The New York Times is reporting that GM and Chrysler are talking merger:

Breaking News Alert
The New York Times
Friday, October 10, 2008 — 10:06 PM ET

G.M. and Chrysler Explore Merger

General Motors is in preliminary talks about a possible
merger with Chrysler, a deal that could drastically remake
the landscape of the auto industry by reducing the Big Three
of Detroit automakers to the Big Two.

The talks between G.M. and Cerberus Capital Management, the
private equity firm that owns Chrysler, began more than a
month ago, and the negotiations are not certain to produce a
deal. Two people close to the process said the chances of a
merger were “50-50” as of Friday and would most likely still
take weeks to work out.