Delphi is planning to cut 25% of its workforce

Delphi, which is in bankruptcy protection, is trying to reduce its liabilities as it attempts to restructure its business.

Delphi said it would seek a court order to annul "unprofitable" GM contracts and scrap labour agreements.

The firm also plans to cut 8,500 jobs and close a number of factories.

Negotiation hope

Some analysts have speculated that GM's financial liabilities stemming from its relationship with Delphi could force it into bankruptcy.

Earlier this month, GM warned that its Delphi-related liabilities - also including pension and healthcare costs - could rise as high as $12bn.

We disagree with Delphi's approach Rick Wagoner, GM chief executive

GM said it was "disappointed" with Delphi's decision but stressed that it still hoped to reach a negotiated agreement with Delphi and its unions.

"We disagree with Delphi's approach but we anticipated that this step might be taken," said GM chief executive Rick Wagoner.

"GM expects Delphi to honour its public commitments to avoid any disruption to GM operations."

Delphi is seeking court approval to void about 10% of its existing GM contracts - which it says are highly unprofitable - and has written to the car giant to try to renegotiate about 400 other contracts.

'Difficult decisions'

An initial court hearing has been scheduled for early May.

Delphi said it was still committed to negotiating an agreement.

"Emergence from the Chapter 11 process in the US requires that we make difficult, yet necessary, decisions," said chairman and chief executive Robert Miller.

As part of a radical restructuring, Delphi plans to sell off or close all but eight of its factories by the start of 2008.

It also plans to eliminate 40% of management positions.

Delphi sought bankruptcy protection in October, saddled with huge pension and employee healthcare costs.