BMW and Toyota extend technology ties -sources

MUNICH/HAMBURG Wed Jun 27, 2012 8:15am EDT

MUNICH/HAMBURG (Reuters) - BMW (BMWG.DE) and Toyota (7203.T) plan to expand a technological partnership, two sources close to the companies told Reuters, a deal that could prompt a shift in auto industry allegiances.

The agreement will be extended to include hybrid powertrains and lightweight design, the sources said on Wednesday.

BMW has primarily preferred France's PSA Peugeot Citroen (PEUP.PA) as a partner when it comes to reducing development and production costs.

But the cash-strapped French have recently sought savings through an alliance with General Motors (GM.N). By aligning more with Toyota, BMW would have a partner that offers greater scale than Peugeot and a financially healthy one at that.

BMW will host a news conference at 0630 EDT on Friday to mark a visit from Toyota scion and chief executive Akio Toyoda to the German luxury carmaker's Munich headquarters.

The companies declined to comment on the conference's subject matter, but the sources said Toyoda and BMW CEO Norbert Reithofer would explain their new ideas. The sources added, however, no contracts have been drafted for them to sign.

Eager to bulk up its diesel engine line-up in a sagging European market, Toyota agreed to collaborate with BMW on lithium-ion battery research in exchange for a steady supply of BMW-made diesel engines starting in 2014.

This time BMW looks to be the partner in need. Now that Peugeot is devoting resources to cementing an alliance with GM, the joint venture with Peugeot on hybrid parts looks shaky.

BMW needs to reduce the carbon emissions of its new car fleet by roughly a third, to 101 grams per kilometer, by 2020, which Reithofer argues can only be achieved if it ramps up the number of hybrid and electric cars in its range.

"I would bet that there will soon be BMW cars equipped with Toyota's hybrid powertrains," one of the sources said.

The Japanese carmaker could then gain access to the carbon fiber joint venture with SGL (SGCG.DE), which produces cutting-edge lightweight materials that BMW aims to use on an industrial scale to mass produce its Megacity electric car, dubbed the i3.

(Reporting by Irene Preisinger and Jan Schwartz, additional reporting by Christiaan Hetzner; Editing by David Hulmes)

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