From what I know, and I've never had a 126 front sway bar or upper control arm off the car, the sway bar tapers so a shoulder that slips into bushings in the upper control arm. A bolt goed into the shoulder from the front.
I'm not sure what I see in the picture but it looks like the shoulder fell off and the remaining end of the sway bar was pounded to look like a flat mushroom. If that's the case, I doubt it can be repaired in place.
Check out this thread -
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http://www.peachparts.com/shopforum/showthread.php?threadid=76052&highlight=sway+bar>
I'll look for the follow-up by DslBnz. I know his car is back on the road without major surgery.
Sixto
95 S420
87 300SDL