June 25 (Bloomberg) -- General Motors Corp. and Chrysler LLC may face a cash crunch next year as U.S. sales decline on a slowing economy and rising gasoline prices that are pushing buyers toward more fuel-efficient vehicles, Fitch Ratings said.

Fitch lowered the issuer default ratings at GM and Auburn Hills, Michigan-based Chrysler to B-, six steps below investment grade, from B. Both companies have a negative outlook, meaning they could be downgraded further, Fitch said in a statement today. Ford Motor Co.'s rating is being reviewed.

The changes reflect concern that efforts to cut costs and revamp product lines haven't been enough as gasoline at $4 a gallon erodes demand at U.S. automakers, which generate more than half their sales from pickups and sport-utility vehicles. Through May, GM's sales are off 16 percent from a year ago, Chrysler's are down 19 percent and Ford's have lost 11 percent.

``Negative cash flows could result in Chrysler's liquidity position reaching minimal required levels in late 2009,'' Mark Oline, an analyst at Fitch, said in a report today. Fitch expects ``new financing activity will be required over the next 18 months to keep GM's cash position over the minimum comfort level,'' he said in a separate report.

While Dearborn. Michigan-based Ford may have sufficient liquidity to weather current conditions through 2009, ``unrelenting industry and economic pressures make it increasingly likely that Ford will be unable to maintain its existing ratings,'' Fitch said.

Cash Levels

Standard & Poor's said last week it may downgrade debt ratings on Detroit-based GM, Ford and Chrysler for similar reasons.

GM will probably drain more than $10 billion in cash this year, and may have to borrow more money to stay above the minimum of $12 billion to $14 billion needed to pay operating costs, Oline said. Falling below that mark could result in the company being unable to pay bills.

Ford is expected to have ``more than adequate'' liquidity through next year to stay above the $10 billion to $11 billion minimum needed for its operations, Fitch said.

Ford said it had $33.8 billion in cash and near cash at the end of March. GM said it had $21.6 billion. Chrysler, owned by Cerberus Capital Management LP, doesn't have to release financial information because it's closely held.

Tapping Credit

Chrysler began 2008 with about $9.5 billion in cash, a person with knowledge of its finances said in an interview with Bloomberg News earlier this month. The company, which tapped a $2 billion credit line this week, will use up $2.5 billion in cash this year, said the person, who declined to be named because Chrysler doesn't reveal the information.

Chrysler's minimum cash balance is between $2.5 billion and $3 billion, the person said.

GM fell 38 cents to $12.81 at 4:01 p.m. in New York Stock Exchange composite trading. Shares are down 49 percent this year. Ford fell 8 cents to $5.24, and is down 22 percent this year.

GM's $1.5 billion term loan taken out in November 2006 plunged 4.64 cents to 87.2 cents on the dollar, the lowest price in 2008, according to London-based Markit Group Ltd. It's also the biggest one-day drop this year.

To contact the reporter on this story: Mike Ramsey in Southfield, Michigan, at mramsey6bloomberg.net

Last Updated: June 25, 2008 16:23 EDT