As expected, they tendered contracts to their three remaining arbitration-eligible players -- Chad Billingsley, Hong-Chih Kuo and James Loney.
General manager Ned Colletti said non-tendering Martin was "one of the toughest decisions I've had to make, maybe ever."
Nonetheless, Colletti said he's now "pretty far down the road" with signing another catcher, and on Friday the team completed a one-year deal with 35-year-old free agent Rod Barajas, who spent the last two months with the Dodgers this season, hitting .297 with five homers in 25 games after being claimed from the Mets. Barajas will team with A.J. Ellis behind the plate.
Yet, Colletti left open the possibility of Martin's return as more than a catcher, namely at third base and even left field. But not at the salary Martin is currently seeking.
"We tried many times to strike a deal. We just couldn't bridge the gap," Colletti said. "We're still interested in discussing, and we'll see where it goes from there."
Despite reduced offensive production the last two years and missing the last two months with a broken hip, Martin wanted a $5 million guaranteed salary and $1 million in incentives. The Dodgers wanted something closer to $4.2 million guaranteed (Martin received $5.05 million in 2010) plus roughly $1.5 million in incentives.
"I don't know how to handicap it at this point," Colletti said of Martin's return. "As much as we appreciate what he did here, especially in the early part of his career, the uncertainty of his performance and the uncertainty to some extent of his health, we weren't prepared to guarantee at this point."
Martin won't start running until later this month and won't start baseball activities until next month, even though he has not had any setbacks in his rehabilitation.
Martin, originally an infielder, hit .248 this year with five homers and 26 RBIs in 97 games. A two-time All-Star, Gold Glove and Silver Slugger winner, Martin's offensive production had dropped each of the last three seasons.
As expected, the club non-tendered Sherrill, who earned $4.5 million while struggling to a 6.69 ERA. Sherrill, however, remained effective against left-handed hitters (.192 average), which is why he still figures to be pitching in the Major Leagues next year.
Oeltjen, a 27-year-old Australian, was acquired in midseason from Milwaukee and played in 14 games with the Dodgers in September, batting .217.
Ken Gurnick is a reporter for MLB.com. This story was not subject to the approval of Major League Baseball or its clubs.