A merger of General Motors Corp. and Chrysler LLC would land a heavy economic blow on Michigan, a state already battered by waves of home foreclosures and the loss of tens of thousands of auto-industry jobs over the last few years.

GM is negotiating a potential deal with Chrysler's majority owner, Cerberus Capital Management LP, hoping it can reap billions of dollars in cost savings by shutting down overlapping operations. Analysts estimate more than half of Chrysler's 66,000 employees would lose their jobs in a merger. Thousands more would be affected at GM and at suppliers and service companies that rely on work with Chrysler.

While GM and Cerberus have accelerated the talks in the past week, securing the financing for a deal remains a major hurdle and it is far from certain that a merger will come to pass. Still, Motor City and the entire state have little choice but to think ahead about the possible ripple effects.

Michigan has borne the brunt of the auto industry's massive payroll cuts. Since 2005, GM, Chrysler and Ford Motor Co. have cut more than 100,000 jobs across the U.S., pushing the Detroit area into one of the highest foreclosure rates in the country. The economy has turned so dire that the U.S. State Department recently cut back on the placement of Iraqi refugees in Michigan.

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