Delphi has taken a key step towards emergence from Chapter 11 by settling all its outstanding disputes with former owner and still (by far) its major customer GM.

The resolved issues include future pricing of components, GM's contribution to Delphi's future labour costs and commitments by the carmaker for the future parts business.

Details of the pricing arrangements are not known.

GM had demanded significant price reductions. The carmaker will receive a USD2.7bn cash payment in settlement of its claims, as well as a USD1.5bn interest-bearing note in return for assuming Delphi's under-funded pension obligations.

GM has said that it expects to spend about USD7bn to fund retirement and severance packages at Delphi, as well as to subsidise pensions and wages for remaining unionised workers.

Delphi said it is talking to a consortium of banks and is confident it will have commitments for the USD7bn early in the fourth quarter.

Delphi's agreement with GM follows pacts reached with all six of Delphi's labor unions as well as a finalised deal for investors to invest as much as USD2.55bn.

Rodney O'Neal, Delphi CEO and president said: "Each of the numerous moving pieces to our transformation are coming together. In recent months, we have announced a new equity investment agreement with our Plan Investors and agreed on consensual distributions with our Statutory Committees for both our creditors and equity holders.

"Additionally, we completed our labor transformation with our six U.S. unions, settled complex multi-district ERISA and securities litigation, and finalised comprehensive settlement and restructuring agreements with GM. While achieving these transformation objectives, we also continued to support our customers and deliver operational excellence every step of the way. Delphi has made great progress toward its stated transformation goals and is intensely focused on completing the remaining items in order to successfully emerge from Chapter 11 as a more competitive technology leader."