It's a conflict of interest.
What if the Government decides not to compete and dictate that we buy only cars manufactured by them? They could easily abuse their power and legislate a monopoly that could ruin more profitable companies who offer a superior product at a lower price. I'm not particularly comfortable with the Government having a controlling interest in GM and Chrysler and the sooner they can pay back the tax payers and the Government can divest it self, the better we will all be.
The question about GM and Chrysler is a strategic one. What harm would it do to our nation economically if they were allowed to fail utterly? Would we still have the manufacturing base needed to build heavy equipment, including those used in national defense in time of war? Would the spin off affect cause other companies, that were their vendors and suppliers, to crash? If GM and Chrysler had gone under, it would have destroyed thousands of businesses who supplied them with products and services and would have thrown their employees into the unemployment lines through no fault of their own. All of this would have taken considerable amounts of money out of circulation worsening the impact. Considering the unfortunate coincidence of their failure with the banking crises the combined impact could have been catastrophic to our economy had not the government intervened. That was the lesson to be learned from the Great Depression. The Market can't always fix it self.
There's also a bit of a hypocracy here too. Our government subsidizes industry all the time and always has. Particularly in agricultural industries and in basic material industries.