HispanicBusiness

This week, the New York Times revealed that General Motors (NYSE: GM), in concert with the government's wishes, is considering filing for bankruptcy in the coming months. The company has fallen victim to the new patterns of energy consumption, which have changed the demand for automobiles, as to the lack of credit and the consequent slump in demand caused by the recession.

Both the new and the previous administrations agreed to use some of the stimulus package approved last year to support restructuring the company, without going to court. However, government funding, in the amount of $13.4 billion, was conditioned to the compliance with requirements, which were not met. This led, on March 31, to the resignation of the chief executive, Rick Wagoner and to his replacement by Fritz Henderson, who declared that the company is working on two tracks. Before the government set deadline of June 1st, if there is agreement mainly between bondholders and workers, one path can lead to restructuring out of court. If there is no agreement, the other path leads to filing for bankruptcy.

The solution depends from a complex set of mutual concessions granted by the main creditors, the bondholders, the workers, the pension plans and some of the main suppliers of parts. Anyway, both of these alternatives, either out of court agreement or bankruptcy, will require at least $70 billion in government financing. This time, what is good for General Motors may not be good for the United States.

Isaac Cohen is the former director of the Washington Office of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). He is a commentator on economic and financial issues for CNN en Espanol TV and radio.