Ford hopes to conclude the sale of Jaguar and Land Rover by early next year, the carmaker said as it reported a narrowing in third quarter losses yesterday .
A shortlist of three bidders has been drawn up by the Detroit firm, which is now looking to take the sale to the next stage.
Rival Indian industrial conglomerates Tata and Mahindra & Mahindra are thought to have won through to the final stage along with One Equity Partners, the private equity arm of American bank JP Morgan which is led by former Ford chief Jac Nasser.
Although Ford would not be drawn on the identity of the bidders yesterday, it said the sale of the two brands - which together employ 15,000 people in the Midlands - was making good progress.
Chief executive Alan Mulally said: "The company continues to explore in greater detail the potential sale of Jaguar and Land Rover with interested parties and anticipates these discussions will culminate in an agreement no later than early next year."
Price is not thought to be the primary consideration for Ford, which is keen to protect its corporate image in the UK.
The update came as Ford posted a narrower quarterly loss of $380 million US (£181.3 million), compared with $5.2 billion (£2.49 billion) loss a year earlier.
The results beat Wall Street expectations, although it was worse than the $750 million (£359.6 million) profit Ford reported for its second quarter, its first profitable quarter in two years.
The turnaround included a small profit at the combined Jaguar and Land Rover operation, with the year-on-year improvement at the luxury brands aided by cost reductions and the non-recurrence of one-off items from the previous year.
The Premier Automotive Group (PAG), of which Jaguar and Land Rover are part, narrowed its losses from $508 million (£243.5 million) to $97 million (£46.5 million), although the performance was dragged down by losses at Volvo.
The quarter saw the best ever sales figures for Land Rover, Ford said, helping PAG improve sales from $6.5 billion (£3.11 billion)
to $7.4 billion (£3.54 billion). Higher sales volumes and prices partially offset the effect of the continued weakening of the US dollar against European currencies.
Mr Mulally said the company was confident of reaching its target of being profitable by 2009. But reports that the size of a pension deficit meant that Ford was likely to have to pay any buyer to take the brands were denied by the company yesterday.
The deficit in the Jaguar fund has narrowed from £298 million in 2005 to £150 million in 2006, while the Land Rover pension scheme has seen its shortfall reduce from £135 million to £49 million.
The performance of both funds is thought to have improved further this year.
A Ford spokesman said: "The Jaguar and Land Rover pension funds are maintained separately, but both are healthy and performing well."
Ford is also conducting a strategic review of Volvo in order to improve the brand's financial performance. But Mr Mulally said Ford was likely to hang on to the Swedish car maker, while concentrating on improving costs.
"The most important thing we can do is improve the cost structure, but they have great products for the future.
"Our plan is not to sell it, but to focus on improving the cost structure and positioning of the brand itself."
Ford bought Jaguar in 1989 for £1.6 billion and paid £1.7 billion for Land Rover in 2000. It sold another iconic PAG marque, Aston Martin, for £450 million in March. It is looking to sell the brands after it posted losses of $12.7 billion (£6.08 billion) last year - the largest deficit in its 103-year history.
Jaguar employs more than 8,000 staff in the UK, at sites in Allesley and Whitley in Coventry, Castle Vale in Birmingham and Hale-wood, Liverpool.
Land Rover has the bulk of its manufacturing sites at Lode Lane in Solihull and Halewood near Liverpool.