PSA Peugeot-Citroen and BMW currently build small engines together that the French auto giant uses for a number of compact hatchbacks and urban runabouts and BMW for its Mini range. There are now reports that the two companies are considering strengthening this agreement with plans to build a greater variety of powertrains, including hybrid units for the first time.

The news comes from PSA CEO Christian Streiff, who revealed to Germany’s Suddeutsche Zeitung that talks will be taking place with a number of companies about further possible cooperation. These companies include BMW and Ford, as well as “other partners”. PSA will then complete a study to examine the technological, production, and financial benefits of developing more engines in partnership and if given the green light will move ahead with the development of a new range of four-cylinder engines that are expected to be around 2.0L in size.

Streiff also spoke out about the current practice of 'state scrapping premiums' sweeping Europe. Under the scrapping premium plan, governments offer consumers a cash back if they purchase a new vehicle and hand over their old vehicle - usually a vehicle that is at least nine years old. Streiff sees the plan as dangerous and called for the premiums to be reduced or abolished once the market had recovered sufficiently.

BMW's examination of its relationships with other manufacturers is not being limited to PSA Peugeot-Citroen. Yesterday we reported that BMW may be in the process of swapping 7% of its shares with 7% of Daimler's shares, and there is also a previous agreement signed with Fiat Group.