One new-car dealer recently opened a retail outlet in Randallstown, a second intends to open in downtown Baltimore and more may be looking to open in the area. Existing dealers, wishing to safeguard their multimillion-dollar investments, are beginning to battle back.

The manufacturers are taking advantage of the fact that Maryland is one of only five states that don't have laws to protect existing dealerships' marketing regions.

The Randallstown outlet was recently opened by Mitsubishi, and Volkswagen is seeking to have a store in downtown Baltimore. "There are several other stores already in the planning stage and rumors of even more," said Jacob C. Cohen, managing director of the auto dealers group of American Express Tax and Business Services Inc. in Timonium, which serves about 60 percent of the state's 345 new-car franchise dealerships.

Dealers are reluctant to talk about the problem, fearing that it will disrupt their delicate relationships with the manufacturers that supply them with their cars.

"The manufacturers are the dealers' lifeline, they can make things difficult for a dealer if they want to," said Cohen.

Cohen said the recently opened Mitsubishi store on Liberty Road is taking business from Mitsubishi stores in Woodlawn and Owings Mills.

"This is a way a manufacturer can punish a dealer if it wants to," Cohen said.

Although it is a touchy issue, dealers have begun to fight back.

Three metro area dealers filed suit in U.S. District Court in October to block Volkswagen of America's plan to open a VW store in downtown Baltimore.

In the lawsuit, Russel Motor Cars Inc. in Catonsville; Valley Motors Inc. of Cockeysville; and Heritage Oldsmobile -- Imports Inc. of Owings Mills, which does business as Heritage Volkswagen, argued that they will suffer irreparable harm if VW opens a new store in the marketing area.

They have asked the court to issue an injunction preventing the opening of what would be Baltimore's first downtown dealership - at Pratt and President streets - in decades.

Volkswagen of America, based in Auburn Hills, Mich., distributes the imported cars to dealers around the country.

Officials of all three dealerships decline to discuss their legal action.

However, their attorney, Stephen C. Winter, with the Towson office of Miles & Stockbridge, said Volkswagen violated a verbal agreement with the dealers that it would not open a new store in the metropolitan region as long as the existing dealers properly served the market.

He said VW's move also came after the dealers had each made significant capital investments to upgrade their stores as part of a VW image-enhancement program. Two invested at least $1 million, and Russel invested $3 million, he said.

During the image enhancement discussion, the dealers claim in the lawsuit, Volkswagen representatives gave them assurances that it would not open another store in the Baltimore metro area.

The suit claims that, instead of complying with terms of a dealer agreement to discuss any deficiencies in their performance in selling and servicing the Baltimore metro market, with the opportunity for them to correct any such deficiency, VW unilaterally determined that an additional dealer was needed in the region.

Steve Keyes, a spokesman for Volkswagen, defended the company's decision, saying a downtown store would be a convenience for VW customers.

"It was a great opportunity for us," he said.

"It helps the city because it is located in an economic empowerment zone that the city is trying to develop."

Cohen said experience shows that "when a new dealership opens in a region it reduces the dollar volume of sales at the stores already open. It reduces the number of cars they sell. It reduces their service and parts business.

"We've found that unit sales usually go down 5 or 6 percent. You end up with the same volume of business, but you have more dealerships competing for it."

Competition can benefit the consumer, but not always, said George E. Hoffer, a professor of economics at Virginia Commonwealth University in Richmond and an auto analyst.

"I can guarantee you that Volkswagen prices will go down if an additional dealership opens," he said.

But Hoffer also agreed with Cohen, who said that new-car buyers benefit when doing business with a viable dealership.

"High volume sales lends itself to consumer discounts," said Cohen, who added that when dealers are making a fair profit they can also provide customers with better service.

This is the reason that General Motors Corp. has tried in recent years to reduce the number of outlets it has in the United States.

"The new-car business is not nearly as profitable as most people think," said Paul Taylor, chief economist with the National Automobile Dealers Association. He said the average dealer profit on the sale of a new car is $240, down from about $300 last year.

Taylor said a dealer concerned about paying his electric bill next month is not in position to give a customer a break on a service problem.

"People think the dealer has a 25-percent markup on a new car, but those days are long gone," said Peter Kitzmiller, president of the Maryland New Car and Truck Dealers Association. "That dates back to the era of three domestic manufacturers and just a few imports."

Dealers in surrounding states don't have such territorial conflicts.

According to Hoffer, Virginia law prohibits a manufacturer from opening a new store within 7 1/2 miles of an existing store. The law also provides the existing dealers with a marketing area representing 200,000 people.

Pennsylvania has similar legislation.

Kitzmiller said the trade group, which represents the vast majority of Maryland's new-car dealerships, will likely seek legislation in the next General Assembly to protect a dealer's sales territory.

He said the bill would seek to establish a marketing area to be serviced by an individual dealer.

"It doesn't mean that the consumer would have to go that that dealership," Kitzmiller said. "They can go to whatever dealer they wish. It won't even prevent a manufacturer from adding a new point. They would just have to make a case for it."

Similar attempts in recent years have not been successful, said Winter.

"I guess the manufacturers' lobbying efforts are stronger in Maryland," he said.