Two weeks ago in a blog titled ‘Pump up the Volume’ I signed off with this thought.

‘In truth, BMW and Mercedes will have to swallow their pride and cut deals with other carmakers, if not each other. If they don’t, heavy losses will be the inevitable reward.’

Industry reports had just suggested that months of talks between Mercedes and BMW on collaboration had just broken up with little more than an agreement to share some modest under-skin components.

So the report from Germany’s Der Spiegel that the two carmakers are preparing a cross-shareholding of 7 percent is a big surprise. With little in the way of concrete news, the most logical thought is that BMW and Mercedes have finally overruled their senior engineers and pushed through plans for a collaboration on future front-wheel drive vehicles.

Perhaps minds have been concentrated by the 24 percent fall in sales enjoyed by both brands in February. Or that the fact that the Audi A4 was, for the first time, the best selling premium car in Germany in 2008.

Audi’s success should be concentrating minds in Munich and Stuttgart, It has access to VW Group technology and a record of success, for example, in selling premium-priced A3s which are no more than a Golf with slicker styling and a 500 Euro more expensive interior. The new Audi A1 isn’t far away either.