That is my take on the situation too. They will have to go bankrupt to get out of their chains, then rise like a phoenix and build more affordable, efficient cars without the union ballast. There is no point in pumping money into them unless they can first become competitive. It would be just bailing the Titanic.
The problem is getting the union ballast to go quietly. Do you fire every one of them and hire a complete new workforce? What if the union decides to take the autmakers down with them like Eastern airlines? How do you keep disgruntled employees now working at half pay with no benefits from trashing the place at every opportunity? Bankruptcy sounds good on paper but it will be a nightmare to work through.
While what you said makes perfect business sense, the Democrats have a lot of vote buying debts to repay. A bailout will happen.