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Auto bailout price tag rises to $25 billion. How high will it go?

During the depths of the financial crisis, the U.S. government spent some $85 billion to rescue Chrysler, GM, and a few of their suppliers, in order to prevent the two large automakers from imploding. According to the latest U.S. Treasury report, taxpayers will now lose $25.1 billion on those auto bailouts. That's $3.3 billion more than previously estimated. And it's not even the final price. So how costly could the bailout get, anyway?

A lot depends on whether GM can alleviate its current woes, especially in Europe. And a lot depends on when, exactly, the U.S. government decides to sell all the shares of GM that it currently holds. Analysts say that the final cost of the auto bailout could actually turn out to be much lower than $25 billion. But, of course, there's a risk it could end up higher, too.

Let's break down the cost of the auto rescue. The government has already sold its shares of Chrysler, incurring a loss of about $1.5 billion. That money can't be recovered. But the U.S. government still holds about 500 million shares of GM stock. It also has a large stake in Ally Financial, an auto finance company. If those two firms continue to struggle, then the U.S. Treasury will have to sell its stock at a loss. That's where the cost estimate of $25.1 billion comes from.

GM, for its part, has hit a rough patch. The U.S. auto market is still relatively soft, with auto sales this year projected to hit 14.2 million. That's much better than the past few years, but it's still below the economy's potential — which might be as high as 16 million cars per year. Worse still, the recession in Europe is wounding GM, which has a lot of factories running at low capacity overseas. Here in the United States, GM was able to restructure its operations and renegotiate its union contracts to deal with the recession. That's harder to do in Europe, where labor laws are stricter. And GM is still trying to fill a $25 billion hole in its pension obligations to workers.

Currently, GM's stock price is hovering at around $20.25 per share. If the Treasury Department were to sell shares at that price, it would incur a $16 billion loss. But some analysts think the company has a chance of recovering, with the share price rising higher. If GM's stock were to rise to $35 per share (this is just hypothetical), taxpayers would take a smaller — though still substantial — loss.

"That's led a lot of people to ask why the government should sell its shares now, with the market not yet recovered," says Sean McAlinden, chief economist at the Center for Automotive Research. He notes that there are still reasons for optimism with GM. "It's a leaner company now, they're making better cars," he says. In North America, at least, GM is making roughly $2,200 on each car it sells — about five times as much as it did before the bailout forced it to restructure.

But, of course, there's also the risk that GM could continue to struggle. If that happens, taxpayers could lose even more money.

The Treasury Department is unlikely to offload its GM or Ally Financial stock before the November elections. But it's unclear what will happen after that. In June, Mitt Romney told the Detroit News that he would sell the government's shares as quickly as possible, even if that meant taking a loss. "There is no reason for the government to continue to hold [its GM stake]," he said.

Meanwhile, says McAlinden, it's worth putting the cost of the bailout in context. The $25.1 billion Treasury may lose has to be weighed against the cost of not bailing out GM and Chrysler in the first place. A study in 2010 by the Center for Automotive Research found that the auto rescue likely saved 1.14 million jobs and saved the government $28.6 billion in lost tax revenue. And those estimates, McAlinden said, are likely conservative.

If that's true, it means that the cost of the auto bailout, in taxpayer terms, still isn't quite as high as the cost of not bailing out Detroit would have been.