Crown content to wait out 'doldrums'

April 02, 1995|By Kim Clark | Kim Clark,Sun Staff Writer

From a horse-drawn wagon delivering kerosene to Baltimoreans, Henry A. Rosenberg Jr.'s grandfather invented the modern oil industry. He thought up high-octane gasoline and drive-in gas stations and turned his American Oil Co. into one of the biggest, most profitable oil companies in the world.

Today, the oil company run by Mr. Rosenberg and other heirs of Amoco founder Louis Blaustein is one of the worst performers in its industry. Crown Central Petroleum Corp. is losing money even as competitors prosper. Crown has lost $51.2 million in the last four years, and its stock, which traded in the low $30s two years ago, now is about $13.

The problems of the last Fortune 500 company based in downtown Baltimore has sparked soul searching among everyone from its investors to its 3,000 employees.

"The guys were just sitting around and discussing that," said Alvin Freeman, a welder who heads the Oil, Chemical and Atomic Workers unit at Crown's refinery in Pasadena, Texas. "Why haven't we made money and what can we do" about it?

The debate has become increasingly bitter as the losses have mounted, and some dissident shareholders blame the company's performance on blunders by the Rosenberg family that manages Crown and controls 52 percent of the company's stock.

"These guys can't execute. They're the Mets," said Jeff Rosenberger, a Clover Capital Management fund manager who bought nearly 200,000 shares of Crown stock.

But the Rosenbergs and some analysts insist that Crown has done as well as could be expected in a difficult time. The company is the victim of an unusually unlucky set of circumstances, and is really much stronger than the numbers indicate, they say.

And Mr. Rosenberg, the chief executive officer, says the company's conservative management style has made Crown's problems seem worse in three ways: its accounting system actually inflates the losses; the value of its stock has been suppressed in part because unlike many firms, Crown doesn't trumpet itself to Wall Street analysts; and it has invested millions of dollars in equipment and technology that took away from the bottom line.

"We are a very conservative company. We always have been. Maybe too conservative at times," Mr. Rosenberg said.

That approach, although resulting in short-term losses, will pay off in the long term, he said.

That conservatism enabled the company to survive the 1990s -- when a Middle East war sent crude prices swinging wildly and when new anti-pollution laws demanded expensive and risky investments. And it will buoy Crown through the current storm, in which refinery profits have sunk to near-record lows, Mr. Rosenberg said.

"We're doing everything we can," to improve the company's performance, he said. And Mr. Rosenberg believes the end of the troubles will come soon.

"I don't see how the doldrums we are in can continue," he said.

Such problems are comparatively new to the Blaustein and Rosenberg clan, which for many years led the oil industry.

Louis Blaustein, who fled Russia in 1888 to avoid the Czar's draft, started his life in the United States at age 16. Bankrolled by the 50 cents in his pockets, he built a fortune in oil.

In 1910, after working for Standard Oil of New Jersey for 18 years, he quit to start the American Oil Co., which consisted of Mr. Blaustein, his son Jacob, and a wagon drawn by the family horse, Prince.

The Blaustein family's inventiveness turned Amoco into a success. It built the first visible gas pump so that customers could see how much gasoline they were buying; put the nation's first drive-in gas station in downtown Baltimore; and fueled Charles Lindbergh's Spirit of St. Louis on its historic flight across the Atlantic.

By 1923, Amoco couldn't get enough oil to meet its booming demand, so Mr. Blaustein traded half of Amoco for a stake in a company that owned large oil fields, the Pan American Petroleum and Transport Co. But Pan American was soon bought up by an Amoco competitor, Standard Oil of Indiana.

The ensuing legal battle cost Mr. Blaustein and his son their management of Amoco. But the 1954 settlement made his heirs -- who manage most of their holdings through the American Trading and Production Co., or ATAPCO -- holders of the single-largest block of Amoco stock, and among the richest people in Maryland.

In 1930, as the battle over crude supplies worsened, the elder Mr. Blaustein bought a 48 percent share of a small oil exploration and refining company founded in 1917 by Texas wildcatters -- Crown Central Petroleum.

In the 1940s and 1950s, Crown was steadily profitable under the leadership of one of Mr. Blaustein's sons-in-law, Henry A. Rosenberg Sr., who developed a network of Crown gas stations around the Southeast to market the gasoline produced at Crown's Texas refinery.

In 1966, Henry A. Rosenberg Jr. took over as president, and molded the company to fit his vision. He got rid of all of the repair bays, making Crown one of the first gas station chains to shift to gas-and-merchandise-only stations, for example.

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