Sources close to the top management of the US car maker say that the company is about to buy BMW and Honda - two of its top rivals.

According to agency reports the details of the package are not known yet, but it appears not to be a merger of equals but a buy-out of both companies.

A computer firm with historical ties to the auto industry is said to be involved in the deal as well.

A spokesman for Ford UK said the company could "neither confirm nor deny market speculation".

Honda has insisted it plans to remain independent

However, Honda said there was "no truth" in the rumours and the company "firmly intended" to remain an independent motor manufacturer.

A statement issued by the firm referred to the New Year speech made by Honda President Hiroyuki Yoshino in which he emphasised the virtues of Honda remaining independent.

He said: "Honda is not interested in growing bigger (globally). Our goal is to become more competitive by staying in touch with the needs of customers, accelerating the pace of innovation and increasing efficiency.

"Honda has grown into a global company - and we want to retain the strength and flexibility of our worldwide operations. But we must retain the speed, efficiency and local market sense of a small company," he added.

BMW shares rise

BMW shares rose on the rumours

In Frankfurt, the rumours pushed up the price of BMW shares ahead of the second denial in as many months.

BMW's share price rose to a high of 765.00 euros ($903.9) before falling back before BMW issued its denial.

A spokesman for the company said that neither the Quandt family, the Munich-based carmaker's largest shareholder, nor BMW had an interest in selling to Ford.

In December, BMW denied similar newspaper reports that it was considering a merger with Ford, while Ford officials declined to comment.

On Monday, BMW said 1998 group sales held steady at around 1.2m cars as declining demand of vehicles produced by its Rover subsidiary in the UK offset gains by other divisions.

However, traders said the results were not the issue, but rather the rumours.

Buy-out 'unlikely'

Analysts agreed that the prospects of Ford buying BMW were very unlikely but an alliance between the two was a possibility.

Bjorn Kircher of Banque Nationale du Paris said the Quandt family, the largest single shareholder in BMW, had always said it was not interested in selling its stake.

"Another possibility for the family is to take a stake in any joint Ford-BMW tie-up but even that is an unlikely scenario," he added.

Tom Aney of HypoVereinsbank said "an alliance would make it interesting," adding that "BMW has always been scared of any tie-up because it knows its success lies in its independence."

He said that, while it was true that Ford was in relatively cash-rich position to embark on a major acquisition, he considered it very "un-Japanese" for a Japanese company to link up with a non-Japanese as a first step.

"Honda is in a very profitable position. The Japanese mentality is that it first will try to seek consolidation within the Japanese industry itself before going abroad," Aney added.