Ford’s Debt Rating Is Cut by S&P; Amid Weak Sales

Ford Motor Co. had its debt-rating cut further into junk status Wednesday by Standard & Poor’s, which cited declining sales of Explorer sport utility vehicles and F-Series trucks.

S&P; lowered Ford’s corporate long-term rating one step to B-plus, or four levels below investment grade, from BB-minus. The New York-based ratings company said, “2006 will be a more difficult year for Ford than previously anticipated.”

Ford may be headed to its 11th straight annual loss in U.S. market share even as it tries to diversify its lineup to rely less on SUVs and other light trucks. S&P; said U.S. sales this year through May fell 27% for the Explorer mid-size SUV and 0.3% for F-Series trucks. The large pickups represent a third of Ford-brand sales and “far more in profitability,” S&P; said.

“We see very little to reverse the slide” in Ford sales, said Pete Hastings, a Morgan Keegan & Co. fixed-income analyst based in Memphis, Tenn. “We believe Ford’s ratings will be downgraded enough to eventually catch up with GM’s.”

S&P; rates General Motors Corp., the world’s largest automaker, at B, one level lower than Ford.

Ford is now a bigger risk of default than GM, credit derivatives show. Investors are paying $980,000 a year to insure $10 million of Ford debt against default for five years with credit default swaps. Similar protection for GM costs about $970,000, according to JPMorgan Chase & Co. prices.

Ford shares fell 18 cents to $6.36 on Wednesday. They have dropped 17% this year.