Nissan and Mitsubishi may jointly develop a small city car.

A spokesman for Nissan told the Northern Business Daily: "Nissan is open to business opportunities and related partnerships from any company that would create a win-win situation for both companies.

We have been in discussions with Mitsubishi along those lines." He added it was too early to speculate on the outcome of such discussions.

In November Mitsubishi reported it had lost £1.5bn in the third quarter of this year. As a result alliance partner DaimlerChrysler decided not to invest further in Mitsubishi’s recovery plan, having acquired a 37% stake in the firm.

Mitsubishi already has a co-operative agreement with Nissan concerning automatic transmissions and a Mitsubishi van supplied to Nissan for Japanese distribution.