Detroit could suffer another significant blow if the merger of Chrysler and General Motors becomes a reality, sources told the Detroit Free Press.

The newspaper reported Sunday that sources familiar with the discussions predict major job cuts at Detroit-area plants as duplicated operations are eliminated should the deal materialize.

GM has launched talks with Cerberus Capital Management, the private equity firm that owns Chrysler and a major stake in GM's finance corporation, GMAC, about a deal that would conceivably turn the auto industry's Big Three into a Big Two.

Sources told the Free Press that while the deal is a long way from reality, it makes economic sense from a business standpoint.

"I think you've got to look at those things when you're in their situation," said reorganization expert Van Conway of Conway MacKenzie & Dunleavy. "I think you could find, after the integration, billions of dollars of cost savings."

On the other hand, some analysts don't see a melding of the two companies as a positive development.

"What you end up with in the end is just a big struggling automaker," said Crowe Horwath's Eric Merkle.