Speaking to German newspaper Handelsblatt, Daimler CEO Mr Dieter Zetsche, has hinted that the firm is in talks with several firms to secure a partnership that will help build its next generation of compact cars.

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One of these firms is thought to be French car manufacturer Renault, with the new partnership rumoured to form from as early as mid-2010.

Daimler’s luxury car brand, Mercedes-Benz, plans to launch four new compact cars to replace the current A- and B-Class models when they reach the end of their product cycles towards the end of next year.

Both Daimler and Renault have previously admitted to be in talks over a new family of small cars, with Daimler looking for a new range of engines for its models and Renault seeking a low-cost platform for its cars.