Detroit Free Press from Detroit, Michigan • Page 25

i kmmA a fc Mttfc a 9 NEW YORK STOCKS 3 AMERICAN STOCKS 4 OVER THE COUNTER 5 I 1 Jl Call Buslnett Newt 222-8765 i I i 1 I Dow Jones Weekly Avg. 1,196.11, 17.93 Prevailing prime rate 10'? New fixed-rate mortgages, 20 down 12 Highest 26-week certificate rate 9.04 Donoghue's Money Fund7-Day Average 7.85 Inflation rate (national) Inflation rate (Detroit) Michigan unemployment rate National unemployment rate Tax-Exempt Bonds 3.9 3.9 14.9 10.1 9.78 DETROIT FREE PRESS l- a If if II tats on Michi Se SUE gan IDLg insider Paul LIsnert 4 1 Vette driver is in the doghouse Some folks at Chevrolet are fuming literally over a foul deed done to one of its new corvettes. Chevy loaned the body in question to a local news person to evaluate, a common practice in the industry. The allegation, from usually-reliable sources, is that the car was returned from a weekend test drive with a decidedly ca- i Out-of-state banks launch campaign for credit business By BEN JOHNSON Free Press Business Writer Out-of-state banks have launched a new assault to get credit card customers in Michigan, with the result that an estimated 1.2 million Michigan residents now have credit cards from such banks as New York City's Chase Manhattan and Citibank. That means about 20 percent of the credit cards in Michigan are from out-of-state banks, and Michigan banking officials and observers fear the share could grow unless the state relaxes its limits on consumer loan interest rates.

In recent months, Chase Manhattan and Citicorp of New York, Bank of America in San Francisco and First National Bank of Chicago have used direct mail campaigns to blitz many of Michigan's upscale neighborhoods, luring customers with credit cards and liberal lines of credit. But they're also after the thousands of less-affluent Michigan residents who have not been able to get credit cards from local banks because the recession has tightened credit standards, causing banks to reject many applicants. Michigan banks blame the state's usury ceilings, which they say have forced them to tighten credit standards and thus reduced their ability to lend money during a time of high interest rates because they could not raise rates to keep pace with their increased cost of deposits. THE BIGGEST reason out-of-state banks are doing so well in Michigan, according to state bankers, is the 18 percent cap on credit card credit. The out-of-state banks plucking customers from Michigan operate from states which permit higher rates, allowing more profit on credit cards and more lenient credit standards.

Chase, Citicorp, First Continental and Bank of America, whose credit operations are based in states with no interest limit, are charging 19.8 percent for credit cards for their customers all over the country. They could charge more if interest rates went up, and while people complain about high loan rates, obviously, tens of thousands of them are willing to pay the higher rates to get credit. Two Michigan banks Michigan National and Comerica say they will fight back by moving their credit operations to states with more liberal credit laws. Others are dropping hints they may follow. The situation also has revived the debate over whether Michigan should relax or erase its usury ceilings, especially as the number of other states around the country are doing that, including several in the Great Lakes area.

Past attempts have failed because of heavy lobbying by labor and consumer groups in the Legislature, but recently Gov. Blan-chard indicated he's more receptive to the idea, because it could save jobs and taxes for Michigan. BANKING EXECUTIVES say Michigan must act soon, or find Free Press Artwork by NOLAN ROSS nine uruma 10 u. Byron MacGregor dog apparently mistook the fancy perforated-leather seats for a fire hydrant," barked one wag familiar with the fiasco. After resorting to desperate measures to eradicate the odor (including, we hear, dumping a bottle of cheap perfume over the foam cushions), Chevy's faithful car prep-pers threw in the towel and ordered a new pair of seats from the engineering department to the tune of about $900.

The culprit? That's something of a mystery, according to Chevy, although insiders claim the person who had the car for the weekend in question was Byron MacGregor, newscaster for WKBD-TV and WWJ-AM. "I had the car over the weekend, and there was nothing wrong when I dropped it off Tuesday," growled an indignant MacGregor when we called to inquire. "SOMEBODY CALLED me up on Wednesday and said there was some kind of urine odor, apparently from my dog, but I didn't know what the hell they were talking about. I have a three-year-old German shepherd, and she's too well-trained to do something like that. Besides, she was only with me for 10 minutes on Saturday, and I never left her alone in the car.

There's just no way my animal did what they claim." Added the wounded MacGregor, apparently with tongue in cheek: "It's water over the dam. I'm not going to get into a ping contest with 'em over it." A good-humored Chevy public-relations official observed: "I guess nothing surprises us anymore; we expect almost anything when we put our cars into the hands of you press guys. We're just trying to laugh this one off." Moral of the story: Think twice before taking your dog to the Vette. Those states have wooed bank credit business by making it easy and inexpensive for out-of-state banks to establish subsidiaries there; Citicorp, the country's biggest credit card issuer, and Chase were the biggest rewards of that strategy. BANKS CAN charge interest based on the laws of the state where their operations are based, regardless of where the customers live.

