Michigan Governor Jennifer Granholm joined us from Lansing for part of the show today to talk about the General Motors bankruptcy and her hopes for the auto industry’s future. GM’s Chapter 11 filing, she said, is “one more painful operation … but then the prognosis is good.” She went on to say that allowing the company to fail without government assistance would have weakened the entire nation.

You can listen to Governor Granholm’s interview with host Tom Ashbrook here (a transcript of key excerpts follows):

GOV. JENNIFER GRANHOLM: Frankly, I’m grateful that the federal government is committed to having a viable auto industry, and a viable manufacturing sector. Personally, I’m grateful that the bleeding is going to be over. I was saying a little bit earlier today that I feel like a patient that’s been undergoing painful treatment for nine years, and the doctor says, we’ve got one more painful operation, it’s going to take you a few months to heal, but then the prognosis is good, and the cure is on the way. So I feel like at least we can put an end to this bleeding that we have been seeing since the year 2000.

TOM ASHBROOK: But what’s the guarantee that the bleeding is over? The federal government will have 50 billion or something like that invested here, but there’s still a lot of competition out there. GM does not have a track record in the kind of smaller, high-efficiency cars that are supposed to now maybe become its backbone. What’s the guarantee that the bleeding is over?

GOV. GRANHOLM: Well, you know, nobody has any guarantees, clearly. But General Motors now will have a balance sheet that is a competitive balance sheet, will have UAW agreements that are competitive with the foreign transplants. They will have lightened their load significantly and identified the product lines that they can be competitive in. This restructuring is intended to position them to be economically competitive. And that’s exactly why there’s some hope. With 90 days, we’ve seen with Chrysler, obviously, consummate the sale with Fiat, and that positions them to emerge from bankruptcy in record time. If that same kind of focus is placed on General Motors and their restructuring — we can see it’s much more complex, I understand that – but at least we can see that by the end of the summer we should have a General Motors that has emerged from bankruptcy leaner and stronger. And, yes, greener as well.

. . .

ASHBROOK: Governor Granholm, Frank [a caller from Detroit] said there would have been panic in the streets of Detroit without a government intervention.

GOV. GRANHOLM: That’s exactly right. I mean, I shudder to think what would happen. We would have liquidation. These companies would be gone. And therefore the suppliers would be gone, and therefore the manufacturing infrastructure of our country would be on its last legs. So without this extraordinary action, we would really, I think, be a much weaker – certainly city of Detroit, certainly state of Michigan, but nation as well.

Responding to a caller, Gov. Granholm urged consumers to buy American:

GOV. GRANHOLM: Preach it, sister, preach it! I’m totally in agreement with her, and I hope that Congress passes this “cash for clunkers” bill, a version of which was passed in Germany, and they saw a huge increase in support for German-made vehicles, a big uptick in consumer demand.

I mean, not just American companies, all companies that are manufacturing vehicles right now, we know, are victims of what’s happening with the global recession. People are not buying cars. So let’s provide some incentives for demand, for there to be an uptick in demand.

And folks, everybody who’s listening, you as taxpayers now are part owners of these companies, so let’s support the home team. Let’s support those who are making these cars, your neighbors in communities all across the country, and the suppliers, and the people who you may not even realize are benefited by having a strong manufacturing sector and a strong auto industry. It’s the steel industry, it’s the glass industry, it’s the electronics industry, it’s the plastics industry. This is the most technologically advanced mass-produced product in the world. And if we give that up, if we don’t even support our own home team, then we will be the ones to suffer from that. So I say, buy it, buy it! If it’s made in America, buy it! So you can support your own neighbors, and your own taxpayer dollars will be invested on your behalf.

Our guest Allan Meltzer of Carnegie Mellon offered some strong pushback to the government rescue during the balance of the hour. You can listen to the full show here.