Mercedes-Benz and BMW, the world's two leading luxury carmakers, could co-operate more closely on several projects, from smaller cars to engines, in a sign of how alliances could change the shape of the industry.
Dieter Zetsche, chief executive of Mercedes' parent company, DaimlerChrysler, said earlier this week that he was open to partnerships with BMW, and was discussing whether to develop the A- and B-Class small cars with his rival.
Asked by Der Spiegel magazine whether the two companies could develop a joint engine, Mr Zetsche replied: "Yes, why not? The Porsche Cayenne [sports utility vehicle] was very successful with a VW engine."
His comments underline one of the main topics - alliances between rival carmakers - likely to be discussed at the Frankfurt motor show which started yesterday. Another big topic of debate is likely to be the latest conflict at the increasingly soap-operatic Volkswagen. A dispute has broken out at Europe's largest carmaker between its biggest shareholder, sports car manufacturer Porsche, and its powerful union, IG Metall. Porsche provoked the union's ire by saying there were "no holy cows" at VW, including its generous wage rules and close worker-management co-operation.
IG Metall retorted that any attempt to change those rules would lead to a "massive conflict" and that Porsche should stop trying to "discredit VW's successful management".
Porsche and VW have a number of co-operation projects, including the Cayenne and hybrid motors.
BMW and Daimler already co-operate over hybrids, but Mr Zetsche's comments suggest far deeper co-operations are possible. Both Daimler and BMW declined to comment further.
"We are open to partnerships with everybody. Mercedes is definitely part of that," said a BMW executive. A senior Daimler executive said there were no current talks with BMW over engines. But he stressed: "We are open. Look, in the US we both have a market share of only 2 per cent so it is definitely possible internationally to co-operate."
Mr Zetsche, however, used the interview to scotch market rumours that Daimler and BMW could take cross-shareholdings in each other.
He also underlined that no decisions on any co-operations had been taken. "We are talking to different business partners about different topics and we examine all the possibilities without emotion," he said.
Mr Zetsche said the chances from a co-operation with BMW were large, because the two companies build cars that are technologically similar. But he warned the risks were also high because of a possible watering down of the differences between the two.