FRANKFURT, Oct 18 (Reuters) - Daimler AG (DAIGn.DE: Quote, Profile, Research) plans to use four-cylinder direct injection engines developed by BMW's (BMWG.DE: Quote, Profile, Research) Mini brand and built by PSA (PEUP.PA: Quote, Profile, Research) in the next generation of Mercedes-Benz compact cars, a magazine reported.

Germany's Auto Bild, without citing sources, said Daimler intended to use the engines in the new B-Class compact from 2011. Cooperation would be confined to engines rather than complete compact car platforms from Mini, it added.

That meant prospects for using a Fiat (FIA.MI: Quote, Profile, Research) platform for Mercedes compact cars had dwindled sharply, it said in the summary of a report to appear on Friday.

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