BMW is to join DaimlerChrysler and General Motors in an alliance to develop new hybrid vehicle technology. The three companies involved signed a memorandum of understanding today to create the ‘alliance of equals’ earlier today.

DaimlerChrysler and GM last month finalised a deal to co-develop new hybrid vehicle technology as they try to catch up with Japanese rivals on the fuel-saving systems that reduce harmful emissions.

The automakers have said they will develop a “two-mode” hybrid technology that boosts both acceleration and fuel economy by 25 percent and can be used on a wide variety of vehicles.

In Troy, Michigan, the new “GM, DaimlerChrysler and BMW Hybrid Development Center” will develop the overall modular system and the individual components: electric motors, high-performance electronics, wiring, safety systems, energy management, and hybrid system control units. In addition, the Hybrid Development Center will be responsible for system integration and project management.

Joining the project marks a shift of emphasis for BMW. The world’s largest maker of premium cars has until now focused on developing next-generation powertrains that either burn hydrogen in converted internal-combustion engines or that use hydrogen in fuel cells, Reuters noted.

“The participation of the BMW Group has allowed us to gain another expert partner for the development of this advanced two-mode hybrid system,” says Tom Stephens, Group Vice President at GM Powertrain. “This cooperation paves the way for extensive hybrid collaboration among the three companies. We also continue to discuss additional partners for this alliance.”

“By pooling the development expertise of the three automakers — BMW Group, DaimlerChrysler and General Motors — we are making it possible for all companies to bring to market appealing vehicles with convincing performance, comfort and environmental features for the benefit of our customers,” says Dr. Thomas Weber, DaimlerChrysler Board of Management member responsible for Research and Technology as well as for Development at the Mercedes Car Group.

“The creation of a shared technology platform for hybrid drives will allow us to more quickly integrate the best technologies on the market and will therefore exploit and strengthen the innovative potential of all participating companies,” explains Prof. Burkhard Göschel, Board of Management member for Development and Procurement at BMW AG. “Because the technologies will be adapted to the individual vehicle models, the participating brands will retain their distinctive characters.”

The “two-mode” hybrid system, adapted from GM’s transit bus hybrid on the market in some U.S. cities today, uses smaller electric motors that work like a gear set to offer what the partners call superior performance and fuel economy.

That allows the system to use a smaller conventional engine, making it more cost effective than competitors’ hybrids.

GM will first use the system in late 2007 in its Chevrolet Tahoe and GMC Yukon full-size sport utility vehicles. Chrysler will follow with a hybrid version of its Dodge Durango full-size SUV among a range of hybrids, Reuters said.

Daimler’s Mercedes brand is also working on an application for rear-wheel-drive passenger cars, the report added.

The Reuters report also said that Continental AG and ZF Friedrichshafen said on Tuesday they had joined forces to develop fuel-saving hybrid technology.

“The trend is toward full hybrids,” Karl-Thomas Neumann, head of the Continental Automotive Systems (CAS) division of the tyremaker and car parts group, said in a statement.