PSA and BMW responded to reports that its engine alliance had split last week by asserting that the deal is actually as strong as ever, and growing. The deal will expand to produce 1 million engines for BMW and PSA in 2009; recent reports even suggest that Daimler could buy its way into it, in search of cheaper-to-produce engines for its small cars.The BMW Group and PSA Peugeot-Citroen agreed to work together to develop and manufacture small-capacity petrol engines in 2002. The 1.4- and 1.6-litre petrol engines that resulted are currently used in Mini, Peugeot and Citroen models, and will go on to be included in the BMW 1-series next year.Annual production figures currently stand at 640,000 units, but the 1 million mark should be achieved in 2009.Further to that, Daimler AG could become the third car-maker to join the engine venture, if reports in the German press are to be believed. PSA boss Christian Streiff has already gone on record with his view that Daimler should be brought into the deal; in a report in Handelsblatt last week, BMW CEO Norbert Reithofer confirmed that its domestic rival has shown interest in being included in the engine development deal."A third partner would bring improved synergies," said Reithofer. "Daimler is interested, and the door is open."The report has fuelled speculation in Germany of further collaborations between the BMW Group and Daimler AG; many expect the companies to join forces on the development of new small cars in the near future.