FORD may sell Volvo, the Swedish car-maker, to BMW as part of a drive to raise cash, say senior car-industry sources.

Sources close to Ford and BMW said yesterday that there had been preliminary talks between the two automotive giants, although that was denied by the companies. “No talks have taken place,” said a BMW spokesman.

BMW and Ford are understood to have held extensive talks two years ago about a collaboration involving Jaguar and Land Rover. Ford later sold the two British car groups to Tata of India.

Ford and its Detroit rivals, GM and Chrysler, are under increasing financial pressure as sales slump and debts mount. GM reports what are expected to be poor third-quarter figures this week and is intensifying merger talks with Chrysler, which told staff on Friday it may have to lay off a quarter of its work-force. Car-industry sources say the pair are pressing for some kind of financial assistance from the US government before they go ahead with the deal.

Members of the Michigan congressional delegation have written to US Treasury secretary Hank Paulson urging him to use the $700 billion (£440m) bank package to “protect this critical sector”. In September President George Bush signed off on a $25 billion loan package for the car industry to encourage the sector to develop more fuel-efficient vehicles.

However, it has yet to receive that cash and in the meantime the credit crunch has hit. Executives and lobbyists are now arguing they need that money fast and that they should also be included in the bailout. The car companies’ financing units are already part of that rescue package.

Stephen Collins, president of the Automotive Trade Policy Council, a Washington-based lobbyist representing the Big Three, said 2008 had proved a “perfect storm” for the auto industry.

“The government needs to look at the fact that our companies have 2m people for whom they provide directly health insurance. If they are not able to provide that, the government has a bigger problem. We have over 1m to whom we pay pensions. That’s just our three companies [Ford, GM and Chrysler],” he said.

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