NEW YORK (Reuters) - Moody's Investors Service said on Tuesday it may cut its ratings on Ford Motor Co. (F) deeper into junk territory, citing sharply lower demand for the company's trucks and sport utility vehicles.

Moody's also said it may cut its ratings on Ford's finance arm, Ford Motor Credit, to junk status from investment grade. A downgrade to junk territory would eject Ford Credit from the widely followed Lehman Brothers credit index, limiting the investors who can buy its bonds and raising borrowing costs.

Ford, the second-largest U.S. automaker, has about $142 billion of consolidated debt, most of it issued by Ford Credit.

Ford and its rival General Motors Corp. (GM) have both struggled this year with high labor costs, excess manufacturing capacity and high gasoline prices that cut into sales of their trucks and SUVs.

Ford's shipments of full-size trucks and SUVS plunged by 30 to 40 percent in September and October, and the shift is expected to continue as buyers look for more fuel-efficient vehicles, Moody's said.

Moody's rates Ford Motor Co. "Ba1," the highest junk rating. It rates Ford Motor Credit "Baa3," the lowest investment-grade rating. Moody's also said it may cut Ford's "Prime-3" short-term rating.

"I don't think people will be completely surprised by this," said Mirko Mikelic, portfolio manager and analyst for Fifth Third Asset Management. "Moody's has been drawing a line in the sand and Ford has been crossing it in terms of cash position and market share."

Moody's said it may downgrade Ford Credit because its earnings could be hurt by any weakening at Ford.

Ford and Ford Credit are still rated an investment-grade "BBB-minus" by Fitch Ratings. Standard & Poor's rates them "BB-plus," the highest junk grade, and has them on review for a downgrade.

Ford last month swung to a third-quarter loss, its first loss in nearly two years. Its key North American operations lost $1.2 billion before taxes and excluding special items.

Massive losses at GM and worries about a strike at its key supplier Delphi Corp. sparked fears of a bankruptcy filing by that automaker in recent weeks, prompting heavy selling of both GM and Ford bonds.

Ford's bonds with a 7.45 percent coupon due in 2031 fell to 71.5 cents on the dollar from 71.75 cents on Monday, according to MarketAxess. Those bonds have plunged from 101 cents on the dollar at the beginning of the year.

Ford Credit's 7.25 percent bonds due in 2011 fell to 90.5 cents on the dollar from 91.75 cents on Monday.

The annual cost of insuring Ford's debt for five years with credit default swaps rose by around 15 basis points to 872 basis points after Moody's announcement, on trader said. Default swap spreads on Ford Motor Credit Co. widened by around 20 basis points to 493 basis points.

(Additional reporting by Karen Brettell)