Ford and GM sittin' in a tree
One plus one, with you two, ain't three .

--Potential playground taunt

In what could have been the biggest hookup since peas and carrots, car-industry stalwart Automotive News reported today that Ford (NYSE:F) and GM (NYSE:GM) were considering, at least a few weeks back, a hookup of mammoth proportions.

The ripple-effect headlines today make it seem like this deal is still on the table. Both firms are refusing to comment on the speculation, but Automotive News' reporting makes it seem pretty clear that any discussion along these lines is already done. Seems this was just a summer fling. (Cue soundtrack from Grease.)

As an investor, I can see why the big two let this deal die. A hookup between them would offer enormous scale, but what else? Size has not been the problem for either. Utilizing size as efficiently as Honda (NYSE:HMC) and Toyota (NYSE:TM) have -- that's been the problem. (That, and losing market share to newcomers from Korea. ... Oh, and having profitability tied to behemoth SUVs precisely during a period of spiking fuel prices .)

In retrospect, despite the headlines devoted to difficult union negotations, rectifying those problems may turn out to be the easiest of problems to fix. Ditto plant closings and other attempts to slim down.

Both companies face long odds on a more fundamental level. Recently, I came across an interesting article on parts sourcing that made clear the scope of the transformation necessary at American carmakers. According to the piece, GM uses on the order of 10 separate seat frames. Across Toyota's entire product line, there were three. That sort of lean manufacturing gives Toyota enormous advantages in terms of sourcing, inventory control, and engineering.

Can GM and Ford move toward similar, streamlined models? Sure, but not very quickly, and not without some major costs for redesign. There's still a ton of work to be done, which is why it was no surprise to me when Bill Ford stepped aside and let a Boeing (NYSE:BA) exec, Alan Mulally, take the reins. Boeing's reorganization of the commercial airplane biz ranks as one of the most impressive in recent history. If Mulally can work similar magic at Ford, he'll ensure a slot in the turnaround hall of fame.

But resurgence for Ford or GM is still a long way off, if it's coming at all. I continue to believe investors in either of the big two are betting more on faith than finance. GM's recent climb, in particular, baffles me. Sure, its balance sheets might look slightly less putrid, but a check of free cash flow shows a money-incineration machine with few equals. Ford, for all its warts, hasn't been burning quite so much green. That's not to say investors won't make some green on turnaround hopes. But for my hard-earned bucks, I think there are better, more visible, values out there.

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At the time of publication, Seth Jayson had no positions in any company mentioned here. View his stock holdings and Fool profile here. See what he's Digging these days. Fool rules are here