Not sure why you're being downvoted. That's a huge part of the reason: Due to the nature of the auto industry, many suppliers only have a few customers; take away a third of a company's business, and there's a good chance it will fail.

The entire economy of Michigan (and many neighboring states) would have collapsed. Over here in West Michigan, we have many companies—ranging from mom-and-pop injection mold shops with 50 employees to large companies like Gentex, Delphi, etc. Those companies were already struggling back in 2008; GM going away would have meant the death of most of them.

I hate many of GM's historical business practices as much as anyone (there used to be two streetcar lines within a quarter-mile of my home, dammit), but the saving of GM was a critical component in preventing a catastrophic depression, especially for Michigan—which was already suffering before the Great Recession hit.

It's not all or nothing, the government could have broken GM up into component parts as a condition of a bail out. AKA killed GM but kept the parts. Chances are many parts would have failed and been bought up over time but as smaller companies the market could have dealt with this much easier. There many have also been some part that becomes much stronger when no longer part of the collective.

EX: Verizon vs. the old AT&T and the new AT&T.