Too Big To Fail?

A sign carried by a demonstrator in Fort Wayne, Indiana states that 1 in every 10 American jobs depends on the "Big 3" automakers, who are in Washington again today to ask for government help to stay in business.

To me, this seems more like a philosophical problem than an economic problem.

10% of our human capital in this country is tied to three companies that aren't being run effectively.  These companies have struggled for years to compete with international rivals, and in many ways, have continued to run their businesses ineffectively for decades despite mounting evidence that their methods are not working.

It begs the question: have the combined efforts of unions, governments, investors, and aggressive sales and marketing techniques obviated a need for these companies to work effectively?  Has the free market been completely undermined by artificial factors that have somehow managed to conceal the fundamental flaws in the automakers' business model until now?  Or are they really doing everything right, as they claim, and this is just a little "blip" in the economy that can be easily solved with a quick cash loan from Uncle Sam?

As our country shifts more and more in the direction of the "service economy," at the expense of manufacturing, innovation, research and development, we run the risk of becoming increasingly dependent on everyone else for the goods we need.  At the same time, our talented engineers, machinists, and laborers become increasingly dependent on a shrinking base of employers, with the long-term outcome being that 10% of our working population is employed, either directly or indirectly, by one of three companies, all three of which seem to be running themselves into the ground.

What's wrong with this picture?