Chrysler and Chery Automobile have signed a letter of intent that should soon see some US Chrysler group dealers selling a new small car to compete with the likes of the Toyota Yaris and Honda Fit.

The deal is however subject to both Chinese government and DaimlerChrysler supervisory board approval.

The brand name under which the new car would be sold has not yet been announced but US industry pundits say Dodge is most likely.

Chrysler has previously looked overseas for small cars for the US. In the 1970s it imported the English Hillman Avenger as the Plymouth Cricket and subsequently rebadged partner Mitsubishi’s Colt/Mirage line for US sale under various nameplates.