Delphi Corp. said Tuesday that its third-quarter net loss narrowed due to smaller expenses related to its reorganization under bankruptcy protection, but it continued to struggle against the effect of auto industry production slackness in North America.

Troy-based Delphi, the former parts-making operation of General Motors Corp., lost $1.2 billion or $2.08 per share, compared with a loss of $2 billion or $3.51 per share in the third quarter of 2006.

The latest loss included an accrual of $369 million for interest expenses related to its bankruptcy reorganization plan, $124 million in charges for warranty matters and $112 million in costs including benefits for employees who have been let go.

It also included charges of $244 million for programs to train U.S. employees for new careers, down from $1 billion a year earlier.

In a filing with the Securities and Exchange Commission, Delphi said production cuts at GM, Ford and Chrysler, rising commodity prices and high labour costs were to blame for its ``poor financial performance.''

But Delphi said union concessions approved this year will improve its competitiveness.

``We are beginning to see the benefits of decreased labour costs, primarily through lower costs of sales and the resultant improvement in gross margin,'' Delphi said.

``However, we still have future costs to incur to complete our transformation plan, divest of non-core operations and realign our cost structure.''

Delphi reported revenue of $6.2 billion in the third quarter of 2007, up about three per cent from $6 billion in the same three months in 2006.

GM remains Delphi's biggest customer, and the supplier said its future remains tied to GM. Non-GM revenue was $3.6 billion, 58 per cent of the total, up from $3.4 billion in the third quarter of 2006.

``Delphi is facing considerable challenges due to revenue decreases and related pricing pressures stemming from a substantial reduction in GM's North American vehicle production in recent years,'' Delphi said in the filing.

Delphi, spun off by GM in 1999, filed for bankruptcy in 2005. It plans to emerge from bankruptcy early next year.

Its reorganization program includes closing or selling 21 of its
29 U.S. plants as it shrinks to eight factories making electronics,
safety systems, heating and air conditioning systems and some
mechanical parts.