Merger talks between General Motors and Chrysler are progressing, with some sources indicating that Detroit's Big Two may be a reality by the end of October.   But while the press seems to be arriving at a consensus that a merger is coming, there is little agreement on who is driving the deal or what its impact could be.  Most analysts believe that the deal under consideration would give GM complete control of all of Chrysler's automotive operations, and give Chrysler's current owner, Cerberus Capital Management, complete control of all of both companies' financing arms.  In effect, GM would emerge as an automaker, while Cerberus would emerge as the automotive industry's dominant lender.

The AFP reports, "U.S. automakers General Motors and Chrysler aim to finalize their merger agreement within the next two weeks, or before the November 4 presidential election." 

The two companies, USA Today adds, "are lobbying for government financial assistance to help clinch the deal, says a source who has been briefed on the talks.  They are pointing to the impact on the U.S. economy if either company were to fail, compared with the viability of a merged colossus that would control 36% of the U.S. auto market. Those are the chief selling points in asking for government help, says the source, who did not want to be identified because talks are not public."

The prospect of a merger has many frightened.  The AP reports that, in a "doomsday scenario" causing anxiety in Detroit, "General Motors Corp. makes a deal for Chrysler LLC, keeps Jeep and the minivans, and vaporizes the rest of the company," causing "tens of thousands of Chrysler's 66,409 employees [to] lose their jobs as cash-desperate GM swiftly cuts redundant operations and sheds unprofitable models. Factories and dealerships are closed, and the lights go out at Chrysler's gleaming corporate headquarters campus in the northern suburb of Auburn Hills" 

On the other hand, Business Week argues, "the rewards" of a potential merger "are huge."  Negotiators are said to believe that "if the two lenders and two automakers are combined, all would have better balance sheets. Then they can weather the storm and get to 2010, when executives on both sides think a new health-care deal with the United Auto Workers will save money, and auto sales will rebound from today's dismal levels. " 

Many believe General Motors is driving the deal, with that goal in mind.  The AP notes, "In August, Chrysler said it had accumulated $11.7 billion in cash and marketable securities as of June 30. That figure remains around $11 billion" today. "Detroit-based GM is burning up more than $1 billion per month, with several analysts predicting it will reach its minimum operating cash level of $14 billion sometime next year...Chrysler's money pile would help solve GM's cash problem if credit remains unavailable."

But Autoblog's John McElroy thinks the press may be looking at the entire deal backwards.  "Cerberus is in the driver's seat," he writes, "And it has the power to force Chrysler down GM's throat."  Cerberus currently owns 51% of GMAC.  Last week, GMAC announced that it would no longer lend to anyone with a credit score under 700 - "which effectively wipes out the vast majority of GM car buyers."  GMAC has also tightened its lending standards to dealers.   Most dealers don't buy cars from automakers with cash and then sell them.  Instead, they finance the cars they sell and use the proceeds from the sale of a car to pay off their own loan for that car, pocketing the difference.  "If GM's customers can't buy cars, and if GM dealers can't buy them either, then GM does not run out of cash in the first quarter of 2010. It runs out of cash before Christmas," he comments.

He may be on to something. Last week, GM began paying its own dealers not to sell cars through GMAC - as though trying to cut off Cerberus' move to squeeze GM.  What if we're all reading this wrong, McElroy wonders, and the merger is part of a Cerberus plan to "force GM to take [Chrysler], whether it wants to or not?"

Regardless, the outlook for car shoppers is probably negative.  Kicking Tires comments, "Mergers are good for companies and stockholders because they eliminate competitors. The auto industry has too much capacity and too many companies looking for buyers, but that's a good thing for you. It keeps prices low and gives you the greatest choice."

A merger might merely eliminate Chrysler, reducing competition for your car buying dollar somewhat.  It might also hasten the end of GM by making it more unwieldy in the marketplace - further reducing competition for your business.

There may not be a better moment to buy, however, than this one.  There are still three struggling U.S. automakers, and even more foreign makes, competing for your business with heavy incentives.  Research the best car deals for October with U.S. News' car rankings and reviews.