Delphi Corp. (DPH) Monday posted a second-quarter loss on production cuts by major customer General Motors Corp. (GM) and said it may have to file for bankruptcy if it cannot reduce high wage and benefit costs.

The largest U.S. auto parts supplier, whose shares fell nearly 14 percent, said it expects continued year-over-year declines in North American vehicle production this quarter, hurting revenue and margins.

"Clearly Delphi is under pressure here, and their threat (of bankruptcy) is a real threat," said Tim Ghriskey, chief investment officer for Solaris Asset Management. "Theiion, Delphi said.

Besides lower production from GM, high commodity costs and increasing costs for pension and health care benefits contributed to the quarterly loss, Delphi said. The company's non-GM business outside the United States performed well.

Delphi, which has struggled to become profitable since GM spun it off in 1999, is in talks with the world's largest automaker and the United Auto Workers (search) union about cutting high U.S. wage and benefit costs to try to avoid bankruptcy.

The company wants the right to close underperforming plants and cut about 4,000 inactive union workers, although the discussions include the entire U.S. work force, acting Chief Financial Officer John Sheehan told Reuters.

"We are not able to fix, sell or close a facility without the agreement of the union," Sheehan said. "We want to be able to take the actions that a management team needs to take in response to a changing industry environment."

Delphi has sufficient liquidity to finance its operations during the period of its discussions with the unions and GM, Sheehan said.

Delphi said it would consider a Chapter 11 bankruptcy reorganization (search) of U.S. operations if it cannot cut wages and benefits. In a quarterly regulatory filing, the company said a change in U.S. bankruptcy law should reduce the flexibility of corporations that file for bankruptcy protection after Oct. 17.

Troy, Michigan-based Delphi inherited union contracts from GM requiring it to pay wages at the much higher automaker level, putting it at a competitive disadvantage against other parts companies.

The company has about 48,690 U.S. employees, including 34,000 unionized hourly workers. The UAW represents about 24,800 of the union workers.

If Delphi reaches agreements with the UAW and GM, it would be the second such three-way pact in recent months after parts maker Visteon Corp. struck a deal with Ford Motor Co. (F) and the union in May.

Visteon Monday posted a $1.2 billion net loss after $1.1 billion of charges from the agreement, which it expects to close by the end of September.

On Friday, Delphi said it had started to draw down a revolving credit facility in connection with the talks with GM and the UAW, a tactic companies use at times to pump up cash before a bankruptcy filing.

Credit and stock analysts said the drawdown was a message to GM and the unions about the seriousness of Delphi's financial condition and the urgency for a deal. The three major ratings agencies all downgraded the company's credit.

Delphi said it expects third-quarter revenue of $6.1 billion to $6.3 billion, below analysts' expectations of $6.56 billion. The company sees negative cash flow for the period.

Shares of Delphi were down 68 cents, or 13.7 percent, at $4.28 in morning New York Stock Exchange trade. Through Friday, the stock was off 45 percent for 2005, while the Standard & Poor's 500 index was up about 1.2 percent.