Fiat, BMW look at Alfa Romeo-Mini cooperation

FRANKFURT/BALOCCO, Italy (Reuters) - BMW AG BMWG.DE, the world's largest premium carmaker, could help Italy's Fiat SpA FIA.MI launch its Alfa Romeo brand in the United States as the two also discuss developing the Mini.

A worker inspects a newly produced Fiat Ducato at the Severstal Auto plant in Elabuga May 27, 2008. REUTERS/Denis Sinyakov

While Fiat has partnered with the likes of Tata Motors Ltd TAMO.BO and Ford Motor Co F.N to build vehicles, the move represents a departure for BMW, which has so far only agreed to cooperate with rivals such as PSA Peugeot Citroen PEUP.PA and Daimler AG DAIGn.DE in the fields of engines or hybrids.

“We are currently examining with the Fiat Group possibilities for the joint use of components and systems in Mini and Alfa Romeo vehicles in order to achieve economies of scale,” BMW management board member Friedrich Eichiner said in a statement.

“As part of possible cooperation, BMW group will provide (Fiat) with support in launching the Alfa Romeo brand in the North American market,” Fiat said in its version of the statement.

Fiat has committed to return the Alfa Romeo brand to the U.S. market and Chief Executive Sergio Marchionne has said he aims to start making the cars in North America between 2010 and 2011.

Possible cooperation between Fiat and BMW comes as many car makers seek alliances to share production and other costs in the highly competitive sector known for its meager profit margins.

“Everything is going in the wrong direction for the industry: adverse currency effects, higher raw materials prices which have so far been impossible to pass on to customers, and now a much weaker European market,” Deutsche Bank analyst Gaetan Toulemonde said.

Both BMW and Fiat had reportedly been in separate talks with Daimler over possible joint development of small cars with Mercedes-Benz, but negotiations yielded no results.

A deal with Fiat could involve sharing common architecture between the next generation Mini, due to hit markets in about five years, and Alfa Romeo’s MiTo subcompact, an industry source told Reuters.


A cooperation with Alfa for joint motors was unlikely, the person added. BMW already sources small petrol engines for the Mini that it jointly developed with French partner Peugeot PEUP.PA, which uses them in its Peugeot 207 subcompact.

The two carmakers have agreed not to divulge details of the possible collaboration but they did say results of the talks will probably be achieved by the end of the year.

“The proposed cooperation with BMW is a significant cornerstone of our strategy of alliances,” Marchionne said in the statement.

Marchionne also confirmed Fiat’s targets for the year, which include a higher trading profit of between 3.4 billion euros ($5.3 billion) and 3.6 billion.

“We are about to close the quarter and the results are all in line with the targets. We don’t see anything coming up for the rest of the year, barring any disastrous events in the next six months,” he said. “What’s important is to see how the third and fourth quarters will go.”

Shares in BMW rose 0.87 percent while Fiat closed 0.5 percent higher, compared with a 1.41 percent fall in the DJ Stoxx index of automotive stocks .SXAP.

Reuters reported on Monday that Fiat planned to temporarily shut most of its plants in Italy because of weak demand. <ID:nL07133264>

“Brazil and Latin America continue to go strongly and we don’t see any dark clouds on the horizon,” Marchionne added. “2008 and 2009 will be exceptional years.”

Analysts cite the region as Fiat’s saving grace because its sales are declining in Italy and other parts of western Europe.

Other car makers like General Motors Corp GM.N are having a much harder time grappling with rising fuel prices, and the U.S. giant is considering selling brands that include Buick, Pontiac and Hummer.

“Fiat is not interested in any of the American group’s brands,” Marchionne added.

Additional reporting by Gilles Castonguay in Milan, Irene Preisinger in Munich and Marcel Michelson in Paris; Editing by Will Waterman and David Holmes