GM, Ford, Chrysler Credit Ratings May Be Cut by S&P

June 20 (Bloomberg) — General Motors Corp., Ford Motor Co. and Chrysler LLC credit ratings may be lowered by Standard & Poor’s as higher gas prices inflict “financial damage” on the auto industry.

S&P placed the carmakers’ credit ratings, already five levels below investment grade, on CreditWatch negative, according to a statement today. New York-based S&P, a unit of McGraw-Hill Cos., said it may also downgrade their financing arms. While the carmakers will be able to pay their debts this year, their cash may shrink to “undesirable levels” by the end of 2009, S&P said.

“As we look forward, we do not see a lot of visibility on how bad things are going to get,” S&P analyst Robert Schulz said in an interview on Bloomberg Television. “We thought the best thing to do would be to stand back and look at these three companies and look at how the market could unfold.”

A weakening economy and soaring fuel prices are dragging U.S. auto sales to their lowest levels in 15 years. Ford, the second-biggest U.S. automaker behind GM, said today its losses will widen because sales of its large pickup trucks in the U.S. are plunging on $4-a-gallon gasoline. The Dearborn, Michigan- based automaker said its financing unit, Ford Motor Credit, will also have a loss.

Bloomberg