BMW and PSA Peugeot-Citroen looking to expand engine

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Plans to co-develop a new hybrid powertrain could see the fuel-efficient option offered in BMW�s Mini range

PSA Peugeot-Citroen and BMW currently build small engines together that the French auto giant uses for a number of compact hatchbacks and urban runabouts and BMW for its Mini range. There are now reports that the two companies are considering strengthening this agreement with plans to build a greater variety of powertrains, including hybrid units for the first time.

The news comes from PSA CEO Christian Streiff, who revealed to Germany�s Suddeutsche Zeitung that talks will be taking place with a number of companies about further possible cooperation. These companies include BMW and Ford, as well as �other partners�. PSA will then complete a study to examine the technological, production, and financial benefits of developing more engines in partnership and if given the green light will move ahead with the development of a new range of four-cylinder engines that are expected to be around 2.0L in size.

Streiff also spoke out about the current practice of 'state scrapping premiums' sweeping Europe. Under the scrapping premium plan, governments offer consumers a cash back if they purchase a new vehicle and hand over their old vehicle - usually a vehicle that is at least nine years old. Streiff sees the plan as dangerous and called for the premiums to be reduced or abolished once the market had recovered sufficiently.

BMW's examination of its relationships with other manufacturers is not being limited to PSA Peugeot-Citroen. Yesterday we reported that BMW may be in the process of swapping 7% of its shares with 7% of Daimler's shares, and there is also a previous agreement signed with Fiat Group.

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BMW eyes Peugeot tie-up for Mini

BMW is examining whether to share platforms with French rival PSA Peugeot Citroën for its Mini small car, it emerged yesterday, as the German premium carmaker returned to profit in the second quarter on the back of cost-cutting.

Norbert Reithofer, BMW's chief executive, said BMW was talking to Peugeot about a deeper cooperation, but he refused to give any details.

Industry insiders told the Financial Times, however, that the carmaker was in "preliminary talks" about a future shared platform for the Mini model family, which the carmaker aims to expand.

In addition, the two carmakers are looking at ways to share modules - components that can be used in different car segments - for BMW's main brand.

The move marked a swift strategic foray by Philippe Varin, Peugeot's chief executive, who joined the French carmaker in May and since then has met Mr Reithofer twice.

Volume and premium carmakers have been looking at ways to co-operate in order to increase economies of scale in a competitive car market that has been faced with a sharp downturn this year.

The implications of such a future co-operation for Mini's "production triangle" of three plants in the UK remained unclear, as the talks are at a very early stage.

Mini has stepped up production and rehired 250 agency workers at its Oxford plant as statesponsored scrapping incentives have triggered rising demand for small cars.

BMW and Peugeot declined to comment. But Mr Varin said last week that the company was "open to studying other alliances or co-operation programmes".

Peugeot and BMW some years ago jointly developed 1.4 and 1.6 litre petrol engines for use in small and mid-size cars.

BMW uses them in its Mini range.

The news came as BMW said it countered an 18 per cent sales drop in the second quarter when it generated a €121m ($173m) net profit in the same period.

This followed a loss in the first three months of the year and compared with a €507m profit in the second quarter of 2008.

BMW has fared better than many rivals after its management slashed administrative costs ahead of the recession and aggressively cut back production immediately after the crisis started to hit the premium segment a year ago.

"Generating cash at the low point of the product cycle and in the middle of the biggest economic crisis ever is very impressive," Arndt Ellinghorst, head of automotive research at Credit Suisse, said.

But Mr Reithofer remained cautious on the outlook.

"Despite some positive signals, a sweeping and enduring economic recovery is not in sight," he said.

FT

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Peugeot Boss Looking To Strengthen Ties With BMW Beyond Engines

BMW's relationship with PSA/Peugeot-Citroen has been a tenuous one despite having endured for years now. Their engine cooperation has seen engines shared between the Peugeot 207 and MINI Cooper, but PSA boss Philippe Varin wants to include purchasing and components in the mix, too.

BMW is no stranger to the suitor game. Mercedes-Benz and BMW have flirted with the idea of a partnership for years now as well, often issuing conflicting statements on the idea. Varin wants in on more joint purchases and parts sharing with the Bavarian automaker, and he appears to have a plan to get there.

Some of the things that could be shared include transmissions and climate control systems. Currently the two companies have "groups of experts" looking at how to best exploit synergies between them. The cooperation talks aren't being done with an eye toward acquisition or merger, however, according to Varin.

The 1.6-liter four-cylinder engine currently shared between the companies may be replaced by a three-cylinder unit built by PSA/Peugeot-Citroen from 2011. Engine cooperation between the two is expected to grow, as both have expressed a desire to see more sharing over the next several years. There has even been discussions around sharing platforms, though nothing solid has yet come of it.

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BMW and Peugeot Citroen Extend 4-Cylinder Engine Partnership

A lot of people don't know that the engine inside their BMW-parented MINI Cooper was built and designed in cooperation with PSA Peugeot Citroen. An agreement announced today between the two companies means that relationship will continue with a new four-cylinder to be jointly developed.

The engine will be built to meet EU 6 emissions requirements, and will again find its way into MINI, Peugeot and Citroen vehicles. The EU 6 standard aren't going into place until 2014, but the engine is expected to come long before the regulation goes into effect.

The current Prince engine family jointly developed by BMW and Peugeot is available in 1.4- and 1.6-liter displacements. A turbocharged version of the engine found in the standard MINI Cooper is also used in the Cooper S. Peugeot uses these engines in the 207 and 308, and Citroen puts them in the new C4.

Specs and details on the next-gen four-cylinder aren't known, but expect it to bump up output slightly over the 120 horsepower and 118 pound-feet of the current base engine and the 172 horsepower and 178 pound-feet (192 pound-feet with overboost) of the current S model. The recently-unveiled Countryman is specced to get an S version with a 180-horsepower twin-turbo four-cylinder mill at launch, and a JCW version rated up to 225 horsepower has been rumored.

BMW and PSA Peugeot Citroen also announced that they are looking at developing other avenues for cooperation, though they declined to specify what aspects of their cars might be subject to "further collaboration."

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