Auto Bild, a German motor magazine, reported that BMW, the largest premium carmaker in the world, and its closest competitor, Mercedes-Benz, are in negotiations over a partnership in order to build subcompact cars.

Without citing sources, Auto Bild said in its forthcoming Friday edition that the two companies are expected to make a decision in July if the next generation Mercedes A-Class will be built on BMW's Mini platform.

BMW, Mini’s parent company, is considering finding a partner because heavy cost pressure means Mini runs the risk of losing money should its Oxford, England plant not run at full capacity.

Other than that, discussions could include Honda and existing partner PSA, and Mercedes, its arch-rival.

For its part, Mercedes has reportedly planned on building the next A-Class in 2012 on a platform to be developed together with Chrysler. But these plans have been dropped after parent company DaimlerChrysler have disposed majority of its stake in the loss-making U.S. carmaker.

Michael Ganal, BMW's sales and marketing head, suggested early last month in an interview with German business magazine WirtschaftsWoche the expansion of its current cooperation with Mercedes, which develops hybrid powertrains, into other fields also.

A BMW spokesperson said that Ganal was generally speaking on the possible further partnerships.

Ganal's counterpart, Mercedes sales chief Klaus Maier, denied days later that there were "any plans at present" to broaden the partnership any further.

A spokesman for Mercedes said that the brand retained its openness to cooperation where it makes sense but reaffirmed Maier's comments that there were no current plans to broaden its hybrid partnership with BMW into other areas.

About BMW

Along with its automotive concerns such as building quality BMW emblem, the BMW Group's activities encompass the development, production and marketing of motorcycles, as well as comprehensive financial services for private and business customers.

With BMW, MINI and Rolls-Royce Motor Cars, the group is the only car maker in the world to pursue a purely premium strategy for all market sectors covered by its brands, from exclusive smaller cars to top-of-the-range luxury limousines.

Other business interests of the group are insurance (Bavaria Wirtschaftsagentur GmbH), IT consulting and systems integration (Softlab GmbH).

About Mercedes-Benz

Since then, German car maker Mercedes-Benz is the pioneer in innovations, striking design and industry-leading safety features that are sure to impress. It has also pioneered reduction of CO2 emission, comfort for high mileage drivers, and driving dynamics.