Bloomberg News

BMW to Build Sports Car With Toyota in Deeper Partnership

January 24, 2013

Toyota, BMW Deepen Collaboration In Fuel Cells, Sports Cars

Yasumori Ihara, director and senior managing officer of Toyota Motor Corp., from left, Takeshi Uchiyamada, vice chairman of Toyota Motor Corp., Herbert Diess, development chief of Bayerische Motoren Werke AG (BMW), and Klaus Froehlich, senior vice president of BMW Group, shake hands as they pose for a photograph during a joint news conference in Nagoya, Japan. Photographer: Kiyoshi Ota/Bloomberg

Bayerische Motoren Werke AG (BMW), the world’s biggest maker of luxury vehicles, will work with Toyota Motor Corp. (7203) to produce a midsize sports car, expanding their cooperation amid industry efforts to limit development costs.

BMW and Toyota, the world’s largest automaker, will also set up partnerships to create fuel-cell systems, lightweight materials and lithium-air batteries, the companies said today. The two began collaborating in 2011 on lithium-ion batteries and other fuel-saving projects.

Automakers have been setting up technology development deals to share spending on vehicles and recoup investments quicker as parts are used in more models. General Motors Co. (GM:US) and PSA Peugeot Citroen (UG) today outlined their compact-model development strategy as part of a year-old partnership aimed at restoring earnings in a shrinking European market.

“These technologies are expensive, so I think you’ll see more of these in the future as a way to share costs,” Stephen Girsky, GM’s interim European chief, said in an interview in Brussels. “It’s all about which companies can work together. As the cost of technology keeps going up, we’re going to look for ways to offset the costs and share risks.”

Daimler AG (DAI) has teamed up with Renault SA (RNO) to refresh its Smart small-car brand, while BMW’s Mini brand shares gasoline engines with Peugeot. Fiat SpA (F) last week announced a final deal to build a new Alfa Romeo roadster with Mazda Motor Corp. (7261) Paris- based Peugeot, Europe’s second-biggest carmaker, and Detroit- based GM said today that a parts-purchasing venture they’re setting up in the region has won antitrust clearance.

Teaming Up

Wolfsburg, Germany-based Volkswagen AG (VOW), Europe’s biggest carmaker, and Ford Motor Co. (F:US) are the only producers among the region’s Top 10 that don’t have large-scale cooperation agreements on technology or models.

Toyota’s collaboration with BMW allows the Toyota City, Japan-based carmaker to expand its European lineup of diesel- powered vehicles. The partnership enables BMW to work with the world’s biggest producer of hybrid vehicles as the German company develops alternative powering systems while fending off efforts by VW’s Audi division to take the global lead in luxury- car sales.

“The cooperation between BMW and Toyota is very promising,” Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler, said by phone. “The two companies are working together from a position of strength, and doing so as a matter of choice rather than pressure. The Peugeot-Opel partnership has more the tone of an emergency alliance.”

Taking Lead

Peugeot will develop three platforms, or the chassis and major parts, for subcompact and compact models that the French carmaker and its U.S. partner will produce and sell separately, Chief Executive Officer Philippe Varin said today at a press conference in Brussels. The companies “have nothing to announce” about any joint car manufacturing, Girsky said at the briefing.

Peugeot posted an 819 million-euro ($1.09 billion) net loss in the first half, and it’s closing a factory and cutting 17 percent of its French workforce. GM’s European division has racked up $17.3 billion in losses since 1999, and it’s looking at accelerating plans to shutter a factory in Germany in response to the regional car market contraction.

The Peugeot-GM alliance is targeted at yielding a combined $2 billion in cost savings and sales improvements over five years, Varin estimated in December. The joint parts-purchasing venture will be a “cornerstone” of the partnership, Girsky said today.

Powertrain Talks

BMW talks to work with Toyota on electric powertrains are continuing, Mathias Schmidt, a BMW spokesman, said by phone. The German carmaker dissolved a joint venture to develop electric powertrains with Peugeot last year after GM took a 7 percent stake in the French company as their alliance formed.

Toyota is aiming for a joint project in the development of battery-powered cars, Yasumori Ihara, a senior managing officer, said today at a Tokyo press conference. BMW will supply Toyota with 1.6-liter and 2-liter engines for the Japanese company’s models in Europe starting in 2014.

Under its new “i” sub-brand, BMW plans to introduce its first electric-powered model, the i3 city car, later this year. The vehicle will be followed by the i8 plug-in hybrid sports car, which is scheduled to go on sale in 2014.

“In light of the technological changes ahead, the entire automotive industry faces tremendous challenges, which we also regard as an opportunity,” BMW Chief Executive Officer Norbert Reithofer said in a statement. “This collaboration is an important building block in keeping both companies on a successful course in the future.”

To contact the reporters on this story: Dorothee Tschampa in Frankfurt at dtschampa@bloomberg.net; Mathieu Rosemain in Paris at mrosemain@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Young-Sam Cho at ycho2@bloomberg.net


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