In terms of units, Daimler and BMW are only medium scale manufacturers. For this reason, the companies are confronted with less favorable conditions when it comes to achieving scale effects, in particular in the area of procurement where they increasingly get under fire from luxury brands which in turn are part of a larger group — such as Lexus (which is part of the Toyota group) or Volkswagen subsidiary Audi AG.

Despite the fierce competition between the two, Daimler and BMW already about two years ago have announced to cooperate in developing a hybrid drive. Now a report from Sueddeutsche Zeitung states that the tow companies have agreed to tune their development and procurement activities, in particular in the electronics sector. The move will be announced at Daimler's yearly finance press conference Tuesday (February 17), the paper writes, quoting a source close to the negotiation teams saying that there won't be one huge move but many small activities. According to the paper, the move will affect both companies' production and procurement activities in the U.S. and China in the first place.

While Daimler was not available for comment, a BMW spokesperson acknowledged the report but played it down to some extent. "Daimler and BMW have a long-standing cooperation, for instance in the development of the Autosar software standard," he said. "Basically, the report did not contain many new facts besides the procurement cooperation."

BMW has a procurement budget of €26 billion (about $34 billion) annually. The figure however includes all types of parts the company buys for its car production — from tires to transmission boxes. Market watchers believe that electronics account for some 25 percent of the total value of a modern car, with increasing tendency.

The BMW spokesperson declined to break down the procurement activities by technology. The car maker however has announced a cost cutting program at a volume of €6 billion by 2012. Experts regard the power train as a segment where costs could be reduced significantly, which includes buying electronic parts in larger volumes as a result of a procurement cooperation.