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BMW joins DaimlerChrysler-GM hybrid project

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Reuters / September 07, 2005 FRANKFURT (Reuters) -- German luxury carmaker BMW has joined DaimlerChrysler and General Motors in an alliance to develop new hybrid vehicle technology, DaimlerChrysler and GM said on Wednesday. A joint statement said the three carmakers had signed a memorandum of understanding to become equal partners in the project. Hybrids burn less fuel by adding one or more electric motors to a standard gasoline or diesel engine. The batteries help power the vehicle and recharge by capturing energy during braking. Last month DaimlerChrysler and GM finalized a deal to co-develop hybrids as they try to catch up with Japanese rivals on the fuel-saving systems that reduce harmful emissions. The automakers have said they will develop a "two-mode" hybrid technology that boosts both acceleration and fuel economy by 25 percent and can be used on a wide variety of vehicles. Joining the project marks a shift of emphasis for BMW. The world's largest maker of premium cars has until now focused on developing next-generation powertrains that burn hydrogen in internal-combustion engines or that use hydrogen in fuel cells. "The creation of a shared technology platform for hybrid drives will allow us to more quickly integrate the best technologies on the market and will therefore exploit and strengthen the innovative potential of all participating companies," BMW executive board member Burkhard Goeschel said. OFF THE SIDELINES Analysts said BMW could no longer afford to stand on the sidelines while hybrids become more popular even if modern diesel motors, popular in Europe, offer similar fuel efficiency. "The market is forcing them to join forces," Dresdner Kleinwort Wasserstein analyst Arndt Ellinghorst said, noting the step would save BMW the expense of playing catch-up on its own. "The negative thing is you don't have any stand alone technology or any uniqueness. For a company like BMW, which likes the image of being technology leader, that is definitely a concession," he added. "BMW is reacting to the popularity of the hybrid in North America, a market of immense strategic importance for the company," said Willi Diez, head of the car institute at the University of Applied Sciences in Nuertingen, Germany. The United States remains BMW's biggest market, accounting for nearly a quarter of all group vehicle sales last year. "Hybrids could attain a share in the U.S. new car market of more than 10 percent over the medium term. And since German carmakers tend to sell larger-than-average vehicles (with greater fuel consumption) this could be key in view of the surprising increase in petrol prices." Porsche is also exploring options for a hybrid version of its Cayenne SUV. Tom Stephens, group vice president at GM Powertrain, said the allies were discussing additional partners. The initial alliance pitted GM, the world's biggest automaker, and DaimlerChrysler, the global number five, against such rivals as Toyota Motor Corp. and Honda Motor Co. Ltd., which have a head start in the hybrid market. The GM and DaimlerChrysler alliance's "two-mode" hybrid system, adapted from GM's transit bus hybrid already on the market in some U.S. cities, uses smaller electric motors that work like a gear set to offer what the partners call superior performance and fuel economy. GM will use the system in late 2007 in its Chevrolet Tahoe and GMC Yukon full-sized SUVs. Chrysler follows with a hybrid Dodge Durango SUV among a range of hybrids. Daimler's Mercedes brand is also working on an application for rear-wheel-drive passenger cars. Toyota's Prius car, first launched in Japan in 1997, has emerged as the most popular hybrid. Toyota plans to build 180,000 Prius cars this year, and is targeting combined annual output of 62,000 Lexus RX400 h and Highlander hybrid SUVs, both launched earlier this year. Toyota had initially set a goal of selling 300,000 hybrid vehicles annually by this year or next, and has said it aims to boost that to 1 million as soon as possible.

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