Since then, other states, such as Ohio and Nebraska, have loosened their credit limits, and other banks have moved their credit operations to escape limits in their home states. Michigan National, long one of the loudest protestors against usury limits, recently got approval to establish a subsidiary bank in Rapid City, S.D., for its credit operations. Only federal approval, considered a formality, is needed to make the move official. The bank has an option on a square-foot building to house the center. They expect to begin op eratmg there this fall.

itself in the same situation as New York and Maryland. Ten to 20 Michigan National employes will be transferred from Lansing, where 200 to 300 people now work in the credit Legislatures in those states didn't relax usury guidelines until ROBERT CHRISTENSEN, a National Bank of Detroit vice-president, estimated the state already has lost 500 to 600 jobs because of the out-of-state cards. Justin Moran, a spokesman for the Michigan Bankers Association, calls the phenomenon "mail-order credit." "What we're seeing is out-of-state banks attempting to exploit Michigan's usury laws to their advantage," he said. "To a degree, that makes our state's banks weaker. To the extent that out-of-state banks are able to attract business on terms we are not legally able to deal with, in a qualified sense, it would tend to weaken those institutions because of the lost business." The push into Michigan by out-of-state banks began more than 10 years ago when national banks, led by Citicorp and Chase Manhattan, changed their focus from a mostly commercial one to include expanded consumer credit offerings, Moran said.

At the time, credit card operations were profitable because banks were charging about 18 percent and paying only four to five percent for deposits. The forays stepped up about three years ago, when skyrocketing interest rates began to squeeze bank profits in Michigan. DEPOSIT RATES, especially those tied to rising Treasury bill rates, rose while loan rates were essentially stuck. As a result, some state banks stopped issuing credit cards; Michigan National, even took application forms out of its branches. Money for car loans, home improvements and personal loans effectively dried up.

At the same time, changes in federal law made it easier for people to declare bankruptcy. Principal losers amid the rush by beleaguered consumers to wipe their debt slate clean were issuers of unsecured credit, primarily banks, Christensen said, forcing banks to be even stingier with loan money. The one area where banks could act was mortgage rates, which can go as high as 25 percent in Michigan. Before they began turning down last year, they went as high as 18 percent. But banks were stymied on other consumer rates.

The situation was ripe for banks such as Chase Manhattan and Citibank, which had moved their credit operations into no-ceiling havens in Delaware and South Dakota in 1981. operation, to Rapid City, said James Kidle, bank vice-president, after their states' biggest credit card issuers had moved to ceiling-free havens, taking with them hundreds of jobs and millions The bank will hire another 100 workers, mostly clerical, in South Dakota. Displaced Michigan employes will be transferred else' in tax dollars. where within the bank and the positions will be absorbed "We're going to learn the lessons of Maryland and New York through retirement and attrition. the hard way, but not without warning," said Leo Cooney, president of CCA, a Detroit-based credit card processing center that "We think that should send a clear message to the Michigan Legislature," said Kidle.

Michigan either has to change or face serves 247 banks in nine states, including 210 in Michigan. the loss of these kinds of jobs and businesses." Cooney estimates Michigan residents have more than $1 bil lion in outstanding balances on credit cards from out-of-state COMERICA'S CREDIT card facilities also are preparing to banks, representing millions in fees and interest lost to state exit the state. Last February, bank executives applied to Ohio of' ficials for permission to operate a credit card center in Toledo; "They're spending the money in Michigan, but they're paying interest at the higher rate for the services," Cooney said. "That's a pretty good vote when the people say they want the credit at the higher rate rather than not have the credit." Further, Cooney said these customers are using the out-of- Ohio allows rates up to 24 percent on credit cards. While awaiting approval, bank executives are considering other options.

Far down on the list is staying in Michigan. "We feel very strongly that usury relief is needed," said Comerica spokesperson Mary Guregian. "If usury relief were achieved, Comerica would no longer need to consider out-of-state options." See CREDIT, Page 2C state banks for other services, such as installment loans, costing Fiat's Bertone-bodied 19 TONY BERTONE: Famed Italian coach-building house Bertone, which designed the popular Fiat 19 sports car among other production models, is taking a cue from pop designers like Bill Blass and Givenchy. "They're getting into men's jewelry in the U.S., and they're looking at other items with designer brand potential like sporting goods, clothing and office equipment," says J. Bruce McWilliams, a pioneer in the im-ported-car business in this country and Ber- Michigan banks still more money.

