GM to eliminate 25,000 jobs, cut plants

General Motors Corp., burdened by high healthcare costs, perceptions of poor quality and bland design in its vehicles, and a confusing array of brands, said yesterday it will cut 25,000 manufacturing jobs over the next three years.

In addition, the company, which has the capacity to build far more cars than it can sell, said it will close an undisclosed number of assembly and parts plants in a bid to save $2.5 billion a year. It had already said health costs need to be trimmed and that the range of cars from brands such as Buick and Pontiac would be cut back.

Changing customer perceptions about the company's products will be a challenge. GM has demonstrated that it can turn a brand around with its bold redesign of the Cadillac line. But the company has been dogged by questions of reliability, despite a steady rise in quality rankings issued by ratings firms such as J.D. Power and Associates.

America's Big Three automakers continue to lose market share to foreign manufacturers -- particularly Toyota -- and those foreign builders have stepped up the construction of highly modernized plants in the United States. Sales of GM's most profitable products, its sport-utility vehicles, have dropped because of vastly expanded competition in that segment, and rising gasoline prices.

GM lost $1.3 billion in the first quarter of this year, its biggest quarterly loss in 13 years. Its US sales are down 6.7 percent this year, and its market share has slipped from 27.0 to 25.4 percent in the past year.

At the end of last year GM had 150,000 US jobs, 110,000 of them hourly workers. Its 30 North American assembly plants worked at 85 percent capacity last year, according to a Harbour Consulting survey released last week. In addition, Harbour, a manufacturing and management consulting group based in Troy, Mich., reported it takes 27.9 man hours per vehicle to build a Toyota at one of that company's North American plants. For GM, the figure is 34.3 man hours, driving up costs and vehicle price tags.

While there is demand for about 5 million GM vehicles per year, the company could build 6 million. GM chairman and chief executive Rick Wagoner said GM capacity would fall to 5 million by the end of this year.

Stephen Girsky, a Morgan Stanley analyst, in a posting labeled, ''GM: Small Step in the Right Direction," said that it was significant that GM recognized that its financial problems are ''not just about healthcare. Revenue improvements and cost improvements will be necessary."

He warned, however, that $2.5 billion in annual savings may not be reachable until 2008. Wagoner said healthcare costs -- about $5 billion per year for 1.1 million workers, retirees, and their families -- adds $1,500 to the price of each GM vehicle built. The company has asked the United Auto Workers union for health cost concessions.

GM has no manufacturing plants in New England. It closed its auto assembly plant in Framingham, which employed 1,300 workers, in 1989.

GM stock rose 31 cents to close at $30.73 yesterday on the New York Stock Exchange.

The notice of intent to cut costs, plants, and people -- delivered by Wagoner at the company's annual shareholders' meeting in Wilmington, Del. -- follows an earlier declaration that GM would trim its product offerings in response to analyst and dealer complaints. Critics say GM, whose product lines include Cadillac, Chevrolet, Pontiac, Saturn, Buick, GMC, Saab, and Hummer, has been building too many versions of virtually the same car across its brands.

The company said it would continue a full range of Chevrolet and Cadillac models, using them as bookends to slimmed down model lines from Buick, Pontiac, and GMC, with Saab and Hummer serving their niches. Pontiac, for instance, likely will focus on performance cars in much the same way Dodge cars have been reborn as a hot-rod brand under DaimlerChrysler.

Cars with an edge -- such as the reborn Cadillac -- are what GM needs, said Herb Chambers, one of New England's largest automobile dealers. Chambers owns 27 auto dealerships, many of them for foreign brands such as Toyota, Honda, Lexus, and Mercedes. He also owns Cadillac and Saturn dealerships, and he is negotiating the purchase of a Danvers dealership that sells such brands as Chevrolets and Pontiacs.

A generation ago, ''the quality wasn't where it should be," Chambers said of GM. ''And they got caught by the Japanese and the Germans."

In the last decade, GM has made dramatic progress in narrowing the quality gap, Chambers said. But until recently, GM made products that many Americans didn't want.

''They don't want their father's Oldsmobile," Chambers said of US consumers. ''They want cars that look beautiful -- like Infiniti, Lexus, and Mercedes."

''You've got to build cars that people say, 'I want that.' For many years, [GM] built cars that all looked alike."

George Magliano the director of North and South American automotive industry research for Global Insight, an economic forecasting firm, agreed with Chambers.

''GM got into this predicament because of the fundamental weakness of their product line-up," he said. ''In recent years, their product has not been well received by the consumer."

The automaker's plan to eliminate some offerings is an idea that appeals to Jeffrey E. Hodgdon, vice president of Hodgdon-Noyes Buick/Pontiac/GMC in Arlington.

He said that Buick already has replaced its Century and Regal cars with a single car called the LaCrosse, which has easily sold as well as the other two combined. And he expects the new Lucerne, which is replacing the Park Avenue and LeSabre, to perform as well.

He said it has been frustrating as GM spread various types of basically the same automobile -- such as minivans and SUVs -- throughout all its brands.

He recalled attending a dealers meeting and seeing competing GM minivans from Chevrolet, Buick, Pontiac, and Saturn that were virtually the same vehicle with minor styling differences.

''You talk about duplication," he said, of GM vehicles that compete against each other.

Royal Ford can be reached at ford@globe.com.Chris Reidy of the Globe staff and Globe wire services contributed to this report.