The cloud of bankruptcy speculation hanging over Delphi ( DPH) thickened Friday as details of the financially shaky auto-parts supplier's tough stance in labor negotiations became public.

The company, a spin-off from General Motors ( GM) and a chief supplier to the world's largest automaker, has reportedly asked the United Auto Workers union for wage cuts of more than 50%. Delphi also wants to eliminate pay for laid-off workers and cut vacation packages as a way to avoid filing for Chapter 11.

"Delphi is playing a game of chicken here," said Burnham Securities analyst David Healy. The company's shares were recently down 69 cents, or 31%, to $1.51.

Hourly workers at Delphi make a minimum of $14 an hour, but the average pay rate is around $26 an hour. Delphi is looking for wage cuts to as low as $10 an hour. Meanwhile, its parent, GM, has refused to come to its aid.

The automaker, currently staggering under its own bloated cost structure, could have to bail out Delphi or take back a lot of high-paid workers in the event of bankruptcy. By some estimates, GM could be responsible for as much as $6 billion to $7 billion in Delphi employment costs.

"My assumption is that Delphi will file for bankruptcy," said Morningstar analyst John Novak. "On one hand, this could weaken the UAW, because it shows that Delphi and GM are playing hardball and they're willing to take some pain in order to achieve real restructurings that can make them competitive in the long run.

"On the other hand, this raises the possibility of a labor strike," Novak said. "That could pose a serious problem for these guys."

In another possible sign that bankruptcy may be near, Delphi disclosed that its board's compensation committee reviewed the company's separation policies for executives and found problems. As a result, the company entered severance-payment accords with 21 individuals, including some executives. Chairman and Chief Executive Robert Miller wasn't part of the changes.

Delphi lost $4.87 billion in 2004 and another $747 million in the first half of this year. The company has said publicly that it would file Chapter 11 unless it received bailout funding from GM and labor concessions from the UAW. Delphi set a deadline of Oct. 17, when U.S. bankruptcy laws stiffen, for negotiations to make progress.

In addition to pay cuts, Delphi wants to close least 11 U.S. plants and cut about 11,000 of its 35,000 UAW employees, according to The Detroit News.

On Thursday, Standard & Poor's cut Delphi's credit rating one step further into junk status, citing concerns that time is running out in the negotiations.

"Although a potential deal is still possible, it now appears less likely because of the complexity of the issues involved and the very limited time frame remaining to reach an agreement," S&P said in a press release.