One possibility is that the folks who are supposed to protect the people have been in a rather cozy relation with the automakers. This is, of course, a common thing in government: folks in business (say, Wall Street folks) often end up in the agencies regulating their former business and folks often leave regulatory agencies to serve in the businesses they previously regulated.
People in favor of these practices claim that these folks know the business the best and hence are ideally suited to act as regulators. Likewise, folks who were regulators know the regulations and can thus help the companies they now work for.
Critics tend to avail themselves of the analogy to a fox guarding a hen house. Beyond the analogy, this situation also creates a blindingly obvious conflict of interest. The fact that these agencies tend to drop the ball badly when these “cross overs” are involved indicates quite nicely that there is a problem.
Naturally, I am not claiming that everyone who crosses over is a villain or that the regulatory agencies are always more lapdogs than watch dogs. But, the Toyota case (and the past financial meltdown) shows that we need more watch dogs and fewer lapdogs serving the public interest.
I do think that the state should not over regulate industry. To use an analogy, I teach best when I am not micromanaged or overburdened by an onerous administration. Likewise, I suspect that companies work the same way. But, I do recognize the need for evaluations of my professional work and I also accept the need to regulate aspects of my job so that I (and other professors) am properly accountable. The same applies to corporations as well. So, my principle is that folks need enough freedom to do their work properly but should not have the freedom t0 commit misdeeds.