A source familiar with the situation said the automakers, which already are working on other joint product plans, had discussed expanding their collaboration to midsize cars, but it was not clear if those discussions were continuing.

Earlier this year, the automakers struck a pact that calls for Chrysler to produce a full-size truck for Nissan in exchange for the Japanese automaker making a subcompact car for the U.S. company's dealers to sell.

With its sales down 23 percent this year, Chrysler is desperate to have a competitive vehicle in the midsize segment, where its competitors are seeing double-digit growth.

Partnering with Nissan on a midsize car would mean a foreign platform would have a significant stake in Chrysler's lineup. Chrysler does not offer a subcompact car; it has produced midsize sedans for much of its 83-year history.

That lack of small car offerings contributed Thursday to a downgrade of Chrysler's corporate debt further into junk status by Moody's Investors Service.

Without any announced small cars in its pipeline through 2009, Chrysler's operating cash flow likely will remain negative, Moody's said.

'Down the road, Chrysler could become a company that produces trucks and minivans and then largely sells others' cars,' said Aaron Bragman, auto analyst at Global Insight Inc.

Sharing costs with Nissan could allow Chrysler to keep pace on comfort, quality and other attributes that consumers demand, Bragman said.

With no known plans for a Dodge Caliber replacement, it's possible Chrysler could turn to Nissan or a Chinese or European partner in the compact segment as well, Bragman said.

The only new car products Chrysler has publicly announced it will soon introduce are replacements for the full-size Dodge Charger and Chrysler 300 sedans.

Chrysler responds to needs

Chrysler Chairman and CEO Bob Nardelli has pointed to Chrysler's Project D as an example of how the automaker is quickly responding to customers' needs.

But in a sign the plan for midsize sedans may be changing, workers at the automaker's Belvidere, Ill., plant said recently their factory is destined for production of the midsize Avenger, now built in Sterling Heights. Belvidere produces a trio of compact vehicles, including the Caliber.

The Caliber and the midsize sedans share some of the same underpinnings, so it's possible that Chrysler could make the Dodge midsize sedan alongside the Caliber and tap Nissan's Altima platform for a more upscale offering in its lineup, said Stephanie Brinley, analyst with AutoPacific Inc.

'The plant should be flexible enough to handle both cars... or Chrysler may move forward with just one midsize model,' she said. 'They are likely looking at all their options at this point.'

Sales of the Sebring sedan are down 31 percent this year; the Avenger posted a 2 percent increase through July.

Others in the segment such as the Chevrolet Malibu, Nissan Altima and Honda Accord have posted double-digit sales increases this year.

Chrysler's private owner, Cerberus Capital Management LP, won't hesitate to pursue money-saving options that could bring products to showrooms quickly, Brinley said.

'As industry outsiders, they're willing to explore more options.'