Sources familiar with the negotiations say the talks still are in early stages, and many combinations are being considered. Analysts say a deal along the lines of Chrysler's purchase of AMC, which eliminated Detroit's No. 4 automaker as an entity and all its brands except Jeep, would make sense for GM. Such a deal would differ from the 1998 acquisition of Chrysler by Germany's Daimler-Benz AG, which left the U.S. carmaker operating intact as a separate division. Instead, Chrysler would be completely absorbed into GM and melded into its car making and other operations over time. 'That would be the likely scenario, if such a thing were to happen,' said Aaron Bragman, an analyst at Global Insight. Besides the Jeep brand and Chrysler's minivans, the company has few assets of value to its bigger rival, he said. 'For GM, the only reason to absorb Chrysler would be to eliminate a competitor,' he said. Many industry experts believe GM's interest in Chrysler, both now and in 2007, when DaimlerChrysler AG put the American unit up for sale, reflected its goal to reduce the excess capacity in the U.S. auto industry that has hurt all of Detroit's carmakers. 'The others (automakers) will be delighted to have Chrysler just die and take 1.5 million units out of the industry, which is about what the excess is,' said Gerald Meyers, former chairman of AMC and now a professor at the University of Michigan. Such a deal would surely worsen Michigan's economic woes, eliminating thousands more auto jobs in Metro Detroit, canceling contracts with suppliers and prompting more plant closures. The source familiar with the negotiations told The Detroit News that GM could cut costs by eliminating much of Chrysler's staff and gradually shifting production of Chrysler vehicles to use more GM components. Lincoln Merrihew, an analyst with TNS Automotive in Boston, said he didn't see the Dodge or Chrysler brands surviving if such a deal were concluded. 'In the situation the Big Three face, you're looking for hard-core, quick economies of scale,' he said. At Chrysler's Auburn Hills headquarters, morale is bleak as employees fear huge job losses in any GM deal, while the top bosses installed by Cerberus are expected to leave with fortunes. GM, struggling with huge losses and a liquidity squeeze, might use Chrysler's cash -- $11.7billion at the end of June -- to close Chrysler dealers and some of its businesses, as well as shore up GM's finances, analysts say. Sources close to the negotiations say Chrysler might survive -- or at least fare better -- in a three-way deal with the Renault-Nissan alliance. But it is unclear whether the French-Japanese partnership still is interested in Chrysler. Renault SA is in debt, and executives are studying whether Nissan Motor Co. has enough cash to comfortably afford a deal in this difficult economic environment. Carlos Ghosn, the CEO of Renault and Nissan, is said to have been more inclined to do a deal with Cerberus a few months ago. At GM, many top executives support acquiring Chrysler, but only in a deal like Chrysler's acquisition of AMC from Renault. Renault agreed in 1987 to sell its 46.1 percent stake in AMC, and AMC's board sold the remainder to Chrysler in a $1.2 billion deal, the biggest merger in the U.S. auto industry at the time. Chrysler ended all of AMC's car lines, keeping only the Jeep brand. In their discussions, GM and Cerberus also have looked at their shared ownership of GMAC Financial Services since 2006, when GM sold 51 percent to Cerberus. Cerberus wants to acquire the rest, but GM wants GMAC focused on its auto sales business. This week, after GMAC's announcement that it would consider auto loans only for customers with high credit ratings many wondered whether Cerberus was putting pressure on GM. At Cerberus, officials deny any ulterior motive. GMAC spokeswoman Gina Proia said the decision to increase credit requirements was a result 'of the current market environment that has reduced access to funds and increased the cost of funds.' Robert Snell contributed. You can reach Christine Tierney at ctierneydteom.