The rumor has been taking shape in recent weeks, and in Barcelona it emerged that the Austrian company Avl might also get involved to help Honda finally end its reliability and performance crisis.
Mercedes chief Toto Wolff, however, is not confirming the rumblings.
"Honda is a large and prestigious company," he told Spain's El Mundo Deportivo.
"They're in a difficult situation now but I'm sure they will find a way out and do not need our help."
But amid the rumblings, there are already signs that some of Mercedes and Honda's rivals are not happy with the plan.
Renault-powered Red Bull's Dr Helmut Marko said: "I don't know if it's true, but I don't think it's a good idea.
"There are already very strict rules about cooperation with regards to the chassis."
And amid a sea of 'no comments' elsewhere, Bob Fernley admitted that as Force India's deputy boss, he would not be happy if Mercedes started working with Honda.
"As a team that's not only paid for its (Mercedes) engines but contributed to the development of them, I would certainly be very negative towards sharing that technology with another team that is a competitor of ours," he said.
05/14/17 (GMM) Niki Lauda has hit back at claims Mercedes is set to bail out its struggling F1 engine rival Honda.
In Barcelona, rumors are swirling that Mercedes will either help Honda to develop its uncompetitive and unreliable power unit, equip McLaren with customer engines, or both.
McLaren and Mercedes team figures were seen meeting in the Mercedes motor home for 45 minutes earlier in Barcelona.
But Mercedes team chairman Lauda told Salzburger Nachrichten newspaper: "It's all nonsense. Why should we help Honda when we have our own car?"
Indeed, the great Austrian tipped Honda to improve on its own.
"There are skilled engineers at Honda, as they show in MotoGP, which is also a state of the art engine," he said.
|Honda F1 engine – why did Renault struggle so much with the current engine formula, and now Honda? Does it really need to be so complicated?|
04/26/17 (GMM) F1 could be set to help Honda emerge from its three-year struggle for reliability and performance.
According to Spain's El Confidencial, the plan could be spearheaded by new F1 owner Liberty Media, aware that Honda's troubles are not a good advertisement for other manufacturers interested in entering the sport.
"It is so serious that some rivals even seem willing to help," the report claimed.
Indeed, there are reports in both the Spanish and British press that Mercedes, having dominated F1 in the 'power unit' era to date, could support Honda's desperate push to improve.
"We are in a competitive world," said McLaren boss Eric Boullier, "and I know a lot of people who do not want us to be there."
McLaren, meanwhile, declined to comment on speculation that former F1 engine guru Mario Illien is now actively working with Honda.
But Honda's Yusuke Hasegawa said: "We are doing everything we can. We are using external sources and have been changing our organisation since the beginning of March."
The first fruits will reportedly be seen this weekend in Russia, following a much more reliable showing for Honda's troubled V6 power unit in the post-Bahrain test.
Germany's Auto Bild reports that the centerpiece of the Sochi upgrade is a new MGU-H unit.
And it is expected that a customer engine deal for Sauber will be announced for 2018 in the coming days.
"We are still behind our rivals," said a Honda spokesman, "but we are going in the right direction."