The New York Times says that Treasury is preparing a bankruptcy filing for the automaker. After failing to get the bondholders to make concessions, the government is stepping in to guarantee the workers' pensions and retiree health care benefits. This will be very expensive, and it hardly seems fair to other workers whose pensions aren't guaranteed. On the other hand, it beats bailing out the bondholders, and whatever you think of the unions, leaving members who were promised pensions high and dry isn't particularly fair.
It's possible, of course, that this is just a negotiating tactic--but I don't see what the tactic is. The government wants to salvage as much value as possible for the workers. As long as they're trying to save UAW jobs, the bondholders will always be able to get a better deal in bankruptcy, because the UAW is paid well above the market rate for its work, and has huge legacy costs that would be written down in a liquidation.
Meanwhile, a blast from the past: remember Chrysler's last brush with bankruptcy?