The 1908 Ford Model T had a 4-cylinder engine, ran on 4 wheels, used gasoline, with a mileage of 20mpg. A hundred years later, the basics are still the same. Why put billions more in a dead-end industry?
The government should instead invest in new ways of building cars. Like the Aptera 2e (http://en.wikipedia.org/wiki/Aptera_hybrid_car) which is fundamentally changing the way a car is built. Or Tesla. Or Zap.
Forget the Big 3. Create the Small 300.
I'm more excited about Mission Motors electric motorcycle. http://www.ridemission.com/. (I'm an investor.) It's breathtakingly fast and fun to ride.
[1] http://earth2tech.com/2008/10/01/aptera-tweaking-electric-ve...
Woz figured out how to drastically minimize the number of hardware components on the Apple II. He could cut those 45 circuit boards down to 4.
The Mission Motors bike, on the other hand, is firmly in the Tesla roadster camp: The projected price point puts it out of the "this could save you money, eventually" category and into the "cool toy for rich eco-geeks" category. Its performance is similar to my Daytona 675's, which cost me $7500 and gets 45mpg.
By investing in 300 small companies, you get better chances to reinvent the market and create better big ones.
Yes, it eventually consolidated. It will again. But we're not going to get from here to there without some competition that just isn't going to come from the established players, for a variety of reasons.