 states have passed such rules, including some that toughened regulations already on their books.

Already, state franchise laws ensure that independent online sites such as CarsDirect are just fronts for franchised car dealers. That is because those laws mandate that only franchised dealers can sell a new vehicle - and only franchised dealers can get the cars at true wholesale cost. What's more, franchise laws in most states bar car makers from giving price breaks to certain dealers - high-volume operations, for instance - and not to others. So traditional car dealers have a lot more protection from Internet challengers than, say, book sellers did from Amazon.com.

The dealers' most sweeping victory in the franchise squabble came last month in Arizona, where they persuaded lawmakers to beef up the law specifically to restrict makers' ability to sel directly online. Among other things, that law bars manufacturers from circumventing local dealers when passing along the name of potential customers - or "leads" - including those gotten on the Internet. Manufacturers are considering filing a lawsuit against the Arizona law on constitutional grounds when it takes effect in July. Dealers hope to replicate it in other states as soon as next year.

Meanwhile, the fight is wending its way to Washington, where dealers are asking Congress to amend federal arbitration law. Their concern: that some auto makers have added clauses to their dealer contracts requiring dealers to resolve disputes with manufacturers through binding arbitration. Dealers want to be able to take disagreements, particularly over the issue of manufacturer-owned dealerships, directly to court, and to amend the law to exempt the auto industry from federal binding-arbitration requirements.

Auto makers call the dealers' campaign a shortsighted protectionist push. What terrifies manufacturers is that the stakes in this fight go far beyond the new-car market, huge as that is. At issue, manufacturers say, is their ability to wring more profit out of their products by expanding from merely building cars to selling a range of automotive services. To auto makers, such an expansion is key to convincing investors that they aren't just smokestack dinosaurs.

Dealers "want to lock in an anachronistic, old system," says Kris Kiser, vice president for state affairs for the Alliance of Automobile Manufacturers, a Washington-based trade group that represents 13 auto makers, including Detroit's Big Three. Kiser, who has spent much of his time recently jetting among state capitals to lobby against dealers proposals, contends dealers are winning for a simple reason: "They've got the system greased."pAuto makers are mustering their own big political guns. But the manufacturers face two big disadvantages. One is that though they have plenty of clout in Washington, they are less important in most states than auto dealers, who are the biggest businesses in many state legislative districts and - in most states - collect enormous sums in sales taxes.

Just as important, auto makers are hamstrung by a huge case of what e-commerce insiders call "channel conflict." Car makers worry that if they push too hard to create a new retailing system, they will alienate their old retailers, hurting sales. Indeed, GM executives earlier this year publicly backed away from plans to buy and run dealerships in the face of a storm of dealer protest and sliding US market share.

"It's a tough spot for the manufacturers to fight the dealers," Kiser says. "We don't want to vilify the person that's selling our product." Spats between manufacturers and dealers are nothing new. What's different this year is that dealers, mobilised by what they regard as an unprecedented competitive threat from the very companies whose products they sell, have begun working together. "Until this year, it was state by state by state, with no coordination whatsoever," says John Whatley, assistant general counsel for the auto manufacturers' alliance.

Central to the coordination effort is Myers, who works as a team with his legal partner and wife, Loula M Fuller. Their Tallahassee law firm, Myers, Forehand & Fuller, has emerged in the past few years as a nationally known boutique representing the people who sell cars and trucks in their fights with the companies that make them. People on both sides of the debate say Myers and Fuller, skillful at marketing themselves and hungry to fill a lucrative legal niche, are largely responsible for transforming the dealer backlash against manufacturer ownership from a series of isolated state maneuvers into a national campaign.

Myers, 55 years old, is the firm's public face, travelling around the country to testify before state legislative committees about the horrors of manufacturer ownership. Fuller, 50, works behind the scenes, drafting the basic legislative language that has ended up in several state bills. Business has been very good for the couple, who Wednesday depart for a European vacation. They plan to sail over on the Queen Elizabeth II and to fly back aboard the Concorde.

The two work out of a nondescript building in an office park beside a McDonald's and a short drive from the capitol. In one storage room is a bookshelf stuffed with three-ring binders from old lawsuits; opponents' names, printed on the binders, read like a Who's Who of the global auto industry: GM, Ford, Isuzu, Mitsubishi, Volkswagen.

Myers went to law school late in life, after a career where he "made a ton of money and lost a ton of money" in the mobile-home business. One of his first cases as a lawyer was representing a North Carolina auto dealer in a dispute with a manufacturer in the mid-1980s. He won the case, he says, and calls from dealers began to roll in. He has represented auto dealers ever since.

Fuller did personal-injury work before joining a Tallahassee firm that represented the Florida Automobile Dealers Association. She, too, left to practice on her own, but continued to represent dealers. She married Myers, whom she had met in law school, and later joined his firm.

