Delphi's bankruptcy while not a surprise, has got observers worried

In several interviews Steve Miller warned pension liabilities are pushing firms close to the brink of collapse.

Unions must relax their pension and healthcare demands if companies are to compete and succeed, he added.

Mr Miller is trying to secure Delphi's future and is looking to cut costs and secure long-term contract commitments.

'Staggering legacy'

Delphi, which posted a loss of $741m (�421m) in the first half of 2005, filed for Chapter 11 bankruptcy protection on Saturday.

Chapter 11 allows a company to continue trading as it sorts out its financial affairs.

My worries go beyond the industry ... The problem will only grow Steve Miller, Delphi

Talking to the New York Times, Financial Times (FT) and Bloomberg, Mr Miller added that other firms including General Motors (GM) were also experiencing problems.

GM could be forced to file for bankruptcy unless it managed to secure wage and pension concessions from unions by 2007, he warned.

"GM has already declared it can't wait till then to trim its $80bn of accrued retiree health care obligations," he told the FT.

"They are headed down the same Chapter 11 path as Delphi, unless there is dramatic change in their staggering legacy labour burden."

Business links

Delphi has a very close relationship with GM - which spun it off in 1999 - relying on the group for almost half of its sales.

Car firms are finding it increasingly difficult to lure consumers

However, that means GM would suffer should Delphi's flow of parts dry up.

While Mr Miller said he wanted to inflict "minimal damage" on GM, he told the New York Times that Delphi's sales are likely to be slashed to $20bn from the current $28bn a year.

GM shares tumbled 10% on Monday after it emerged a deal it agreed with Delphi may force it to pay out billions to support the company's pension-holders should the parts firm go bust before 2007.

Greater risks

Bank of America Securities analyst Ronald Tadross said he now believed the chances of GM filing for bankruptcy in the next two years has increased from 10% to 30%.

"It is our view that bankruptcy protection for GM is increasingly looking like a reasonable way to properly address the company's retirement liabilities and job security benefits," he said.

The unions are involved, because our labour contracts are simply unaffordable and must be changed Steve Miller, Delphi

Mr Miller told the FT he was trying to secure guaranteed contracts worth $1bn a month from GM as part of a rescue plan for Delphi - something a GM spokesman said the firm was unlikely to be able to guarantee.

Mr Miller also said he was continuing talks with unions in the hope of prolonging Delphi's life.

"The unions are involved, because our labour contracts are simply unaffordable and must be changed," he told the FT.

"My worries go beyond the auto industry," he continued. "The problem will only grow.