The largest U.S. auto supply company filed for bankruptcy Saturday, sending ripples through the U.S. car-making industry, already beset by falling market share and high labour costs.

The bankruptcy of Delphi Corp. is one of the largest in U.S. history.

Delphi Corp. CEO Steve Miller (AP Photo/Carlos Osorio)

The company filed to reorganize its American operations in federal bankruptcy court in New York, where hearings were to begin next week. Delphi's non-U.S. operations were not included in the filing.

Delphi Chairman and CEO Robert S. Miller said the company hopes to emerge from Chapter 11 in early to mid-2007.

Miller, a restructuring expert hired to save Delphi in July, had threatened to take the company into bankruptcy if he failed to reach a restructuring agreement with Delphi's former parent, General Motors Corp., and its largest union, the United Auto Workers.

Miller said Delphi will continue negotiating with GM and the UAW to lower its labor costs. He said the three parties agreed to continue their discussions after a bankruptcy filing.

Miller said nothing will change immediately. He said Delphi will continue to pay its 50,000 U.S. employees and suppliers and will ship its products on schedule.

The Delphi chairman said: "We are not going to adversely affect our customers. Our people will get their pay checks and will still have their health benefits. Retirees will continue to get their checks. Any changes to that will be dealt with in an orderly way."

Delphi has 31 plants in 13 states, including Michigan, Ohio, Alabama and California. The company has 185,000 employees worldwide.

Delphi will finance its operations with $4.5 billion in loans, including up to $2 billion in debtor-in-possession financing from a group led by JPMorgan Chase Bank and Citigroup Global Markets Inc.

Delphi -- based in Troy, a suburb of Detroit, Mich. -- has struggled to make a profit since GM spun it off in 1999. It lost $4.8 billion in 2004 and nearly $750 million in the first half of this year.

Delphi had $16.5 billion in total assets as of June 30, and has total debt of $6 billion. The company had $4.3 billion in unfunded pension liabilities at the end of 2004, according to a filing with the U.S. Securities and Exchange Commission.

Delphi has struggled with the high cost of steel and other raw materials as well as cuts in U.S. auto production.

Delphi blamed its spinoff agreement with GM for saddling it with high labor costs.

Under the agreement, Delphi is required to pay GM wages of $27 an hour to most of its 24,000 UAW-represented workers. That's double the level of competing suppliers, according to Standard & Poor's Ratings Services.

Delphi also had to pay full wages and benefits to 4,000 laid-off workers in jobs banks, which cost it $400 million each year.

Delphi has 30,000 U.S. hourly employees and 12,000 hourly retirees. About 6,000 hourly employees are represented by other unions, including the International Union of Electronic Workers/Communications Workers of America.

Under a bankruptcy filing, Delphi could shift at least some of its pension liabilities to the federal government's Pension Benefit Guaranty Corp. and could get the court to order lower wages and benefits for the UAW and higher costs for its parts.

Under the spinoff agreement, GM is liable for some of Delphi's pension obligations if Delphi is in bankruptcy. In a note to investors, Merrill Lynch analyst John Casesa said GM could be liable for $4.4 billion to $6.7 billion worth of pension and health care benefits.

Delphi and GM have been tightlipped about the negotiations. But a letter from UAW leaders to union members in Kokomo, Ind., this week said Delphi asked the UAW to accept wage cuts of more than 50 percent, to $10-$12 an hour, and eliminate the jobs bank. Delphi also called for a reduction in health care benefits and vacation time.

Delphi has been plagued by an accounting scandal that the FBI and the SEC are now investigating. Six people resigned because of the investigation, including Delphi's former Chief Financial Officer Alan Dawes.

The largest corporate bankruptcy in the U.S. was WorldCom Inc., which had $103.9 billion in pre-bankruptcy assets.