I think Yglesias' advice is eminently sensible. That it ignores the political realities that, while certainly down, the "Big 3" still carry weight in Washington, DC sufficient to funnel cash their way even as they mismanage themselves in to oblivion should also be obvious. I say this as someone who lives near a town propped up, very badly, by a Chrysler manufacturing plant.
Like giving banks that made bad investment decisions more money to make more bad investment decisions, giving auto makers more money to build more cars no one buys makes little sense. In reality, America just doesn't make good cars anymore. I own a Kia. My wife owns a Pontiac Vibe, which is in fact a Toyota car design. The biggest selling American vehicle of the past decade, the Ford F-series pick-up, is no longer financially feasible. The idea that somehow GM, Ford, and the rump of Chrysler will somehow miracle their way out of the death spiral they are currently experiencing just ignores the reality that other countries make cars people want to buy, for any number of reasons. There is nothing wrong with that, either. Someday, those manufacturers - Nissan, Toyota, Honda, Hyundai, Volkswagen, Kia, Volvo - will go the way of the REO, the Packard, and the Moon, and perhaps we will buy cars manufactured in Ghana, Cameroon, and the Ivory Coast.
Until someone in Washington gives some straight talk to the automobile industry and tells them that throwing good money after bad makes no sense and they need to sink or swim on their own, however, I believe that we will be giving welfare to these corporate queens for quite a while.