The problem is that letting the bottom fall out of these companies in THEORY is a good idea, but in reality it would cause massive job loss across the board, not just at the big 3. Even Toyota has stated that any of the big 3 dying would be bad for their business as well.
All of the people working in those companies equals a ton of buying power. Subtract that buying power, even temporarily while they find new jobs (not all of them will, especially because so many other people are out of jobs right now) and you have more people losing jobs because nobody is there to buy their products. That will continue for quite a while.
That’s the issue the US government has run into. In principle these companies should be forced to close up or completely restructure themselves, but the pain in the meantime would be (in my opinion) too great.
Like I said too, this is a bottom up issue, and not just the top management being stupid. Too many lazy people on the lines, too lax line team leaders, area leaders who just want to make friends, maintenance workers taking too long, factory managers not putting enough pressure on the workers, GM managers not putting enough pressure on the factory managers to put pressure on their area leaders…you can see where this is going.
That’s the problem GM and others are in as well. They push the UAW, and the UAW pushes back. Nothing gets done.