(By the way, Obama, personally, bought a 4,000 pound Chrysler 300 land yacht when he got rich -- his family's safety is a high priority to him -- but who's checking?)
You might think that with gas at $1.75 per gallon, the smart response would be to suspend temporarily the CAFE rules and let GM make more big high-profit big cars and fewer low-profit little cars. That seems more likely to bring in enough cash flow to get them through the next couple of hard years than insisting that they right now switch over to building go-karts powered solely by the owner's sense of enlightened superiority.
And, why does anybody think that even after GM spent years of government-mandated retooling to make small cars that it would even then be competitive with Toyota and Honda at making small, well-engineered cars? It's not like Toyota and Honda are going to be getting worse over the intervening years. I don't understand how that would work without slipping dumb pills to Toyota's and Honda's engineers. The only policy that would make sense would be a high tariff on the car parts that are imported from Japan (transmissions?).
The reason that Japanese car companies build cars in America is because the Reagan Administration imposed import quotas on them in 1982, which is roughly the equivalent of a tariff.
If we are serious about Detroit carmakers surviving, then protectionism seems like the only alternative. Think about the recruiting problems the Detroit carmakers must have getting young engineers and designers out of college to move to the Detroit area, which a giant ring of suburbs around a central void. If I was a 22 year-old Purdue engineering grad, I'd much rather take a job in Chicago than in Detroit.