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Daimler Says BMW Engine Cooperation Possible

Reuters
Tuesday, 23 Oct 2007 | 11:15 PM ET

An engine cooperation pact between German carmakers BMW and Mercedes is likely but it will not be concluded this year, Daimler chief executive Dieter Zetsche said on Wednesday.

"We are entertaining discussions with a number of carmakers, including BMW," Zetsche told a group interview at the Tokyo Motor Show. "No decision has been made ... but going forward, I do not exclude cooperation, including in parts and other areas, with BMW," he said.

"We are studying whether it makes sense, whether we can arrive at a win-win situation for both. Such a study takes time. It is unlikely that there will be a decision this year -- probably next year," Zetsche said.

German magazine Auto Bild reported last week that Daimler was planning to use four-cylinder direct injection engines developed by BMW's Mini brand and built by PSA Peugeot Citroen in the next generation of Mercedes-Benz compact cars.

The magazine, without citing sources, said Daimler intended to use the engines in the new B-Class compact from 2011, diminishing the prospects for using a platform of Italy's Fiat for Mercedes compact cars.

Zetsche said Daimler, which has the Mercedes passenger car brand and Benz truck brands, was also in exploratory talks with other carmakers but he declined to confirm whether that meant with Fiat.

"It is true that I see (Fiat Group CEO) Sergio Marchionne often. He is ACEA chairman and is in Formula 1. But I do not want to make a statement here that we are in talks with Fiat," he said. ACEA is the organization of European carmakers.

Daimler and BMW already cooperate in bringing out dual-mode hybrids together with General Motors .

Divorce

Daimler this year sold an 80 percent stake in Chrysler, ending a failed $36 billion merger that many hailed at the time as a recipe for success through economies of scale.

Asked whether the loss of volumes would put Daimler at a disadvantage to behemoths like Toyota Motor and GM, Zetsche said Daimler was financially sound, profitable and still big enough to succeed in the increasingly competitive industry.

"Certainly, economies of scale help. But it's not a necessary prerequisite. We have 100 billion euros in revenues. We are definitely large enough to be a very successful company."

Daimler is targeting a 10 percent operating profit margin for the Mercedes-Benz passenger car division by 2010, up from around 8 percent targeted for this year.

Zetsche said the 10 percent target was independent of any parts deal with BMW.

As part of the divorce with Chrysler, the two companies still have to work out how to split their joint venture in China, but these talks are difficult because there are three parties involved as well as the Chinese authorities.

"One could imagine a sort of holding company in which both carmakers retain a stake," Zetsche said.

In the first nine months of the year, Mercedes-Benz, the world's second-biggest premium carmaker after BMW, achieved a 0.9 percent increase in vehicle sales to 942,300 cars.

The group includes Smart minicars and super-luxury Maybach limousines.

Toyota's Lexus is challenging Mercedes in the premium sector, but Zetsche appeared unperturbed.

"We have a high esteem for Toyota, but we believe we are strong enough to take on the challenge. Lexus only has a limited impact so far in Europe, but there is no reason why Toyota will not do its best to change that," he said.

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