Fitch cuts Ford deeper into junk on sales slump

NEW YORK, Aug 1 (Reuters) - Fitch Ratings on Friday cut Ford Motor Co (F.N) and Ford Motor Credit ratings deeper into junk territory on weaker U.S. sales, concerns about access to capital and higher commodity costs.

Fitch Ratings lowered Ford and Ford Credit ratings one notch to "B-minus," six levels below investment grade, and said the outlook was negative, which means another downgrade is possible in the next one to two years.

The downgrade reflects "further deterioration in Ford's U.S. sales as a result of economic conditions, an adverse product mix and the most recent jump in gas prices," Fitch said.

The latest cut follows a downgrade of the Big Three carmaker ratings by Standard & Poor's on Thursday and Ford's announcement on Friday that its U.S. sales fell 14.9 percent in July on an unadjusted basis amid the downturn in the U.S. auto industry. For details, click on [ID:nWNAB4455].

Ford's liquidity has declined to $26 billion at the end of the second quarter from $36 billion at the end of 2007, Fitch said.

Fitch said liquidity will continue to decline in the second half of 2008, but it will be sufficient through 2009 to finance operating losses, working capital drains and restructuring efforts even if sales remain flat next year.

The automaker has access to an $11.5 billion revolving credit facility and faces moderate debt maturities over the next three years.

The rating agency expressed concerns about increasing default rates and higher severity of losses on retail and lease contracts at Ford Credit, a car financing unit.

Fitch said it could cut the automaker's rating again if Ford's cash level falls below $12 billion, it lacks access to the securitization market or cannot execute its near-term cost, margin and product plans. (Reporting by Anastasija Johnson)