BMW to supply 240,000 engines for U.S. start-up

Germany's BMW AG, the world's largest maker of luxury vehicles, will supply more than 240,000 diesel engines to a green-economy start-up planning to build fuel efficient police cars, officials said on Monday.

BMW's deal with U.S.-based Carbon Motors Corp will bolster fuel savings initiatives popular with the Obama administration and local governments facing tight budgets.

The initiative will also further efforts by BMW and other European automakers to popularize clean diesel technology in the United States as a gasoline alternative.

BMW sold nearly 500,000 diesel-powered vehicles worldwide in 2009, accounting for nearly 40 percent of sales. BMW sells two diesel models in the United States -- the X5 sport utility and the 335d sedan.

Expanding its powertrain business is a crucial strategy for BMW.

"Today's agreement with Carbon Motors marks another important milestone along this route with others to follow," Ian Robertson, BMW's global sales chief, told reporters at a signing ceremony in Washington.

Robertson said BMW saw "some growth" in overall U.S. sales in January and February and is cautiously optimistic for the year in anticipating single-digit growth. California and Florida are bright spots, he said, with the luxury market getting a boost.

China is "very clearly outperforming" for BMW, which expects to break the 100,000 unit mark in sales this year, Robertson said.

The agreement Robertson signed in Washington calls for delivery of inline six-cylinder diesel engines complete with cooling and exhaust gas system and an automatic transmission.

BMW says the technology will improve fuel efficiency and carbon emissions in the Carbon Motors sedan by up to 40 percent while providing the heavy torque and performance demands of police vehicles.

Carbon Motors Chairman and Chief Executive William Santana Li told reporters the privately held company plans to retool a former auto supplier plant in Connersville, Indiana, to build the E7 for law enforcement agencies.

Li said the vehicle will meet or exceed all the regulatory requirements for emissions and fuel economy, including new U.S. regulations requiring vehicle fleets to average 35 miles per gallon by 2016.

Carbon Motors hopes to help finance its plant retooling with a $310 million loan from the U.S. Energy Department. The company expects to create more than 1,500 long-term jobs at the Indiana plant and begin production roughly three years after the loan is approved.

The company has not said how much the vehicle will cost.

Ford Motor Co has long been a leader in police vehicle production, and this month introduced its Police Interceptor, which is based on the Taurus sedan. General Motors Co and Chrysler are also interested in the segment.