STUTTGART, Germany — Mercedes-Benz has rejected the idea of a small-car joint venture. After studying proposed ventures with both Fiat and BMW, Mercedes-Benz has decided to push ahead with development of the next-generation A- and B-Class on its own, according to the Web site www.Edmunds.com.

Insiders say Mercedes will rely on internal efficiency moves to cut costs on the new entry-level models. Sources tell Inside Line that the efficiency moves are an extension of the Mercedes CORE cost-cutting program that has been one of the first initiatives of Dieter Zetsche's leadership.

Commenting about the end of the Fiat and BMW talks, Zetsche said: "In certain model lines we have certain themes and principles closely networked. We would have been forced to throw them overboard had we shared a platform with another carmaker." He said the new program is for "a platform below the C-Class with front-wheel drive and high-mounted transverse-sited engines." Mercedes-Benz is rumored to be considering bringing out the third-generation A-Class as a three-door only, possibly adding a cabriolet version later. The second-generation B-Class is set to grow in size to roughly match the current Volkswagen Touran.

There is also reportedly an idea in the works for a third small car. It would be a junior-size SUV based on Mercedes' new front-wheel-drive platform, sources tell Inside Line. The new model would be positioned under the upcoming GLK — and would compete head-on with the Audi A3 and the BMW X1.

Mercedes is also reportedly considering a new low-cost assembly plant in eastern Europe to get around the high cost of production at the automaker's Rastatt plant in southwest Germany. Target annual production at a new plant would be some 300,000 units.