DaimlerChrysler and BMW said they will cooperate on developing a hybrid drive system for premium cars, the Dow Jones Newswires reported.
"This collaboration will allow the two companies to share their extensive know-how and to achieve increased efficiency through economies of scale," the two companies said in a statement.
The companies said the deal wouldn't affect the identities of the different brands, because the systems would be tailored to fit different vehicles.
BMW and DaimlerChrysler said they plan to bring the new system to market within the next three years.