If Congress further deregu lates banking to allow intra-state banking, Michigan banks could lose checking and savings account customers, too. tone's newest U.S. representative. McWilliams says the carrozzeria has Automakers racing toward a new image just opened a new design center outside Turin, in the foothills of the Alps, and is still cranking out the 19 sans Fiat logo. Our U.S.

importer and distributor, Mal colm Bricklin, should begin getting some cars later this summer," McWilliams said. "They'll be '83 models, but there will be few noticeable changes between them and the '84s." By PAUL LIENERT Free Press Automotive Writer It seemed like a page out of history. There was the president of Ford Motor Co. and the general manager of Chevrolet, stalking the pits Bertone is Italy's oldest coach builder, opening its doors in 1912, three years before Ghia (now owned by Ford Motor Co.) and at the Detroit Grand Prix, chatting with the drivers and team managers. well ahead of Pininfanna, which was found ed in 1930.

Then there were the back-to-back press Bricklin, incidentally, also will be selling conferences prior to the race, staged by Ford and Chevy to announce their latest racing hardware GTP editions of the Mustang and the Cor the Spider 2000 for Pininfarfria, which designed the roadster for Fiat and subsequently inherited it when the Italian auto giant pulled up stakes in North America earlier rtr this year. Both the 19 and the Spider will retail for $15,900 when the new models bow this summer, according to Bricklin. vette. A return to fabulous horsepower races of the '60s? Not to hear Chevy general manager Robert Stempel tell it. "We don't go racing (and) we don't promote motor sports," he insisted.

Npverthplpss fhevv'e away from recent concerns like fuel economy. Explained Ford: "We got out of racing about 10 or 11 years ago as more people were becoming consumed with the subject of fuel economy. We felt then that racing and fuel economy didn't really go hand in hand. "When the demand for performance started coming back in the mid-to-late 70s, we didn't have the hardware. Now, the consumer has matured, and we're trying to tell those people that we're no longer the stodgy, old-fashioned company we used to be.

We've got performance versions of nearly every car we build, and we're trying to stress the American technology we're building into our race cars." Stempel sees a fine line between direct factory participation in motor sports and "making the hardware available for our customers who want to go racing. "Even a farmer is going to xi his horse once in a while," he reasoned. "If he wants to race his family car, we'd like to see him have a chance with a Chevrolet, so we offer those parts through the Chevrolet dealers, including the latest parts that just ran at Indy." FORD'S MOTOR sports activity these days is headed up by German expatriate Michael Krane-fuss, director of the company's Special Vehicle Operations. Part of his mandate, in addition to creating new race cars like the GTP Mustang and specialized production models like the '84 EXP Turbo, is developing performance hardware for customers who want to race Fords, be it at drag strips, oval tracks or road-racing circuits. Although Edsel Ford admits he'd like to see In Dusincss Monday: A city on tho ropss The Ford GTP Mustang, above, and Chevy GTP Corvette are proof of a new involvement in motor sports.

special vehicles reach the point where "parts sales pay for our motor racing," Kranefuss believes "we may never be in a position to contribute significantly to the company's overall profit picture, but we can contribute to the company's image. "Motor sports generates lots of publicity. Even people who think they don't like racing can't help but be fascinated by it. And people in this company have something to be proud of. Our involvement (in motor sports) helps project the image of a company that's young, dynamic and ready to meet the competition head on." Just who is the competition? TO HEAR Ford and Stempel talk, little remains of the traditional Ford-Chevy racing rivalry from the '50s and '60s.

The new target appears to be the European performance brands like Porsche, BMW and Jaguar, and that means Detroit is looking beyond drag racing and the stock-car circuit to field new entries. Stempel noted: "We've come full circle to where the competition is really world class, and when you look at the world-class cars like Edsel Ford II growing participation in Four vears of recession and a depen the sport, with entries like the Monte Carlo SS and the new GTP Corvette, is plain, as is Ford's dant nn General Motors have left Flint reeling. Automotive Writer James Risen nvolvement, highlighted by its new GTP Mus tang and NASCAR Thunderbird. details the struggles or a company town. A more candid assessment of Detroit's new Clare Kabel Is a researcher at heart role in motor racing is offered by Edsel Ford II, marketing product plans manager for Ford Division: caught up In one of the fastest growing Industries around.

Business Monday Editor Stephen Advokat profiles Kabel, community affairs manager for Tri "It's a great way to expose our products (and) Porsche and Jaguar, it's a logical extension for us to do something like the GTP Corvette." Kranefuss said Ford's development of the GTP Mustang "was an excellent opportunity to show off our technology against BMW, Porsche and the others." His chief priority this year is to make Ford more competitive in road racing, particularly in the Camel GT series that's sanctioned by the See RACING, Page2C et people know we can build cars that are as bune-United of Oakland (joumy. good as the stuff coming out of Europe." Think vou communicate well? Take IT APPEARS the pendulum in the automobile the test in the Management column. industry is swinging back to performance and it 53.