Right, sure, there's still demand.
And that demand would be fulfilled by Japanese, Korean, or possibly Chinese manufacturers who have their shit together rather than the decaying and bloated corpse that is Detroit. And it most certainly wouldn't be a situation where "startups fill the void".
Buying up GM's old plants? Why the hell would Nissan, Toyota, Kia, or SAIC want old and busted facilities with only wealthy union workers to hire in a state with strong union laws, in a country with a working EPA? Shipping costs aren't that much. And now that China has come online, all the parts that GO INTO the car are produced in China anyway, so you either ship the car over as a whole or ship it over in parts.
It would most certainly be an "end of the world of USA car manufacturing" scenario. Which is arguably already on it's way. Hey, you're looking at this problem from the perspective of small business vs big business. There's a LOT that can learned from that. But in this case it's a matter of INTERNATIONAL competition where the capabilities of the nation are involved and it has close ties to national security. As in, can we build tanks and planes and bombs sort of stuff. This is a little detail that people tend to ignore, but our civilan manufacturing plants are all viewed as emergency war-machine makers by the top brass and people that play the international politics game. That's less important with nukes on the table, but China desperately wants to be able to wave their dick around in the form of a fully capable military power.
You're just not looking at the big picture.