Premium brands have been hard hit by the global recession, which is pushing Germany's two luxury automakers to put aside their rivalry and join forces in development and production.
Even BMW's popular Mini has been hurt by falling consumer demand
BMW and Daimler's Mercedes-Benz are sharing their research and production facilities as the auto industry looks to streamline costs during what is expected to be the worst economic slump in decades, according to the weekly Frankfurter Allgemeine Sonntagszeitung.
The two prestigious German archrivals have talked about pooling their resources for years, but engineers at both companies have been protective about proprietary technology.
Now with premium sedans suffering a sharp dive in worldwide sales and mounting pressure to cut costs, combining production to cut costs has become a practical option.
A Daimler spokesman declined to comment on the newspaper report on Sunday, but said that an announcement would be made by top executives at the company's annual financial meeting in Stuttgart on Tuesday.
Sharing components, but no cross-shareholdings
At BMW's Munich headquarters, a spokesman told reporters that both luxury automakers were already working on a joint project in developing hybrid powered vehicles that partly run on electrical power.
Both companies said in a statement on Monday that they do not foresee cross shareholdings in each other's companies and talks about creating a common vehicle platform have been abandoned, but the daily Sueddeutsche Zeitung reported that the two automakers plan to jointly design, buy and produce components such as air-conditioning systems and seatbelts for new models.
Downsizing at Mini plant
The world financial crisis has hurt BMW in particular in its key North American market, where it is struggling and overall unit sales were down five percent last year compared to 2007.
The economic slowdown has even hurt its iconic fuel-efficient Mini brand at its Cowley plant in England, where 850 contract workers are being laid off.
Sales of the Mini, which marks its 50th anniversary in August, fell nearly 35 percent in January, compared to the same period the previous year.
BMW said in a statement, "While Mini has been weathering the economic downturn, it is not immune from the challenges of the current situation."
Speculation about possible collaboration with Mercedes-Benz however, has given BMW share prices a boost, leading to a near three-percent rise to 24.39 euros ($31.25) per share on the Frankfurt stock exchange in Monday trading. Daimler shares also rose by 0.6 percent to 24.25 euros.