Billionaire Kirk Kerkorian's firm Tracinda has made a $4.5bn (£2.2bn) cash offer for Chrysler, the ailing US arm of Germany's DaimlerChrysler.
DaimlerChrysler has been in talks with potential partners
Tracinda, formerly a key shareholder in Chrysler, said it wanted to "build and strengthen" Chrysler.
Chrysler management and United Auto Workers could be "equity partners", said private investment firm Tracinda.
DaimlerChrysler confirmed that it was in talks with potential partners over Chrysler, but made no other comments.
Tracinda was the main shareholder in Chrysler when it merged with DaimlerBenz in 1998.
Mr Kerkorian, who had opposed the merger, then tried to sue the firm in 2000, claiming that DaimlerBenz organised the deal to buy Chrysler in such a way that meant he lost billions of dollars. The case was rejected.
The bid requires that Chrysler reach agreement with the United Autoworkers (UAW) in addition to settling with DaimlerChrysler on how to divide up costs incurred by Chrysler retirees - including unfunded pension and health costs.
Tracinda advisor Jerome York - also a former Chrysler executive - made the case for the bid in a letter to Dieter Zetsche, DaimlerChrysler's chief executive.
"Tracinda believes, by taking a long-term approach to solving Chrysler's problems, it can become a robust and lasting, stand-alone entity," said the letter.
Han Tjan, a spokesperson for DaimlerChrysler, said the firm was talking to partners about a sale but added that talking about Tracinda was "speculation".
On Wednesday, chief executive Dieter Zetsche had said the firm was talking to "some of the potential partners who have shown a clear interest" in Chrysler.
The moves come after Chrysler saw a $1.5bn (£776m) loss last year, strengthening calls on the firm's German bosses to sell Chrysler.
The world's biggest carmaker, General Motors, and Canadian engineering firm Magna International have been linked with possible bid moves for the Detroit-based firm.
Like US rivals such as Ford, Chrysler has struggled with rising fuel prices and a shift from gas-guzzling sports utility vehicles and trucks to smaller, more fuel-efficient cars.
In a bid to revitalise the firm, DaimlerChrysler revealed plans to cut 13,000 US jobs and close two factories in February .
Analyst Himanshu Patel said if the UAW backed Tracinda's bid it could have "positive ramifications for GM and Ford", and could signal the union's willingness to negotiate solutions to healthcare costs at pending contract renewal talks.
Tracinda's strong interest in the automotive industry is far from new.
Kirk Kerkorian failed to reach agreement with GM
"Having been a major shareholder for over a decade we are very familiar with both Chrysler and the automotive industry," said the investment firm.
The letter from Tracinda added that "a private ownership approach is in the best interests of all Chrysler constituencies."
Last year Mr Kerkorian urged for an alliance between GM, Nissan and Renault, but after lengthy talks collapsed, the plans came to nothing.
DaimlerChrysler shares ended 4.7% higher at $84.80. General Motors also benefited from the news, seeing its shares close 2.8% up at $31.90.