BMW/Mercedes Mull Small Car Partnership?

Hot off the presses: it looks like BMW’s desire to share MINI development costs and Mercedes need for a cheaper A Class may lead to a shocking future partnership. Auto Bild is reporting this morning that the two rivals are seriously considering a partnership to help defray development costs of the new small cars in an effort to make them more profitable. Here’s an excerpt from Reuters via AutoBilde:

In July, the two companies are expected to make a decision on whether to build the next generation Mercedes A-Class on BMW’s Mini platform, Auto Bild said in its forthcoming Friday edition without citing sources.

Heavy cost pressure means Mini runs the risk of losing money should its Oxford, England, plant not run at full capacity, so parent BMW is considering finding a partner.

Discussions could include Honda (7267.T) and existing partner PSA (PEUP.PA), and Mercedes, its arch-rival, as well.

Mercedes for its part planned on building the next A-Class in 2012 on a platform to be developed jointly with Chrysler, but these plans have been dropped after parent DaimlerChrysler’s disposal of its majority stake in the loss-making U.S. carmaker.

BMW’s sales and marketing head, Michael Ganal, suggested early last month in an interview with German business magazine WirtschaftsWoche expanding its current cooperation with Mercedes, which develops hybrid powertrains, into other fields as well.

You can read more below:

[ BMW, Mercedes mull subcompact partnership ] Reuters [ Neue A-Klasse auf Mini-Basis? ] Auto Bild (German)

MF Analysis: We’ve known for sometime that BMW’s very concerned about the long term profitability of the MINI with current engineering costs, plant capacities and currency values. In fact we’ve heard that, while the new car is easier to produce, it’s not necessarily any cheaper than the previous to build. And just last week we heard from Dr. Kay Segler (MINI Brand VP) that MINI doesn’t want to simply sell more to make the car profitable. So the solution would seemingly be either to cheapen the car or partner with another company to reduce development costs.

What could this mean for future MINIs? While we don’t know how this could affect the end product, you can be sure BMW will guard MINI’s core brand attributes (go-kart like handling and unique design) very closely. After all, if this partnership happens, it would almost surely be at a component level not seen or felt by the end consumer.