Standard & Poor's has lowered its credit ratings for General Motors Corp. and Ford Motor Co. by as much as two notches, warning that the economic slowdown comes as pressure is building

from foreign rivals.

The downgrades are likely to make it more expensive for the automakers to borrow money, a blow to their giant finance units, General Motors Acceptance Corp. (GMAC) and Ford Motor Credit, which rely heavily on commercial paper to fund loans to car buyers.

As a result, analysts say GM and Ford now will find the bill rising for the zero-interest financing deals they rolled out for consumers last month to revitaslize vehicle sales after the terrorist attacks.

Both companies expressed disappointment at the downgrades and insisted they still have substantial financial flexibility, having reduced their reliance on commercial paper

this year.

S&P reduced both auto makers' long-term corporate credit ratings by two notches, from A to BBB+, its third-lowest investment grade, making it more expensive for the firms to sell bonds to raise capital. It also lowered their short-term ratings to A-2 from A-1, making it more difficult for them to access commercial paper, or short-term debt.

The downgrading came as Ford and GM are preparing to report disappointing third-quarter earnings. On Wednesday, Ford is expected to post a third-quarter loss of 28 cents a share, down from a 50-cent profit a year ago. The consensus among analysts is that GM will

announce on Thursday a third-quarter profit of 80 cents a share, down to nearly half of its $1.55 earnings per share in the same quarter last year.

"The downgrades reflect Standard & Poor's concerns about the long-range profit potential of both GM and Ford, in light of ... deterioration in industry fundamentals. Intensifying price competition in the companies' core North American market has resulted in significant declines in profitability this year, notwithstanding

industry demand that has been far stronger than previously assumed," S&P said.

S&P says its bleak outlook for the automakers includes an assumption that the economy will continue to deteriorate.