Back in the 1950’s, the idea that what was good for General Motors was good for America was a matter of faith. But I wonder if that’s still the case. The same goes for the rest of the Big Three.

In recent months, the entire North American auto industry-foreign companies included-has been rocked by skyrocketing fuel prices, and the response has been more than a little telling.

Honda, with its lineup of high-quality, fuel-efficient automobilescan’t build its vehicles fast enough. Toyota, despite taking an unprecedented hit in terms of profitability, is quickly setting about thebusiness of retooling. And the Big Three? Well, GM’s answer to the Toyota Prius is a hybrid Yukon that gets a whopping 21 miles per gallon. Over at Ford, management recently announced that after a generation of playing catch-up, it wasfinallygoing to close the quality gap with Toyota-in a couple of years.

Oh yeah, and apparently the Big Three are going to need $50 billion in cheap government loans to accomplish all this, despite years of making money hand over fist producing high-margin SUVs. Whatever happened to American leadership? Ford tough? GM innovation? It’s starting to get embarrassing.

It’s also getting a little scary. Pinning the U.S. economy’s future on unwieldy, shortsighted corporations like General Motors is starting to look a lot like booking first-class passage on theTitanic. For those of us who came of age in the 1970s, the decline of the domestic auto industry has long since been a simple fact of life. The Big Three have been losing market share fordecades. Now they want the taxpayer-you and me-to loan them $50 billion.

Of course, at this point we are hardly in a position to say no. An industry analyst recently said a General Motors bankruptcy would be the economic equivalent of setting off a nuclear bomb, and he’s right. But that doesn’t mean the U.S. government can’t take at least some kind of action.

First, any low-cost loans should be predicated on some serious changes in leadership. I don’t know whether running an automotive company is actually rocket science. But it is pretty apparent that in the case of GM’s Rick Wagoner, in particular, whatever it is, the current bunch of people in charge ain’t got it.

Second, if the U.S. government is going to start financing the automotive industry, let’s invest in the entire automotive industry-not just the cloistered bunch running things in Michigan. There are a number of interesting startups out there, companies like California-based electric carmakersZAPandTesla Motors. Unlike their more established counterparts in Detroit, these companies are truly lean, hungry and innovative. They have to be to stay in business. GM claims it will have an electric car on the market by 2010, but ZAP and Tesla Motors are building cars right now. Wouldn’t it be nice to actually get a jump on the folks over atNissan and Mitsubishifor once?

It’s a basic tenant of investing that your portfolio needs to be diverse if you are going to prosper over the long term. The same goes for the domestic automotive industry. It’s time for some truly fresh blood in the domestic auto industry. What’s good for America is no longer just what’s good for the Big Three.