* BMW, Hyundai may share engine development costs - source
* Hyundai denies holding cooperation talks
* Carmakers face enormous R&D costs to fulfil emission norms
By Hyunjoo Jin and Christiaan Hetzner
SEOUL/FRANKFURT, May 4 German premium carmaker
BMW and South Korean group Hyundai Motor
are discussing a possible tie-up in engine development and other
areas, a source with direct knowledge of the matter told
"The talks are at early stages," the source said on
condition of anonymity because the talks were confidential.
Another source told Reuters the two companies had discussed
a comprehensive alliance, including jointly developing an engine
and sharing development costs equally. He said he had no
knowledge of whether the talks were still under way.
German industry publication Automobil Produktion reported on
Thursday that Hyundai Motor Group chairman Chung Mong-koo's son
and heir apparent, Chung Eui-sun, met top BMW managers in Munich
to discuss sharing 1-2 billion euros ($1.3-$2.6 billion) engine
Neither carmaker would seem to need a deal - a recent global
auto industry benchmarking study by Ernst & Young said Hyundai's
10.4 percent operating margin last year was only topped by the
11.7 percent earned at BMW.
BMW, developing a single engine architecture for all three,
four and six-cylinder engines, has dismissed speculation it
might look to add another technology partner beyond Peugeot
, Toyota and possibly General Motors.
"Further co-operation partners are currently not foreseen,"
chief executive Norbert Reithofer told reporters on Thursday.
A spokesman for Hyundai Motor denied there were alliance
talks or meetings between senior company officials, saying: "It
Munich-based BMW would not comment on Friday.
The company has openly looked to sell BMW-built engines to
rival carmakers and has a history of striking targeted,
project-by-project cooperation deals that do not threaten its
Analysts said some form of tie-up with Hyundai would yield
benefits, since BMW's 1.6 million vehicle sales base means it
lacks the scale effects of an Audi, which can share development
costs with parent Volkswagen.
Developing a new generation of conventional and alternative
propulsion systems that fulfil stricter EU carbon emission norms
in 2020 and beyond are forcing carmakers to spend billions of
euros on research and development.
"Even in the premium car industry you will find increased
competition over costs. Enormous investments are required and
BMW as a small carmaker relative to Volkswagen will be compelled
to cooperate simply to save money," said Stefan Bratzel,
Director of the Center of Automotive Management in Bergisch
"Hyundai is one of the most agile and dangerous competitors
in the global mass market car industry today. But any strategic
alliance with the Koreans would be tantamount to an earthquake
since the Rover disaster still haunts BMW," he said, referring
to the 1990s acquisition of the loss-making British carmaker
that almost threatened BMW's very existence.
Last February, BMW agreed to expand its long-standing engine
partnership with French mass market carmaker Peugeot beyond
joint development of small four-cylinder petrol engines to
include hybrid electric components.
But Peugeot has been struggling heavily to compete against
the likes of Hyundai, losing money and burning billions in cash
last year. It chose recently to enter an alliance with rival
Opel's parent in the hopes of lowering costs.