Bottom line, up front: North American streetcar companies, including LA's famed Red Cars, failed due to economics, not because of an automaker conspiracy.
A lot of posting on here is to discuss just how much mass transit used to exist before the Second World War. But what I really want to clarify is *why* the great American streetcar networks disappeared. In general, there are three reasons:
(a) the automobile's increasing popularity made many streetcar lines simply uneconomical to operate;
(b) most streetcar companies like the famed Los Angeles Red Cars operated their streetcar systems to promote their real estate developments, and not the other way around; and
(c) the bus was actually a technological improvement in mixed traffic over the competing streetcar.
If you check out my map of the Pacific Electric streetcar system near its height in 1926, there's lots of things that are incredibly unusual to modern eyes. First, the streetcars go everywhere. You could take a train way out to places which are considered the periphery of Greater LA even in modern times. These are places like San Bernardino, contemporary population 37,000, or Riverside, population 29,000. This kind of network is only economically viable if there are literally no other transportation alternatives available. And the Pacific Electric was infamous for exploiting its transportation monopoly to the limit. Once the motor bus was invented, and automobile competition arrived in earnest, large-scale abandonment began. If you check out this significantly-less-clear map from 1947, nearly all passenger service to outlying areas has been abandoned or replaced by buses.
This is largely because of how the streetcar companies made their real money. In general, it's pretty hard to make money only by running trains, even in the densest cities, which means that the primary source of income was going to be from real estate. In Los Angles, the owner of the Pacific Electric, Henry Huntington made his money by building suburban subdivisions. Places like Huntington Beach, Huntington Park and San Marino were all developed by Huntington money. In the Pacific Electric's case, the streetcar system actually operated at a loss for much of its life, and it was the real estate development that kept the trains running, not the other way around. (Similarly, in Northern California, the Key System streetcars were actually owned by a company called the "Realty Syndicate".) When the transit companies began to fail, they needed tax dollars to maintain and modernize the rail networks - and the public had no desire for that kind of corporate welfare. In LA, Mayor Fletcher Bowron proposed that the City of LA buy out the Red Cars and turn it into a modern subway in 1948, but the City Council wouldn't fund it.
Finally, there's the technological question. One-car streetcars running in mixed traffic are technologically inferior to diesel buses, because they can't be rerouted for construction, and if something blocks the tracks, there's not much the streetcar driver can do except wait. In the Pacific Electric's case, many of their routes ran down busy thoroughfares, and they didn't have dedicated lanes the way that the modern Metro's trains do. And buses are cheaper to run per-passenger on low-capacity routes - there's no overhead wires or tracks to maintain. Trains really shine when they have dedicated right-of-way (i.e., their own dedicated lanes or tracks), and it's a high capacity route - a three-car train of streetcars, like the modern Expo Line, can handle 600 passengers per train with a single driver, which is equivalent to five buses. But one-car trains of streetcars running in mixed traffic have both the disadvantages of a train (can't detour) and the disadvantages of a bus (limited capacity).
Because of this it made a lot of economic sense to abandon streetcars for buses. GM and National City Lines took advantage of this process to sell buses, but it was a decades-long trend that began long before the alleged streetcar conspiracy began in the late 1930s.
The automakers weren't hawks swooping in on healthy prey - they were vultures picking the bones clean.