I find nothing more irritating than dealing with people who think that the collapse of GM isn't going to affect them. Even worse are the people who believe that they market will sort it out.

The biggest irony is that the Just in Time (JIT) production system employed by Toyota and the other transplants is extremely vulnerable to any supply disruption. And because GM and Toyota share a common supplier base, a collapse at GM would put workers at Toyota's North American operations out on the streets. Because a GM collapse would cut Toyota's supply chain.

Toyota, the industry behemoth, just recorded its seventh consecutive month of declining sales, and the company's second-quarter net profit plunged nearly 70%. Toyota has cut its earnings forecast for the fiscal year ending March 2009 to $6 billion, which is just one-third the profit it made the previous year. "You are looking at the deepest downturn that Japanese automakers have ever seen," says Chris Richter, senior research analyst at CLSA, a Hong Kong–based brokerage house. "They've faced downturns before, but not downturns in virtually every global market simultaneously. Even Honda Civics and Toyota Priuses aren't selling well."

This bleak outlook could get even worse, at least in the short term, if GM, Ford or Chrysler went bust. That's because of a domino effect that would probably result in the subsequent failures of parts suppliers that also sell to factories operated by Toyota, Honda and Nissan in the U.S. Vehicles built on American soil accounted for 63% of Japan's total U.S. sales in 2007, according to the Japan Automobile Manufacturers Association. A sudden parts shortage could force companies to shut down some of those assembly lines, generating major losses.

In addition, the loss of hundreds of thousands of jobs due to the disappearance of a major manufacturer — not to mention the blow that would be dealt to U.S. consumer confidence by the bankruptcy of an iconic brand — would mean even fewer cars sold. That would take another bite out of consumer finance receivables, the biggest asset on carmakers' books. So even though Japan would almost automatically gain market share if a U.S. carmaker went under, any gains would be outweighed by the negative impacts. "In this environment, gaining market share is not a good strategy," says Yoshida.

I suppose that for the most fervent market worshipers the only evidence that is going to be enough to demonstrate this point to them is for it to actually come to pass.