After failed co-development talks with Fiat, it seems now that negotiations with BMW as well have come to an end for Mercedes-Benz. Daimler chief Dieter Zetsche has reportedly suggested that it would be hard to interlink the smaller Mercedes models with other lines, which has made it hard to find a co-development partner, although the search is not dead yet.

According to Auto Motor und Sport, product planners at Stuttgart plan to turn the A and B-class models into four variants, with a convertible and an SUV among the possibilities. These models could be built in a new factory in Eastern Europe instead of Rastatt, hinted Mercedes exec Rainer Schmückle.
Engines for these new models may come from the joint BMW-PSA venture, with BMW gaining Bluetec and urea-injection technologies from Mercedes in return.

The reason behind the extra models is because of increased competition from BMW’s Mini brand, which is about to add a new SUV model to the existing hatch, cabrio and long-wheelbase model. According to Schmückle, production numbers for the new A and B-Class family could top 300,000 units annually.
http://www.motorauthority.com/news/hatchbacks/more-variants-planned-for-a-and-b-class/