A US bankruptcy judge has provisionally granted bankrupt car parts maker Delphi Corp permission to end health care and life insurance benefits for its retired salaried workers as of April, but left a door open for some former employees to be excluded from the move.

Under its Chapter 11 filing for bankruptcy protection, Delphi, one of the biggest suppliers to ailing car major General Motors, sought relief from the benefits which cost it more than $70 million per year. The benefits amount to liabilities of more than $1.1 billion on its balance sheet.

Citing Delphi's need to conserve liquidity, Judge Robert Drain of the bankruptcy court of the Southern District of New York said that the company had waited for a sufficient time before seeking to suspend the benefits.

Delphi, which filed for Chapter 11 in 2005, has had complications with its exit financing over the last year and recently said former parent General Motors Corp was in talks to buy back parts of the company.

Lawyers for about 15,000 salaried retirees had argued that parts of the US bankruptcy code limited the ability of a debtor in possession to modify retiree benefits, but Delphi countered that those benefits are provided "at will''. Judge Drain seemed to agree, ruling that the code only applied when retirees could prove they have a guaranteed right to those benefits.

"It is crystal clear to me that debtor is well within its business judgment in assuming that it will need to eliminate the projected (post-retirement benefits) liability, which is projected at $1.1 billion, in order to reorganize," Drain said.

Troy, Michigan-based Delphi also sought to stop providing similar benefits to future salaried retirees and post-retirement life insurance benefits to its current and future retirees.

Drain ordered a committee be formed to see whether any group of employees may be vested in the plans and have guaranteed rights to the benefits. He granted the committee a budget of $200,000 and set a hearing date of March 11 for it to present its results.

"The consequence of the court being wrong is pretty serious," Drain said.

"No company is ever satisfied with having to cut benefits," said Jack Butler, Delphi's bankruptcy lawyer. "But we appreciate the judge concurring with our business judgment."

Delphi and other auto parts makers are under intense pressure after steep production cuts from all three US automakers. In early February, Delphi warned that the value of its business would be substantially below the $6.3 billion it had estimated in October.

The company wants to cut off the benefits effective 1 April. But before it does, Drain said the 15,000 affected retirees can form a committee to investigate if certain retirees, such as those who were on disability before their retirement, have the right to negotiate with the company before it can terminate their benefits.

The committee also will check if some retirees can qualify for a federal tax credit that pays 65 per cent of their health care premiums if their pensions are ultimately turned over to the Pension Benefit Guarantee Corp.

Delphi executive chairman Steve Miller testified that Delphi is still in talks GM about the automaker taking over plants that make key parts for its vehicles. But Miller cautioned that the discussions are "far from complete" and a deal isn't certain.

More than 1,600 retirees sent letters to the judge in recent weeks begging him to deny Delphi's request to cut their benefits. Attorneys representing them wouldn't immediately say whether they planned to appeal Drain's ruling.

Delphi's salaried retirees hired before 1993 and their survivors currently receive health insurance benefits until the age of 65 when they become eligible for Medicare. Under the changes Delphi has requested, those retirees will have to pay the full cost of their health insurance, which could amount to more than $1,000 per month for a retiree and spouse.

Tuesday's ruling doesn't affect retirees who were covered by union contracts. Delphi's unions made wage and benefit concessions in their 2007 agreements with the company.