From my branding standpoint, the benefits of a merger between two of the big three automakers is potentially huge. While both GM and Chrysler have been hemorrhaging money, the opportunity to pare their respective brand portfolios along with the development costs of vehicles, engines and alternative-fuel technologies might give the merged company real market traction.
My recommendation would be to drastically prune the combined brand portfolio on both sides of the house. Pick no more than 5 brands (Jeep Chevrolet, Dodge, Cadillac and maybe Saturn) and toss the rest including Chrysler, Pontiac and Buick. In other words, get rid of whatever components they don't need. It hasn't been easy to watch these iconic brands lose their way, but it's been easy to see why they have. With fewer brands to focus on the company will have a better chance to compete on the global stage with Toyota, Honda, and BMW.
On top of that, a lean mean auto company might also benefit from a " Made in America" branding spin in the short term. And wouldn't that be nice? But I believe if these two companies focus on where they went off the track and make some hard choices now it might be possible to put an American car back in a leading-brand driver seat.