The Tritek factory in Brazil that builds engines for BMW and DaimlerChrysler is facing severe overcapacity.
The Tritek plant was originally a 50-50 joint venture between Rover and Chrysler. It is now jointly owned by BMW and DaimlerChrysler.
The factory was established for the production of engines for the new Mini, the Rover R30, the Chrysler Neon and a future compact Chrysler vehicle designed for European, South American and Asian markets.
But two of those cars have now been canceled, idling at least half of the Tritek plant's annual production capacity of 400,000 engines.
When DaimlerChrysler acquired a majority stake in Mitsubishi in March, it said the Japanese manufacturer, along with Smart, would play a key role in D/C's small car strategy. As a result a Chrysler vehicle smaller than Neon was scrapped.
The Rover R30 will also not be produced. After selling Rover to Phoenix Group earlier this year, BMW kept hold of plans for the R30 project - possibly for use in component development for the new BMW small car.
'But we will not use the Tritek engines in our future small car,' said Burkhard Goeschel, member of the BMW management board resposible for research and development. 'It will be equipped with a BMW four-cylinder engine. Even if we had wanted to use the Tritek engines we could not have done so without major changes to them, because they are designed for front-wheel drive. We chose rear-wheel drive for our new small car.'
BMW will now utilize the Tritek plant only for engines for the new Mini, which eventually should be built at a rate of 100,000 units a year.
'Each side [Daimler-Chrysler and BMW] can utilize exactly half of the Tritek plant's capacity, and each side will have to bear the cost of its operation,' said Jurgen Hubbert, DaimlerChrysler board member responsible for Mercedes-Benz passenger cars and Smart.
Starting next year the Tritek-built 1.6-liter, four-cylinder engine will be fitted into the Dodge Neon and the Chrysler PT Cruiser, said James Holden, Daimler-Chrysler board member, responsible for Chrysler.
The entry-level engine for both cars is currently a 2.0-liter, four-cylinder, which critics say lacks power and torque.
This raises questions about the success of an even smaller, less powerful Tritek engine in those cars.
Hubbert said the engine could also be fitted into the Mitsubishi and Smart four-seat, four-door vehicle, due in 2004.