BMW chairman Bernd Pischetsrieder laughed when asked to comment and said, "That's vintage Piech," according to Der Spiegel magazine.

Piech, who has embarked on a buying spree to turn VW into a global car giant, has a reputation as an eccentric go-getter. One paper once called him the motoring world's "Rottweiler."

Pischetsrieder said takeover rumours surrounding BMW had recurred for the past 35 years and had only made BMW stronger.

"Such a rumour is always an opportunity for me to call on our employees to improve. In this way we will avoid becoming sluggish," Pischetsrieder told Welt am Sonntag newspaper.

"As long as our shareholders have no better investments than BMW the question does not arise in any case -- that is exactly what we have worked towards in the past. And itwill remain so in the future."

Piech raised the idea of a merger in a newspaper interview published on Saturday, saying a link-up between the two companies was open to speculation and suggesting that failing that, a share swap might be possible.

"You can speculate about that," Piech was quoted as saying when asked about a merger. But he added that such a marriage would likely face difficulties from cartel authorities.

The comments ended a week that saw Piech maligned in the media for letting legal rights to the Rolls-Royce brand name fall to BMW.

One BMW executive said he could not see where synergy benefits of a merger with VW could come from and added that Piech just wanted to turn the spotlight away from his failure to get Rolls-Royce.

VW appeared to have the inside track in acquiring the Rolls-Royce name after it purchased Rolls-Royce Motor Cars in June. But in a stunning announcement, BMW said it had secured rights to the name from Rolls-Royce Plc starting in 2003.

That means VW's purchase ofRolls-Royce Motor Cars will leave it only with the Bentley brand and former Rolls-Royce plant in Crewe, England.

BMW's annual sales of 60 billion marks ($33.90 billion) make it just over half as large as VW but the carmakers are pursuing very different strategies.

BMW sees itself as safe from takeover as long as it continues to concentrate on the high-class end of the market while VW is seeking to cover the entire automobile spectrum, from the mass market to the world's most exclusive cars.

In addition, BMW says its main shareholder, the Quandt family with a stake of almost 50 per cent, has pledged it will not sell its stake in the company.

Welt am Sonntag reported BMW had already decided to develop a new Rolls-Royce model in Munich, but the newspaper did not cite its sources and Pischetsrieder declined to comment.

Pischetsrieder told the newspaper that production of the new Rolls-Royce generation "Silver Seraph" would continue long after Rolls-Royce passes to BMW in 2003.

He added that BMWwould assemble a workforce to produce Rolls-Royce cars at the new plant the German carmaker plans to build in Britain but indicated that those staff would not come from the Crewe plant where Rolls-Royce cars are now made.

"One of our main tasks will be to gather a highly-qualified work force which will guarantee the protection of the Rolls-Royce tradition and which can do what the workers in Crewe can. But they don't have to come from the plant there."

Pischetsrieder said further growth was possible in the market for luxury vehicles costing more than 200,000 marks, a segment where demand was strongly influenced by supply.

"Buyers of such cars usually have several cars. The `average Rolls-Royce customer,' if he exists, has seven additional cars. Worldwide about 15,000 vehicles in this price segment are sold. But we regard further growth as possible."