April 3 (Bloomberg) -- Diversion is the name of the game in Detroit as the men’s college basketball championship comes to town tomorrow.

“It’s going to make people forget what’s going on for about three days,” said Frank Gegovic, 32, general manager of Detroit Beer Co., which is designated by local organizers as the official bar for University of North Carolina fans.

Adding to the anticipation is that Michigan State University, 90 miles away in East Lansing, made it to the Final Four and will compete against teams from North Carolina, Villanova University and the University of Connecticut in the National Collegiate Athletic Association tournament.

Playing host offers a respite in a city blighted by abandoned homes, a high foreclosure rate, a shrinking population and an economy undermined by its dependence on the auto industry. The event caps a week in which President Barack Obama ousted General Motors Corp.’s chief executive officer, Rick Wagoner, Chrysler LLC was told to complete an alliance with Italy’s Fiat SpA, and both U.S. carmakers teetered on the brink of bankruptcy filings.

“We’re reeling, with GM and the economy,” said Michael Whitty, 67, a business professor at the University of Detroit Mercy. “We need a shot in the arm.”

Companies in the hospitality industry are ready to put the ailing auto industry out of mind long enough to benefit from basketball fans’ spending.

Welcome ‘Tidal Wave’

“It’s like a tidal wave in the desert,” said Jennifer Cooper, a spokeswoman for Cheli’s Chili Bar, which is owned by hockey player Chris Chelios of the Detroit Red Wings and is the designated tavern for Michigan State fans. “We’re grateful, we’re ready.”

The event comes at a time when the people of Detroit need something to distract them from their troubles, said John Lambrecht, 29, co-owner of Bookies Bar & Grille, the official hangout for Villanova fans.

The auto industry won’t be absent from the festivities. Wagoner is executive chairman of the local organizing committee. The games will be played at Ford Field, named after money-losing Ford Motor Co.

While Ford, unlike GM and Chrysler, hasn’t sought U.S. financial assistance, it hasn’t had a profitable year since 2005 and had a record loss of $14.7 billion in 2008. GM is based in Detroit, while Chrysler is nearby in Auburn Hills and Ford in Dearborn.

“Detroit is adjusting itself,” said Michael Bernacchi, 67, a marketing professor at University of Detroit Mercy. The region “is going from the Big Three to the Detroit Three.”

Lower Profile

GM won’t have any activities at the stadium this weekend, said Tom Wilkinson, a spokesman. The company had said in February that it would reduce on-site spending at the event by at least 60 percent and might end its Pontiac brand’s 25-year- old sponsorship of the tournament after this season.

Neither the NCAA nor the local committee conducted a study to estimate how much money the tournament would bring to Detroit, said Gail Dent, an NCAA spokeswoman. Last year’s men’s Final Four in San Antonio generated $47 million in economic impact, according to the NCAA. The Detroit Metro Sports Commission expects an economic effect of $30 million to $50 million, according to its Web site.

Bernacchi said the financial benefit will be short-lived. The lasting result will be the boost to Detroit’s self-esteem and image, keeping the city on the national stage, he said.

“I think it’s going to shine an extremely positive light on Detroit,” said Joe Koenig, 38, a Michigan State alumnus.

Koenig worked 10 years as a spokesman for Ford, until his job was cut in 2005. He’s now in graduate school at DePaul University in Chicago and doesn’t expect to get back to Detroit for the tourney.

Factory ‘Better’

“The idea that any sports event can make a massive change in the way we live is silly,” said Jack Lessenberry, 56, a Wayne State University journalism professor and a columnist for Metro Times, a weekly newspaper. “It would be better if somebody opened a factory that employed a thousand people.”

The auto industry’s contraction led to a 12 percent unemployment rate for Michigan in February, compared with a U.S. rate of 8.1 percent. Detroit’s population dwindled to 917,000 in 2007, according to the U.S. Census. It’s less than half the peak of 1.85 million in 1950.

The city’s housing foreclosure rate was 4.5 percent last year, 10th-highest in the nation, according to RealtyTrac, which monitors foreclosures. Median household income of $28,097 in 2007 was the lowest among large metropolitan areas, U.S. Census figures show.

Ryder Cup, Baseball

The Final Four isn’t the only major sports event to visit the Detroit area this decade. The Ryder Cup was held in nearby Oakland County in 2004 and the city hosted the Major League Baseball All-Star game in 2005. The Super Bowl and World Series were played in Detroit in 2006.

“It’s a big deal to be represented by Michigan State in the Final Four,” said Paul W. Smith, 55, host of a talk show on WJR- AM that often draws public officials and automaker executives as guests. “It’s a time when we needed every positive boost.”

Coach Tom Izzo, 54, led the Michigan State Spartans to its second national title in 2000. Its previous win was in 1979, led by Magic Johnson against Larry Bird’s Indiana State University. The team also reached the Final Four in 1999, 2001 and 2005.

While the NCAA contest offers a dose of excitement, Detroit needs to find an identity outside the auto industry to survive, Whitty said.

“We cannot go back and get in that ’57 Chevy with Dinah Shore,” he said.

To contact the reporter on this story: Bill Koenig in Detroit at wkoenig@bloomberg.net

Last Updated: April 3, 2009 00:00 EDT