General Motors ( GM) may have finally closed the book on its annual report for 2005, but the world's largest automaker remains in a tussle with organized labor, and its standing with investors is still on shaky ground.

The contents of the 10-K filing late Tuesday did little to patch up GM's credibility issues. Aside from the dismal sales and profit figures it had already reported for last year, GM revealed further accounting errors at its residential mortgage division. It also reported increased scrutiny of its financials from federal regulators and cast a veil of uncertainty over its ongoing attempts to sell a majority stake in GMAC, its finance subsidiary.

Amid all these problems, GM finds itself at a crossroads with respect to the bankruptcy of its former subsidiary Delphi ( DPHIQ). With a Friday deadline looming, the automaker needs Delphi to reach an agreement with the United Auto Workers union to lower wages paid to its hourly employees. If the sides don't reach an accord, GM faces the prospect of a labor strike at it largest auto-parts supplier -- an event that could result in calamity for the company and the broader financial markets.

The three-way negotiations between GM, Delphi and the UAW appeared to be showing progress last week when the companies announced a plan to offer buyout packages to thousands of workers in return for early retirement. But on the thornier issue of wage cuts for Delphi's hourly workers, the company's latest proposal on the table has been so far rejected by the union.

"While we still believe that GM, Delphi and the UAW will eventually come to terms and a strike will be averted, we believe tensions will intensify in the near term," said Deutsche Bank analyst Rod Lache in a research note.

According to several media reports, Delphi's proposal included cutting hourly wages at its surviving plants to $22 from about $27 this summer, followed by a further decrease to $16.50 to be phased in next fall. In addition, the plan reportedly required workers to pay higher health care premiums and included $50,000 in incentive payments to workers to sweeten the deal.

This marked a partial retreat from Delphi, which had previously offered to cut wages to $12.50 an hour, but various unions representing Delphi workers were reportedly opposed Tuesday to the latest proposal. The auto-parts supplier has insisted that it must lower its labor costs as part of its restructuring in bankruptcy. If no agreement is reached this week, Delphi is threatening to file papers in the bankruptcy court to start the process of rejecting its labor contracts -- a move that could provoke devastating work stoppages.

For its part, GM has said it will be liable for anywhere between $5.5 billion and $12 billion in costs related to Delphi's bankruptcy. It also agreed to shoulder some of the costs of the buyout packages, wages and other financial incentives offered to Delphi workers. In the event of a strike at its largest parts supplier, the automaker's production lines would be crippled and its sizable cash cushion, GM's main bulwark against a liquidity crunch, could rapidly disappear.

The prospect of bankruptcy at GM, one of the largest issuers of corporate debt in the world, has been raised routinely on Wall Street since the major agencies reduced its credit rating to junk status last year. With its sales slumping and its market share dwindling, the company has consistently disappointed Wall Street as it struggles under the weight of its spiraling cost structure.

GM posted a loss of $10.6 billion for 2005 after its chairman and chief executive, Richard Wagoner, had predicted in January of last year that it would earn $4 to $5 a share. In February, the company reported a loss of $8.6 billion for the year, but it revised that figure two weeks ago, further hurting its credibility.

On Tuesday, GM stated in its annual report that it received a subpoena from a federal grand jury investigating its handling of payments from suppliers. That brings the number of subpoenas being juggled by GM to six from the Securities and Exchange Commission and two from federal grand juries. The subpoenas reflect widespread scrutiny of various aspects of GM's accounting practices, but no one at the company has been accused of wrongdoing.

GM also said its board of directors concluded early this week that the company's financial statements for the years 2004, 2003 and 2002, and statements for the first three quarters of 2005, couldn't be relied upon because of accounting errors. It filed corrected statements for each of those periods. Amid all these issues, GM said it found "material weaknesses" and "significant deficiencies" in its accounting controls.

Some of GM's accounting issues stemmed from problems at GMAC, the automaker's only profitable division of late. GMAC said issues were uncovered at ResCap, the residential mortgage division, related to cash outflows concerning certain mortgage loan originations and purchases that weren't appropriately classified.

Meanwhile, GMAC deflated hopes of some investors who had expected a sale of the finance arm to be announced any day now. The company said "we are uncertain at this time if any transaction" will occur for GMAC or any of its subsidiaries. GM has been trying to unload the finance business, long its only profitable unit, as an attempt to free it from the parent's bad debt ratings.

"Even if a third party acquires a controlling interest in us, or if a transaction is completed with respect to ResCap, there is the possibility that these initiatives will not restore our credit rating or maintain ResCap's credit rating at investment grade," GMAC noted in its filing.

"Language in the filing seems to suggest that the deal is not imminent and may not happen at all," Lache said. "Since the company appears to have suggested to the rating agencies that it expects resolution by the end of the first quarter , we perceive elevated risk surrounding the sale."

Shares of GM were recently down 60 cents, or 2.6%, to $22.15. Aside from the ongoing issues, the shares were also hit Wednesday after Standard & Poor's said it is reviewing whether to cut GM's ratings even further.