Aug. 5 (Bloomberg) -- Ford Motor Co. and General Motors Corp. couldn't stop their credit ratings from dropping to junk when the U.S. economy was healthy. The prospect of a recession suggests their survival chances are getting worse.

``The big problem for the U.S. auto companies is that their performance deteriorated rapidly even while the economy was still growing,'' Jim Reid, a credit strategist at Deutsche Bank AG in London, wrote in a report this week. ``They have a huge problem if the economy doesn't bounce back going into and through 2009.''

The chart of the day shows the surging cost of protection against Ford or General Motors failing to pay their debts. The likelihood of default is perceived to be at a record, based on prices in the credit-default swap market.

``Survival in their current form is probably out of their hands and with the macro gods,'' Reid wrote.

Standard & Poor's currently rates both companies B-, six levels below investment grade, with a negative outlook that suggests that assessment is more likely to worsen than improve.

To contact the reporter on this story: Mark Gilbert in London at magilbert@bloomberg.net

Last Updated: August 5, 2008 09:26 EDT