Moody’s Investors Service, one of the prominent US credit ratings agencies, has downgraded Ford Motor Co.’s debt to the lowest investment grade Baa3, down two notches from its previous rating Baa1. Moody’s that has not changed Ford’s rating since 2002 gave the company’s bonds a negative outlook.

The move rippled through the markets as investors saw that the worst fears, the downgrade to the junk status, were not confirmed. Such a move could trigger massive forced selling by investors who are not allowed to hold junk bonds. The decision comes on the heels of S&P’s decision to downgrade both Ford’s and GM’s bonds to junk level.

The company is fighting with a dwindling market share in North America and the increasing popularity of foreign auto makers. This is combined with huge pension liabilities and a rise in the cost of raw materials.

William Clay Ford Jr., Ford chairman and chief executive, said that the decline in popularity of sport-utility vehicles, as consumers move to more fuel-efficient cars, is "happening much faster than we anticipated." Mr. Ford said that anticipated cost reductions "would be damaging to the long-term health of the company."

In an effort to offset the decline in business, Mr. Ford has declared the intention to forgo his compensation until "the compensation committee and I are satisfied that the company has achieved and is sustaining profitability."