GM said it expected to sell 15 to 20 per cent of the common stock of Delphi, the worlds largest automotive supplier, in an initial public offering during the first quarter of 1999. The remainder of the Delphi's shares would be distributed to GM's shareholders later in the year in what is expected to be a tax-free exchange.

The move, which will end an 89-year ownership affiliation between GM and its in-house supply operations, represents a major step away from the vertical integration that has been a hallmark of the worlds largest automaker.

GM chairman Jack Smith said separating Delphi would give it more room to expand its businesses, make acquisitions and capture additional non-GM customers.

‘‘For Delphi, independence will unlock the strategic growth potential it is unable to attain while part ofGeneral Motors, he said.

About 35 per cent of Delphi's $31.4 billion of 1997 revenues came from customers outside of GM's North American operations. Delphi wants to hit 50 per cent by the end of 2002. Delphi executives refused to divulge non-GM business in total, but industry sources said it is about 14 per cent. Net income last year was $1.2 billion, excluding special charges and including Delco Electronics.

By comparison, Ford Motor Cos Visteon parts unit, the worlds second-largest auto supplier, has a long-term goal of 20 per cent non-Ford sales. Analysts also expect Ford to spin off Visteon to shareholders eventually, perhaps starting later this year.

The Delphi news came after a closely watched GM board meeting on Monday at which analysts and investors waited to see what kind of restructuring GM plans to reduce its cost base -- the highest of Detroit's Big Three. More changes are scheduled to be unveiled on Tuesday when GM marketing chief Ronald Zarrella is scheduled to announce reorganisations tothe companys sales and marketing units.

Delphi chief executive JT Battenberg, who will serve as chairman, CEO and president of the new company, said splitting off Delphi will not result in job losses for its 200,000 or so workers around the world.

He said Delphi would honour the no-sale and no-closure agreements of two plants reached with the United Auto Workers Union last week to end two crippling strikes. Battenberg also said he briefed UAW vice- president Richard Shoemaker on the Delphi plans on Monday.

But UAW officials quickly issued a press release on Monday opposing any of the ways GM is proposing to separate Delphi.

If General Motors proceeds with its plans, ‘‘the UAW's record is clear -- we can and will aggressively work to protect the rights and interests of UAW members impacted by the sale, UAW vice-president Richard Shoemaker said in a news release.

UAW strikes of Delphi facilities have the potential to bring GM to its knees. One of the strikes that ended last week was against a Delphioperation in Flint that supplies most of GM's cars and trucks with filters, spark plugs and instrument clusters. A 1996 strike at two Dayton brake plants shut down most of GM's North American operations.

‘‘The biggest question for all of this is, what's the UAW going to do? said McDonald & Co analyst Gregory Kagay, who valued Delphi at $10-$12 billion.

GM executives outlined two possible distribution scenarios for Delphi shares. Under a split-off, GM would offer Delphi shares in exchange for GM $1-2/3 par value -- the name of the parent companys shares -- to those GM stockholders who want to participate.

GM may also spin off Delphi shares and distribute them to GM $1-2/3 shareholders on a pro-rata basis. Another possibility is a combination of the two scenarios. Whatever method it uses, the transaction will be tax-free to shareholders and should preserve its credit ratings, GM said.

‘‘Either transaction would create value for holders of GM $1-2/3 par value common stock, said chairman Smith.

GM chieffinancial officer J Michael Losh, during a news conference with reporters, said the company was for now leaving its options open for what path to take.

On Monday, GM's stock fell $1.18 on the New York Stock Exchange to $71.12, but GM officials said they do not take that as a negative sign for the Delphi plan.

‘‘We have all the confidence in the world this is a transaction that will create considerable shareholder value, Losh said.