And they have. They (American car manufacturers) have designed poorly engineered vehicles, and built them to loose standards. Now, don't take this to say that Americans can't build fine cars - because they can. Honda, Toyota, etc. make GREAT cars with American workers on our own soil. The upshot of all of this is that "the market" has been allowed to build lousy cars, and much like the 70s/80s, American manufacturers got trounced by Japanese competitors (as well as some ugly economic times).
Now, given the amount of subsidies that the "free market" companies begged the government for - I'm going to go out on a limb here... and say that it's not "free market" anymore. Now, you want "free market" to decide how companies can operate, that's cool, but me? I'm a fan of some safeguards for the public here and there. Here's a GREAT example of what's happened over the last
100 years. Another GREAT example is the infamous Ford Pinto - yes, that's right, they did a cost - benefits analysis to decide if it would cost them more to settle with the families of people that were going to DIE in their cars, or to do a recall. That's "free market" in this country, always has been. When you buy something from soneone in good faith, but they aren't dealing with you in the same manner - it's kind of hard to just go out and buy another car. They're not inexpensive.
"Big safe cars" were NEVER safe until the government mandated it. Car companies fought seat belts. They fought air bags. They fought the extra cost associated with designing crumple zones and reinforcing vehicles to withstand side impacts (t-bone). Even over the last 20 years, cars have made HUGE advances in terms of safety. I can attest to this first hand, having been driven into a guard rail on the freeway, getting flipped over, and grinding to a halt upside down. I walked away with some bruises, and a sore back.