High gasoline prices are affecting sales of the once-popular truck-based SUVs, such as these Ford Explorers, leading many industry analysts to declare the SUVs extinct as U.S. consumers flee from trucks to cars.

AP / Paul Sancya

Standard & Poor’s said yesterday it may cut the credit ratings of Ford Motor Co., General Motors Corp. and Chrysler LLC 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. 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. “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 yesterday its losses will widen because sales of its large pickup trucks in the U.S. are plunging on $4-a-gallon gasoline. The Dearborn, Mich.-based automaker said its financing unit, Ford Motor Credit, will also have a loss.

Ford yesterday tried to deal with the mess by delaying production of the new F-150 pickup truck and announcing further factory cuts.

Ford conceded in a statement that the U.S. market is declining this year, reducing its industrywide light vehicle sales forecast. The company now predicts sales will not rise above 14.9 million and could go as low as 14.4 million, which would be the lowest level in 13 years according to Ward’s AutoInfoBank.

Just a month ago, Ford dropped its forecast to a range of 14.7 million to 15.1 million. The company’s sales fell 16 percent in May.

Because of the crumbling sales, Ford said it will cut third-quarter production by another 50,000 vehicles. It now plans to produce 475,000 vehicles, 25 percent fewer than the third quarter of last year.

The company also says fourth-quarter production will drop by another 40,000 vehicles to a range of 550,000 to 590,000. That’s on top of a previously announced 8- to 14-percent cut from the fourth quarter of last year.

Ford and GM shares dropped and the cost to protect against a default on their debt soared. Ford shares fell 51 cents, or 8 percent, to $5.81 in New York Stock Exchange composite trading. GM’s shares declined $1, or 6.7 percent, to $13.79. Chrysler, based in Auburn Hills, Mich., is owned by New York private equity firm Cerberus Capital Management LP.

Moody’s also changed its outlook on Ford’s B3 rating to “negative” from “stable” yesterday.

In the S&P report, Schulz said he has renewed concerns about the companies’ “future cash outflows in light of the prospects for U.S. sales for the rest of 2008 and into 2009.”

“The erosion of demand for SUVs and pickups has been particularly troubling,” Schulz said.

Ford surprised analysts with a first-quarter profit in April, and then last month abandoned its forecast for full-year profit in 2009. Ford lost $2.7 billion last year and $12.6 billion the year before. Detroit-based GM reported $38.7 billion of losses last year after a $1.98 billion loss in 2006.

S&P rates all three automaker’s debt B. For issuers rated B, “adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment,” according to S&P’s ratings definitions.