S&P may cut debt ratings on Ford, GM, Chrysler

NEW YORK (Reuters) - In another blow to beleaguered U.S. automakers, Standard & Poor's on Friday said it may cut its ratings on Ford Motor Co, General Motors and Chrysler LLC, citing financial damage resulting from high gasoline prices.

Bonds and shares of Ford (F.N: Quote, Profile, Research, Stock Buzz) and GM (GM.N: Quote, Profile, Research, Stock Buzz) extended their losses, while the cost of protecting their debt with credit derivatives rose.

S&P said it was concerned about cash outflows from all three automakers as high gasoline prices erode demand for sport utility vehicles and pickups. The "dire state" of the vehicle finance market was also worrisome, S&P said.

The rating agency also said it may cut its ratings on automaker finance units Ford Motor Credit Co and DaimlerChrysler Financial Services Americas LLC, as well as GM's 49 percent-owned finance affiliate GMAC LLC.

The rating warning came after Ford said it would post a deeper loss for its auto business this year and warned it would be difficult to avoid a loss in 2009. That was a weaker outlook than Ford offered just last month.

"All of the factors behind Ford's weaker guidance also apply to the other U.S.-based automakers," S&P said in a statement.

Moody's Investors Service changed its outlook on Ford and its finance arm and Chrysler LLC to negative from stable, indicating a rating downgrade is more likely over the next 12 to 18 months. Moody's now rates Ford and Chrysler "B3," the sixth-highest junk rating.

Sales of light trucks and SUVs, historically key profit centers for the automakers, have plunged as consumers shift to more fuel-efficient cars.

"Although these segments have been weak for some time, the exodus of demand that began in April, caused by escalating gas prices and consumer preferences for smaller vehicles, is gathering speed," S&P said in a statement.