The couple's first foray into the thicket of state franchise law came in their home state. Florida traditionally has had among the most dealer-friendly franchise laws in the nation. In fact, its law was instrumental in the growth of AutoNation Inc, Fort Lauderdale, Florida, which now owns more than 400 new-vehicle franchises and service centers nationwide. AutoNation's expansion was a major factor in convincing manufacturers they needed to change their retail business or risk losing control over their industry.

In the mid-1990s, auto manufacturers sought to change Florida's franchise law to give them more control over the placement of new dealerships. The state's auto dealers, with help from Myers and Fuller, thwarted the effort.What transformed the couple's practice into a national business, however, was a series of more-recent moves by manufacturers to enter the retail business. The first salvo was fired by Ford, which announced in 1997 that, in a handful of large cities, it would begin consolidating new-car dealerships into a subsidiary of megastores in which it would hold a minority interest. Dealers owning about 50 Ford stores chose to participate in the program; the manufacturer has about 5,000 dealerships nationwide.

"That was the first time the car dealers were absolutely galvanised around one common fear: We cannot compete against the guys who make the product," recalls Myers, whose firm represents the one dealer who refused to sell a stake to Ford in Salt Lake City, one of the cities where the auto maker launched its pilot effort.

The following year, Ford further riled dealers when it set up an Internet site to sell, for a fixed price, vehicles coming off leases in the Houston area. Ford's moves reverberated across the country. In North Carolina, the state auto dealers association responded by persuading lawmakers to toughen the state's franchise law. A lawyer for the North Carolina dealer group had worked with Myers years earlier, and called him for help.

What followed was "a monster battle" in the state legislature last spring in which manufacturers hired an array of lobbyists, and dealers packed a key committee hearing with between 60 and 70 of their members, recalls Bob Glasser, executive vice president of the state dealers association. State lawmakers passed restrictions against manufacturer ownership of dealers -- in language that, not coincidentally, closely resembles the law in Florida.

GM angered US auto dealers further last September when it announced it was forming a special unit to buy entire dealerships - not just a stake in them, as was Ford's plan - in 130 US markets.

Back at Myers and Fuller's office in Tallahassee, calls from incensed dealers began pouring in. GM's move was "the last nail in the coffin," Myers says. "Dealers that were still on the fence ceased being on the fence."

The dispute over Ford's Internet effort in Texas quickly intensified. In November, Texas regulators ruled that Ford's site ran afoul of the state's franchise law, and they ordered the auto maker to shut it down. Ford complied, but in December filed suit in federal court to overturn the regulators' ruling. The suit is pending.

By the time Texas officials had shut down the Ford site, representatives of the Arizona dealers were talking regularly with Myers and Fuller about ways to bolster their own state's franchise bill.

The Arizona auto dealers association persuaded lawmakers to introduce franchise-law changes when the legislature convened in January, hiring outside lobbyists and packing legislative meetings with dealers. The association's Ramsey says the discussions with the auto makers' representatives were "done in a very businesslike, nonconfrontational way," but the discussions clearly left a bitter taste in the mouths of some on the other side.

"There was never a question about who had the political upper hand, which was them," complains Knox Kimberly, a lobbyist in Arizona for the Alliance of Automobile Manufacturers. "So the opportunity to negotiate was limited to attempting to convince them that they were overreaching."

The manufacturers argued that several provisions of the Arizona bill were unconstitutional. Of particular concern were provisions that the manufacturers felt would effectively bar them from selling directly to consumers over the Internet. One such measure was the stipulation that auto makers couldn't bypass local dealers when referring "leads." Another was a ban on manufacturers' using their financing subsidiaries to lend to buyers who didn't go through a dealer.

Kiser, the official with the Alliance of Automobile Manufacturers, flew out to the state and, in a private meeting with Gov. Jane Dee Hull and other auto-maker representatives, asked her to veto the dealers' franchise bill. Gov. Hull, noting she never has had a veto overridden by the legislature, declined, citing lawmakers' overwhelming support for dealers. "She said, `Look, guys. The numbers are such that I will be overridden. I want to protect my record,' " Kiser recalls. An aide to Gov Hull confirms the account, adding that the governor supports the laws protecting dealers against manufacturer competition.

With the ink barely dry on the Arizona law, Myers and Fuller have begun to use it as a bargaining chip in other states, among them Florida, Missouri and Oklahoma.

The Florida legislature adjourned last week without passing any changes to its automotive franchise law, a consequence of disagreements among the state's dealers about exactly what kind of changes they wanted. Myers and Fuller say they hope to peddle the Arizona law as a model that other states will follow. Auto makers "created the monster, and I don't think the monster's going to die," Myers says.

"I think this year has been a baby step. Next year's going to be a monster step."

-- The Wall Street Journal