Bailout?
According to the US Department of commerce, at it's peak in 2000, there were 1,313,600 people employed by the American automotive industry. The peak number of people employed in automotive parts was 1,022,200. That's a total of 2,335,800.
Any remotely Bayesian (updates his/her beliefs based on observations: also known as learning) agent would be pessimistic about Detroit's likelihood of ever becoming sustainable again. The big three CEOs' rhetoric is cheap. It's entirely costless for them to state, in front of Congress, that if they are given enough money, the industry will survive.
The most probable scenario is that, given a bailout, rather than just disappearing, the Auto industry will have a long drawn out death. And this isn't particularly great for workers. They will be confronted by a great deal of uncertainty about their livelihoods.
A reasonable assumption would be that most workers are, in fact, risk-averse. That is, they would be willing to accept say a year's salary for sure (and look for jobs during that time) rather than a random period ranging from a few months to a few years (the latter being with very small probability).
Why not just do that? Why don't we just liquidate the "big three" , throw in more of the government's money and offer reasonable unemployment packages to everyone who loses their job as a result? Supposing an average salary of $60,000.00 (this is a reasonable assumption as an order of magnitude: it's not off by a zero or two), a year's compensation for 2,500,000 workers (a generous upper bound) would be about $150 billion. To pay for it, sell whatever assets the auto industry has. And for whatever the difference is, remember that we are willing to pay large amounts for bailouts of all kinds when we think that they might work: think of this as a bailout for the auto worker.
What are the objectives of an intervention?
1. Prevent massive job loss.
2. Prevent the repercussions of such a collapse, bringing down the rest of the economy.
A plan like this would address the issue of job loss in a more sustainable way. First, it would shield people who would potentially lose their jobs from uncertainty. Second, it would give people time and resources to invest in human capital: they would be able to gain skills that could help them find other jobs.
If the incomes of those involved in the industry are not affected, their spending is not likely to be affected immediately either. And if they are able to find better/different jobs by the end of their guaranteed salary period, which they should, the persistent effect of a disappearing industry would be mitigated.
As for the supply side, the source of the problem has been the ineptitude of the American auto industry. This wouldn't have been a problem if there weren't competitors to take their lunch. Those competitors have done a better job of adapting market conditions like a shift in demand towards better mileage, lower emissions, etc.