U.S., German Firms to Team on Jet Engines : Aerospace: United Technologies and Daimler-Benz will operate their engine divisions as a single unit in a bid to cut R&D; expenses.

United Technologies Corp. and West Germany’s Daimler-Benz AG announced preliminary agreement on Tuesday to operate their jet engine divisions as a single company for certain ventures, a move analysts said makes sense given looming defense cuts.

Under the memorandum of understanding, Daimler-Benz will invest in Pratt & Whitney, United Technologies’ jet engine division, and United Technologies will invest in Daimler’s Motoren und Turbinen Union, or MTU, Daimler’s aerospace and defense division.

“This agreement is setting in stone the relationship that has existed for some time between United Technologies and Daimler-Benz,” said David Franus, an analyst with the market research firm Forecast International. “This is a synergistic agreement that will open up new markets for both of these huge companies.”

Franus said the companies will be able to work together on projects by pooling their resources, allowing them to pare research and development expenses.

The two divisions already are partners with three other jet engine makers in International Aero Engines, a consortium that produces the V2500 commercial jet engine. The other partners are Rolls-Royce PLC, Japanese Aero Engines Corp. and Fiat Aviazione.

“This agreement comes at a time when the aero industry is undergoing some serious rethinking,” Franus said. “With defense cuts, United Technologies will undoubtedly see sales decrease, and it needs to approach other avenues in the commercial sector.”

During the past several years, Pratt & Whitney and the Daimler unit also have expanded cooperation in the development and manufacturing of commercial jet engines, including the Pratt & Whitney JT8D-200, PW2000 and PW300 models.

“We have concluded that a formal collaboration between our companies is an excellent strategic step to broaden and expand our historically close relationship,” Robert F. Daniell, United Technologies’ chairman and chief executive, said in a statement.

“It will allow both Pratt & Whitney and MTU to expand their markets and complement each other’s unique strengths in technology and manufacturing,” he said.

Daniell and Edzard Reuter, Daimler-Benz’s chairman and chief executive, said the agreement comes after more than two years of discussion among top management of both companies. Full details have not been settled, they said.

Under the agreement, MTU will be Pratt & Whitney’s principal partner for Europe and the preferred partner worldwide.

Once new commercial engine programs of interest to both companies are identified, joint teams will coordinate research, development, manufacturing and marketing, the companies said.

“The joint teams will work to minimize duplication in product development and maximize efficiency by concentrating production of certain components for common products at one company or the other,” the companies said in a joint statement.

“Operations in these programs . . . will be conducted as if we were one organization,” the companies said.