The official tuning arm of Mercedes-Benz, AMG, is working on a whole new range of sporty cars based on Mercedes’ upcoming small cars like the new A Class and the long-rumored ‘BLS’ four-door coupe.

AMG plans to distance its cars from the regular Mercedes fleet by making them all-wheel drive instead of front-wheel drive and dropping in a unique turbocharged four-cylinder engine.

New details have started to emerge, including a report that AMG may call upon the company responsible for building Mercedes’ Formula 1 engines to help tune its new small car engine.

That company is Mercedes AMG High Performance Powertrains (formerly Mercedes-Ilmor, then High Performance Engines), which Autocar reports will help AMG develop a 2.0-liter four-cylinder for use in the upcoming A Class AMG and BLS AMG models. While several B Class models wearing AMG upgrades have been spotted, these are likely to be test-mules for the BLS AMG.

Mercedes AMG High Performance Powertrains, based at Brixworth, Northamptonshire, in the UK, originally developed a new turbocharged 1.6-liter four-cylinder for the 2013 Formula 1 season. However, since the FIA decided to drop the four-banger idea and go with a V-6, High Performance Powertrains are now stuck with an engine design it doesn’t need.

That same unit, with its 7-mm wall thickness and 90-mm bore, will reportedly have its displacement enlarged to 2.0 liters for use in the AMG models. And in keeping with AMG boss Ola Kallenius’ desire to outdo his rivals, the engine is likely to be tuned to deliver more than the 340 horsepower of Audi’s 2.5-liter five-cylinder turbo from the RS3 and 335 horsepower of the BMW 1-Series M Coupe.

Look out for a debut of the new A Class AMG model, which may wear an "A25 AMG" badge, at the 2012 Paris Auto Show this September.