Saab will initially purchase BMW engines for the 9-3 model that is scheduled for release in late 2012, said the person, who asked not to be identified before a contract is signed. The carmakers plan to sign and announce the pact in Trollhattan, Sweden, on Wednesday, the person said.

The automakers are also in talks about Saab buying diesel engines from BMW, as well as using BMW's Mini Countryman platform for its smaller 9-2 entry-premium car, the person said.

Saab owner Spyker Cars NV issued a statement Monday that said that the company "has noted recent press speculation about the possible supply relationship with BMW. The Group confirms that talks are ongoing and will give further details once a final agreement has been reached."

Saab said it will make an announcement on Wednesday and will hold a press conference in Sweden.

A BMW spokesman said: "We are in talks with other manufacturers every now and then about a number of topics, on which we currently cannot provide any details. On Wednesday Saab is organizing a conference in Sweden. We can only refer you to that conference."

Saab Chairman Victor Muller has said he would like the company to build the 9-2 model, which is inspired by the tear-drop shaped Saab 92 model that was in production between 1949 and 1956. Saab would like to launch the 9-2 by 2014,

Muller has said he needs an industrial partner or another investor to help fund development. On Monday, Muller would not comment on reports of the BMW tie-up.

Muller's Dutch-based luxury car maker Spyker closed the deal to buy Saab from General Motors Co. in February. Reviving the Saab model lineup is key to Muller's $1 billion recovery plan for Saab.

Saab's upgraded 9-3 will be the first model designed by Jason Castriota, the U.S. designer known for creating the Ferrari P4/5 and Maserati GranTurismo.

Saab has said it aims to sell 60,000 to 70,000 units of the new 9-3 a year, out of total sales of 120,000 cars, by 2012.

BMW CEO Norbert Reithofer has been looking for opportunities to sell components to other manufacturers to boost revenue. BMW agreed in March to supply more than 240,000 six-cylinder diesel engines, cooling systems, and transmissions to Carbon Motors Corp., which is developing a police car for U.S. law enforcement agencies. BMW also supplies engines to exotic car manufacturer Wiessmann GmbH.