(Adds background, recasts lead)
NEW YORK, Nov 14 (Reuters) - Moody's Investors Service on Friday affirmed its ratings on Ford Motor Co. and its finance arm but said the U.S. automaker could face a downgrade over the longer term.
Despite progress Ford is making on financial objectives, "Ford will continue to face formidable challenges that could make it difficult for the company to sustain the current rating," Moody's said in a release.
Moody's action came two days after Standard & Poor's downgraded Ford, the biggest U.S. corporate borrower, to one notch above junk. Earlier on Friday, Fitch Ratings affirmed its ratings on Ford and its finance arm.
Dearborn, Michigan-based Ford and its finance arm have about $180 billion of debt.
The rating affirmation reflects progress Ford has made on its 2002 revitalization plan, the company's exceptional liquidity and an expectation that Ford is laying the groundwork for much stronger operating performance and cash generation in 2005 and beyond, Moody's said.
The outlook remains negative, Moody's said, indicating a downgrade may be likely over the next 18 months.
Moody's affirmed Ford's long-term rating of "Baa1," its third-lowest investment grade, and Ford Motor Credit Co.'s long-term rating of "A3," roughly one notch higher, and short-term rating of "Prime-2." Moody's also confirmed the "Baa2" long-term and "Prime-2" ratings of Hertz Corp.