By Michael Wei and Bernie Woodall

BEIJING/DETROIT (Reuters) - Ford Motor Co <F.N> said on Wednesday it is nearing an agreement to sell its Volvo Swedish cars unit to China's Geely in a deal that underscores China's arrival as a major force in the global auto industry.

The deal, which Ford said it expects to sign in the first quarter and close in the second quarter of 2010, would be the largest acquisition of an auto brand by a Chinese company.

It comes at the end of a year that has seen China overtake the United States as the world's biggest auto market in a reversal of fortune that would have been unthinkable only a few years ago.

Traditional Ford rival General Motors Co <GM.UL>, meanwhile, is moving to abandon its own Swedish brand, Saab, after selling some assets to another Chinese automaker, Beijing Automotive Industry Holding Corp or BAIC, for $200 million.

Geely Automobile Holdings Ltd is China's largest private automaker. Its charismatic founder, Li Shu Fu, sometimes likened to Henry Ford, has shown global ambitions for Geely, which means "lucky" in Chinese.

As U.S. automakers have faced deepening distress over the past two years, Chinese automakers have had preliminary talks about buying a range of assets, but those deals have been small in scope and difficult to close until now.

SIGNAL TO CHINESE GOVERNMENT

Dearborn, Michigan-based Ford Motor said it had agreed on all substantial terms in a deal to sell Volvo to China's Zhejiang Geely Holding Group, parent of Geely Auto.

The unusual update on negotiations from Ford and Geely was seen as a signal to China's government, which must approve the sale. Such approval is needed for Geely to be able to borrow $1 billion or more from Chinese banks.

"While some work still remains to be completed before signing ... Ford and Geely anticipate that a definitive sale agreement will be signed in the first quarter of 2010," Ford said in a statement on Wednesday.

The value of the deal has been estimated at $1.8 billion -- far short of the $6.45 billion Ford paid for Volvo in 1999.

But for Ford, closing the sale would give it cash at a time when it is looking to repay debt faster, as the No. 2 U.S. automaker strives to return to profitability by 2011.

Should Ford close on Volvo's sale as expected, it will have succeeded in divesting all three of its luxury brands. It sold Jaguar and Land Rover to India's Tata Motors Ltd <TAMO.BO> in 2008 and sold British-based Aston Martin in 2007.