Volkswagen plans to buy the German sports car company Porsche in stages while retaining the latter's independence.
The biggest carmaker in Europe says its board will hold talks with Porsche "in order to reach a final concept fulfilling this goal".
Both companies earlier said they wanted to form an integrated automotive group.
Porsche has a 51% holding in VW and had hoped to build this to 75%, but the financial crisis and the slump in the global automotive sector put paid to its efforts, which in the end saddled the sports car company with huge debts.
According to Christian Wulff, governor of Lower Saxony, the German state that owns a large stake in VW, the two companies aim to complete the merger by the middle of 2011. Details would be laid out in principle on 13 August.
Porsche will effectively become the 10th brand under the VW umbrella.
Earlier on Thursday, Porsche said it would increase its capital by at least 5 billion euros ($US7.10 billion).
The Gulf state of Qatar is also to buy a 17% stake in VW. Qatar will be the third largest investor in the company.