NEW YORK -- Moody's Investors Service on Monday revised the outlook of DaimlerChrysler AG's debt ratings to negative from stable, citing tougher price competition in the U.S. car market and weak margins in its Mercedes unit.
An outlook change to negative indicates the company's ratings are more likely to be cut. Ratings downgrades usually raise a company's borrowing costs.
DaimlerChrysler currently holds an "A3" long-term rating and a "Prime-2" short-term rating from Moody's.
The ratings agency said DaimlerChrysler's "A3" rating could be cut one notch to "Baa1" in the next 12 to 18 months if the Mercedes Car Group does not meet a 7 percent operating margin by 2007 and also if Chrysler Group does not raise its operating margin above the current level of nearly 3 percent.
Moody's also said the automaker's commercial vehicle division must reach profitability through the next market down-cycle in order to avoid a rating downgrade.