Shares of Ford Motor Co. (F) and General Motors Corp. (GM) posted gains yesterday (Tuesday) on speculation that consolidation in the U.S. domestic auto industry could be the struggling sector’s saving grace.

Over the last three trading sessions, Ford shares are up almost 18%, while GM shares are up over 37% on reports of possible merger talks and asset sales.

Both stocks have been hammered year-to-date, with Ford shares having plunged over 63% and GM shares down a staggering 74%. Declining sales have seen the automakers’ stocks touch lows not seen in decades.

Waning U.S. consumer spending and high oil prices have hit domestic automakers that have long relied on large trucks and sport-utility vehicles (SUVs) as the cornerstones of their product offerings. U.S. firms have been slower than their foreign counterparts, such as Toyota Motor Corp. (ADR: TM), in adopting the now popular fuel-efficient hybrids and smaller car models.

But both GM and Ford have said that bankruptcy is not an option they will consider. The automakers are aggressively pursuing two different paths to try to return to profitability. While GM seeks out a potential merger, Ford is selling off assets.

GM and Chrysler in Talks: WSJ

The Wall Street Journal reported over the weekend that GM has had talks with private-equity firm Cerberus Capital Management LP over a possible sale of the hedge fund firm’s 80.1% stake in Chrysler LLC. In addition to its marquee Chrysler brand, the automaker produces the Dodge and Jeep lines.

However, Chrysler is the weakest of Detroit’s “Big Three” and its line of Dodge Ram pick-ups and Jeep SUVs have been poor sellers in the current economic environment, which casts doubt on the validity of that report.

“Ford and even GM have been trying to shed unprofitable brands, so why would CEO Rick Wagoner go out and purchase brands that are struggling?” David Silver, an analyst at Wall Street Strategies Inc. (OTC: WSSSQ), told MarketWatch.