* "Handful" of employees will target auto clients

* Detroit leaders working on fix for financial crisis

DETROIT, April 4 (Reuters) - Twitter, looking for better proximity to car companies with hefty ad budgets, said on Wednesday it will open an office in Detroit just as the city's elected leaders scramble to avoid bankruptcy or a state takeover.

The San Francisco social media firm has located an office in the Motor City following a notable financial recovery by General Motors Co, Ford Motor Co and Chrysler from years of painful restructuring and depressed auto sales. Google Inc made a big splash in Detroit a couple of years ago when it opened offices in a nearby suburb.

Robert Weeks, a spokesman for Twitter, said the company will have a "handful" of employees in Detroit, and their efforts will be aimed at working with automotive brands and advertising agencies. He said the company is "happy to play a role in downtown Detroit's digital renaissance."

Twitter also has Midwest offices in Chicago and Cincinnati.

Dan Gilbert, the chairman of Detroit-based Quicken Loans Inc, owns the office space that Twitter will use and he has been influential in courting companies to come to Detroit. He is in talks with other big-name companies that could soon locate in the city.

"We're in negotiations with other names as recognizable as Twitter," Gilbert said in an interview. He hopes to have additional deals to announce in coming months.

The expansion comes at a period when Twitter, founded in 2006, has aggressively sought to boost revenue by selling "promoted Tweets" after years of largely ignoring advertisers.

Promoted tweets are advertisements that are inserted in a user's stream of messages on Twitter - analogous to a Web page that features pop-up ads.

In recent months, Twitter has rolled out a self-serve advertising platform for small businesses, while its sales staff have crisscrossed the country wooing marketing executives at large corporations, from media conglomerates to financial firms and now Detroit car makers.

Detroit's Big 3 and their vast chain of suppliers and dealers spend billions annually on advertising. The companies also employ a vast arsenal of social media techniques, including heavy use of Facebook, in their attempt to court buyers.

Twitter plans to locate the office in Detroit's downtown district, near other businesses that have recently expanded, including insurance companies, investment firms and advertising agencies.

"I think that Twitter is another confirmation of (Detroit's) credibility," Gilbert said. "This isn't 200,000 square-foot deal or anything but it's a deal that is important."

Gilbert started buying up Detroit properties in 2010 under a broad expansion initiative, and has since seen 40 companies move into downtown office space. He said the strength of the auto industry and the availability of young tech-oriented workers are draws for companies considering the area.

Unlike much of Detroit, known for blight, crime and a lack of sufficient city services, the downtown region stretching from the Detroit River up through the historic Woodward corridor is showing signs of economic revival.

Twitter's move comes as elected officials in Detroit and the state of Michigan rush to craft a financial fix to avoid running out of money next month. Detroit has been plagued by population decline and a shrinking of the business community, leading to revenue decline and financial crisis.

In order to lift revenue, Detroit's city council this week voted to double corporate income taxes, to 2 percent of income from 1 percent.

The Detroit auto industry, meanwhile, has rebounded in recent years following a half-decade of job cuts, red ink and several high-profile bankruptcies. A strong U.S. car market and healthier balance sheets have led to big profits at GM and Ford.

• A Permanent Economic Emergency