Combining General Motors Corp. and Chrysler LLC, a proposed union in doubt today with reports that aid talks involving the U.S. Treasury are suspended, could threaten iconic brands such as Hemi and Cummins.

Negotiations between GM, Chrysler parent Cerberus Capital Management LP and the Treasury reportedly broke off over the prospect a government-funded assistance package could facilitate thousands of job losses. Industry analysts and observers peg the fallout between 25,000 and 200,000 jobs.

Meanwhile, the potential implications of a tie-up involving GM and Chrysler run deep. Should GM succeed in acquiring Chrysler, it’s likely the Hemi V-8 – one of the auto industry most romanticized and lucrative engine brands – could return to hibernation.

“GM has very good V-8s of their own,” says Jim Hossack, vice president of auto industry consultancy AutoPacific Inc. “What are you going to do? Go to your own employees, your own (United Auto Workers union) workers here in the U.S. and say, ‘Guess what? We’re going to pay you to go home? I’m going to buy these Chrysler engines from Mexico?’

“There would be a strike, probably within the hour, from which you would never recover.”

The Hemi’s survival likely would hinge on GM retaining the Dodge brand, and Hossack is not optimistic. “One of GM’s biggest problems is they’ve got too many brands.”

Chrysler’s revival of the Hemi name in 2002 was “a brilliant move,” Hossack says, citing its sourcing from the auto maker’s cost-effective plant in Saltillo, Mexico.

“Somebody at Chrysler should have (received) a bonus for that program,” Hossack tells Ward’s.

Then there are Chrysler’s obligations to Nissan Motor Co. Ltd. By virtue of a contract-assembly agreement that also involves technology sharing, the next-generation Nissan Titan fullsize pickup will be based on a Dodge Ram platform, and expectations are the Titan also would benefit from the Hemi.

The auto makers decline comment on the future of their relationship if GM were to assume control of Chrysler.

The Cummins name also could witness a departure from the light-vehicle market.

Cummins Inc. supplies engines and engine components to customers around the world and Friday demonstrated its robust financial health by reporting record third-quarter sales and profits. But the popular I-6 turbodiesel it supplies to Chrysler for Dodge heavy-duty pickups and a second engine program scheduled to benefit the light-duty Ram next year could be trumped by GM’s solid Duramax-brand diesel engines the auto maker manufactures in-house.

“They’re not going to shut down their own plants to buy engines from somebody else,” Hossack says.

During an earnings teleconference today, senior Cummins executives give terse one-word confirmation that a second diesel on tap for a Chrysler light-duty program remains on track.

“Until something happens with Chrysler, if and when, we’re not going to speculate,” adds spokesman Mark Land. “We’re going under the assumption that our plans are what they have been.”

John Wolkonowicz, an analyst at IHS Global Insight, says the future of the Hemi and Cummins names depends greatly on how long GM would choose to retain the Dodge brand.

“If GM acquires Chrysler, it will need to hold onto the Chrysler brands to keep the dealers happy,” Wolkonowicz says.

GM could keep the Dodge brand with its popular engine names as a means to differentiate it from other divisions, Wolkonowicz adds. But he thinks a more likely scenario involves selling the Chrysler units or integrating them into GM as part of a government-backed dismantling.

“Chrysler has to go away. Nobody wants to say it, but that’s what must happen,” he says. “The government will essentially pay GM to conduct an orderly winding down of Chrysler.

“There’s no solution that won’t contain hurt and harm,” he adds. “So it’s about finding the solution with the least hurt and harm.”

Meanwhile, government aid appears held up over concerns of job losses, a source in Washington tells Ward’s.

The source says negotiations have covered a number of closely linked options, such as expeditiously releasing a chunk of the $25 billion direct loan package from the Energy Dept. to GM, which would allow the auto maker to divert spending from advanced propulsion to its war chest, or providing a liquidity stimulus through the Treasury’s $700 billion Emergency Economic Stabilization Act.

But concerns were high over what could be construed in some circles as funding job losses, the source says, despite an urgency on both sides to get a deal done before Tuesday’s national election and a turnover in the administration.

“The inappropriate link is assistance to provide for a merger,” the source says, noting that discussions have been held with each of the Detroit Three. “The goal is to provide for their survival.”

A report released by the financial consulting firm Grant Thornton LLP estimates a takeover of Chrysler from GM would result in the elimination of 30,000 to 40,000 of Chrysler’s 67,000 jobs. The cuts would come through eliminating overlapping positions, as well as the closure of up to seven of Chrysler 14 plants, including three facilities already slated to shutter or for sale, the firm says.

Grant Thornton estimates GM possibly would retain seven of Chrysler’s 26 models. The seven comprise 56.0% of Chrysler sales and include vehicles such as the Ram, Chrysler Town & Country and Dodge Grand Caravan minivans, Dodge Charger fullsize sedan, Dodge Caliber compact sedan, Jeep Grand Cherokee midsize SUV and Jeep Wrangler compact SUV.

Grant Thornton Principal Kimberly Davis Rodriguez tells Ward’s GM would need about $10 billion in cash – either from the government, existing stakeholders “doubling down to protect their initial investment,” or combination of the two – to finance an absorption of Chrysler.

“There’s not a lot available in new financing to the automotive markets right now,” she says. “(Capital) has got to come from those people with something at risk in the transaction.”

Cerberus desperately wants to offload the 83-year-old Chrysler it bought from Daimler AG just 17 months ago, though it hopes to retain an equity stake in the new enterprise. Meanwhile, GM needs the estimated $11 billion of cash Chrysler currently sits on to help buy its way to 2010, when gains from a new labor contract kick in, U.S. sales begin an anticipated rebound and the company’s financial health improves.

Chrysler Chairman and CEO Robert Nardelli told Ward’s earlier this week he hopes Washington fathoms the auto industry’s role as an economic pillar in the U.S.

“I’m hopeful that they understand the severity,” he says. “You’ve got housing and you’ve got auto, in that order.”

But should government assistance play a role in GM’s acquisition of Chrysler, Ford Motor Co. tells Ward’s it wants its share, as well.

“We have ongoing dialogue with policymakers and the powers-that-be to make sure they understand not only the challenges facing the industry, but the challenges facing us, and that there’s a degree of parity,” says Mark Fields, Ford president-The Americas.

“We want to make sure we continue that ongoing dialogue and make sure whatever happens there’s a degree of parity,” he says.

–with Byron Pope and Christie Schweinsberg