Dec. 27 (Bloomberg) -- Bayerische Motoren Werke AG is in talks to cooperate more closely than anticipated with rival Daimler AG's Mercedes unit, the Financial Times Deutschland said, citing unidentified people familiar with the matter.

The carmakers may extend possible cooperation beyond the joint construction of engines to entire modules comprising axles, steering gear or drive systems, the newspaper said.

BMW has set an internal cost-savings target of 8 billion euros ($11.6 billion), 60 percent of which is to be achieved through lower material costs, the newspaper added, citing people at the Munich-based company.

To contact the reporter on this story: Jann Bettinga in Frankfurt at jbettinga@bloomberg.net.

Last Updated: December 27, 2007 02:08 EST