Standard & Poor’s Ratings Services reportedly is reviewing the credit ratings of General Motors and Ford and could downgrade them further into “junk” status as early as mid-January.

The Associated Press (AP) noted that S&P placed Ford and GM’s ratings below investment grade earlier this year. GM’s debt totaled $284 billion as of June 30, while Ford’s debt stood at $158 billion, S&P said.

Analyst Scott Sprinzen told the news agency that S&P probably won’t downgrade Ford more than one notch, but it could take more drastic action with GM.

“We see Ford as the better of the two credits. The earnings and cash flow of Ford are holding up better than General Motors this year,” Sprinzen told the Associated Press.

According to the report, Ford said it wouldn’t comment on the review while GM said it is taking action to improve its position.

Schulz reportedly said GM and Ford have adequate liquidity – both have around $US20 billion in cash.

S&P will look at the effect of higher petrol prices as well as incentive spending, analyst Robert Schulz told AP. The agency also will take into account any restructuring actions and the outcome of GM’s continuing negotiations with the United Auto Workers to lower health care costs.

The Associated Press said S&P will focus on North American operations which lost $1.2 billion in the second quarter while Ford lost $907 million.

Auto supplier Delphi Corp. will be another factor, Schulz reportedly said. Schulz also told AP it’s not clear how much impact a bankruptcy filing or restructuring would have on GM.

According to the Associated Press, S&P said high petrol prices appear to be accelerating a move away from sport utility vehicles in the US market.