At the conclusion of a nearly four-hour hearing, Drain said in a ruling from the bench that Delphi had a right to terminate health and life insurance benefits and that they were not vested benefits. He said Delphi's view was the 'right one' representing the majority viewpoint of the courts. Drain acknowledged there was conflicting authority' on the question.

But Drain acknowledged the ruling would affect some retirees 'in very dire ways.'

Delphi, which sought bankruptcy protection in October 2005, has struggled to obtain financing to emerge. In the face of a sharply lower auto market, it has sought to conserve cash, requesting to cut off benefits on Feb. 4.

Delphi's 'short-term liquidity needs require marshaling available cash as quickly as possible,' the company said in a court filing Monday.

About 1,600 Delphi retirees filed objections and some retirees attended today's hearing that's underway in U.S. Bankruptcy Court. Three separate law firms retained by retirees have filed formal objections.

The case seemed to hinge on a 1980 General Motors Corp. benefit handbook and other older documents that assured salaried employees would get retiree health benefits for life. But Delphi points to more recent documents that repeatedly reflect the company's contention that it could modify or end benefits unilaterally.

First on the witness stand was Delphi executive chairman Robert S. 'Steve' Miller, who defended the decision noting 'the harsh economic reality' that Delphi faces.

'We are very aware that this would be a significant hardship for our retirees,' Miller, the former Delphi CEO, said. 'I do have some friends who are retirees who have expressed their concerns to me.'

Delphi's lead bankruptcy attorney Jack Butler said the company was taking this step as a last resort and warned that the company's future was tenuous. 'If we don't do this right, there's going to be a real problem,' he said.

Miller confirmed that the automaker is in talks about transferring some U.S. plants to its former parent GM.

'We are in discussions with General Motors about the possibility of their taking possession of the plants, but those discussions are far from complete and far from any certainty that will occur,' Miller told the court.

He said that Delphi would likely see a spike in health care costs in March if Delphi won permission to end benefits. That brought a sharp retort from Dean Gloster, a San Francisco lawyer for the salaried retirees, who noted that retirees would be 'scheduling cancer surgery while they still have life insurance.'

But Gloster acknowledged they will have to make sacrifices. 'We are not under illusions that Delphi has stacks of money that we just haven't found yet,' he said.

Two Delphi retirees briefly took the witness stand this morning, while several others were in the courtroom.

David Blaze, who went to work for General Motors Corp. at General Motors Gear and Axle in Hamtramck in 1963 before retiring from a subsidiary in 2000, said the elimination of the benefits would be devastating to the family budget.

Blaze, 67, said in a letter to U.S. Bankruptcy Judge Robert Drain that his 63-year-old wife would be without benefits for two years. 'Judge Drain, please reconsider Delphi's request to bailout on their responsibilities,' Blaze wrote.

Another objection from New York state Sen. George Maziarz said many of his constituents in the Buffalo-area would lose their health and life insurance benefits.

Delphi estimates that it will cost the average retiree between $305 and $666 a month to maintain coverage, while a family could see yearly premiums of up to $22,400. Dental coverage would add another $44 to $123 per month, depending on whether an individual or family sought coverage.

Christopher Voydanoff Jr., 55, who retired after Delphi closed its Flint East engineering center last year. 'The elimination of these benefits would create undue hardships on the thousands of current retires including myself and family,' said Voydanoff, of Mio.

Delphi wants to be able to cut off benefits by April 1 and end future retiree health care and life insurance benefits to current salaried employees. The move would save $200 million through 2011 and cut the company's long-term liabilities by nearly $1.2 billion.

In a court filing late Monday, Delhi said it 'acknowledges and recognizes the hardships that terminating the (benefits)' will impose on its retirees.

Some Delphi retirees now argue they would not have agreed to early retirements or buyouts if they had known that Delphi would cancel their health and life insurance benefits.

But Delphi argues that it has the legal right to terminate its retiree benefits -- with the exception of its pension plans -- unilaterally because they aren't 'vested benefits.'

It's the latest effort by the auto industry to shrink its health care bills, especially for its salaried work force and retirees.

In 2005, Delphi announced it was ending company-paid health insurance for Medicare-eligible retirees starting in 2007.

Last year, GM announced it was ending employer-paid health insurance for salaried retirees 65 or older and instead giving them a $300 a month pension increases they could use to buy gap coverage along with Medicaid. GM capped the total amount it would spend on salaried retiree health care in 2006, meaning retirees must make up the difference in higher annual health care costs.

Ford Motor Co. capped its salaried retiree health care spending in 2006 as well.

Delphi disclosed that it is 'currently in discussions with their stakeholders who have a continuing economic interest in their reorganization regarding further plan modifications,' the company said in a court filing.

Harley Shaiken, a labor expert at he University of California, Berkeley, said the effort by Delphi 'sends a chilling message to every salaried auto retiree' about the consequences of a bankruptcy filing by a domestic automaker.