The Italian car maker Fiat has confirmed it is in talks with General Motor's Opel, which includes Vauxhall.
The deal to absorb Opel comes as Fiat prepares to acquire the troubled US carmaker Chrysler.
Fiat said the double deal could create a mega motoring empire, raking in £70bn a year in revenue.
Fiat boss Sergio Marchionne will meet the German economy and foreign ministers later to discuss his firm's offer.
Opel, which is General Motor's European operation, says it needs £2.9bn to stay in business.
The German government says the company needs to secure cash from a private investor.
Fiat Chairman Luca Cordero di Montezemolo told Italy's Corriere della Sera newspaper at the weekend that Opel was an "ideal partner".
Canadian car parts maker Magna International has also put forward proposals for a deal with Opel.
Fiat meanwhile is pushing ahead with a deal to buy the troubled US carmaker Chrysler.
Chrysler filed for bankruptcy protection in the US last week.
Vauxhall employs around 5,000 workers in the UK at bases in Luton, Bedfordshire and Ellesmere Port, Cheshire.
Around 1,200 are based at Luton and 2,500 at Ellesmere Port, with the rest at dealerships across the UK.
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