The model is already in place,(the steel industry back in 2002-3). Back then the steel industry was in similar condition. Here is what they did, the companies agreed to consolidate, shut down over-capacity and outdated plants. The Union's pensions were dumpped on the Pension Benefit Guarantee Corporation and a VEBA plan was set up to administer retiree health insurance.
I think they will make GM and Chrysler merge. I would expect them to eliminate the GMC truck line and maybe Buick or Pontiac and eliminate a lot of Chrysler models also maybe sell some of their foreign interests. The Union will have to give up their pensions to the PBGC. Below is a link showing the PBGC maximum monthly pension payments. I think the Big 3 already has a VEBA plan set up under their last contract.
http://www.pbgc.gov/workers-retirees/benefits-information/content/page789.html The main problem with the Auto industry, labor wise that is, is the hourly costs due to legacy costs. They eliminate the pensions and health insurance for retirees they have labor cost parity with the foreign transplants. This not what I think should happen but I think this is basically what will go down. I don't know how well funded their pension plans are, but if they are underfunded Obama may have another problem dumpped on him if he has to bailout the PBGC.