“Curiouser and Curiouser” is a Phrase from “Alice's Adventures in Wonderland,” but now also describes Washington's direction of Detroit.

We know the Obama Admin. believes bigger government is better government. But when it comes to Detroit, it believes Detroit auto makers must get smaller and smaller to survive. Every action is aimed at shrinking Chrysler and General Motors, even though this is contrary to everything we know about the automotive business.

I cannot think of any auto company or brand that saved itself by getting smaller. American Motors under George Romney; Chrysler under Lee Iacocca and then again under Bob Lutz; Pontiac under Bunkie Knudsen, John DeLorean and Bill Hoglund; Fiat under Sergio Marchionne; They all rescued themselves by adding new cars that caught the imagination of buyers, not by chopping their companies down.

AMC came up with the Rambler compact. Chrysler prospered with minivans and swoopy LH sedans. Pontiac wowed consumers with performance, wide-track Bonnevilles and GTOs. Nissan revived the Z cars. Fiat hit a home run with its little 500 minicar.

They survived by growing. Today's best and brightest think they can save GM and Chrysler by whittling them down and handing them over to the United Auto Workers union.

I fear Chrysler and GM will turn into Alice's Cheshire cat: It “vanished quite slowly, beginning with the end of the tail, and ending with the grin, which remained some time after the rest of it had gone.”

But it's not just Washington. Detroit executives are focused on shrinking, too. GM's European Opel unit engineered many of the new small cars it plans to build and sell in the U.S., yet it is making no fight to save its European operation.

Curiouser and curiouser!

Then there is Fiat's deal with Chrysler. Get realistic. It could be three years before Fiat cars are built here in Chrysler factories, if it could happen at all. Melding Italian underbodies and engines with Chrysler's U.S. body designs and factory production technology does not sound like a slam dunk.

What's more, Fiat is supposed to help Chrysler sell its vehicles abroad, but Fiat is no great global seller. It's strong in Italy and Brazil, period. Its China operation was a disaster. It has nothing in North America.

And as far as Fiat helping Chrysler sell Jeeps, Chrysler has been selling Jeeps overseas for half a century. Chrysler even built Jeeps in China and Brazil.

Fiat had better learn how to sell abroad, itself, before it talks about helping Chrysler.

Curiouser and curiouser!

Then there is the story about “too many dealers.” Yes, there are too many retailers. But that's not why GM and Chrysler are losing billions; it's because too many Americans prefer Toyota, Honda and other foreign brands. The answer is to build better cars.

Cutting the number of dealers won't help sales. In fact, right now fewer dealers might mean more frightened customers and fewer sales as consumers worry about service, parts and resale value.

I want GM and Chrysler to reorganize and come back stronger. But the way things are looking now, I keep thinking of that Cheshire cat vanishing quite slowly until all that's left is the grin.

Jerry Flint is a columnist for, and former senior editor of, Forbes magazine.