WHY IT MATTERS: Auto bailout

Associated Press Modified: October 23, 2012 at 2:15 pm •  Published: October 23, 2012
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The issue:

The government bailout of General Motors and Chrysler is one of the most polarizing issues of the presidential campaign. Many Americans wonder why $62 billion in tax dollars went to keeping the two automakers afloat in 2008 and 2009. There's little doubt the bailout saved the automakers and huge numbers of jobs. But there's also little chance the government will get all its money back.

Taxpayers are out about $1 billion on the Chrysler bailout. GM stock is selling for less than half the price needed for the government to recover all of its nearly $50 billion investment.

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Where they stand:

President Barack Obama often boasts about the bailout's success, saying the decision saved about 1 million jobs at automakers, parts companies and other businesses tied to the industry. That estimate is backed by a 2010 study by the Center for Automotive Research, an industry think tank. Obama doesn't want to sell the government's remaining 500 million GM shares at a huge loss, but also says he's not interested in being a long-term investor or running the company.

Republican Mitt Romney argued that GM and Chrysler should have been sent into bankruptcy protection without government money to keep the companies running. Instead, he said private loans should have paid for the bankruptcies. But because of the financial crisis and because both companies were bleeding cash, there was no private capital available at the time. Romney advocated government-guaranteed private loans for both companies after bankruptcy and also said the government should back their warranties. He would "responsibly sell" the GM shares but has given no time frame.

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Why it matters:

GM and Chrysler are major employers, with most of their operations in the Midwest, including Ohio, a pivotal presidential state. Without the bailout, it's likely the companies would have been forced into liquidation. Their factories, office buildings and patents would have been sold at auction and their workers would have lost their jobs.



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