General Motors Corp. (NYSE: GM) is giving out another chunk of cash to its ailing and bankrupt parts vendor Delphi Corp. (OTC: DPHIQ). To exit bankruptcy status, Delphi said GM would increase its loan to $950 million from $650 million so that the auto parts supplier could maintain minimal liquidity.

Delphi, which almost had a savior in July when hedge fund Appaloosa Management LP was about to inject over $2.5 billion to assist it in reorganizing itself for a speedier exit from bankruptcy, is now suing the hedge fund for backing away from its earlier plan. When Appaloosa saw that the downturn in the U.S. auto market was here to stay, it closed its checkbook. But does that mean Delphi can sue it for changing its mind? It appears so.

With GM's recent $15.5 billion quarterly loss, it's becoming harder and harder to see how the American auto giant is going to survive as is. The loss just reported a few weeks ago was the third-largest ever in the history of the company, and $2.8 billion of that was tied to its joined-at-the-hip partnership with Delphi. Yet, there appears to be no ready alternative for supply parts for GM that is instantly usable. Delphi, which entered bankruptcy protection in October 2005, is now trying to emerge from that state almost three years later. GM still has no other partner for the majority of its parts. What else can go wrong for GM? Right now, just about everything.

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