GM is already in trouble amid mounting North American losses

Delphi - once a GM subsidiary - said on Saturday that it was seeking protection from its creditors.

The move, analysts said, could spell trouble for GM, which had agreed to support Delphi pension-holders if the parts firm went bust before 2007.

At the same time, auto parts firm Dana said it would have to restate its earnings because of Delphi's problems.

Dana said it had found weaknesses in its accounting of customer pricing and transactions with suppliers in its commercial vehicles business, covering 2004 and the first half of 2005.

Less than a month earlier, the firm had said its earnings for the rest of 2005 would fall short of forecasts because of rising steel and energy costs. It has now postponed its third-quarter earnings announcement.

Industry in crisis?

Dana's news - the latest instalment in a string of problems for the car industry - saw its shares slide more than 34% to close at $6.04 in US trade.

Delphi's bankruptcy filing could mean massive job losses

Among the US industry's recent woes have been poor results for major auto companies including GM, the biggest carmaker in the world and one of Dana's customers.

GM lost $2.5bn on its North American operations in the first six months of 2005.

The carmaker's shares fell 10% to $25.48 at the close of trade in New York as a key investment bank warned it could be at risk.

Downgrading GM's stock from "hold" to "sell", Bank of America said it was raising its estimate of the probability that the car giant itself would go bankrupt from 10% to 30%.

As for Delphi, the troubled parts firm is now seeking to scrap its deals with its workforce as part of a wholesale restructuring.

The company is talking to unions which represent about two-thirds of its 50,600 employees, in the hope of getting an agreement by 16 December to scrap plants, sack thousands of workers and cut the wages and benefits of those who remain.