Don't blame the workers - they made the best of a bad situation,. and if the car makers weren't so completely incompetent in the world's largest car market, they would justify their conditions and wages as a small fraction of the overall cost of a new vehicle (it's about 1/4 of the car's cost, if you're interested).
The automakers failed in several ways:
a) To this day, they produce crap cars no one wants, with awful quality compared to their peers. Compare a VW door shutline on the next Jetta (produced in Mexico) you see with a shutline of your average US made SUV. VW's shutlines are 4 mm wide at the top and bottom of the openings, and less than 1 mm wide for non-openings such plastic mouldings to body panels. The Dodge Nitro I hired a while ago had a gap between the rear bumper and the tail gate I could see through, and don't get me started on how much that Nitro sucked - it nearly killed me five times with its terrible road manners.
b) Once they realized that no one wanted their shit products, they moved into SUVs as the other manufacturers were producing cars folks actually bought. I am still surprised that folks bought such agricultural SUVs, but ...
c) They made so much money from these crap boxes that they cut back on designing any other type of car and really scaled back investment in cars the US used to be leaders in (large sedans like the 50's Chevy's and Cadillacs). No US maker has a small fuel efficient car in their domestic line up (say 40 mpg+, which nearly ALL EU cars can manage without difficulty)
d) They forced the US govt to implement effective protectionism, under the guise of safety standards, which prevents cars from outside the US from being imported. This is now biting them really hard because no matter how much Ford or GM WANT to bring in *profitable*, *well made*, *extremely safe* and *desirable* cars from Europe, they can't.
e) they lobbied hard against any form of fuel efficiency standards, and got CAFE. They fought extremely hard to keep CAFE standards low, even to the extent that the SUVs are not subject to safety standards or fleet average fuel consumption figures that slug sports cars and some of their elderly models like the Crown Victoria. CAFE does not address consumption or demand when fuel costs are low. Thus you have the most wildly inefficient country fleet in the world and no domestic models that can manage 30 mpg combined (only the Cobalt comes close, and the Focus is a Euro car). The same manufactures in EU have average fuel consumption figures in the high 30's / low 40's. They addressed the bottom line - CO2 emissions and heavy taxation of fuel to make it artificially expensive. They have efficient cars.
f) Those huge profits they made on SUV's? Wasted on a binge of consolidation, wasteful depreciation inducing inducements ($5k on the hood of perfectly good cars, employee pricing scams, etc), and all sorts of other shenanigans. They failed to invest these bumper profits in new products consumers actually want, saving up for a rainy day or diversifying their range to cope with all buyers, not just guys with exceptionally small penises (Hummer, anyone?) Women buy and / or approve more than 50% of all the cars on the road. Makers and advertising do not target women - at all, which is a huge mistake.
Car makers have royally hung themselves by their own petard. I'd love it if I wasn't a car guy.
But it's not all the car maker's fault. They are burdened with the dumbest idea since dumb idea were invented. No national health care plan.
The US fails all its citizens and burdens its companies unnecessarily because it has no national health care plan like every other first world country. The US pays three times the amount for medical costs compared to Japan or Australia for worse health outcomes and a shorter lifespan.
If the US had a national health plan and decent medical costs, some of the costs now forced on the UAW by the last deal (or other auto makers without the UAW deal) wouldn't be holding them back - it's a significant part of the purchase price of a car in the US compared to ANY other country. This is the sharp end of the stick of the failed laissez faire approach to the most basic of human rights - the right to a healthy life.
I don't think we should bail them out, but if we're going to, let's do it for the long term, not just to keep them going until they fuck it up next time.
Personally, my plan would be that they should go into Chapter 11, strip away all of the protectionism, talk to the EU and Japan about harmonizing measurements (yes, that means you go metric like everyone else), fuel, and safety standards so that cars will be able to be sent where they're needed rather than some countries with an oversupply and others without any cars at all.
If the $25B loan is given, they govt should force regulations on manufacturers so that more of a car can be recycled after a longer period on the road, force investment in products that wean folks off oil in both the short and long term (fossil fuels are a complete dead end, so let's start today and not wait until the next crisis or the one after that). Modern cars do not need a 3000 mile oil change. They need it when the oil is sucky, which is about 20,000 to 30,000 km after it's been put in. Cars can be and should be more environmentally friendly, as they're about the most unfriendly thing we do to the planet today.
It's time to get rid of the maker's current management except for Ford's Mullaly who actually gets it. Dinosaur head in the sand Lutz has to go - his day was gone with Iaccoca's last attempt to kill the US auto industry. The $25B should have a reciprocal investment in public transport and regulations prohibiting satellite cities and extra-urban design that effectively require cars to live there. Any regulations that prohibit public transport, such as anti-compete mechanisms, should be stripped away. Given a real free market and some choices, folks wouldn't drive so much.
Lastly, I would require that car makers employ more artisans and designers. US sedans and SUVs are SOOO boring, literally white goods on wheels with no style. Back in the 30's through the 50's, the cars were beautiful and functional. The crap boxes I hire all the tiem drive like crap too, so some folks who know how to make a good driving vehicle. Ford's EU cars drive well, may be they could import those folks.
But enough hammering the workers. As you can see they are not the problem.