BMW in talks with Mercedes over subcompact deal?

Update: Mercedes has denied they have had talks with BMW but say there is still hope for such a deal.

BMW is currently in negotiations with Mercedes-Benz over a possible deal to build a new subcompact car based on the same platform used for BMW’s Mini. The two carmakers are expected to make a decision later this month on whether to build the next-gen A-class on the Mini platform, reports AutoBild, but there are also rumors that Mercedes could drop the A-class altogether.

The Mini brand faces the risk of losing money if its plant in Oxford doesn’t run at full capacity, so BMW is hoping to find a partner to lift production numbers. Other carmakers tipped to be on BMW’s list of possible suitors include its existing partner PSA-Peugeot Citroen, Honda and arch-rival Mercedes.

Mercedes’ original plan was to build its next A-Class on a platform borrowed from Chrysler but these plans have since been quashed following the split-up of DaimlerChrysler. Two BMW execs, Klaus Draeger and Michael Ganal, have both suggested that BMW seek a partner to share development costs but the only response so far has been a rejection, as revealed by Mercedes marketing Chieft Klaus Maier.