Delphi Corp. is asking the United Auto Workers (UAW) union for wage cuts of more than 50% and wants to axe pay for laid-off workers as it tries to stave off bankruptcy, according to a letter from UAW leaders seen by The Associated Press (AP).

The letter from UAW Local [branch] 292 in Kokomo, Indiana, which AP noted was posted on a union website, said Delphi wants to cut wages from $US27 an hour to $10-$12 an hour and eliminate a jobs bank that gives full pay to 4,000 laid-off workers – Delphi has about 25,000 UAW-represented workers.

Delphi also wants to reduce health care benefits and vacation time for its hourly workers as part of a restructuring deal, the letter said, according to the news agency. The company also wants the right to close or consolidate plants.

“It is clear that in one form or another, there is a restructuring of Delphi forthcoming and it will have a dramatic impact on UAW members,” the letter reportedly said.

The Associated Press noted that Troy, Michigan-based Delphi has threatened to declare bankruptcy by October 17 if it fails to reach an agreement with GM and the UAW to reduce its labour costs.

US bankruptcy laws are scheduled to change on that date, and Delphi has said the changes will make bankruptcy more difficult, the report added.

According to the Associated Press, in a note to investors, JPMorgan Chase & Co. analyst Himanshu Patel said the letter indicates that GM expects the UAW to make most of the concessions Delphi needs and has not yet agreed to provide billions of dollars in relief to the supplier.

GM spun off Delphi in 1999, and under that agreement, GM would be liable for some of Delphi’s pension costs if the supplier declared bankruptcy, AP noted.

Standard & Poor’s Ratings Services lowered Delphi’s credit rating, saying it is increasingly concerned the auto supplier could file for bankruptcy in the next few days, the Associated Press said.