Geely Holding Group Co., a small but ambitious Chinese automaker with overseas ambitions, is Ford Motor Co.'s preferred bidder to purchase Volvo Car Corp.
Ford announced last week that it will start more detailed negotiations with Geely, adding that no final decisions have been made.
A Geely-Volvo match would create an odd couple.
Volvo is steeped in decades of engineering tradition.
Geely, founded just 12 years ago by Chinese entrepreneur Li Shufu, has been selling inexpensive vehicles in China, trying to catch up with large, state-owned competitors.
In 2008, Geely sold about 220,000 vehicles in China, and Volvo sold about 385,000 vehicles worldwide.
Geely had planned a factory in Mexico capable of assembling 300,000 vehicles a year, but the recession put those plans on hold, Chairman Li said a year ago.
Geely has shown cars at the North American International Auto Show and has said it wants to sell cars in the United States someday.
"Ford believes Geely has the potential to be a responsible future owner of Volvo and to take the business forward while preserving its core values and the independence of the Swedish brand," Ford CFO Lewis Booth said in a statement.
Ford said it does not intend to retain a stake in Volvo but will continue to work with the automaker in several areas after a possible sale.
Ford did not disclose a possible sale price, but media reports have suggested it would be closer to $2 billion than the $6.45 billion Ford paid for Volvo in 1999.
Reuters contributed to this report