Sparing the UAW at the expense of secured creditors is a very, very dangerous precedent. Firstly, organized labor managing its own negotiations is absurd - the companies will be set up for bailout again.
Secondly, the government rewriting the capital structure to destroy creditors in order to prevent a bankruptcy and turn over ownership to the UAW... that's textbook socialism.
Bankruptcy with warranties guaranteed by the government would have been much, much better.
(I'm no lawyer, but I get the feeling Obama's auto plan is not legal... if this were France, where civil law dictates our creditors' positions, perhaps it would be, I don't know enough about France, but our credit laws are derived from English Common Law, under which this is almost certainly illegal. Here's hoping the law wins.)