BMW, Mercedes Parts Alliance: Caution, Bimmer Chief Says

(MoneyWatch)  A low-level production alliance between longtime luxury German automakers BMW and Mercedes is not as certain as it appeared earlier this year, with BMW showing signs of hitting the brakes.

When the plan to share parts and components arose in March, analysts cheered and this low-level uber-luxury European marriage seemed imminent. But now BMW is having second and third thoughts about commitment to its chief rival, and it's no wonder.

Reading between the lines, we'd imagine it could have something to do with Daimler's former affiliation with the Chrysler brand. Recall the folly of Chrysler attempting to align itself in the U.S. with German engineering in an ill-advised marketing campaign a few months before Daimler sold it off to Cerberus. Mercedes made plenty of noise about staying clear of same-breath mentions with Chrysler.

Now, even the hint of Mercedes' one-time affiliation with Chrysler seems to make BMW a bit uneasy. Mercedes, of course, is more than willing to join hands with the unsullied BMW brand. Earlier this month, Daimler Chief Executive Dieter Zetsche told Reuters that "[i]n general I only see a few areas where working together is in principle out of the question."
But BMW's Chief Executive Norbert Reithofer told the Frankfurter Allgemeine Zeitung newspaper last week: "There are clear limits. The BMW brand, which one study has valued at $24 billion (?£15.8 billion), must not be diluted or the brand identity damaged."

The initial plan was for a parts and/or platform sharing deal, which would be good for both in order to keep supplier costs down in the pricey European auto theater. Both BMW and Mercedes posted losses in Q1, and a sharing some elements of production would certainly help.

What would be bad is for BMW -- or Mercedes -- to lose identity, which is what can happen when sharing starts to happen, even at a lower level.

And both might be running along with a cautious eye on Audi, which continues to gain worldwide market share in the luxury segment thanks to new product and steadily improving marketing.

BMW/Mercedes image by Flickr user pinoyako812, CC 2.0