NEW YORK (Reuters) -- Moody's Investors Service cut Ford Motor Co.'s debt ratings on Thursday but left them at investment-grade status, just days after another rating agency had slashed Ford's ratings to junk territory.
Despite the downgrade, the investment-grade rating means Ford's bonds will stay in some widely followed credit indices, preventing the forced selling that could have been triggered by a second cut to junk.
Ford's ratings have slid from top "triple-A" levels in the 1980s as it battled competition from Asian rivals and rising health care costs.
Moody's cut Ford's long-term credit ratings by two notches to "Baa3," the lowest investment-grade rating. It cut Ford Motor Credit Co.'s rating by two notches to "Baa2," the second-lowest investment-grade rating, from "A3." The outlook on the new ratings is negative, meaning another downgrade is possible over the next 12 to 18 months.
Ford said that it is disappointed with the debt ratings cut.
"While we are disappointed, we appreciate that Moody's recognizes that there has been significant progress at Ford Motor Company and we see the challenges they cited," Ford's Chief Financial Officer Don Leclair said in a statement.
The ratings cut, just days after Standard & Poor's slashed Ford's ratings to junk territory, were not as bad as some investors feared.
Moody's said it was concerned about consumers' shifts away from Ford's profitable trucks and SUVs, high health care costs and rising costs for steel and other materials.
Ford's performance next year will be well below expectations and the pace of its recovery will be delayed, Moody's said in a statement.
Ford's bonds were a touch weaker relative to Treasuries after the downgrade but took back much of their earlier losses because the downgrades were not as severe as some had feared.
Spreads, or the extra yield over Treasuries, on Ford Credit's notes with a 7 percent coupon due 2013 widened 0.06 percentage points to 5.03 percentage points, according to MarketAxess. Ford and its finance arm have about $161 billion of outstanding debt including secured notes.