Moody's Investors Service on Oct. 18 downgraded its debt ratings for Ford Motor Co., but in an unusual move did not also downgrade its ratings for Ford's captive finance arm, where most of the debt of the automaker lies.

The rating agency's one-notch long-term debt downgrade for Ford, which had $12.1 billion of debt as of Sept. 30, and its affirmation of its rating for Ford Motor Credit Co., which had $146.4 billion, came just three days after Standard & Poor's on Oct. 15 cut all of its long-term debt ratings two notches for both entities.

Moody's and S&P said Ford, which on Oct. 17 reported a $692 million net second quarter loss, suffers from rising competition, especially from non-U.S. automakers, and shrinking profit margins. S&P's downgrades lowered the prices of Ford's bonds, suggesting higher costs for the $3 billion or more of bonds that Ford and Ford Credit plan to sell on Oct. 19.

Moody's action, however, which came as a surprise to many in the financial community. gave the bonds a lift.

Moody's cut Ford's long-term debt rating to "A3," its seventh highest investment grade, from "A2." It affirmed Ford Credit's long-and short-term debt ratings at "A2" and "Prime-1." The outlook for the ratings is negative.

"We're disappointed that they downgraded Ford Motor, but we're pleased they kept the Ford Credit ratings unchanged," said Ford spokesman Todd Nissen. "It will help us keep our costs of borrowing down, which benefits Ford Credit and ultimately Ford Motor."

S&P, on the other hand, cut all of Ford's and Ford Credit's long-term ratings to "BBB-plus," roughly one notch below Moody's "A3" rating, and their short-term debt ratings to "A-2," one notch below Moody's "Prime-1" rating. Its rating outlook is stable. It imposed similar cuts on No. 1 automaker General Motors Corp. and its finance arm, General Motors Acceptance Corp. (GMAC).

Moody's said its Ford downgrade "reflects the erosion in the company's long-term competitive position in North America" from higher competition, especially from non-U.S. automakers, and a cyclical industry downturn. It said Ford faces "weak cash generation and debt protection measures through 2002."

In contrast, it said Ford Credit enjoys a "sound operating and financial position," and its creditors enjoy a "relatively stronger position" than those of Ford itself.

The Ford Credit affirmation could mean fewer investors will have to sell Ford Credit's commercial paper, which is short-term unsecured debt. Ford Treasurer Beth Acton said on Oct. 17 the finance arm has cut its commercial paper exposure this year to $17 billion from $42.3 billion, in anticipation of a downgrade.

Ford Credit is expected on Oct. 19 to sell $2 billion of five-year notes, and Ford is expected to add $1 billion of bonds to an 7.45 percent issue maturing in 2031. The total sale could grow as large as $5 billion, according to traders.