updated 3/30/2006 3:13:28 PM ET 2006-03-30T20:13:28

In a move that would send shudders through an ailing U.S. auto industry, Delphi Corp. was expected to ask a federal judge to cancel its union contracts Friday following months of trying to reach an agreement with General Motors Corp. and its unions to lower workers’ wages.

Delphi, the largest U.S. auto supplier, had set a deadline of Thursday to reach an agreement to lower wages for its 34,000 U.S. hourly workers, but it appeared unlikely Delphi would meet that goal since the United Auto Workers and GM hadn’t agreed to Delphi’s latest wage proposal as of Thursday afternoon.

In a message on its Web site Thursday, the United Auto Workers said Delphi would file motions to void its contracts on Friday morning. Delphi spokesman Lindsey Williams said the company wouldn’t comment on that posting.

Williams said Delphi was still in talks with GM and its unions as of Thursday afternoon and hadn’t set a deadline for those talks to end. On three other occasions, Delphi has delayed filing motions to cancel its contracts to continue negotiating with GM and its unions. The company has the option of delaying again.

Delphi insists wage cuts are a necessary part of its restructuring. The company, which filed for bankruptcy protection in October, says it was saddled with uncompetitive labor agreements when it spun off from GM in 1999. Delphi says it is now paying workers $75 an hour in wages and benefits.

But the UAW, which represents most of Delphi’s hourly workers, reacted angrily this week to Delphi’s latest proposal, which calls for lowering workers’ wages from $27 an hour to $16.50 an hour in 2007. Local union leaders have said the UAW won’t take the deal to its members for a required vote.

GM’s cooperation in a settlement also is key, since Delphi would depend on GM, its former parent and largest customer, to supplement its wage offer and pay for one-time, $50,000 bonuses to union members. If GM doesn’t agree to supplement workers’ pay, there would be no bonuses and wages would fall to $12.50 an hour, according to the UAW.

GM spokesman Jerry Dubrowski said was no settlement as of Thursday afternoon, but he confirmed all three parties were still in negotiations.

If Delphi asks the bankruptcy court judge to void its contracts, the company wouldn’t immediately face organized strikes. Judge Robert Drain has scheduled a hearing on Delphi’s request for May 9 and wouldn’t decide whether to void Delphi’s contracts until after that hearing.

But if Drain does agree to void Delphi’s contracts, the International Union of Electronics Workers-Communications Workers of America — which represents around 8,000 Delphi workers — has already authorized a strike and UAW members could authorize one as well.

A strike would be devastating for GM, which depends heavily on Delphi parts. GM, which is struggling with declining U.S. market share and spiraling costs, lost $10.6 billion in 2005 and is in the midst of its own restructuring. A strike would hurt other companies and smaller suppliers, also. Delphi supplies every major automaker, including Ford Motor Co. and Nissan Motor Co.

Delphi wouldn’t be the first U.S. auto supplier to ask a judge to cancel its union contracts this year. Tower Automotive Inc. asked a judge to cancel its union contracts in late February after failing to agree on lower wages. The judge in that case has put off a decision to allow Tower to continue negotiating with its unions, which also have threatened to strike.

Delphi, GM and the UAW did agree last week to a buyout offer for approximately 17,000 U.S. hourly workers. Under that agreement, workers will be eligible for a lump sum payment of $35,000 to retire. Also, up to 5,000 Delphi workers will be eligible to return to GM.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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