A spokesperson of the Swedish carmaker has confirmed that the two companies are currently conducting negotiations and might join forces to design a brand-new internal combustion engine model soon.
The rumors that Mercedes wanted to sell Volvo its drivetrain tech have been circulating for a few years. The final decision has not yet been reached. In the spring of 2018, one of the top managers of Daimler AG said the company was wrapping up its ICE R&D branch and re-focusing on electrified and all-electric systems instead.
As for Volvo, the Swedish marque stopped designing new engines even earlier, preferring instead to focus on converting most of its range to hybrid power and gradually strengthening the electric component.