While I absolutely agree that the gov't has no business bailing these companies out or directing their marketing, I'll argue that this is necessarily a bad direction for them to take (had they opted to do so themselves). I believe it's been a losing proposition for a number of reasons:
-Some of this is demand-based. Large, comfortable, and powerful cars tend to be more desirable to a decent chunk of the population. However, economic realities help to drive this. When fuel costs are high, small and efficient vehicles see a huge upswing in demand.
- A very significant portion of the move from "American" vehicles has been the absolutely abyssmal quality. I've had several company vehicles and owned an American vehicle myself over the last 7 years or so. Not a single one was without quality issues that sidelined the car and had significant price tags associated with their repair. Fords and an Olds Alero. However, our two Nissans continue to run without a single problem. Statistics bear out my anecdotal evidence as well.
-People who are buying small and efficient vehicles are doing so for a number of reasons - primarily owing to TCI. Better fuel economy and a lower cost overall works very well in favor of foreign manufacturers.

On the overall - this proposition has been losing for the manufacturers due to crappy designs, poor quality, and tremendous overhead due to poor management decisions. If they can get around that, the entry-level vehicle market is wide-open as is the "green" vehicle market.

This doesn't mean I disagree with your position that Obama and Pelosi have no business sticking their noses in here. I do. However, blame needs to be assigned appropriately, no?

My feelings about the bailout are quite ambiguous. I very strongly feel government is always the "most-worst" solution to any problem. However, the auto companies have done a very poor job of managing themselves, and certainly seem to be the poster child of "too big to fail."

Still, in my own opinion the fault of the car companies' failure lies squarely with organized labor and the practices it has forced on the auto industry for decades. Having a Democrat manage their restructuring is, to me, rather like having a Mexican drug lord oversee the restructuring of the pharmaceutical industry.

While the automakers are, in fact, in horrible straits due to many things, I don't seem them as too big to fail. We're currently getting a bit of an economic reset (home values are more affordable, certain costs are coming down, needless businesses are being weeded out, etc). However, even if GM or someone goes bankrupt, all of their facilities, tooling, and production lines don't disappear. They can be purchased and workers rehired (at normal wages), allowing them to become productive. Alternatively, they could disappear and foreign vehicles take the market over entirely. As Ford seems to be in a position where they could survive, the latter seems doubtful.

I don't, however, place the blame solely on the UAW. While labor costs and declining quality are definitely hugely impacted by their workers, vehicle design and management decisions have also factored into this equation as well. The response to an influx of competitively-priced, high quality, and low cost of maintenance foreign cars was a marketing program - the UAW and all didn't influence that. Nor can I blame them for such fun cars as the Mustang II, Pinto, and other crap-fests that they Big Three foisted upon us.

Remember the planned obsolescence strategy?

The UAW and it's supporters deserve their fair share of derision and blame - but it's not solely their fault.