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Tuesday May 24, 12:26 PM EDT

NEW YORK (Reuters) - Fitch Ratings cut General Motors Corp.'s (GM) debt ratings to junk status on Tuesday, dealing a second blow to the world's largest automaker after a similar move by Standard & Poor's on May 5.

A protracted decline in sales of sport utility vehicles, mounting competition in the truck market and rising costs will cause GM to deplete cash through at least next year, Fitch said in a statement. GM's sales of mid-sized and large SUVs, a significant source of profits, have dropped more than 20 percent so far this year, the rating agency said.

The rating downgrade by a second agency will cement GM's status as a junk credit, raising borrowing costs and further limiting its options for raising funds. GM's ratings have slid from top "triple-A" levels in the 1980s as it battled global competition and rising healthcare costs.

GM and its finance arm had about $292 billion of long-term debt including secured notes as of March 31.

"Most people were expecting Fitch to cut GM to junk this year, so they did us all a favor and did it sooner rather than later," said Brian Jacoby, auto credit analyst at Morgan Stanley in New York.

The combined downgrades could force investment funds ineligible to hold junk bonds to sell billions of dollars of GM debt. The cuts also could cast a shadow over the corporate and junk bond markets as they curb demand for riskier debt.

Prices of GM's bonds fell after the downgrade. GM's bonds with an 8.375 percent coupon due in 2033 fell to 71 cents on the dollar from 73.5 cents before the Fitch action, according to MarketAxess.

Fitch cut GM's long-term senior unsecured ratings by one notch to "BB-plus," the highest junk rating, from "BBB-minus." It also cut GM's finance arm, General Motors Acceptance Corp., to "BB-plus" from "BBB-minus." The outlook on the new ratings is negative. (Additional reporting by Dan Wilchins)
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