Former General Motors corp. President Edward N. Cole says the government should compel automobile manufacturers to build all cars with airbags so as to save the lives of up to 12,000 drivers and front-seat passengers annually.

He also says that "no more tests are needed," that to make the devices optional would be "half-baked" and that laws to make wearing of safety belts compulsory are "not the answer."

In addition, he says a major reason for industry resistance to the airbag is that "attorneys for the auto companies are worried about liability suits even if the system works perfectly."

"With all the product liability cases now in the mill, I can understand why they are gun-shy," Cole told Dr. William Haddon Jr., president of the Insurance Institute for Highway Safety.

Cole expressed his views in two letters earlier this year to Haddon, who released them recently, and in a phone interview with a reporter.

As president of GM from 1967 to 1974. Cole led the industry in developing airbags and offering them as extra-cost options on the company's large cars.

Last December, then-Secretary of Transportation William T. Coleman Jr. proposed that auto manufacturers partially subsidize a braod test of airbags. They are designed to inflate into balloon-like cushions in a split second after a frontal crash at certain speeds - 12 or more m.p.h., in the case of an immovable barrier - and then instantly deflate.

Coleman said that once installed in all cars the bags would "probably save over 12,000 lives annually and prevent or reduce in severity over 1000,000 moderate to critical injuries per year."

But he ruled against making the bags mandatory because "forcing on the public an unfamiliar and controversial technology" could generate consumer hostility that would prevent wide acceptance of the devices.

Coleman's successor, Brock Adams, has said he intends to review the ruling and indicated that he may reverse it because of the bags' acknowledged potential to save lives and prevent and lessen injury.

Meanwhile, GM and Ford Motor Co. have agreed to produce up to 440,000 bag-equipped demonstration cars in model years 1980 and 1981.

Cole, who is now chairman of International Husky Corp. in Bloomfield Hills, Mich., said that testing will lead to useless delays while the equipment being tested probably will be made obsolete by new technology.

The only way the bags "are going to get to first base is making them mandatory," Cole said, adding, "I firmly believe the air cushion system can be made to work successfully at a reasonable cost."

Coleman has said the maximum retail price, in 1976 dollars, should not exceed $100 with full production. But Cole said he thought anything under $150 "is probably low."

Car makers - including GM - have urged the states to adopt laws requiring wearing of seat belts, saying that even 70 per cent usage would achieve benefits similar to the bags. But Cole said such laws can't be enforced and that, unlike bags, belts don't protect middle front-seat passengers.