Base on your statement, any business that closes the door will have negative impact to all ancillary businesses. Regardless if it is a factory, or a chain of furniture stores. So why not bail out our retail industry? Our national chain of restaurants? The list goes on. Where does it end since all industries are eventually a six degree of separation?
Lot of stuff there but I will focus on this one. More maybe later.
Yes, any business that closes has a negative impact on ancillary businesses and the surrounding economies. But in this country, at this time in history we really don't have another industry that rivals the Auto Industry for the amount of impact that it would have should the industry be allowed to fail. The closest comparison is that of the housing/building construction industry.
The effects on everything from the actual employees to the ancillaries to the communities, their tax bases, federal tax bases, unemployment expenses and the GDP are on a scale that is not matched by other industries in this country.
You touched on the question of the 99% turning a blind eye. That is not the case. That makes the assumption that the problems are in the assembly and manufacture of cars where about 60% of the direct employees work. That is not the case. The errors of the Big Three have been, in most parts decisions from the board rooms and management side, whether it was to go with 20 SUVs instead of writing off the economy side to the Japanese [which they did] or cost cutting quality issues such as paint quality or component decisions. These can't be addressed by the 99%. Their job is, unfortunately ONLY to assemble what comes down the line. Is it a good style or a good component? That's no where near their "eye".
So the Big Three decided, in the board rooms to write off much of the economy cars because they did not see much profit in them. They decided to go with big SUVs and trucks, as loaded as they could make them and pickup as much profit as possible from that group. They did not look at the future when there was a saturation of those trucks and SUVs and they did not look at fuel economy issues, choosing again to enter horsepower wars even as we were in Iraq destabilizing our oil supply...Got a Hemi?
As for my answer that the entire industry is compressing, you take that to mean that "they will die anyway". NO. It simply means that the other companies don't have extra capacity to absorb 250,000-750,000 workers. Nor do the towns have the requirements or job availability to pick up the ancillary workers in this particular economy.
So, in a STRONG ECONOMY it might make ZERO sense to bail out the Auto Industry. Letting them fade away or morph into a smaller version of themselves might be an appropriate action. BUT in a stalled, very WEAK ECONOMY, the story is completely different. The Economy as a whole is not able to absorb that kind of hit. The towns are not able to absorb the hit. The States or Feds are not able to absorb the hit. We really have NO ability to absorb a 10-15% increase in the unemployment rate due to just ONE action.
THAT is why I look at this type of bailout as something that really has to be looked at seriously. Not in the abstract but in the here and now. Much like the financial sector, it is unique to the economic conditions we have been handed.