NEW YORK - Drawn by the potential to expand into new, nonauto financial services, General Motors, Ford Motor Co., and BMW of North America are setting up their own banks.
GM and Ford have applications pending with the U.S. Office of Thrift Supervision to set up federal savings banks. BMW already has been granted a state charter by Utah for a type of near-bank.
Using their banks, the three auto companies would be able to offer customers such services as credit cards, checking and savings accounts and investment services - some of which cannot be offered by captive finance companies.
By offering such nonauto services, the automakers hope to build customer loyalty and capture more auto-related spending. The new financial services also would yield a gold mine of data on customer spending.
Christophe Germain, a credit card industry analyst for Moody's Investors Service in New York, said he was skeptical about automakers succeeding in the credit card business.
Ford had a credit card program, but killed it in 1997. It was a joint venture with Citibank, where spending on the card earned rebates on Ford products. GM still has a joint venture with Mastercard for a credit card that earns rebates, but the partners cut back the benefits in 1997.
'A lot of regional banks are giving up that business. These (auto) brand names have pretty high loyalty, and pretty high leverage, but I don't know how competitive they can be,' Germain said.
Neither Ford nor GM would discuss its banking plans. But according to their applications on file:
GM's bank is to be called MidAtlantic Bank and would be based in Wilmington, Del. It will offer 'a full menu of banking services to its customers' nationwide. That includes credit cards for customers, GM employees, retirees, shareholders, dealers and selected suppliers, plus 'traditional deposit products.'
The new bank also will explore whether it will offer mutual funds and brokerage services, but does not plan to do so at this time, the application says. GM submitted its application in August 1998. GMAC Residential Holding Corp. is listed as the applicant.
Ford Motor Co. has applied for a charter for what it calls ANFC Bank, to be based in Dearborn, Mich. The application, filed in March 1998, says only that a bank charter 'provides greater operating flexibility than alternative means.' Such applications typically take a year or more to be approved.
BMW, meanwhile, was awarded a Utah banking charter Sept. 30 for BMW Bank of North America Inc., based in Salt Lake City. Technically, the BMW Bank is an 'industrial loan corporation,' a type of near-bank created by Utah in 1997 to encourage big corporations to locate in the state to start their own banks.
The loan corporations are allowed to engage in most traditional banking activities, but are not burdened by reserve or asset requirements.
Like federally insured national banks, industrial loan corporations can 'export' interest rates. That means BMW Bank can set its interest rates in Utah, and offer the same rates nationwide. A finance company that is not federally insured has to get state-by-state approval.
Martha McKinley, spokeswoman for BMW of North America, the U.S. sales and marketing subsidiary based in Woodcliff Lake, N.J., said BMW Bank will be a 'virtual' bank, without brick-and-mortar branch offices. BMW is considering issuing credit cards through the bank, she said.