These are tough times for Detroit, America’s auto Mecca. Two American icons and carmakers General Motors and Chrysler have recently started to explore the possibility of a merger in response to the strong losses both firms have suffered in recent years due to the popularity of Japanese cars in America and the decline of the SUV with the increase in oil.

General Motors was once the nation’s largest employer, but recently the firms stocks hit a 50 year low. The company is losing $1 billion cash every singly month. As for Chrysler, due to the firm being a private company, it does not have to release financial reports but it is expected that Chrysler has also been losing a lot of money. Although both carmakers are in the process of revamping there business models in order to once again regain profitability, the recent economic crisis in the United States and the tightening of credit does not bode well for car sales.

Talks between both companies began a month ago and could change Detroit from being the city of the Big Three to the Big Two. Though as of yet talks are not conclusive and The New York Times quoted two persons close to the talks who said that chances are still 50-50.

This is not the first time that General Motors has sought a merger. Previously the company turned down a deal for one with Japan’s Nissan and France’s Renault. The advantage to a merger for both firms would be their ability to combine production lines, car dealers (those less operating costs for sellers) and new auto technology; allowing both firms to cut costs across the board. Something both have been doing, wherever possible, frantically.