Delphi says it will stop paying medical insurance for 4,000 retired salaried workers in 2007.
Troy-based Delphi is the nation's leading auto-parts maker.
The company says it will drop coverage for retirees once they're eligible for Medicare benefits.
It says employees can supplement their retirement health costs with private health care accounts.
The move is expected to save the company $500 million over several years.
Delphi stock has plunged following downgrades from two major Wall Street investment companies.
On Friday, Delphi disclosed improper accounting transactions and announced the resignation of chief financial officer Alan Dawes.