A control methodology for an engine-driven electric machine of a hybrid vehicle electrical system for enabling continued operation of the vehicle electrical system under failure mode conditions that require or result in disconnection of the battery pack from the electrical system. At the onset of a fault condition requiring battery disconnection, the electric machine is controlled to drive the battery pack current toward zero before disconnecting the battery pack. Once the battery pack is disconnected, whether by relay or fuse, the electric machine is controlled to maintain the bus voltage of the electrical system at a specified value. In both operating modes, the electric machine is controlled based on a synchronous vector current command that is determined directly as a function of the control objective (zero battery pack current or maintaining bus voltage) for improved response time compared to a traditional torque-based control.