Chrysler and Fiat are reportedly devising plans to produce the Fiat 500 at a Chrysler plant in Mexico.

The Wall Street Journal, citing people familiar with the matter, said that Chrysler is also looking at making a small Fiat engine for the 500 at a Chrysler plant in Trenton, Michigan.

It is also possible that a Fiat-derived compact car slightly larger than the 500 could be developed for the US market, the WSJ report said.

The Dow Jones report noted that adding production in Mexico could be politically sensitive for Chrysler at a time when plants are being shuttered in the US.

However, analysts say that relatively low-cost production in Mexico is particularly attractive for small cars with small profit margins.