If we follow your prescription, we will certainly have a depression.  The fault of the 60s and 70s was not with the imports, but with the fact they gave the consumer something the big 3 would not or could not.  CHeap cars.  remember the Gremlin, Vega and Pinto?  That was their answer to the cheap cars - shoddy cars!  CAFE was the democrats sabotaging the industry, not Japan or Korea.

Of course the intentions of the democrats were good (intentions always are).  The results were and are disasterous.  You dont treat the fever when you are sick if you want to get well.  And politicians are notorious for going after sumptoms instead of causes.  Now that they have made the bed, the only thing left for Detroit to do is to make the most of it (make the lemonade).  Bailing them out is not going to teach them anything (or congress) and just grease the slide.

You can keep blaming others for filling a niche (a niche since expanded into Detroit's strength), but that is going to get you nowhere. Victims dont win - they just keep playing the victim.

Well IMO it's quite simple: Make everyone play by the same rules for their operations in your country, and don't give any of them any help - i.e. no special loans or subisides to any company. The companies who can't cope will pack up shop and either close down for good or move elsewhere, and those who can (the more efficient ones) will stay and make some profit.

On a domestic level (ignoring the effect of supply from foreign countries - I'll come onto that in a moment), if you have a fall in supply from car makers going under, then that will mean more demand for the remaining car companies to share, meaning they can charge higher prices and get the same demand, or keep prices at the same amount and get increased demand, basically making it more viable for them to stay in business.

On the more global level, if you argued that the supply wouldn't change because all those domestic companies would either move and/or have their supply taken over by imports, that's still fine as well! That's because we're now looking at the comparative advantage trade issue - if another country and produce cars more efficiently relative to another good than we can, it's better to have them produce the cars while you produce the other good, and then trade so that you're both in as good positions as you were before, and there's an additional surpluss then shared between you that has resulted from the trade (i.e. you're likely both significantly better off).

Does that go for Japan's bailout of their cars?

To a point I grant you that. But it was as though they had forgotten how to the build 4cyl and all thay had to do was to go back to Ford's early drawing board. In fact I had a '39 Ford coupe that--though who was really counting then--got over 25 mpg; it was a 60hp V8!

Comparative advantage that we held since WWII and decades after, and one could argue others should now have that advantage. However, as you point out changing the rules is an arrant disadvantage: it was a stroke of luck that Japan could take advantage of the 70s oil crises by flooding the inventories--and liberal credit--of much wanted economy cars when we were caught flatfooted and to buy an American car we had to place an order with stringent credit requisites--and waiting weeks for its delivery! Then the unbelievable influx of imported goods drove the great competitive Sears, A&S, Macy's, Kovettes, Bloomingdales and so forth were forced to downgrade and downsize, not to mention downgrading employee benefits. In short, global unfair trading killed our respectable standard of living. I'm not willing to concede that if Japan in truth makes better cars they should control the auto market and we settle for opening Pizza Prince franchises in Tokyo.